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PSEi to slump as gov’t tightens restrictions anew

THE REIMPOSED enhanced community quarantine (ECQ) in NCR Plus, which includes Metro Manila and nearby provinces of Bulacan, Cavite, Laguna, and Rizal, amid rising coronavirus disease 2019 (COVID-19) infections is expected to dampen investor sentiment this week.

The benchmark Philippine Stock Exchange index (PSEi) inched down by 36.37 points or 0.55% to close at 6,544.63 on Friday.

Week on week, the index gained 108.53 points from its 6,436.10 close on March 19.

“The market went up 1.7% [last] week mainly on optimism after the status of vaccine rollout and deliveries was presented,” AB Capital Securities, Inc. Junior Equity Analyst Lance U. Soledad said in a Viber message. “The run-up was not supported by heavy volume as investors [stayed] on the sidelines given the spike in daily COVID-19 cases, with active cases at all-time high.”

This week, market sentiment will take a hit from the return of stricter lockdown measures, analysts said.

“The PSEi could correct lower largely due to the one-week enhanced community quarantine in NCR Plus that may reduce production, sales, income or livelihood of hard-hit businesses, industries, sectors that lead to lower valuation for some adversely affected listed companies,” Michael L. Ricafort, chief economist at the Rizal Commercial Banking Corp. (RCBC), said in a text message on Sunday.

China Bank Securities Corp. Research Associate Jason T. Escartin expects the move to “worsen selling pressure,” citing its adverse effect on investor sentiment.

Manila and nearby provinces will return to stricter quarantine measures from Monday, a senior official said on Saturday, as the Philippines battle to contain a surge in COVID-19 cases that has strained hospitals, Reuters reported.

Presidential spokesman Harry Roque said the measures, which will be in place until April 4, will ban non-essential movement, mass gatherings, dining in restaurants. They represent a further tightening of curbs imposed on March 22.

“Given the shortened trading week, which will likely be accompanied by lower trading volumes, and developments over the weekend, we think the PSEi may find some footing in the 6,000-6,200 support zone,” Mr. Escartin said via e-mail.

“Through the trading week, we will likely see investors progressively price in the possible next steps after the week-long ECQ, taking their cue from daily case counts and health-care capacity utilization,” he added.

RCBC’s Mr. Ricafort said the PSEi’s expected slump may be offset by the signing of the Corporate Recovery and Tax Incentives for Enterprises or CREATE Act.

“[It] may reduce the corporate income tax rate of the biggest companies or businesses and correspondingly increase their net income by five percentage points and a bigger 10 percentage points for MSMEs (micro, small and medium enterprises), thereby [helping]… offset the adverse business or economic effects of the one-week ECQ,” he said. — Keren Concepcion G. Valmonte with Reuters

CARS program could be extended by three years

THE GOVERNMENT is considering a three-year extension to the compliance period for automotive companies participating in its incentives program, which was developed to support domestic parts production.

Toyota Motors Philippines Corp. and Mitsubishi Motors Philippines Corp. are participating in the Comprehensive Automotive Resurgence Strategy (CARS) program, which offers fiscal support to car companies that produce in the Philippines 200,000 units of high-volume car models over six years. Mitsubishi has a 2023 deadline for production of its Mirage compact car, while Toyota has until 2024 to produce its VIOS car.

An auto industry group has asked the government to review the conditions for the program after the pandemic caused an industry sales slump.

An interagency group on the CARS program is recommending a three-year extension, targeting the signing of an executive order by the end of June this year.

“We are confident that an executive order on the recommendation of the IAC (interagency committee) for the extension of the compliance period for the CARS program participants would be issued before end of June of this year considering IAC already includes different agencies relevant to issue,” Board of Investments Managing Head Ceferino S. Rodolfo said in an online briefing Thursday.

He added that the required number of cars to be produced and the budget caps will be retained.

“We of course do understand the challenging unforeseen circumstances, including the impact of the pandemic on automotive demand,” Mr. Rodolfo said.

The extended timeline, he said, will also cover investment incurred in the course of refreshing the car models.

Mas gusto natin ‘yan kasi at least sigurado tayo na dito pa rin gagawin ‘yung succeeding model. (We want that because it ensures that the succeeding models will still be made here),” he said.

Car sales in 2020 declined 39.5% to 223,793 units, according to the Chamber of Automotive Manufacturers of the Philippines, Inc. and Truck Manufacturers Association. — Jenina P. Ibañez

Domestic vaccine manufacturing seen possible by 2024, BoI says

PHILIPPINE companies are exploring how to develop the country’s capacity to produce various types of vaccines, with some producers possibly participating in the license-manufacturing of inoculations for coronavirus disease 2019 (COVID-19) by around 2024, the Board of Investments (BoI) said.

BoI Executive Director Ma. Corazon H. Dichosa said last week that the private sector is studying potential vaccine technology providers, facility costs, and domestic market demand for “fill-and-finish” vaccine production, in which the active ingredients are imported for local packaging.

Some firms may start working immediately on COVID-19 vaccines to address domestic demand while others may start with regular flu vaccines, she said in an online news conference Thursday.

Potential vaccine technology sources include Russia, South Korea, China, and India, along with US universities conducting vaccine research.

The government is in talks with six companies for domestic vaccine manufacturing, Trade Secretary and BoI Chairman Ramon M. Lopez said last week.

Fill-and-finish facilities could be up in two or three years, Ms. Dichosa said, as the companies obtain licenses to manufacture. Plant development could start by 2022 or 2023, she said.

“We have timetables. In fact, gusto na talaga namin siya i-fast track. But ‘yung mga tataya ng pera nila kasi syempre they also wanted to ensure na di sila malulugi… there are still some studies being done by private sector (We want to fast-track approvals, but the companies are studying feasibility to ensure they don’t lose their investment),” she said.

BoI Managing Head Ceferino S. Rodolfo said domestically-manufactured vaccines could be available by the “tail end” of the COVID-19 inoculation effort, or should the need emerge for additional jabs.

Ang critical role ng government dito (The government’s role here) is to ensure that even after the threat subsides… we’ll (still have) this vaccine capability,” he said.

The Philippines imports its vaccines, and has inoculated over 508,000 people so far. — Jenina P. Ibañez

Cigarette makers oppose gov’t printing agency’s plan to raise tax stamp prices

THE PHILIPPINE Tobacco Institute (PTI), an industry lobby group, said it opposed plans by a government printing agency, APO Production Unit, Inc. (APO), to raise the price for tax stamps to 23 centavos from the current 15.

The PTI said in a statement over the weekend that APO will earn excessive profits from the price increase, which the latter blamed on higher ink and paper costs.

The plan to raise prices was disclosed in a series of meetings with the Bureau of Internal Revenue (BIR).

The PTI noted that the actual production cost for a tax stamp is 11.377 centavos, leaving APO a gross profit of 11.623 centavos per stamp.

The planned price hike is “unconscionable and excessive,” since APO is not a revenue-generating agency of the government, PTI President Rodolfo F. Salanga said in a letter to APO Chairman and President Michael J. Dalumpines.

Mr. Salanga said the agency’s monopoly on tax stamps was implemented to ease regulation, and was not intended as a revenue-raising arrangement for the government.

“In view of the foregoing, we believe that the eight centavos printing cost increase from the current 15 centavos per internal revenue stamp to the proposed 23 centavos is unconscionable and excessive. We wish to emphasize that the intent for the internal revenue stamp is to ensure the collection of excise taxes. APO should not opportunistically use such a requirement to collect internal revenue stamp printing cost with a target of more than 102% (profit relative to) actual cost,” PTI said.

The group said a more acceptable price increase would be two centavos per stamp, as happened in 2014 and 2018.

Cigarette tax stamps indicate that taxes have been collected by the government.

PTI includes major producers like Fortune Tobacco Corp., JTI Philippines, Inc., and PMFTC, Inc. 

APO is one of three entities assigned by the government to produce official forms and other sensitive, high-volume printed material.

PTI said it has been raising its concerns with the BIR and APO since December.

BusinessWorld asked APO to comment Sunday but it had not replied at deadline time. — Beatrice M. Laforga

ADB affirms support for waste-to-energy despite opposition

THE Asian Development Bank (ADB) said it will continue to support waste-to-energy (WTE) projects, noting their potential to help develop a recycling industry for valuable waste materials while enhancing the liveability of communities and reducing the need for landfills.

Over 50 environmental and human rights groups across the world have called on the ADB to divest from WTE projects that use incinerators.

“ADB will support waste-to-energy investments as they provide an opportunity for integrated cross-sectoral projects enhancing the livability and health in cities and rural areas, and prevent environmental hazards caused by landfills,” ADB Chief of Energy Sector Group Yongping Zhai told BusinessWorld in an e-mail Saturday.

He believes that WTE projects will “reduce waste generation while supporting information communication technologies in extracting valuable materials found in the waste logistics chain.”

“(These projects also allow for) increased integration with waste reuse and recycling, notably the integration of biological and mechanical and recycling, and us[e] waste to generate energy within the confines of planned eco-industrial parks,” Mr. Zhai said.

He added that the ADB has tackled WTE technology in its discussions with non-governmental organizations and stakeholders for the bank’s energy policy review update. The bank is in the process of revising its 2009 energy policy, which will guide its investment decisions until 2030.

The updated policy will “reflect the global commitments on climate and sustainable development” which will support developing member countries in their respective low-carbon transitions. 

The plan in running up against opposition from environmental advocates who claim incinerators add to the global warming problem.

“There is no reason why international financial institutions like the ADB should classify WTE incinerators as climate mitigation,” Froilan Grate, the Global Alliance for Incinerator Alternatives (GAIA) Asia Pacific regional coordinator, was quoted as saying in a statement Friday.

“Science and experience show that these dirty, waste-of-energy machines are contributing to global warming as much as fossil fuel-based sources of energy, and are causing harmful effects on human health,” he added.

A March 8 letter signed by GAIA and other organizations argued that WTE incineration is “not an efficient source of energy.”

“WTE projects pose irreversible and long-term fiscal, environmental and social risks for ADB and its (borrowers) because of operational incompatibilities with the region’s waste composition and existing regulations, job losses from recycling, and high investment requirements that profits alone cannot recover,” they said in the letter, which was sent to the ADB Board.

Early this month, the ADB’s Mr. Zhai said the bank is committed to helping its member countries access clean energy. He said the ADB has an $80-billion target for climate financing by 2030. — Angelica Y. Yang

CTA upholds cancellation of P45-million BIR tax assessment on Xylem Water Systems

THE COURT of Tax Appeals (CTA) has rejected a petition by the Commissioner of Internal Revenue (CIR) to review the CTA Special Third Division’s cancellation in 2019 of a P45-million tax assessment and Warrant of Distraint and/or Levy against Xylem Water Systems International, Inc.

The warrant would have authorized the Bureau of Internal Revenue (BIR) to seize personal and real properties over the taxpayer’s failure to pay the assessed taxes for the taxable year 2004 within the required period.

The CTA ruling, dated March 12, denied the CIR’s petition for lack of merit due to the failure to prove that Xylem received its demand letter, as required by law.

Under Section 228 of the Tax Code and Revenue Regulations 12-99 as amended, any assessment failing to comply with the due process requirements are void.

Xylem claimed that it found out about the BIR’s demand letter only when it requested a copy, after receiving the BIR’s preliminary collection letter that had referred to the demand letter.

Associate Justice Catherine T. Manahan issued a dissenting opinion which held that Xylem’s request for a copy of the demand letter and BIR’s compliance with the request satisfied the requirement of the law.

Xylem is a US company that makes, repairs and maintains pumps. — Bianca Angelica D. Añago

Sustainability reporting in the Philippines: Year One review

Today, as markets become more unstable, companies are obligated to create a sustainable business model and implement environmental and social initiatives that will benefit future generations as well as create long-term value for stakeholders.

Now more than ever, organizations need to recognize the value of transparency in reporting by disclosing non-financial information through sustainability reports. Sustainability reporting is no longer just a nice-to-have program but has been elevated as a requirement for publicly listed companies (PLCs).

GOVERNMENT MANDATE FOR SUSTAINABILITY REPORTS
On Feb. 18, 2019, the Securities and Exchange Commission (SEC) released Memorandum Circular (MC) No. 4, series of 2019, under the title Sustainability Reporting Guidelines for Publicly-Listed Companies, specifying the procedure for sustainability reporting in the Philippines. They require all PLCs to submit a sustainability report as part of their annual report each year.

The Commission said this requirement will help companies assess and manage their contributions towards the attainment of the 2030 United Nations Sustainable Development Goals (UN SDGs) and the Philippine Development Plan 2017-2022 or Ambisyon Natin 2040.

The first report was scheduled for submission in 2020, attached to the company’s 2019 Annual Report. For companies already producing sustainability reports in accordance with internationally-recognized frameworks and standards, their reports were considered sufficient compliance with the reporting requirement.

The guidelines also mandate a “comply or explain” approach for the first three years upon implementation. This means that companies need to disclose specific non-financial information using a suggested SEC template or a standalone report attached to their Annual Reports. They can also provide explanations for required data that companies are unable to provide. Companies failing to adhere to the guidelines are subject to the penalty for Incomplete Annual Report provided under SEC MC No. 6, Series of 2015, Consolidated Scale of Fines.

With the new regulation emphasizing the growing importance of non-financial disclosures, SGV conducted a review of how PLCs responded to the SEC requirement to publish sustainability reports and shared our findings in a study, Beyond the Bottom Line: Sustainability Reporting in the Philippines.

The report reviewed 73 PLCs that submitted sustainability reports for the financial year ending Dec. 31, 2019, with the demographic based on the number of PLCs within an industry, information from industry briefings, and changes to local industry regulations. It also included nine listed holding firms that had been reporting on sustainability and non-financial information before the SEC requirement. The study was limited to publicly available information, such as the SEC sustainability templates appended to SEC Form 17-A, standalone sustainability reports, integrated reports and annual reports.

The report also leveraged EY sector trends, the World Economic Forum’s Global Risks Report 2020 and SGV’s experience in supporting businesses in sustainability and non-financial reporting.

WIDELY USED SUSTAINABILITY REPORTING STANDARDS AND PRACTICES
Key findings from the study suggest that 64% out of the 73 companies reviewed used the reporting template provided by the SEC to ensure compliance on the first year. However, more organizations will likely transition to stand-alone or integrated reports moving forward. Of the PLCs assessed, 40% released stand-alone sustainability reports, while 30% disclosed sustainability information as part of their Annual Reports. Moreover, only a small percentage released Integrated Reports, which included financial and non-financial disclosures. These reporting formats are not mutually exclusive, as some PLCs disclosed their non-financial information using more than one reporting format.

Among the PLCs submitting stand-alone reports, the most widely referenced or adopted sustainability reporting standard was the Global Reporting Initiative (GRI) Standards. Companies also used other frameworks or standards, like Sustainability Accounting Standards Board (SASB), Integrated Reporting (IR) Framework and Task Force on Climate-related Financial Disclosures (TCFD), to address other topics like climate change or industry-specific material sustainability topics.

Further, only 11% of the PLCs obtained independent external assurance, all of which had limited assurance. Notably, obtaining assurance on non-financial information, while not required, is considered a global best practice. In fact, according to the EY Climate Change and Sustainability Services (CCaSS) investor survey, 75% of investors see independent assurance of a company’s processes and controls over sustainability reporting as “valuable” or “very valuable,” in addition to the 70% who say the same for non-financial and environmental, social, and governance (ESG) performance measures.

ADDITIONAL INSIGHTS ON SUSTAINABILITY REPORTING PRACTICES
Another significant outcome observed was the focus on the UN SDGs, with 77% of the sustainability disclosures linked to the SDGs, and 45 PLCs using the SDGs to inform about their sustainability strategy, materiality assessment process and/or material sustainability issues. Incorporating the SDGs in a company’s sustainability strategies ensures that their products, services and programs contribute to attaining the global sustainability goals.

Moreover, 60% established the scope and boundary of their reports while only 52% disclosed their materiality assessment process, or the method used to determine the sustainability issues material to the company and their stakeholders. Material sustainability issues are the key focus areas addressed by a company and relevant information or plans in these areas are included in its sustainability report. Stakeholder engagement is an important part of the materiality assessment process to demonstrate that companies listen to their stakeholders and address their concerns.

Meanwhile, only 32% disclosed having sustainability governance in place, which is not surprising since sustainability reporting is relatively new to the country. However, as sustainability issues continue to take center stage in developing business strategies, business leaders should consider having a member of management spearhead sustainability within the organization.

On specific disclosures, Occupational Health and Safety (OHS) was the most disclosed topic by PLCs, while the least discussed were environmental topics. This presents an area for improvement for PLCs as they will not be able to fully address their ESG impacts, risks and opportunities without measuring or reporting on environmental topics.

REITERATING THE SIGNIFICANCE OF NON-FINANCIAL REPORTING
The report reveals that the first year of reporting focused more on compliance. However, it still met the objective of creating awareness and inclusion of sustainability on the board and management agenda. Due to the impact caused by the pandemic, it is very likely that the 2020 sustainability reports will heavily focus on health and safety, with pandemic response programs such as Department of Labor and Employment (DoLE)-mandated safety protocols, testing and vaccinations getting reported as part of ESG concerns. We also expect more robust disclosures on climate-related matters such as decarbonization, baselining energy consumption and air and greenhouse gas emissions.

In addition, PLCs can improve their reporting on topics such as waste management to address pressing global concerns; resource management, specifically of materials and water, since unhampered consumption is not sustainable; and the protection and rehabilitation of biodiversity and ecosystems affected by operations to minimize negative environmental impact. Another area which may be improved further is social issues, particularly privacy and data security, after the pandemic rapidly shifted professional communications into the digital space.

After the initial year of compliance with the new SEC requirement, PLCs will hopefully realize the significance of non-financial reporting and develop strategies that incorporate global and national development goals. By measuring and addressing their current sustainability impacts, risks and opportunities, they can help create long-term value for stakeholders, and at the same time, ensure a sustainable future for generations to come.

This article is for general information only and is not a substitute for professional advice where the facts and circumstances warrant. The views and opinions expressed above are those of the authors and do not necessarily represent the views of SGV & Co.

 

Benjamin N. Villacorte is a Partner and Yna Altea D. Antipala is a Senior Associate from the Climate Change and Sustainability Services team of SGV & Co.

New job markets for the New Normal

At the close of 2019, in what seems to be a lifetime ago, the Philippines was one of the most dynamic economies in the Asia-Pacific region. With increasing urbanization, a large and young population, and a growing middle class, the vibrant labor market was supported by strong consumer demand. The unemployment rate was at its lowest in contemporary history, at 5.3%, and so was underemployment, at 14.8%. The spread of the contagious coronavirus disease (COVID-19) in 2019, however, led to an economic and labor market shock affecting not only the production of goods and services but also consumption and demand. Businesses of all sizes faced serious challenges and while the Philippine government deployed wage subsidy schemes to minimize job losses, most micro, small and medium enterprises’ (MSMEs) liquidity plummeted. Travel bans, quarantine restrictions, and costly sanitation measures as well as the loss of the purchasing public due to the growing environment of uncertainty and fear led most firms to delay the hiring of workers or, worse, retrench its employees. As of last January, an estimated 17.6% of Filipinos were unemployed and without any source of income.

Even before COVID-19 accelerated the demise of archaic institutions and traditional ways of doing work, the fourth technological revolution has likewise challenged the Philippines’ reliance on industrialization and its capacity to generate high-paying jobs as a path towards economic growth. The Philippine labor market, now more than ever, is in need of investment in training, skills, and support to help displaced workers transition into new and even better jobs.

It is time to build a new job market for the new normal.

Policy reform need not focus just on recovery alone. The Philippines needs a better labor market: an inclusive and sustainable one with a view towards the low-paid workers, young and inexperienced graduates, women, ethnic minorities, self-employed, informal, and fixed-term workers. The following strategies can be deployed as the Philippines needs a “whole of society” approach in combining quick acting measures with lasting solutions involving government workers, private enterprises, and taxpayers.

Firstly, investment in skills development is a must — either in terms of reskilling, upskilling, or training in highly technical and soft skills. Current initiatives in Congress such as the reforms in the Apprenticeship Program and “21st Century Skills Act” or House Bill No. 7671 by Albay Representative Joey Salceda — are good platforms in bridging the skills gap of Filipino workers to match the increasingly modernizing and technical labor demands. These programs need not be targeted to new entrants in the labor market only, but, due to the layoffs caused by the economic effects of COVID-19, expanded to include the unemployed and underemployed. Government should invest in the cost apprenticeship training, either in terms of reducing on-site training cost, providing incentives to companies that embark on upskilling programs, or employment facilitation to support those who cannot be hired by employers or looking to transition to new jobs.

Secondly, there is a need to strengthen unemployment insurance to improve income security while employees transition to new jobs or train to acquire new skill sets. Marikina Representative Stella Quimbo’s House Bill No. 7028 or the “PhilJobs Act of 2020” can aid in providing a cushion of, at most, three months salary payments to an employee to provide for a means for subsistence during his/her job search or a training allowance during the upskilling or reskilling period. Tripartite dialogue measures should also be conducted to include and improve on the portability of pension benefits for retiring employees.

Finally, and similar to the business stimulus granted by Vietnam, the government can set up local economic zones called “Special Employment and Recovery Zones” to be placed in labor-intensive, relatively low-skilled plants in high density and/or high unemployment areas. Major features of these special recovery zones would be fiscal incentives for employers to invest in or borrow loans against the government to set up new enterprises within the zone, provide for flexible wages and tenure arrangements based on competency programs or certifications, with health and labor standards to be overseen by a zone Commissioner. If pilot zones prove successful in generating investment and employment, nationwide deployment and labor reforms can be the next step.

The COVID-19 pandemic has rewritten institutional and social narratives; it is also time we rewrite our economic and policy models. While the current economic downturn has gutted obsolete and non-essential industries, it is time to usher in new labor markets for the new normal and not by ignoring structural inequalities but forming inclusive and sustainable skills markets by “building back better.”

 

Kristine C. Francisco-Alcantara is the Managing Partner of Abad Alcantara and Associates and is a Member of the Board of Trustees of the Foundation for Economic Freedom.

AAALaw@tradelawyers.ph

www.tradelawyers.ph

Rethinking to defeat the new COVID-19 surge

The government’s hospital hotline has been “overwhelmed with calls.” The mobile phones of hospital staff have been “ringing nonstop.” And “pop-up” hospitals are being installed. The healthcare system is being crushed by an unprecedented COVID-19 surge.

It is a no-brainer that a strict lockdown is necessary. The government’s decision to impose enhanced community quarantine (ECQ) from March 29 to April 4 is a forced move, a reactive move. It should have been done earlier, precisely to prevent the unprecedented surge.

At the onset of the new surge, the push was for reopening the economy. But as the virus further spread, the government introduced a “bubble,” which fellow columnist Diwa Guinigundo said “would hardly suffice.” The “bubble” in the form of a localized lockdown was inadequate because, in Diwa’s words, “we don’t have that luxury” of enforcing “a localized lockdown and selective easing of health protocols.”

In Vietnam, for example, says Diwa, “health authorities have the capability to trace the whereabouts of their citizens. In times of viral outbreaks, the health authorities could easily identify the specific areas of highest incidence and trace the relevant people.”

But in the Philippines, our lack of a centralized contact tracing system and the failure in coordination between local government units (LGUs) and between LGUs and the central government, inter alia, make granular lockdowns ineffective. Thus, the government has belatedly accepted having an ECQ.

In March 2020, Tomas Pueyo developed the “hammer and dance” strategy to manage the COVID-19 pandemic. According to Pueyo, most countries successful in containing the virus undergo two phases: the hammer and the dance.

The hammer phase entails strict lockdowns when cases rise, with the goal of getting the spread of the virus under control as quickly as possible, buying time to strengthen testing, contact tracing, and treatment infrastructure. The dance phase that follows is a period of gradually reopening the economy while keeping the virus’ reproduction number low through extensive testing, contact tracing, isolation, and quarantine. During the “dance,” the government should be open to the possibility of re-implementing lockdowns in case of new surges.

Although the hammer and dance are proven to be effective, our leaders seem more inclined to “dance and dance,” offbeat and with no lead dancer, at that. In February, the government loosened general community quarantine (GCQ) restrictions without putting in place measures necessary to safeguard people’s health and wellbeing. As a result, we continue to suffer from ineffective contact tracing, dysfunctional referral systems for patients, and substandard isolation facilities, to name a few.

With a record-high surge of almost 110,000 active cases and health systems in disarray, some leaders and opinion-makers were still reluctant to implement a strict lockdown.

The usual argument is that due to the high incidence of lockdown-induced hunger, unemployment, and non-COVID-19 illnesses, localized or granular lockdowns are our only option to contain the virus while protecting jobs and livelihoods.

Our view is that prematurely reopening the economy at a time that the virus threatens to overwhelm the healthcare system will have the perverse effect of further scarring the economy.

We need to struggle with a false dichotomy between health and the economy. One thing is for sure: The central task is flattening the curve and prioritizing public health. COVID-19 is our number one problem, and the economy is the collateral damage.

Even the rise of non-COVID-19 diseases and deaths is the indirect consequence of the pandemic. The health system and the healthcare workers are overburdened or over-exhausted, preventing them from attending to all COVID and non-COVID patients.

Patients postpone medical visits because they fear getting infected when they leave home. Doctors, too, close their clinics because they, too, fear the virus, or because the outpatients postpone their visits.

We can only facilitate economic recovery and address hunger, unemployment and illness by sharply lowering the virus’ infection rate through the appropriate and adaptive use of a range of instruments, medical and non-medical. In this manner, we are able to serve the total health of the people. In turn, this will renew people’s confidence or stimulate their “animal spirits.” Economic recovery will follow.

Countries (like China, New Zealand, and Vietnam) that have contained the virus have likewise been able to facilitate economic recovery. Lockdown restrictions per se are not the root cause of hunger, unemployment and illnesses. Regardless of quarantine policy, the people’s ability to work, feed their families, and seek treatment for illnesses is constrained by a high incidence of virus infection. Loss-aversion or risk-aversion will not go away as long as the virus remains threatening.

Consumer confidence was far from returning to pre-pandemic levels despite the relaxation of mobility restrictions in late 2020 and early 2021. Mobility data from Google showed that despite the loosening of quarantine restrictions, Filipinos mostly left their homes to work and buy essential goods in groceries and drugstores. They themselves have curtailed non-essential activities like going to restaurants and recreational facilities.

No number of pronouncements from government officials can encourage the public to go out if they do not feel protected from the virus or assured that the government has the capability to contain new outbreaks.

Lockdown remains as a tool to contain the virus, especially during a surge and in the absence of effective test-trace-treat systems. But of course, we all wish to avoid drastic lockdowns. They can only be temporary, and they have their limitations.

Our previous lockdowns failed because they were not done right. The timeout or respite that we gained from lockdowns did result in bringing down transmissions only for a short interval. But because the lockdowns were done improperly — the World Bank described our lockdowns as “super-draconian” and “porous,” the gains could not be sustained.

We interpret “super-draconian” measures as those that are punitive, militarized, and rigid. On the other hand, the lockdowns we had were “porous,” arising from among other things: inconsistent or contradicting policies, coordination failure, poor communications, non-compliance with rules by officials themselves.

What is central is to put in place the robust and sustainable interventions. The following reforms must be implemented soonest: consolidating contact tracing among local government units by having interoperability of different applications; establishing an efficient referral system for patients; providing adequate and safe public transport; and ensuring that workplaces follow minimum health protocols like proper ventilation.

Moreover, aggressive fiscal policy is vital to ensure financing for health and social amelioration, given that the economy creating jobs and incomes will not bounce back soon.

The worry over heavy borrowing is misplaced, as we have the capacity to repay.

Structural reforms, especially tax reforms, have been put in place. Low interest rates globally and nationally and the potential for high growth combine for sustainable debt servicing in the future. Furthermore, if we cut unnecessary items such as the counter-insurgency and intelligence funds, budget reallocation can provide additional spending.

Social protection for the vulnerable is the government’s responsibility. We cannot force people to make a daily choice between being stricken by the virus and dying of hunger.

The government cannot use the steep numbers of hungry and unemployed Filipinos to reopen the economy, while simultaneously refusing to provide them with relief. The opening of the economy, to repeat, cannot be willed. Control the virus first, to pave the way for the economy’s gradual reopening. While that is being done, the government must provide relief to the poor, the hungry and the unemployed.

One year into the pandemic, we clearly know the basics in flattening the curve. The problem is that the basics are being violated. We now have to rethink and overhaul governance, demand accountability, have good strategic communication, and ensure inclusiveness of all stakeholders in decision-making.

Winning the war against COVID-19 requires a reframing of the policy debate. We cannot allow ourselves to believe that health and economic policy objectives are mutually exclusive in fighting COVID-19. They go hand in hand, and containing the virus by smartly deploying the full panoply of instruments is the way to recovery.

 

Pia Rodrigo, Eddie Dorotan, And Filomeno S. Sta. Ana III are members of Action for Economic Reforms (AER). Ms. Rodrigo is AER’s communications officer, Dr. Dorotan is the convener of the COVID-19 Action Network, and Mr. Sta. Ana is AER’s coordinator.

Suez shows civilization is more vulnerable than we think

A GUST OF WIND was all it took to bring global container flows and oil shipments to a halt. The errant container ship that blocked the Suez Canal this week has cut off a route that handles more than 10% of international trade.

Part of this situation was simply unfortunate: Egypt has expanded parts of the canal to enable two-way traffic and accommodate larger carriers. The Ever Given ship went off course and got stuck in part of the waterway that’s still narrow.

But it’s also a reminder that even an advanced civilization like ours has points of acute vulnerability. In the strategy and military realm, such bottlenecks are also known as “choke points.” And we often don’t pay enough attention to them until something goes wrong.

Systems designers strive to avoid these single points of failure, so that transport, energy, and communication networks are able to withstand attacks or unexpected calamities. (The twin crashes involving a Boeing 737 Max are one example of a flawed design — a single sensor gave faulty readings to the plane’s automated flight system.) Technological advances and globalization were also supposed to make us less susceptible to this type of problem. The internet, for example, was conceived as a decentralized system that’s pretty difficult to break, as was Bitcoin.

But global infrastructure, defined broadly, still has a surprising number of pinch points. These can be difficult to remedy, as creating back-up options is expensive and counteracts economies of scale. In some cases, the problem is even getting worse: Industries are becoming more concentrated due to corporate takeovers. Furthermore, big chunks of our lives are now mediated by just a handful of technology companies. Nokia Oyj, Ericsson AB, and China’s Huawei Technologies Co. Ltd. control about 60% of the telecoms equipment market, for example.

The upshot is that governments are now more cognizant of the political and economic power held by those who control choke points. It’s one reason why the US has big concerns about Huawei’s involvement in building critical 5G networks.

But first, back to canals. Our creator did a fine job with Planet Earth but if you were to nit-pick, she perhaps didn’t think enough about the needs of the shipping and oil industries. The Panama Canal (which connects the Atlantic and Pacific oceans), the Suez Canal (linking the Mediterranean and the Red Sea), and the Strait of Hormuz (at the mouth of the Persian Gulf) are places where container ships and oil tankers are forced to navigate narrow passages. The alternative is a long detour or more expensive air freight.

For decades these waterways have been recognized as areas of huge strategic importance and as being susceptible to military or terror attacks. Iran has frequently used the Strait of Hormuz to pressure foreign powers. Various back-up routes have been mooted but most haven’t materialized. Nicaragua pitched a canal linking the Pacific and Caribbean Sea, for example, but the rumored cost of $50 billion has been prohibitive.

One can perhaps excuse vulnerabilities arising from the natural world, but we should be less accepting of those in the economic sphere over which we have more control.

Consider energy. In seeking to rid itself of one pinch point — the fact that Europe gets much of its gas via pipelines that traverse Ukraine — Germany has created another: the twin Nord Stream gas pipelines that connect Russia and Germany under the Baltic Sea. The US worries these will weaken eastern Europe and increase Germany’s dependence on Russia.

In the realm of finance, trillions of dollars of financial instruments are tied to the London interbank offered rate, which a small circle of banks found to be shockingly easy to manipulate until they were exposed in the years following the 2008 financial crisis. Libor is now being replaced. Similarly, Europe has long relied on the Swift payments system and the US dollar, but that dependence came into question in 2018 as it disagreed with the US over Iran sanctions.

In technology, people have warned for years that the US needs a back-up for the Global Positioning System, the satellite-based navigation infrastructure that underpins much of the modern digital economy. The system can be spoofed or otherwise disrupted. It has yet to develop one.

Semiconductors are where the clearest pinch points are emerging. A global computer chip shortage during the COVID-19 pandemic has forced auto manufacturers to tear up production plans. The hiatus is temporary, but this belies the real problem: Very few companies are able to produce the most advanced chips, due to the technical challenges and vast cost of constructing foundries. The most important of these, Taiwan Semiconductor Manufacturing Co., is based on an island that’s under constant threat of invasion by Beijing.

It’s not the only example of this industry’s dangerous concentration: ASML Holding NV of the Netherlands has a monopoly on the machines needed to fabricate the best chips. Now China’s inability to buy the most cutting edge gear from ASML is holding back its own semiconductor ambitions.

None of these choke-point problems are easy to resolve. Not only are there geopolitical ambitions at work here, but there are also usually trade-offs between building greater resilience and efficiency. Reinforcing supply chains is expensive.

But because redundancy offers protection and is therefore a public good, there’s an argument that governments should play a role in providing it. Antitrust policy, for example, can be used to challenge monopolies and foster more competition.

Because having a backup is pretty handy. You learn that when the roof falls in, or when a ship called the Ever Given snarls up the Suez Canal.

BLOOMBERG OPINION

Increasing chances for cancer survival

 

We have all lost loved ones to cancer. Personally, I lost my father-in-law and my best friend to pancreatic cancer. Last July, I also lost my brother to lung cancer. If there is anything I learned about this insidious disease, it is that it cannot be stopped if not immediately treated. It must be detected early and managed accordingly.

Last year, 19.3 million people worldwide were afflicted with cancer, ten million of whom succumbed to the disease. One out of every five people develop cancer during their lifetime. One in eight men and one in 11 women die from the disease, eventually.

The survival rate of cancer within the first five years of diagnosis varies according to cancer type. A pre-COVID-19 oncological study conducted in the United Kingdom revealed that survival rates can go as high as 83.2% and 81.1% for prostate and breast cancer, respectively. It is at 60.2% for cervical cancer, 56.6% for rectal cancer, 53.8 for colon cancer, 47% for leukemia and 36.9% for ovarian cancer. The survival rate plunges for stomach cancer at 18.5%, lung cancer at 9.6%, and liver cancer at 9.3%. Survival rates are even lower these days in light of COVID-19. Studies show that patients with cancer who contract COVID-19 are 16 times more likely to progress to a severe or critical stage.

In the Philippines, 153,751 new cancer cases were reported last year, 44% of them were males and 56% were females. Incidences of cancer accelerate progressively as we age. For men, the probability of acquiring the disease doubles after his 55th birthday. For women it progressively increases beginning the age of 40. Among males, the most common types of cancer are lung, colorectal, prostate, liver, and leukemia. For women, it is breast, cervix-uteri, colorectal, lung, and ovarian. A total of 92,606 cancer-related deaths were reported in the country last year.

According to the World Health Organization, the number of cancer cases in the Philippines will rise to 275,000 a year by 2040 if the disease is not mitigated.

To address the cancer menace, the Philippine legislature signed the Universal Health Care Act and the National Integrated Cancer Control Act (NICCA) into law in February 2019.

NICCA is an internationally acclaimed law that comprehensively maps the path forward to strengthen cancer control, increase cancer survivorship, and reduce the burden on patients and their families. The NICCA law is meant to supplement Republic Act 11223 or the Universal Health Care Act. Together, these laws should reduce the mortality rate of non-communicable diseases, including cancer, by 30% by the year 2030.

Although the enabling laws were signed, they have not been implemented yet. See, to activate the National Integrated Cancer Control Act requires the formation of a council to execute the law. The Office of the President is responsible for forming the council. When formed, the council will be tasked to provide technical guidance, support, and oversee the full implementation of the law. It will act as a policy-making, planning, and coordinating body that oversees all facets of cancer control and mitigation. The council will be attached to the Department of Health.

The National Integrated Cancer Control Act is fully funded. In the General Appropriations Act of 2021 ratified last December, a budget of P756 million was appropriated for the Cancer Supportive Care and Palliative Care Medicines Access Program (CSPMAP). This will cover breast cancer, childhood cancer, and other priority cancer types.

Historically, the budget for cancer control programs fluctuated and was always insufficient. With the enactment of the law, cancer care will be better funded, opening the way for more research, mitigation programs, supportive care and palliative care.

All it takes to activate the law is for the President to appoint the members of the council and to convene it. However, the President is said to have been preoccupied with the pandemic that he has not had the time to convene the council.

Cancer victims, their families and all those in the high-risk sector are asking President Duterte to please convene the council as soon as possible. Having the NICCA law in place will increase cancer survival exponentially. After all, cancer is the more insidious killer of our people, more so than COVID-19.

 

Andrew J. Masigan is an economist

andrew_rs6@yahoo.com

Twitter @aj_masigan

Gov’t urged to provide another cash aid round amid lockdown

By Kyle Aristophere T. Atienza, Reporter

THE PHILIPPINE government should boost household spending by giving another round of cash aid to encourage companies to keep their investments amid a stringent coronavirus lockdown in the capital and nearby provinces, according to analysts.

“Even if you provide assistance to enterprises, if no customers are coming in because they don’t have money, the government will just continue to give supply-side aid for no significant gains because of low demand,” Asian Institute of Management economist John Paolo R. Rivera said in a Viber message. “Try stimulating demand first; supply will follow.”

President Rodrigo R. Duterte placed Metro Manila and the provinces of Bulacan, Cavite, Rizal and Laguna under an enhanced community quarantine from March 29 to April 4 amid a fresh surge in coronavirus infections.

Operations of a number of businesses would be reduced during the week, his spokesman Herminio L. Roque, Jr. said at the weekend.

The weeklong strict lockdown would only have a minimal impact on the economy during the Holy Week, when government and private offices and financial markets are shut on April 1 and 2, he added.

The government might extend the lockdown as both public and private hospitals inside and outside the capital region continue to be overwhelmed by the spike in coronavirus cases, analysts said.

“More families losing savings and maybe even more marginal businesses closing will just worsen economic scarring and make recovery even more difficult,”  IBON Foundation Executive Director Sonny A. Africa said in a Facebook Messenger chat.

“Demand-side solutions like substantial cash transfers to poor and low-income households are exactly what’s needed now,” he added.

Mr. Africa said extending cash aid worth about 10,000 monthly to as many as 19 million families for at least three months “would significantly relieve economic distress and help spur more rapid recovery.”

“This is not just to alleviate household suffering but also to spur demand and give micro, small and medium enterprises a good reason to stay in business,” he said. “They are also the missing link to make the huge monetary interventions have any traction because businesses will see that it can be worthwhile to start borrowing.”

The Philippine economy slumped to a record 9.5% last year as Mr. Duterte ordered one of the longest and strictest lockdowns in the world.

Mr. Roque said beneficiaries might get a smaller amount this time compared with last year.

The government should include previously ineligible families that are also affected by the strict lockdown, Terry L. Ridon, convenor of InfraWatch PH, said in a Messenger chat.

“The conditions of the two enhanced community quarantines are no different for families deprived of working contributors due to the limitations,” he said. “There should be no distinction in the daily social amelioration package rate.”

STIMULUS
“A new funding round might be necessary to cover all aspects of our coronavirus response,” Mr. Ridon said.

Mr. Africa said lawmakers should fast-track measures that seek to provide for another round of stimulus measures.

“The post-enhanced community quarantine economic rebound last year quickly lost steam and the modified enhanced lockdown in August likely contributed to this,” he said. “Employment for instance had plateaued by Oct. and is now actually even lower than in July 2020,” he added.

Mr. Africa said the enhanced lockdown this week would affect about half of the economy. “If it disrupts economic activity as much as needed to have an appreciable effect on the spread of COVID-19, then it will also significantly dampen job generation and gross domestic product straddling the first and second quarters,” he said.

“There is no more reason for economic managers to keep rejecting additional stimulus.”

Mr. Ridon said the construction sector, which makes up a significant chunk of economic output, would generate jobs for the country’s working class.

“We need to ensure that there are no further delays in implementing the major infrastructure projects around the country, whether funded by the budget of public-private partnerships,” he said.

Mr. Ridon said the government should address regulatory roadblocks that delay projects and affect job sustainability.

The Palace earlier said priority construction projects would continue during the strict lockdown, subject to the guidelines of the Public Works department.

Mr. Ridon said the government should determine whether the equipment needed to manage moderate to severe coronavirus cases are adequate. “Expanding facilities in the public tertiary hospitals may also be explored, but this will take time given budget and space constraints for expansion,” he said.

The government should focus on expanding testing capacity since it had reached a plateau of 50,000 a day, Mr. Ridon said.

“Doubling this capacity should be a main priority,” he said. “But an inquiry should nonetheless be made on why expansion reached a plateau given massive testing is a main pillar of our coronavirus response.”

The surge in coronavirus infections has weakened the country’s healthcare system, as the use rate of intensive care unit beds reached 73% in Metro Manila. A number of hospitals have said they were no longer accepting coronavirus patients.

“The only way to prevent lockdowns is to contain the pandemic with smarter public health measures to begin with,” Mr. Africa said.