3 South Koreans involved in phone scam arrested

November 1, 2021 | 7:05 pm

AGENTS of the Bureau of Immigration (BI) have arrested three South Koreans involved in phone scams.

An operation conducted last week led to the arrest of 29-year-old Jin Unghyeon, who is wanted in Seoul for involvement in telecommunications fraud, Immigration Commissioner Jaime H. Morente said in an e-mailed statement on Monday.

The raid on Mr. Jin’s condominium residence in Novaliches resulted in the arrest of two other South Koreans who were identified as 34-year-old Choi Sukhyun and 23-year-old Lee Seungsu. They were all caught “in the act of manning and operating their computer workstations which they used to defraud their victims through voice phishing,” Mr. Morente said.

Voice phishing, perpetrated by people pretending to represent a trusted institution, involves the use of fraudulent phone calls to entice people to give money or reveal personal information, according to the Immigration bureau.

Mr. Jin will be immediately sent back to South Korea “as an order for his deportation was already issued against him by the BI’s board commissioners in October last year,” Mr. Morente said.

“His two accomplices will be expelled as well after they are charged with violation of immigration law and undergo deportation proceedings,” he said.

“Their names will then be included in our blacklist to prevent them from re-entering the country.”

Mr. Jin’s “cohorts are overstaying aliens as examination of their passports showed that their tourist visas have already expired,” BI said, citing a report by the bureau’s fugitive search unit.

Mr. Jin, who was “a subject” of a so-called interpol red notice released after a Philippine court issued an arrest warrant against him in Oct. 2019, is “subject of an outstanding arrest warrant issued by the Suwon district court in Korea after he was indicted for being an alleged member of a syndicate that swindled their compatriots of over $US840 million since they ran their voice phishing racket in Jan. 2017,” the Immigration bureau said. — Kyle Aristophere T. Atienza

DENR targets full dredging of Cagayan River sandbar next year

November 1, 2021 | 7:03 pm

THE DEPARTMENT of Environment and Natural Resources (DENR) said it is aiming to complete the dredging of the 134.7-hectare sandbar of the Cagayan River by the first quarter of 2022.

In a news release on Monday, DENR Secretary Roy A. Cimatu said 8.43% or 81,807 cubic meters of the targeted 970,962 cubic meters has so far been dredged since the start of operations in June.

Mr. Cimatu said materials dredged from the river have been placed at the Cagayan riverbanks and will be used to restore the ideal alignment of eroded parts. The restoration is also seen to speed up the flow of water to the river’s mouth in Aparri, Cagayan.

He also said that the Department of Public Works and Highways and the Armed Forces of the Philippines will deploy additional equipment and workforce to help in the dredging operations.

The project is part of the department’s efforts to rehabilitate areas devastated by flooding during typhoons, like Cagayan.

The province experienced its worst flooding in four decades in November last year during typhoon Ulysses (international name: Vamco), which affected 583,493 individuals and left 24 dead in the Cagayan Valley region. — Bianca Angelica D. Añago

A new global tax regime

November 1, 2021 | 6:06 pm

(First of two parts)

Rapidly shaping up at the global tax arena is a new tax regime that challenges the very core of generally accepted international tax rules and principles. Agreed to by 136 member countries of the Organization of Economic Co-operation and Development (OECD) on Oct. 8 is a historic tax pact in what could be the most drastic global tax reform of the century.

At the center of this two-phased reform (Pillar 1 and 2) is fairness in the sharing of revenues between and among countries owing to the rapidly increasing digitalization of the world’s economy where territorial borders, physical presence in brick-and-mortar businesses, on which the current global tax rules are based, are becoming inapplicable. This is Pillar 1 of the Blueprint.

Pillar 2 of the Blueprint, on the other hand, works for the eradication of tax havens and the so called “race to the bottom” practice of tax cuts/lowered tax rates and offering attractive incentives in attracting businesses and investments, resulting in revenue imbalances and significant losses to governments. To accomplish this, a 15% global minimum corporate tax (effective tax rate) has been agreed to.

This article focuses on Pillar 1. The next article (part 2) will focus on Pillar 2.

Under Pillar 1, a new concept called “market jurisdictions” are given taxing rights over revenues of companies despite absence of physical presence in their jurisdictions. Market jurisdictions refer to the locations/countries where goods and services are consumed. This is prevalent in digital companies which could earn income without having to set foot in those countries. Netflix, for example, has subscribers worldwide, earns revenue therefrom without having to pay tax in those countries (under current tax rules) absence physical presence. Under Pillar 1, Netflix can now be made to pay a tax in these market jurisdictions.

Apart from digital companies, Pillar 1 would also potentially apply to “consumer facing” businesses. Consumer facing businesses are those that generate revenue from the sale of goods and services typically sold to consumers. One example is Amazon. The scope of “consumer facing” businesses will be further defined.

Not all businesses will be covered by Pillar 1. As intended, Pillar 1 shall cover only large and profitable businesses with revenues of Euro 20 billion (P1.2 trillion, more or less) and a profit margin of 10% or more. Those falling into this category shall be required to reallocate 25% of their revenue above 10% (profit before tax) to the market jurisdictions with at least Euro 1 million (P60 Million, more or less) generated in that country. Applying it here, digital companies earning P60 million from Philippine customers may be made to pay income tax even without a physical presence in the country.

In terms of implementation, Pillar 1 shall first be applied, then Pillar 2, which means that companies would need to pay the taxes due to the location where they generate revenue and if the taxes paid is below the agreed minimum corporate tax of 15%, these companies would be required to “top up” the taxes to the host jurisdiction to meet the global minimum level agreed upon. In our earlier example, Netflix would be required to pay tax in every jurisdiction it earns revenue despite the absence of a physical presence, and if the taxes paid, computed on a per country basis, does not meet the 15% minimum corporate tax, it shall be required to pay additional tax in those jurisdictions where tax payments do not meet the minimum level.

The OECD has set a deadline of Dec. 14, 2021 for comments on the proposals with the hope of reaching an agreement on the final parameters by mid-2022 and implementation in 2023. At this point in time, the proposals remain subject to change.

WHAT TO WATCH OUT FOR
Analyzing the proposed design parameters of the new global tax regime, there are a number of implications which we should watch out for. As they say, the devil is in the details.

Many of the issues surrounding the two Pillars are not yet set out. Certainly, there will be significant implementation burden and changes on both businesses and governments. Revenue authorities would need to have financial information, on a worldwide scale, of the income and operations of these multinational enterprises to be able to calculate what is theirs. Similarly, companies will have to keep up with humungous requirements for data reporting, tracking, system change, and compliance, among others.

Those in the host developing countries, like ours, may only have access to information about a multinational’s local data and may not be able to reasonably ascertain its share in the whole pie. For Pillar 1, our revenue authorities would need to know the global financial data of the multinationals to be able to ascertain and claim a portion of the residual profits for their country. This would need not only compliance reporting by businesses, but more so, a tighter, more transparent, honest-to-goodness government-to-government coordination and sharing of information.

Many implementation questions are still left hanging. How are jurisdictional effective tax rates going to be determined considering the variations in the tax systems of countries? How would the tax base be calculated? How will companies pay taxes to a specific jurisdiction when it has no relevant tax identification number in that location? Will the companies be taxed on a presumptive income or estimated basis? Will gross taxation be allowed as a substitute? How will collection be enforced? These are some of the questions that are yet to be addressed.

These new concepts are complex, especially in their application. Hopefully, the OECD and the Inclusive Framework will release common rules and guidelines, standardized model or templates for tax treaty agreements and even domestic legislation to lessen complexity and promote uniformity.

Locally, there may be a need to change domestic rules, laws, and regulations to align with these drastic changes in tax rules and principles under this global reform. Internationally, there may be a need to produce a new tax treaty model or renegotiate treaty agreements to effect and carry-out these changes.

Global taxation on the digital economy is inevitable. Businesses and governments should begin considering the impact of these global tax changes on their revenues and operations and prepare for adoption. There remain areas that require further guidance to provide certainty to businesses.

(To be continued.)

This article reflects the personal opinion of the author and does not reflect the official stand of the Management Association of the Philippines or MAP.

Benedicta “Dick” Du-Baladad is chair of the MAP Tax Committee, and founding partner and CEO of Du-Baladad and Associates (BDB Law).

map.map@map.org.ph

dick.du-baladad@bdblaw.com.ph

Engaging workers in The New Normal

November 1, 2021 | 6:05 pm

The pandemic is forcing companies to rethink how they are managing people. Two major forces are pushing this. Firstly, work-from-home arrangements make it difficult, if not impossible, for managers to really know what workers are doing and to directly collaborate in a work process. Gone are the days when a manager can simply ask call a worker to ask, “How’s that report coming along?,” and have the worker drop by the manager’s office to give an update. Managers can do a lot in a face-to-face meeting to know the status of the work and to provide the needed coaching and encouragement.

Nowadays, managers supervise office workers through some combination of messaging, calls, video conferencing and document sharing over the internet. However, without the worker’s physical presence in the office, suspicious managers will always have lingering doubts about how much time the worker is actually devoting to the work.

Secondly, as a side effect of the first issue plus the growth of digital payment platforms, workers now know how much they can do with technology. This opens up many possibilities for entrepreneurship that workers can do for themselves through online businesses.

How can managers engage the minds and hearts of workers in the New Normal?

Let us remember that engagement is the willingness of employees to go the “extra mile” to achieve the goals of the company — to give that extra discretionary effort on the job. In the ferociously competitive global business landscape facing most companies, that extra effort is a big deal!

Before the pandemic, research companies like Gallup had been warning about a global employee engagement crisis. The company had been tracking employee engagement data since the early 2000s and had found that, unfortunately, even though many companies and their leaders worldwide are interested in and actively measure engagement, the low engagement level had not budged in more than a decade.

In the case of the Philippines, a Gallup survey found that less than 30% of workers are engaged at work. For a country that prides itself in its human resources, this is not a good situation. The productivity the country needs to achieve post-pandemic recovery can be achieved only with higher levels of employee engagement. To make our situation more challenging, the country’s predominantly young workers fall right into the least engaged group of employees reported by Gallup — the millennials.

With such low levels of engagement to begin with, the pandemic makes the work of managers even more difficult under work-from-home and the ever-present option for workers to simply opt out and go into digital self-employment businesses where they control their own time.

Today’s managers need to transform the way they manage. The classic idea, developed circa 1910s, that management is about planning, organizing, leading, and controlling (POLC) is hopelessly obsolete and will not engage the modern worker in The New Normal. This idea of management was developed when the average worker was not highly educated and advanced digital technology did not exist. Then, managers focused on standardizing and controlling the work of employees. Achieving psychological commitment was secondary. The workplace has completely changed. Managing in business-as-usual mode is already leading to a massive loss of worker talent in the US which has been dubbed “The Great Resignation.”

Managers in The New Normal need to transform the work culture so that it encourages customer-focus, entrepreneurship, networking, and innovation among all workers. This means breaking up traditional bureaucratic command-and-control systems and functional silos which limit worker initiative and discretion so that workers can collaborate with each other across the organization to deliver higher value products and exceptional service for customers.

Workers need to be in closer contact with customers so that they can understand the latter’s needs better. Then, their innovative ideas for meeting these needs need to be supported by managers and other units within the company.

The workers’ new roles have to be supported by retraining and retooling to provide the much-needed skills and confidence to generate value-creating innovations for the company’s customers. Technology tools have to made available to turbo-charge collaboration with customers and co-workers. Finally, perhaps most importantly, managers need to revamp the company’s reward systems so that entrepreneurial workers will get a fair share of the fruits of their innovative work. The current system where the lion’s share of economic returns go to top management and shareholders has to go.

Managers in The New Normal will need to reinvent themselves from being top-down objective setters, incentive providers, and rule enforcers. If they are to keep workers on board and engaged, POLC has to give way to Inspiring, Connecting, Empowering, and Rewarding (ICER).

Dr. Benito Teehankee is the Jose E. Cuisia professor of Business Ethics and head of the Business for Human Development Network at De La Salle University.

benito.teehankee@dlsu.edu.ph

Why are investments low and how can the country increase investments to generate jobs and recover from the pandemic?

November 1, 2021 | 6:04 pm

(First of two parts)

IN THE FIRST PLACE, how is the country faring with respect to investments? Very poorly. Not just in foreign direct investments, but in domestic investments as well. Both in absolute numbers and in growth rates, the amount of investments (and the portion going into investment spending) is low. FDI was only $4.5 billion in 2019, compared to Vietnam’s $8 billion and Indonesia’s $13 billion. Investment spending as a percentage of GDP is the second lowest in Asia. We rank near the bottom with Cambodia. As a percentage of GDP, the country’s ratio for the years 2010 to 2019 was only about 22%, just ahead of Cambodia and well-behind Vietnam (26%) and Indonesia (31%).

This means that domestic investors also don’t have confidence in the Philippine economy. The question is why? Aside from the restrictive laws that discourage foreign investments (the 3^rd most restrictive in the world, according to the OECD or the Organization for Economic Cooperation and Development), which could account for the paltry foreign investments, why are even domestic investors timid and afraid? Here are my answers:

1. The dominance of monopolies in key industries. This is the answer given by Alexander Bocchi, an Italian economist, who did a study for the World Bank in 2008. He noticed that investments were concentrated in capital-light industries such as Business Process Outsourcing and not much in capital-intensive industries, such as steel and chemicals manufacturing. Bocchi said the explanation lies in the fact that politically connected local conglomerates control key industries. These industries make the economy uncompetitive overall. Not only do investors have to deal with the high costs and bad service from these monopolists, they also would have to deal with the uncertainty of the rules as these conglomerates are politically connected.

Indeed, the Philippines is the most concentrated economy in Asia, tying with Bangladesh, i.e., monopolies and duopolies control many industries. Aspiring competitors would find it hard to compete with these existing monopolies and legal and non-legal barriers to entry.

The dominance of monopolies, especially in regulated non-tradable service industries, has many other negative effects, not just in discouraging investments and making the economy uncompetitive.

For example, the high cost of labor in the Philippines could be accounted for by the monopolists’ tolerance for higher legal minimum wages and other labor costs. They could very well afford to part a pittance of their monopoly rent as it has a negligible effect on their monopoly profits. An increase in legal minimum wages would hardly dent the profits of the telecom companies, for example, but would, and is, gravely hurting MSMEs (Micro, Small and Medium Enterprises).

2. Lack of public goods. Public goods — the stuff that the government is expected to provide — from roads to education — are lacking or are of poor quality. An MSME investor, for example, will find that he/she must internalize the cost of traffic or bad roads. His transportation vehicle will break down easily and be limited in its turnaround time due to congestion and other problems.

The poor quality of graduates is another cost that businesses must internalize. Instead of new employees being able to become productive off the bat, they need to be trained and retrained, at the cost to the employer.

The lack and poor quality of public goods, therefore, is a significant deterrent to investment.

3. Bad governance. Corruption, rigged rules, incompetence, and inefficiency scare away investors. For example, say you are a garments manufacturer. You can repurpose your factory and even buy new machinery to produce masks that the public desperately needs. However, will you even bother when a winner has been pre-determined?

This is just one example. There are millions of other examples. Investors experience bad governance up and down the different levels of government, from securing licenses from City Hall to getting permits from national regulatory agencies.

Investors hate uncertainty. They thrive best when there are rules and predictability. Unfortunately, in this country, the “rules themselves are for sale,” as National Scientist Dr. Raul Fabella so aptly put it. If the rules themselves are for sale, the game becomes chaotic. The risks become unmanageable.

However, the root of bad governance lies in our political economy. Our oligarchy is in regulated non-tradable services, where the incentive is to “capture the regulator” or “penetrate the state” to earn extraordinary profits.

Unlike in other countries, where the economy is outward-looking and their oligarchy is subjected to the discipline of competing globally, the Philippine economy remains inward-looking and a weak, incompetent state serves the interests of the local oligarchy.

Furthermore, lack of competition exacerbates the bad governance. At least when there’s healthy competition, companies try to extract value by innovation and satisfying the customer. Where the situation is monopolistic, the companies try to gain an edge by getting favors or “rents” from the government. In other words, corruption and monopoly go hand in hand.

In an outward-looking economy, companies will have a difficult time competing in the global market if the government is corrupt, inefficient, and incompetent. Samsung can’t compete in manufacturing and selling chips worldwide if South Korea’s infrastructure is creaky or their public education produces incompetent graduates. Look at all the outward-looking economies — China, Japan, South Korea, Singapore, Taiwan, and Vietnam, and they all have relatively strong, competent bureaucracies, good educational systems, and effective governments.

Not so in the Philippines where exports remain a tiny 30% of GDP, compared to say, Vietnam, which can boast of 100% of exports to GDP.

4. Uncertain property rights and over-regulation. Fundamental to investment is well-defined and secure property rights, according to Law and Economics. Indeed, if you can’t reap what you plant, and if your right is made insecure by government regulation, why invest at all?

Uncertain property rights and over-regulation, for example, explain the denudation of the forests, the decline of the forestry industry, and why the country hasn’t been able to realize its forestry potential.

Look at this contradiction: The Philippines has a competitive advantage in forestry. It’s in the tropical zone, where trees mature faster. The country can produce 100 cubic meters of timber per hectare compared to a temperate country like Finland, which can produce at most, 15 cubic meters per hectare. It’s also a mountainous country, which has more than three million hectares suitable for tree plantation.

Moreover, there’s a growing global demand for forestry products, from pulp that can be made into paper, to furniture and construction materials. Because of the carbon credits that forest plantations generate and the “green” branding they project, investors are eager to invest in forest plantations.

And yet, the Philippines is a major importer of wood and wood products. Whereas before the Philippines was a major exporter of logs and timber, presently, it imports 75% of its wood requirements. Very few investors in tree plantation are left.

The answer to this conundrum is unsecure property rights and over-regulation. Forestry investors got whipsawed when the Benigno (Noynoy) Aquino administration issued a total log ban. The EO didn’t make a distinction between natural forests and man-made or planted forests. Over-regulation, in the form of 100% inventory of trees to permits to harvest and transport, increased the costs and uncertainty of doing business. Wood processing plants were given short-term permits contingent on many regulations of the Department of Environment and Natural Resources (DENR). Consequently, in the CARAGA region, a center of forest production, the number of wood processing plants shrank from 120 before the total log ban into a pitiful three plants. Because the demand for timber from wood processing plants evaporated, the tree farmers couldn’t find a market for their products. Government killed the industry.

Even now, although the DENR recently issued DAO 2008-12 to liberalize certain policies for tree plantation, there’s still hesitancy among investors. The reason is that there are a lot of overlapping claims on the forest, even if, under the Regalian doctrine, the state is the sole owner of forest lands. The National Commission of Indigenous Peoples has been issuing Certificates of Ancestral Domain (CAD) titles right and left, without clear surveys and even if IP titles are “qualified titles,” i.e., subject to prior rights. There’s also no central registry for IFMAs (Integrated Forest Management Agreements), CADTs, and similar rights over the forest. There’s just property rights mayhem and uncertainty facing investors.

The problem of property rights uncertainty and overregulation similarly affects agriculture. The rural land markets are overregulated, and therefore agricultural productivity is poor. Efficient farmers, for example, are prohibited from buying out inefficient ones due to the land retention limit of five hectares stipulated in the Comprehensive Agrarian Reform Law. In other words, a farmer making good money and making the land productive is prohibited from buying the land of a neighboring farmer who is much less efficient and unproductive.

Land consolidation through leasing is also prohibited or discouraged. Agrarian Reform Beneficiaries (ARBs) with outstanding debts to the Land Bank are prohibited from selling or leasing out the land. Most of these ARBs (about 75%) are unable to pay the amortizations so their farms, which are the most productive since they were the first ones targeted under CARP, are excluded from the leasing market.

The result of this over-regulation is land fragmentation, which, according to Canadian economists Tasso Adamopolous and Diego Restuccia in a paper published in the US National Bureau of Economic Research, has caused a drop in Philippine farm productivity by 17%. In other words, while peasants become landowning farmers, they became poorer. No wonder our agricultural growth can’t even match population growth and the country has become a big importer of food.

5. Labor rigidities and plight of labor-intensive industries. The country hasn’t industrialized. Services dominate the economy. The economy is suffering from development progeria, according to National Scientist Raul Fabella, or premature aging because it has bypassed the manufacturing stage to go immediately into a service economy.

The problem is that much of the services in our service economy consist of low-productivity, low wage work, such as selling fast food or delivering packages. Higher productivity, higher wage jobs are in manufacturing, but labor-intensive manufacturing fled the country and found more favorable environments in Vietnam, Bangladesh, and other countries, even though nearly a quarter (a third since the pandemic began) of the labor force are unemployed and underemployed.

Here again is a contradiction: the country has a large labor pool, much of which is young and idle, but investors aren’t coming in here to make use of our large English speaking labor force despite labor scarcity and ageing population in many countries. Why? The answer lies in labor rigidities: inflexible rules built into the labor code that discourage employment.

These labor rigidities consist of high minimum wages relative to productivity and strict rules guaranteeing labor security and permanency after a probationary period of a mere six months. The fact that entry level wages are close to average wages in the Philippines is an indication that entry level wages are too high for unskilled, low level wage work.

Investors in labor-intensive industries also must contend with costly and strict standards for labor permanency after a mere six months. Labor disputes can be costly, especially if the decisions are made many years after the alleged illegal dismissals.

Another rigidity that discourages investment in labor-intensive industries, and which mainly penalize MSMEs rather than monopolists is the sheer number of holidays in the country — the most in Asia. With holidays numbering not less than 26 a year, employers are effectively paying 14 months, compared to paying only 12 months in other countries.

(To be continued.)

Calixto V. Chikiamco is a business process outsourcing and internet entrepreneur, a book author, and a writer on political economy. He serves as a property rights consultant to The Asia Foundation and is currently president and co-founder of the Foundation for Economic Freedom. He is a board member of the Institute of Development and Econometric Analysis.

totivchiki@yahoo.com

Climate and coal, PSALM, NEA and NGCP

November 1, 2021 | 6:03 pm

coal-power plant — ROBERT LINDER-UNSPLASH

Today is the second day of the 13-day UN Climate Conference 2021 in Glasgow, UK. Until last week, many news outlets from print, TV, and online reported many alarmist climate scenarios of what would happen unless the world gets out of fossil fuels especially coal. Consider these recent reports in BusinessWorld, (I included some local energy stories):

• “Funding seen insufficient to meet climate commitments” (Oct. 26).

• “House bill extending PSALM corporate life approved in committee” (Oct. 27).

• “Philippine Energy Plan seen inadequate for meeting climate pledges” (Oct. 27).

• “NGCP ordered to procure ‘sufficient’ ancillary services” (Oct. 27).

• “ADB sees coal-fired plant retirement scheme saving 200M tons of CO₂” (Oct. 28).

• “Coal capacity pipeline halved after government ban” (Oct. 28).

The endless attacks against coal (which provides 56-57% of total electricity generation in the Philippines yearly) and endless pushing for wind-solar (which provides only 2.5-3% of total power generation yearly) is really weird.

The ADB has joined the No-coal-financing bandwagon, now with an acquire-retire-coal-soon scheme and targeted the Philippines, Vietnam, and Indonesia. But the ADB cannot and will not offer that scheme to China and India because they cannot bully these two big coal consumers but they can bully smaller ASEAN countries.

China’s coal consumption is so big that the combined coal consumption of Indonesia, Vietnam, and Philippines in 2020 of 6,028 Petajoules (1 PJ = 277.78 gigawatt-hours) was near China’s coal consumption of 5,046 PJ in 1969 and 6,947 PJ in 1970. The US’ 2020 coal use of 9,203 PJ was equivalent to China’s coal use of 9,569 in 1975 (see Table 1).

The bad news for the Glasgow climate meeting is that China’s Xi and Russia’s Putin are not attending and not sending any delegations. In the second report from the list above, about the Power Sector Assets and Liabilities Management Corp. (PSALM), extending its life by another 30 years until 2056, means that it will be a forever bureaucracy. It might even become bigger by re-acquiring already privatized power plants. Then we will go back to the old National Power Corp. days of losing money by “selling cheap power” and just passing all the losses to taxpayers. Let us review the budget and subsidies of the Department of Energy (DoE) and its attached corporations. The most tax-hungry are the National Electrification Administration (NEA) with P5 to P13 billion in subsidies in 2019 and 2020, followed by PSALM with P16 billion in subsidies for 2021-2022 (see Table 2).The NEA is a forever problematic corporation because it pampers and spoils inefficiently run and losing electric cooperatives (ECs) around the country, geographical monopolies that refuse to become private distribution utilities (DUs) and be under Securities and Exchange Commission monitoring. We now have many one-person corporations and yet these ECs with assets worth multi-millions do not want to become private corporations.

PSALM is supposed to bring more billions into the Treasury via the privatization of remaining government-owned power plants, but instead, PSALM will seek billions in subsidies and they intend to become a forever bureaucracy. In the third news report above, on the Philippine Energy Plan (PEP), Senator Sherwin Gatchalian plans to allocate taxpayers money for geothermal exploration — Why? Costly energy exploration is part of risks and rewards of business, taxpayers — who are already burdened with huge public debt that must be paid with higher taxes in the near future — must be spared.

In the fourth report, about the National Grid Corp. of the Philippines (NGCP) ordered to acquire sufficient ancillary services (AS), this should have been done many years ago. AS are effectively peaking plants, on standby to run anytime and whose energy is priced higher because they do not run 24/7, but they will provide energy security and stability, and having them avoids the situation of having frequent yellow-red alerts and near blackouts.

The NGCP has become a big monopoly and a pretender. Pretending to charge a “low transmission charge” but actually exposing electricity consumers nationwide to regular, annual yellow-red alerts of near or actual blackouts. The NGCP should have been long been penalized by the ERC and Congress, but because it is a huge monster monopoly — the only remaining nationwide monopoly in the country — it gets only an occasional slap on the wrist from the ERC.

Finally, we are accumulating huge public debt — P8.22 trillion in 2019, P10.25 trillion in 2020, P11.92 trillion in by September this year, rising by an average of nearly P200 billion per month. We may have P12.65 trillion by end-2021, and P14.5 trillion to P15 trillion by end-2022. These are huge debts that must not be passed on as huge tax hikes or new taxes to the public. One option is large-scale privatization of some government corporations and assets. Like PAGCOR (Philippine Amusement and Gaming Corporation), like many government power plants under PSALM (whose estimated assets in 2022 are P496.2 billion), the National Transmission Corp. (TransCo, with assets worth P324.9 billion), NPC (P52.0 billion), and NEA (P16.6 billion).

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

minimalgovernment@gmail.com

Why Christmas ornaments are about to get more expensive

November 1, 2021 | 5:32 pm

THIS YEAR, the Chinese city of Yiwu — the world’s biggest hub for the manufacture of plastic reindeer, twinkle lights and other Christmas paraphernalia — is feeling a Grinch-like pinch.

Factories are being hit by a shortage of raw materials that’s raising their production costs, and once goods are on their way shipping snarls are delaying their journey to the store shelves of the West. Since mid-October, Yiwu has also been affected by China’s ongoing electricity crunch, which has forced manufacturers to hunt for generators, or suspend production altogether.

“I’m so stressed I couldn’t sleep,” said Lou Ting, the owner of a Christmas ornament factory, as she worked her storefront in Yiwu’s biggest wholesale mall. “It should be great that we’re getting more orders than last year, but there are so many uncertainties slowing the delivery process — and there’s nothing we can do,” said Ms. Lou, who like many in Yiwu is battling manufacturing delays and record freight prices as she works to get candy canes and pine cones shipped to the US and Europe.

Responsible for 80% of the $6.1 billion in Christmas products exported annually from China, the city some 175 miles southwest of Shanghai is a microcosm of the challenges faced by manufacturers and retailers around the world as they end another year plagued by disrupted and distorted supply chains. Home to just over 1 million people, about 45% of what Yiwu makes goes to the US alone.

The majority of orders had already been shipped from Yiwu when power cuts started adding to the travails manufacturers have had to grapple with in 2021, said Cai Qinliang, secretary-general of the Yiwu Christmas Products Industry Association.

But the delays being seen at sea and at ports, as well as the surge in prices for metals and plastic, mean consumers may still have to pay more for their baubles and tinsel this year, according to Chen Jiang, owner of a factory that mainly produces Christmas lights and trees.

Mr. Chen has raised his prices by more than 10% since June due to surging materials costs. The electricity cuts, which forced his factory to reduce production to just three days a week in October, just added to his running expenses at the tail end of the high season, he said. The factory had no lights on during a recent visit.

Business was slashed in half last year, as the pandemic threw the global shipping industry into disarray and major customers canceled orders. Things looked to be picking up in March as retailers who used up back inventories to get through Christmas 2020 rushed to place orders earlier than usual to ensure they were well prepared for the coming season.

Instead, manufacturers’ difficulties were compounded, with soaring commodity prices contributing to the fastest factory-gate inflation in China in 26 years in September.

“Ultimately the costs will be borne by consumers,” said Ding Shuang, chief economist for Greater China and North Asia at Standard Chartered Plc. “Exporters and global brands may only absorb costs temporarily, but companies will not do business if they are making a loss. If more companies exit the market, supply will decline, and prices will increase further as the remaining producers will have greater pricing power.”

At Lyu Xiaofeng’s wholesale Christmas tree store, most business has been moved online amid international travel curbs. In previous years, goods spilled onto the sidewalk to catch the attention of visiting buyers from the US

While sales this year are back at pre-Covid levels, Mr. Lyu said he wasn’t sure he’d make much profit as the price of steel — used to make the trunks of his faux trees — has almost doubled from last year. Plastic price surges have also significantly raised packaging costs, he said. Mr. Lyu expects profit margins, which used to reach 20% at their peak but have declined to less than 10% in recent years, to be even thinner this year.

More than 1 million yuan’s ($157,000) worth of orders that would have normally gone out by mid-October haven’t been shipped yet due to logistics delays, he said. The power cuts mean he’s reliant on a generator that’s running 10 hours a day and he may not be able to get the goods shipped by mid-November, the last real deadline for getting Christmas goods to the West.

“We keep explaining to our clients that we either need to raise prices or have to cancel the orders,” he said, sitting in a store devoid of customers, unable to enter China because of pandemic border restrictions. Instead, Mr. Lyu typed away on WeChat, answering inquiries from clients. — Bloomberg

Japan ruling party’s election win takes pressure off PM for bigger spending

November 1, 2021 | 5:31 pm

Japan-Kishida — Japanese Prime Minister Fumio Kishida — KYODO/VIA REUTERS

TOKYO — The ruling party’s solid victory in Japan’s parliamentary election on Sunday will likely take pressure off Prime Minister Fumio Kishida to inflate the size of a pandemic-relief stimulus package, easing market fears of massive bond issuance.

Mr. Kishida has pledged to compile a fresh stimulus package worth “several tens of trillion yen” to cushion the economic blow from the COVID-19 crisis, but so far offered few details including the exact size of spending and how to pay for it.

During the election campaign, he rebuffed opposition calls for even bigger spending and a cut to the sales tax on the view Japan must not lose sight of the need to rein in its huge public debt that has ballooned to twice the size of its economy.

With his Liberal Democratic Party (LDP) having maintained its single-party majority in the powerful lower house, Mr. Kishida will face less pressure to heed such calls, as well as a proposal by coalition partner Komeito for blanket cash payouts to families with children aged 18 or lower, analysts say.

“Japan may have suffered flat or slightly negative economic growth in July-September. As a political gesture, a spending package around 30 trillion yen ($263 billion) would suffice,” said Saisuke Sakai, senior economist at Mizuho Research and Technologies.

“Having won enough seats, Kishida doesn’t need to inflate the spending package to counter opposition proposals for bigger fiscal stimulus,” he said.

The big winner in the opposition was the Japan Innovation Party, which came in third in the lower house after the LDP and the opposition Constitutional Democratic Party of Japan with calls for more focus on deregulation than pork-barrel spending.

“The Innovation Party’s strong showing is a sign of the rising popularity of a small government,” said Yoshimasa Maruyama, chief market economist at SMBC Nikko Securities. “The Japanese public said no to excessive fiscal expansion.”

PRICED IN
At a news conference on Monday, Mr. Kishida said he will compile the stimulus package in mid-November and aim to pass a supplementary budget through parliament by the end of this year.

“We’ll have to issue bonds to fund necessary emergency steps to help people’s livelihood,” Mr. Kishida said, without commenting on the size of spending or bond issuance.

Markets have roughly priced in 30 trillion yen as a ballpark size of the package, which may lead to issuance of fresh debt but not enough to jolt financial markets.

Mr. Kishida hopes to deliver the package in time to support an economy struggling to emerge from the pandemic-induced doldrums.

While state of emergency curbs were lifted on Sept. 30, consumption has yet to fire up. Supply constraints and rising input costs have disrupted factory output, weighing on the export-reliant economy.

Analysts polled by Reuters expect Japan’s economy to have grown an annualized 0.8% in the third quarter, before accelerating to 4.5% this quarter.

Sunday’s election did leave some scars. Several LDP executives lost seats, including secretary-general Akira Amari, who is among masterminds of Mr. Kishida’s growth strategy and a driver of the party’s focus on economic security.

While Mr. Amari still won proportional representation, domestic media have reported he would step down from the party post.

“The impact of Amari’s loss on economic security policy would be huge,” said Yasuhide Yajima, chief economist at NLI Research Institute. “Regardless of whether he stays on at his post or resigns, there would be uncertainty over the fate of the steps he tried to pursue. — Reuters

LA Lakers in dominant win; KD ejected in rout of Pistons

November 1, 2021 | 5:04 pm

CARMELO Anthony scored 23 points and Russell Westbrook added 20 points, nine assists and eight rebounds as the Los Angeles Lakers routed the visiting Houston Rockets, 95-85, on Sunday.

LeBron James added 15 points, eight assists and seven rebounds for the Lakers, who led by as many as 28. The teams meet again at the Staples Center on Tuesday.

Anthony made 5-of-8 attempts from three-point range in 25 minutes and is averaging 25 points over his last three home games. Anthony Davis recorded 16 points and 13 rebounds.

Eric Gordon scored 17 points for Houston and Christian Wood chipped in 16 points and 13 rebounds. The Rockets committed a season-high 25 turnovers while shooting 21.4% (6-of-28) from beyond the arc.

Anthony made 3-of-4 three-point attempts in the first quarter to help the Lakers take a 27-15 lead.

Los Angeles set the tone by forcing eight turnovers in the first 12 minutes and limiting Houston to 27.8% (5-of-18) shooting.

The second quarter brought more of the same from the Lakers, whose highlight reel included a reverse dunk by James that extended the lead to 40-24 with 7:05 remaining in the half.

The Lakers were 8-of-15 shooting from three-point range in the first half and took a 54-35 lead into the break.

Los Angeles has won two straight since blowing a 26-point lead in a 123-115 loss to Oklahoma City last Wednesday.

The Lakers avoided a similar collapse against the Rockets and moved ahead 61-44 on James’ dunk with 7:31 to play in the third quarter.

Dwight Howard sat out with neck stiffness for Los Angeles, which led 75-54 after three quarters.

Kevin Porter, Jr. had 13 points and nine rebounds for Houston while Kenyon Martin, Jr. scored 12 points in 16 minutes off the bench.

Houston pulled within 11 points with 3:58 remaining after Martin capped a 21-4 run with an alley-oop dunk.

Los Angeles quickly responded with five straight points to help seal the Rockets’ fourth straight loss.

KD EJECTED
Meanwhile, Kevin Durant scored 23 points before being ejected for a flagrant foul late in the third quarter as hosts Brooklyn Nets beat the Detroit Pistons, 117-91, on Sunday night.

Durant was ejected with 3:23 remaining in the third quarter and the Nets leading 85-68. He was thrown out when his right forearm and elbow hit Kelly Olynyk’s face just outside the paint.

Olynyk made the two free throws after the flagrant 2 foul, and Cory Joseph hit a basket, but the Nets ended the third period on an 11-2 run and led 96-74 heading into the fourth.

Durant shot 10-of -3 from the field before getting ejected.

James Harden produced his 59^th career regular-season triple-double with 18 points, 12 assists and 10 rebounds as the Nets led by as many as 30. It was Harden’s 13^th triple-double with the Nets.

The Nets shot a franchise-record 65.3% from the field, making 47-of-72 attempts. Their previous high was 65.2% on April 17, 1982, at Detroit.

Brooklyn’s LaMarcus Aldridge added 16 points on 7-of-8 shooting from the field after getting his 20,000^th career point on Friday. DeAndre Bembry added 15 points and Joe Harris 12.

The Nets won consecutive games for the first time this season thanks to their torrid shooting display.

The Pistons rested rookie Cade Cunningham. The top overall pick made his debut by playing 19 minutes on Saturday in his return from a sprained right ankle.

Joseph led the Pistons with 13 points and Josh Jackson added 12 as Detroit shot 40.5% from the field. Jerami Grant was held to 11 points on 5-of-15 from the floor. — Reuters

Houston Astros force Atlanta Braves to World Series Game Six

November 1, 2021 | 5:04 pm

LOS ANGELES — The Astros overcame an early four-run deficit to beat the Atlanta Braves, 9-5, and force a World Series Game Six in Houston on Tuesday.

The Braves loaded the bases in the first inning on Sunday and Adam Duvall hit a grand slam off Framber Valdez for a 4-0 lead that electrified the Atlanta crowd.

The Astros got on the board in the top of the second on an RBI (run batted in) double by Alex Bregman and cut the lead in half on a sacrifice fly by Martin Maldonado.

The Astros scored twice in the third on an RBI double by Carlos Correa and a groundout by Yuli Gurriel that plated Michael Brantley to level the contest at 4-4.

Freddie Freeman put the Braves in front in the bottom half of the third with a 460-foot solo shot over the center field fence.

But the Astros hitters displayed more patience at the plate than they did in the previous two games and tied the scores when Braves reliever AJ Minter walked Maldonado with the bases loaded.

On the next pitch, pinch-hitter Marwin Gonzalez floated a single into left field that scored two runs to give the Astros their first lead of the game at 7-5.

The Astros tacked on runs in the seventh and eighth innings to hand the Braves their first home loss of the postseason.

Game Six is on Tuesday in Houston with the Braves holding a 3-2 advantage in the best-of-seven Fall Classic. — Reuters

TnT Tropang Giga looking towards more PBA success

November 1, 2021 | 5:04 pm

Champs — FOLLOWING their conquest of the PBA Philippine Cup title and return to the top of the local professional league, the TnT Tropang Giga are looking towards more success moving forward. — PBA IMAGES

FOLLOWING their conquest of the PBA Philippine Cup title and return to the top of the local professional league, the TnT Tropang Giga are looking towards more success moving forward.

Immediate on their sights is the next tournament in the Philippine Basketball Association (PBA) calendar which is targeted to start late this month possibly back in Metro Manila.

TnT is aiming to make it back-to-back titles after waiting for six years to be crowned champions anew.

“As much as we want to savor this (Philippine Cup title), we’re now looking forward to the next. On to the next, and I hope we can compete well again,” TnT coach Chot Reyes following their 94-79 Game Five victory on Friday that completed for them a 4-1 finals series win over the Magnolia Pambansang Manok Hotshots.

The win ended for the Tropang Giga a six-year title drought and gave them their sixth All-Filipino title in franchise history and eighth championship overall in the PBA.

TnT dominated Magnolia in the series on solid collective effort and desire to continuously better itself.

It is the same track it wants to establish in the next conference, which is being eyed as an import-laced tournament.

The Tropang Giga are looking at their options for possible reinforcement, including bringing back former import Terrence Jones, who helped the team reach the finals of the Commissioner’s Cup in 2019.

Apart from finding the right import, TnT is also banking on having its core playing on top of their game and staying resilient and hungry.

The PBA is looking to kick off the second conference this month in line with its push two have at least two tournaments this season as opposed to the lone conference held in 2020 because of the pandemic.

It is angling to have the action back in the National Capital Region after finishing the Philippine Cup in a semi-bubble in Bacolor, Pampanga.

The league is currently in talks with pertinent government agencies regarding the staging of the second conference while the teams are also girding for the possible start. — Michael Angelo S. Murillo

Jonas Sultan proving his worth as a fighter

November 1, 2021 | 5:04 pm

JONAS Sultan may not have the rep so far of some of the top boxers in the country, but he is a capable fighter and he showed it in his fight against Puerto Rican up-and-comer Carlos Caraballo, Sunday (Manila time), in New York.

Mr. Sultan, 29, claimed the vacant World Boxing Organization (WBO) Intercontinental bantamweight title with a unanimous decision victory over Mr. Caraballo in their 10-round showdown at the Hulu Theater in Madison Square Garden on Sunday (Manila time).

The Filipino bet, who was installed as an underdog entering the fight, knocked down his opponent four times throughout the course of the contest and wound up a 94-93 winner in all three judges’ scorecards.

It was Mr. Sultan’s third straight victory and second for the year after his knockdown win over American Sharone Carter in August.

For local boxing analyst Nissi Icasiano, more than keeping his winning streak going, the Caraballo win showed Mr. Sultan’s abilities as a solid fighter and potential to go places if provided the opportunities needed.

“Sultan was intended to be another pedestrian opponent for an up-and-coming boxer like Caraballo. But in the fight, Sultan insisted that he’s nobody’s footstool and flipped the script,” said Mr. Icasiano when asked by BusinessWorld for his thoughts post-fight.

The analyst highlighted how Mr. Sultan showed perseverance, stayed the course and remained go-getting even when Mr. Caraballo put up a tough resistance.

“The Filipino just wanted it so bad and worked hard to get the win,” Mr. Icasiano said.

The analyst, however, noted it remains to be seen if the win would open bigger opportunities for Mr. Sultan immediately just as he said the boxer’s handlers at MP Promotions should build on the gains its fighter achieved in his latest triumph.

“I just hope that MP Promotions can sustain the momentum and ride on it at the same time. It’s too early to say if he will get a title shot. He’s ranked No. 9 in the WBA (World Boxing Association), but the Intercontinental title that’s now in his possession came from WBO. He’s nowhere to be found yet in the WBO bantamweight rankings, but that win may break him in the WBO’s rankings,” Mr. Icasiano said.

Adding, “I would like to see Sultan in a 12-round fight first against an opponent who’s outside the Top 10 or Top 15 before taking on ranked fighters that will help him secure a world title shot.”

Mr. Sultan now sports an 18-5 record, 11 wins coming by way of knockout. — Michael Angelo S. Murillo

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