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Decarbonizing for a better working world

(First of two parts)

Climate change is an urgent issue and taking action is critically necessary to limit and reduce global carbon emissions. Businesses in particular will need to consider their own carbon footprint. With collective technological capabilities, financial resources, innovative capacity and global reach to search for solutions towards a low-carbon future, many businesses worldwide are setting carbon reduction targets, progressing towards net zero. In fact, just last week EY Global Ltd. (of which SGV is a member firm) announced its plans to achieve negative carbon emissions in 2021 and net zero by 2025.

Combatting climate change is a unique challenge for each organization, but it is clear that a collective effort is crucial to avert disaster. With the ongoing pandemic reinforcing the drive towards a sustainable future, transitioning to decarbonization is more vital than ever to achieve long-term resilience for organizations as well as to aid economic recovery.

THE COSTS AND IMPACT OF CLIMATE CHANGE
The Economist estimates that by 2050, the global economy will be 3% smaller due to a lack of climate resilience, potentially raising the cumulative cost of damages to $8 trillion. Research from the EY Megatrends 2020 report also reveals that many Asian countries face high vulnerability to rapidly rising sea levels, flooding, and heat waves. Without clear action to decarbonize economies, hundreds of millions of people may be victims of coastal flooding by 2050.

Domestically, the increasingly worse effects of climate change directly impact the vulnerable agriculture and fishing industries in the Philippines. The Philippine Statistics Authority (PSA) said in a report that the production costs for crops and fish have increased between 2017 and 2019 compared to the period between 2016 and 2018. This alarming trend resulted in much lower income for farmers and fishermen.

MOUNTING PRESSURES FOR CARBON REDUCTION
Businesses are more cognizant of the significance of both decarbonization strategies and climate-related investments in achieving long-term sustainable growth. A rise in new industries to support clean technologies can be expected, while emission caps and carbon pricing could transform taxation and invert cost structures.

Certain governments in the Asia-Pacific have recognized the need to mitigate the disruptive risks of climate change. For example, Japan committed to achieve carbon neutrality by 2050, and China, the largest carbon emitter in the world, announced its intent to establish peak emissions by 2030 and reach net zero emissions by 2060.

The findings from the 2020 EY Climate Change and Sustainability Services (CCaSS) Institutional Investor survey indicate that investors need to look into long-term value by critically assessing company performance through environmental, social and governance (ESG) factors, including climate change.

In order to meet investor expectations and appear future-proof, companies need to prioritize means of analyzing the opportunities and risks of climate change. They will also need to prioritize how to improve disclosure of their sustainability performance, or else risk the possibility of losing access to capital markets.

The decarbonization of businesses is further accelerated by consumers, particularly Generation Z, who are also increasingly aware of how their choices impact climate change. Gen Z is becoming even more influential as stakeholder capitalism continues to rise. They believe in the essential role business plays in addressing climate change and prioritize businesses that protect the environment and utilize sustainable supply chains.

SEC REQUIREMENT FOR SUSTAINABILITY REPORTING
In a 2019 article, Sustainability reports: fad or for good? SGV Partner Benjamin N. Villacorte had articulated that companies are encouraged not to wait for sustainability reporting standards or a regulatory requirement to be mandatory.

Recall that in 2019, the Securities and Exchange Commission (SEC) required publicly listed companies (PLCs) to submit their Sustainability Report with their 2019 Annual Report in 2020. The issued memorandum detailed that the guidelines will be adopted on a “comply or explain” approach for the first three years upon implementation. By 2023, PLCs are required to comply with Sustainability Reporting Guidelines specified in the memo, or else be penalized for an Incomplete Annual Report (under SEC Memorandum Circular No. 6, Series of 2005).

This pronouncement reiterates the need for structured sustainability reporting and for companies to manage their non-financial performance towards achieving the universal target of improved sustainability. For it to be effective and useful, companies should not only view sustainability as an exercise in compliance, but as their responsibility to earn their social license to operate.

BUILDING A DECARBONIZED FUTURE
Given the foreseeable impact of climate change alongside the mounting pressure from investors, employers, leaders, consumers and policymakers to address it, organizations are encouraged to embrace the decarbonization imperative. Adopting a decarbonization strategy will bring about the goodwill of investors, employees and consumers, and also build long-term, sustainable value.

In the second part of this article, we will discuss how EY, as part of its commitment to sustainability, will tackle the challenge of becoming carbon negative by 2021.

This article is for general information only and is not a substitute for professional advice where the facts and circumstances warrant. The views reflected in this article are the views of the author and do not necessarily reflect the views of SGV, the global EY organization or its member firms.

 

Clairma T. Mangangey is the Climate Change and Sustainability Services Leader of SGV & Co.

Duterte urged to allow navy to join drills in South China Sea

PRESIDENT Rodrigo R. Duterte should let the Philippine Navy join war games in the South China Sea after China passed a law allowing its coast guard to fire at foreign vessels in the disputed waterway, political analysts said.

“The President should now allow the Philippine Navy to join drills in the South China Sea, especially that Beijing no longer honors diplomatic protests,” Marlon M. Villarin, a political science professor from the University of Santo Tomas (UST), said in a Zoom Meetings interview. “We have to raise the flag in the disputed waters.”

The Chinese law allows its coast guard to “take all necessary measures, including the use of weapons when national sovereignty, sovereign rights and jurisdiction are being illegally infringed upon by foreign organizations or individuals at sea.”

Mr. Duterte has barred the military from joining naval exercises in the South China Sea to keep a lid on tensions, but critics see it as allegiance to China.

Mr. Villarin said the Philippines and other claimants should sue China before an international tribunal once it enforces its law.

Renato C. de Castro, an international studies professor at the De La Salle University (DLSU), said the Chinese law had killed any plans to come up with a code of conduct in the South China Sea.

Manila should also use its military pact with the United States such as the visiting forces agreement as a way of flexing its military muscles, he said via Zoom. Mr. Duterte should order the Philippine Coast Guard to deploy ships in the area and “raise our flag.”

Presidential Spokesperson Harry L. Roque, Jr. earlier said the Philippines would try to remain friendly to Beijing while protecting the national interest.

Mr. Castro said the government should not sacrifice its territorial rights in exchange for coronavirus vaccines from Chinese drug makers.

“We should not allow them to leverage their vaccines to put us on a defense slip,” he said. “Why should we sacrifice our territories for vaccines with a 60% efficacy rate?”

The Philippines last week filed a diplomatic protest against China. Foreign Affairs Secretary Teodoro L. Locsin, Jr. deemed the passage of the measure a “verbal threat of war.”

“It’s time that we also deploy our coast guard,” Mr. de Castro said, noting that the Philippines had yet to deploy 12 patrol vessels from Japan.

The law passed by the National People’s Congress standing committee of China will allow its coast guard to use “all necessary means” against foreign vessels that threaten them, according to the South China Morning Post.

Mr. de Castro said the Philippines could also use its alliance with the US even if it leads to tensions at sea. The latest Chinese law gives the Philippines more reason to renegotiate the visiting forces agreement (VFA) with the US, he added.

Senator Aquilino L. Pimentel III said the Philippines could work with other claimants for a “coordinated Association of Southeast Asian Nations response,” including speaking with China to prevent “untoward incidents.”

“Form a Department of Foreign Affairs think tank to propose a rule in international law to prohibit the militarization of disputed waters and the use or threat of arms,” the lawmaker, who heads the Senate foreign relations committee, said in a Viber message at the weekend.

Mr. de Castro said China was likely to ignore this. “You don’t need another law because what China would do is continue violating international law.”

The United Nations Permanent Court of Arbitration in 2016 favored the Philippines in a lawsuit that rejected China’s claim to more than 80% of the South China Sea based on its nine-dash line drawn on a 1940s map.

China has rejected the ruling but continues to negotiate with the Philippines and other Southeast Asian nations to come up with a code of conduct. — Kyle Aristophere T. Atienza and Charmaine A. Tadalan

Philippines to get 5.6M vaccines from Pfizer and AstraZeneca in Q1

By Vann Marlo M. Villegas, Reporter

THE PHILIPPINES will take delivery of at least 5.6 million doses of coronavirus vaccines from Pfizer, Inc. and AstraZeneca Plc this quarter under a global initiative that ensures equal distribution, according to the country’s vaccine czar.

The country will get 117,000 doses of the Pfizer vaccines in the middle of February, Carlito G. Galvez, Jr. said in a statement on Sunday, citing a letter from Aurelia Nguyen, managing director of the World Health Organization’s (WHO) coronavirus disease 2019 (COVID-19) Vaccine Global Access facility.

He also said the government would receive 5.5 million to 9.3 million doses from AstraZeneca in the first half. Mr. Galvez said the doses reflect the supply for the first two quarters as the drug maker awaits emergency use listing by the WHO.

“The arrival of these COVAX vaccines is a welcome development as we await the vaccines that we have negotiated, which are expected to be delivered in the succeeding second, third, and fourth quarters of this year,” he added.

The local Food and Drug Administration (FDA) has approved the emergency use of Pfizer and AstraZeneca vaccines.

Russia’s Gamaleya Research Institute of Epidemiology and Microbiology, China’s Sinovac Biotech Ltd. and India’s Bharat Biotech also have pending applications.

Mr. Galvez said the vaccine would be first given to health workers, medical-related personnel and other frontliners. The government targets to get 148 million doses of vaccines this year for 70 million Filipinos.

The Department of Health (DoH) reported 2,103 coronavirus infections on Sunday, bringing the total to 525,618. The death toll rose by 80 to 10,749 while recoveries increased by 11,653 to 487,551, it said in a bulletin.

There were 27,318 active cases, 87.7% of which were mild, 5.5% did not show symptoms, 3.3% were critical, 2.8% were severe and 0.6% were moderate. About 7.3 million Filipinos have been tested for the coronavirus as of Jan. 29, according to DoH’s tracker website.

Meanwhile, 48 people who had close contact with patients positive for a new coronavirus strain have tested negative for the more contagious variant, DoH said, easing worries about further infections.

The Philippine Genome Center (PGC) tested only 48 samples under the fourth batch of gene sequencing because it had run out of reagents, the substance it uses for chemical analysis, the Department of Health said in a statement at the weekend.

“The PGC is also set to sequence another 48 samples this coming week, including samples from the Cordillera Administrative Region and other targeted areas, while waiting for the kits and reagents for genomic sequencing,” it added.

Of the 48 samples tested, 23 came from Metro Manila, mostly from Quezon City; 19 from the Calabarzon region, mostly from Laguna; four from the Cordillera region; and two returning migrant Filipinos, DOH said.

Seven of the patients have recovered, and the rest were either mild cases or did not show symptoms, it added.

There were 17 cases in the Philippines of the new strain first detected in the United Kingdom.

The coronavirus has sickened more than 103.2 million and killed about 2.2 million people worldwide, according to the Worldometers website, citing various sources including data from the World Health Organization. About 74.8 million people have recovered, it said.

Nationwide round-up (01/31/21)

Coronavirus vaccines will be VAT-free under new tax law seen to hurdle Congress by Tuesday

VACCINES and medicines for the coronavirus disease 2019 (COVID-19) will be exempted from value-added tax (VAT) under the second package of the government’s proposed tax reform program, which is expected to be ratified by Congress on Tuesday. “Tuesday is okay. On Monday, we need the signatures (of both chambers of Congress),” Albay 2nd District Rep. Rep. José María Clemente S. Salceda told BusinessWorld Sunday when asked about the timeline of the bill’s ratification. Mr. Salceda released the draft Corporate Recovery and Tax Incentives for Enterprises (CREATE) Act to reporters Saturday, which indicates that COVID vaccines will be allowed duty-free importation along with medicines for treatment of the disease, and personal protective equipment (PPE). The CREATE Bill seeks to lower corporate income tax from 30% to 25% for large corporations and 20% for small and medium establishments (SMEs). Mr. Salceda said the House of Representatives and the Senate settled contested provisions of the measure last Saturday and the draft is ready for final reading. — Gillian M. Cortez

Gov’t to provide free occupational safety training to MSMEs

OCCUPATIONAL safety training for establishments will now be provided for free based on a new policy issued by the Department of Labor and Employment (DoLE). In a statement on Sunday, DoLE said Labor Secretary Silvestre H. Bello III issued the directive to help establishments comply with safety requirements, especially with the coronavirus pandemic. “We are waiving the training fees being charged to micro and small businesses, and those companies in distress,” Mr. Bello said. The Occupational Safety and Health Center under DoLE used to charge a fixed fee of P5,500 per trainee. Employers are mandated to provide occupational safety seminars and training to workers under Republic Act 11058 or the Occupational Safety and Health Standards Act. — Gillian M. Cortez

Regional Updates (01/31/21)

Cordova Mangrove Center with bird-watching deck launched

THE town of Cordova in Cebu’s Mactan Island now has a mangrove propagation center that also features a view deck for bird watching. The facility was funded by Metro Pacific Investments Foundation, the corporate social responsibility arm of Metro Pacific Investments Corp. (MPIC) and its subsidiary Cebu-Cordova Link Expressway Corporation (CCLEC). “We entrust this Mangrove Propagation and Information Center to the people of Cordova, under Mayor Mary Therese Sitoy-Cho, in the belief that they will use this to advance their environmental and economic agenda,” said MPIC Chairman Manuel V. Pangilinan in a statement following the facility’s inauguration last week. CCLEC is the proponent of the P30-billion Cebu-Cordova Link Expressway, an 8.5-kilometer toll bridge that will serve as an additional route between Mactan and Cebu City through the South Road Properties. The small town of Cordova is already a popular tourist destination for its dive site at the Gilutongan Marine Sanctuary, the 10,000 Roses Cafe, and the Lantaw Floating Restaurant. Metro Pacific foundation has previously set up two similar mangrove park/propagation sites, located in Alaminos, Pangasinan and Del Carmen, Siargao.  “Aside from being a point of convergence for mangrove information and research, we intend to sustain it through creating complimentary programs that highlight our rich and thriving ecotourism,” said Ms. Cho. MPIC is one of three Philippine subsidiaries of Hong Kong’s First Pacific Co. Ltd., the others being PLDT, Inc. and Philex Mining Corp. Hastings Holdings, Inc., a unit of PLDT Beneficial Trust Fund subsidiary MediaQuest Holdings, Inc., maintains an interest in BusinessWorld through the Philippine Star Group.

Nestlé collaborates with WWF PHL to address plastic waste pollution in Sorsogon

FOOD and beverage manufacturer Nestlé Philippines has partnered with World Wide Fund for Nature (WWF-PH) to tackle plastic waste pollution in Donsol town, considered a model eco-tourism destination for its sustainable program on whale sharks. The plastic waste program will extend assistance to the town’s community activities for women and a new barangay waste collection project. In a press release issued over the weekend, Nestlé Philippines said it would provide support to WWF-PH’s Plastic Smart Cities project, a $40-million (P1.92-billion) initiative that brings together cities and tourism spots in Southeast Asia, including the Philippines, in fighting plastic pollution. The multinational firm said that it would specifically support WWF-PH’s Kalipunan ng Liping Pilipina (KALIPI) for livelihood development, and the expansion of waste collection and segregation system. “We are thankful for this support from Nestlé Philippines in helping us expand our solution which aims to lessen plastic wastes by 20% in Donsol, while providing livelihood support to women. With this, we will be able to help create more upcycled products from plastics and reach a wider market,” KALIPI President Wilma D. Arevalo said in a statement. In April 2019, Nestlé Philippines said it is working towards making its packaging materials 100% recyclable by 2025. — Angelica Y. Yang

San Pedro Bay in Western Samar added to red tide list, Masbate cleared

SEVERAL parts of the Visayas remain contaminated with red tide, which makes all types of shellfish and Acetes sp. or alamang unsafe for human consumption. The affected areas list now includes San Pedro Bay in Western Samar, based on the latest shellfish bulletin released by the Bureau of Fisheries and Aquatic Resources (BFAR) on Jan. 29. Other red tide zones in the Visayas are: Dauis and Tagbilaran City in Bohol, Tambobo Bay, Negros Oriental; Daram Island, Zumarraga, and Cambatutay Bay in Western Samar; Calubian, Carigara Bay, and Cancabato Bay in Leyte; Biliran Islands; and Guiuan and Matarinao Bay in Eastern Samar. In Luzon, contaminated areas are Honda and Puerto Princesa Bays and Inner Malampaya Sound in Palawan, and Sorsogon Bay in Sorsogon. In Mindanao, red tide alert is up in Balite Bay in Davao Oriental; Lianga Bay and Hinatuan in Surigao del Sur; and Dumanquillas Bay in Zamboanga del Sur. On the other hand, Milagros in Masbate is now free from red tide contamination. Other marine species in red tide areas can be eaten with proper handling. — Revin Mikhael D. Ochave

Unrealistic economic forecasts

Frequent changes and unrealistic figures have made it difficult to believe the government’s economic forecasts.

Last year, the National Economic and Development Authority (NEDA), the Department of Finance, and the Bangko Sentral jointly adjusted their GDP growth forecast five times. Each time a new forecast was announced, we would be bombarded with reasons as to why we should be optimistic. Without fail, however, these reasons were debunked when the actual quarterly statistics were released.

In the early days of the enhanced community quarantine (ECQ), the trio of government agencies announced that the economy could still grow by .08% for the year. In May, they adjusted it to -3.4%. In September, they adjusted it yet again to -6.6%. Last month, they changed the forecast “with finality” to -8.3%. As expected, all forecasts proved exceedingly optimistic when the real numbers showed a contraction of 9.5%.

The frequent adjustments suggest either a lack of a real understanding of the situation, however volatile it may have been, or a deliberate effort to paint a rosier picture than the circumstances merit, even if based only on conjectures. I tend to believe the latter.

We still recall how the trio predicted a sharp spike in pent-up consumer demand when the ECQ was to be lifted. We remember their assurance of a spectacular ramp-up in infrastructure spending in the third quarter, the magnitude of which was enough to pull up the economy for the rest of the year. We took them at their word when they said that the government would hire 50,000 displaced workers as contact tracers so as to ease unemployment and to spur consumer spending. None of these happened.

Later on, statistics revealed that the increase in consumer demand was insignificant in Q2 and infrastructure spending actually contracted by 33% in Q3. As for the 50,000 contact tracers, well, we were told less than 5,000 have been hired.

This year, our economic managers have been at it again. The trio have been making the rounds of webinars proclaiming that the economy will grow by 6.5% to 7.5% in 2021 and between 8% to 10% in 2022. Again, they cite a spike in consumer demand, a ramp-up of infrastructure spending and an increase in OFW remittances. Almost in unison, economic think tanks from abroad as well as respected local economists debunked the forecast saying it was too optimistic, bordering on unrealistic.

The IMF published its forecast on the Philippines and pegged growth at just 6.6% in 2021 and 6.5% in 2022. Meanwhile, banking giant ING said that the economy could eke out growth of 6.5% in 2021 followed by a tepid expansion of 6% in 2022. Estimates of both financial institutions are significantly lower than government’s estimates for 2022.

Here at home, former NEDA Secretary Cielito Habito, opined that growth in 2021 will not exceed 5.5%. For his part, founder of the University of Asia & the Pacific and economic development author Bernie Villegas said that growth in 2021 will not exceed 4%.

Why is there a significant difference between the forecast of the government and everyone else? For those unaware, think tanks and professional economists use econometric models to forecast future trends, all of which are based on the same historical base data. The difference lies in the unforeseen variables imputed into the model. These include levels of new investments, trade activities, and consumption trends, among others. Government purposely skews its assumptions towards the best scenarios to paint a rosier picture in the hopes of it being self-fulfilling.

Much as I would like to be as optimistic, there are just too many factors that stand in the way of a quick recovery. Primary among them is the government’s vague and disorganized vaccination procurement and distribution plan. As we all know, herd immunity is vital to restore consumer confidence. It is also what is needed to revive certain sectors of the economy such as tourism, transportation, sports and entertainment, and services that require face-to-face interaction.

How far are we from achieving herd immunity? The Economic Intelligence Unit (EIU) provides the answer.

The EIU is a 75-year-old institution regarded as the world leader in business and economic intelligence. In a recent report, the EIU made its forecast as to when certain countries would achieve vaccination for 60% or more of its population. The analysis was based on the status of each nation’s vaccines procurements and the readiness of their logistics chains. Singapore and Taiwan are said to achieve mass vaccination by Q4 of 2021; Japan, South Korea, and Vietnam in Q2 of 2022; Malaysia and India in Q4 of 2022; Indonesia in Q3 of 2023; and the Philippines in Q4 of 2023, at the same time as Tonga, Bangladesh, and Samoa.

The findings of the EIU come as no surprise. Government’s handling of the pandemic was heavy handed, unscientific, impulsive, and muddled with political considerations. In fact, the Sydney-based Lowly Institute determined that the Philippines’ anti-COVID response to be the 79th most effective out of 98 countries evaluated. As usual, we lagged behind all our neighbors in the ASEAN.

While competent governments around the world spent the better half of 2020 preparing their logistics cold chains and mass vaccination plans, ours was preoccupied settling its petty revenge on ABS-CBN. While other governments used science-based testing, tracking, and curing protocols, ours imposed the world’s longest continuing lockdown with nary a scientific method. While other governments negotiated their vaccine procurement early on, ours did so belatedly and “mystifyingly” ended up with only one option — the Chinese-made Sinovac. It chose Sinovac even if it was the most expensive and with the least efficacy.

Other reasons why economist believe the next two years will be underwhelming include: the poor intake of foreign direct investments (it has been on a steady decline since 2017); government’s continued restriction of physical movement and retail activities; high unemployment and loss of productivity due the successive closure of large scale manufacturing plants (e.g. the Petron refinery, IMI Electronics in Cavite, Nissan Assembly, etc.); the continued closure of micro, small and medium enterprises and their inability to re-start; and, the high level of conservatism among banks and their hesitance to grant business and commercial loans. Of no help is the fact that the Department of Finance organized the smallest stimulus package in the region at just 5.88% of GDP.

The pandemic was an acid test of leadership and it exposed this government’s limitations. We are paying dearly for how the contagion was handled. Not only do we have to deal with one of the world’s most severe economic contractions, we also face the grim prospect of a long and hard recovery. It is a double whammy that will make us fall further behind the region’s development race. After being touted as Asia’s brightest star in the early part of the decade, we are back to being its sick man. Indeed, the fates of nations boil down to its leadership.

I speak for myself when I say I cannot subscribe to the excessively optimistic forecasts until the mass vaccination of our population is resolved. Only with mass vaccination and herd immunity can the economy run on all cylinders. Until such time, optimistic growth forecasts are but a smokescreen to mask the shortcomings of our leadership.

I would have expected our economic managers to be more pragmatic — more forthright with us all. They are our best and brightest, after all, and they know the real score. I can only surmise that they have to be team players and insulate this government from political blowback following this severe, self-inflicted, economic reversal.

 

Andrew J. Masigan is an economist

andrew_rs6@yahoo.com

Twitter @aj_masigan

Another way of solving the pork price crisis

 

Several national and local government agencies — the Department of Agriculture, the Department of Trade and Industry, the Metro Manila Development Authority, and the National Capital Region mayors — recommended that President Rodrigo Duterte order that pork prices be held below P300 a kilogram. Last I heard from household pork buyers was that the going retail price was reaching P400 a kilogram, about a 77% jump over its 2019 level.

That move, if taken by the President, is not a good start in solving the pork price crisis. As with price controls in the past — not just here but in other countries as well, and not just on food items but on other necessities like housing and medicines — a price cap does not solve the problem of rising prices of pork. On the contrary, it will only worsen it.

By fixing the price at below its market level, the government in effect taxes producers, causing supply to contract further and feeding more fuel to the price spike. The problem calls for assisting producers to produce more in order to restore normal levels of supply, and relieve pork buyers of high prices. Telling hog producers to sell scarce pork at below market value kicks them out of the pork business instead, and blows away our prospects of quickly normalizing production.

Price capping will not even help pork consumers, particularly the poorer ones, that it is intended to assist. Price freezes, particularly on essential food items, tend to be difficult to enforce. The measure will just create a parallel or black market for pork, the price of which exceeds their official level. If water seeks its own level, prices of essential food items will likewise gravitate to their respective equilibrium levels as dictated by the law of their respective supplies and demands. People will have to consume pork, and those who can find supply and afford its price will buy it. Those who cannot switch to substitutes like chicken meat and vegetables, bringing up their prices.

In the past, whenever we had price fixes on food items, retailers in wet markets were selling price-controlled items at prices they thought made most sense. Buyers then just accepted them as their families needed to eat, trashing government orders of freezing those prices. Yes, there were a few buyers who, thinking that laws can moderate the working of the economic law of supply and demand, warned retailers against violating official prices or face the consequences of ignoring price controls. Retailers simply told them to buy their food from the Departments of Agriculture or Trade and Industry. No arrests were made.

I am not condoning those acts against the law of the land, but I would not be surprised if the law breaking would be repeated should there be price controls imposed on pork, chicken meat, and vegetables. If they need to enforce price control on food items, the authorities would need to spend on enforcement, arresting violators. But that is like arresting jaywalkers on a very busy street that is heavily congested. It can be done if authorities have more informers and enforcers in every wet market and retail store. But what will it accomplish? It will only destroy the retailing of food items, aggravating further the shortage and price spike.

The more the government invests in enforcing the official price, the more the price cap looks like a wrecking ball destroying our pork production and marketing capability, evaporating the pork supply further in the process. In the end we all get a triple whammy with a price control on pork: pork producers will quit the business, pork buyers will be hungry and angry, and the authorities will waste public resources in enforcing an order that is difficult to enforce.

ADDRESSING THE SHORTAGE
The current pork price crisis stems from a sharp reduction of pork production starting about two years ago. As the Table accompanying this column shows, the country then produced about 1.625 million tons of pork. A year later, output nosedived to 1.608 million tons of pork. Which was not that bad and may have passed as one of those fluctuations we expect in agricultural production. But the fall persisted last year when output hit 1.331 million tons, a fall of about 17.23%.

We of course know that that is because of the African Swine Fever (ASF) outbreak. The spread of ASF to all the major island groups of the country is unfortunate, and is a testament to the weakened capability of our authorities in protecting our country from such destructive and contagious disease affecting our hog population. Let that be for now as I focus on alternative approaches to solving the pork price crisis.

Using data from the Table, the apparent per capita consumption from 2008 to 2018 is illustrated in the Figure accompanying this piece.

If there was no new supply of pork available in the market, per capita consumption would have fallen to 17.3 kilograms in 2019 and 13.5 kilos in 2020. That would certainly induce a lot of instability in our country considering that pork is a staple meat of our people.

Suppose we get the linear time trend of average pork consumption from 2008 to 2018, and project what their values may be in 2019 and 2020. Based on the linear equation defining the time trend, the country’s per capita consumption in 2019 and 2020 would be 18.001 and 18.243 kilos, respectively. Multiplying these numbers by the country’s population in these years, the demand for pork would be 1.946 million tons and 1.999 in 2019 and 2020 respectively.

Comparing these numbers with the apparent supply (local output and net imports), we have a shortage of 81,000 tons in 2019 and 516,000 tons in 2020. Those numbers may explain why pork prices have been spiraling. No price ceiling can remedy this problem. This problem has to be addressed with additional supply. Since local output cannot immediately expand because of ASF, we have to tap the rest of the world for additional pork.

The Department of Agriculture is aware of this solution and proposes to implement it with an expansion of the minimum access volume (MAV). This is the amount of pork our laws allow to be imported at a lower tariff of 30%. It is not really that low, but it is at least lower than the tariff on pork importation allowed without any volume constraints. The tariff on those imports is 40%.

Expanding the minimum access volume can help. But if the agriculture department expands the MAV by about 100,000 metric tons, the country will still have a deficit of about 400,000 metric tons. Pork prices will still go up, which in turn will put pressure on authorities to resort to an unenforceable price freeze.

Pork prices, even under this scenario, will still be at least 30% above world prices. That will not give consumers and processors enough relief. MAV may just moderate the price increases.

Why don’t we get rid of the MAV system and bring tariff rates down to 5%? The problem with the MAV is its archaic allocation system. Most of it is allocated to existing players, some of whom, like producers and existing large traders, have a conflict of interest in importing pork. How fast can they bring in imports when it is in their interest to slow down the flow of imports to increase their profits? A better approach is to let market competition decide on a better equilibrium price. Let us open up the import market some more and predictably, and bring down pork prices quickly like what we did with the rice price increase in 2019.

What about our hog producers? Producers will adjust to the new price structure. This can be an opportunity for them to become more competitive as they produce local pork at near world prices. Look at rice tariffication — there were those who said rice farmers would reduce rice output. So far, that seems to have not materialized. This year, despite the bad typhoons we had seen at the tail end of 2020, Agriculture Secretary William Dar announced that the country has a very good rice output. And rice imports, which spiked in 2019, started to moderate and adjust to the new equilibrium.

 

Ramon L. Clarete is a professor at the University of the Philippines School of Economics.

How the QAnon conspiracy seduces normal people

QANON is such a weird theory that it’s tempting to think humanity is getting dumber. But it’s better seen as a highly sophisticated way of manipulating people. QAnon may one day be considered a masterpiece of propaganda.

This cult-like belief revolves around a conspiracy theory in which prominent Democrats and Hollywood celebrities are systematically victimizing children in order to extract something called adrenochrome from their blood. They consume this substance, so the story goes, as both a youth elixir and a recreational drug.

People may believe the theory, or parts of it, are true, even if they don’t know that it’s called QAnon. In a December 2020 NPR/Ipsos poll, 17% of Americans said that they thought it was true that “a group of Satan-worshipping elites who run a child sex ring are trying to control our politics and media,” and another 37% said they weren’t sure.

Why would anyone believe this, let alone so many people?

One reason is that believers discover the details of this conspiracy theory for themselves by solving puzzles and finding clues called “drops.” Game designer Reed Berkowitz says he quickly recognized QAnon as a kind of a game known as an alternate reality game. These are fictional stories that send people out into the real world to gather clues. On the way, players encounter others who are engaged in the same hunt.

Berkowitz doesn’t just think QAnon is like a game — he thinks it is a game, though he says it was intended to fool people into thinking it’s real. When people find drops, they are meant to look like valuable, high-level leaks.

The drops are designed to make people feel a sense of discovery, something believers find highly rewarding. In a piece he wrote for Medium, Berkowitz argues that when people think they’ve found an idea themselves, they become attached to it. And they get pleasure from it.

When I talked to him by phone, he said alternate reality games use something called rabbit holes to send people in search of clues. The games can lead to phone calls and real meetings between players. Reality and fantasy blend, but the players recognize they are taking part in a game.

QAnon, he says, looks like something created with a purpose in mind. “I absolutely think that somebody is designing it and promoting it,” he says. The purpose is propaganda. The game leads people to distrust mainstream media, politicians, and medicine, including COVID-19 vaccination campaigns. It also leads them to antisemitic and racist beliefs. Players may or may not believe the literal truth of the blood-draining story, but they tend to be bonded by ideology and feelings of distrust.

The community reinforces those ties, says Berkowitz. “If you’re suddenly involved in this community of people who supports you and believes that you’re valuable… this keeps you coming back.” The game is designed to reward people with social credit when they figure out the “correct” answer, which is the answer the QAnon designer or designers had planned all along.

And of course, we’re more isolated than we’ve been in recent history — missing the diversity of social interactions that in normal life keeps us from falling into ideological rabbit holes.

Simon DeDeo, a social scientist at Carnegie Mellon University, says people too easily dismiss believers in conspiracy theories as stupid. And that makes it hard to understand why these explanations draw people in.

In a paper published in Trends in Cognitive Science, he and a colleague explore the different factors that make explanations valuable. One that applies particularly well to conspiracy theories such as QAnon is called co-explanation, an ability to link seemingly disparate phenomena with a single explanation. The world’s great scientific theories do it, too — from Darwin’s evolution to the theory of electromagnetism to quantum mechanics tying together matter and light.

Conspiracy theories also tie up lots of little loose threads this way, just like a satisfying whodunit. “What something like QAnon does is hijack that source of joy we get from solving a murder mystery,” DeDeo says. But conspiracy believers tend to put too much weight on co-explanation. “Fundamentally, they have the right values… These values are virtues mostly, except when the value is overemphasized,” he says.

Facebook, Reddit, YouTube, and Twitter are the perfect soil for this sort of thing to bloom, bringing together users seduced by the lure of discovery. If people are engaged in QAnon, social media gives them more, until people are storming the US Capitol.

Now that social media is becoming many people’s only social outlet, we can expect more conspiracy theories to spread.

There is no new normal without real-world social interactions. There’s only a new abnormal.

Listen to Faye Flam’s interviews with Berkowitz and DeDeo on her podcast, Follow the Science, available on Spotify, iTunes, or wherever you get your podcasts.

BLOOMBERG OPINION

Australia reopens NZ ‘travel bubble’

SYDNEY —  Australia reopened its “travel bubble” with New Zealand (NZ) on Sunday after the neighboring country reported no new locally acquired COVID-19 cases, but added new screening measures as it marked its longest infection-free run since the outbreak began.

The decision marks the resumption of the only international arrivals into Australia who do not require 14 days in hotel quarantine.

Australia had paused quarantine exemptions for trans-Tasman arrivals six days earlier after New Zealand reported its first new case in months.

Arrivals from New Zealand “are now judged to be sufficiently low risk, given New Zealand’s strong public health response to COVID-19,” acting Australian Chief Medical Officer Michael Kidd told reporters.

However, Australia would require screening of travelers from New Zealand before and after flights for the next 10 days, Mr. Kidd added, “given there is still a small risk of further associated cases being detected and with an abundance of caution.”

The resumption came as Australia marked two weeks without a locally acquired case of the virus, which has infected 29,000 in the country and killed 909.

Australia, which has closed its borders to all countries but New Zealand since March 2020, is now planning a vaccination program starting late February.

On Sunday, Health Minister Greg Hunt said the government would invite the country’s roughly 5,800 community pharmacies this week to apply for a federally-funded program to pay them to administer inoculations, along with doctors and hospital health workers.

“That means more points of presence for Australians in terms of where they can receive their COVID-19 vaccine,” Mr. Hunt said.

“This is potentially life-saving medication. The medicines can work with differing degrees of effectiveness, but all up, this can improve lives, extend lives, or save lives.”

The government plans to start vaccinating priority groups like older and indigenous Australians with a shot developed by Pfizer, Inc. and BioNTech SE from late February.

The plan also involves a vaccine developed by AstraZeneca Plc, although that product has not yet been approved by Australia’s Therapeutic Goods Administration. Pharmacists involved in the program would receive training to administer the AstraZeneca vaccine, with first shots planned in May, Mr. Hunt said.  Reuters

UK offers Hong Kong residents route to citizenship

HONG KONG — Hong Kong residents can apply from Sunday for a new visa offering them an opportunity to become British citizens after Beijing’s imposition of a national security law in the Asian financial hub last year.

The move comes as China and Hong Kong have said they will no longer recognize the British National Overseas (BNO) passport as a valid travel document from Sunday, Jan. 31.

Britain and China have been arguing for months about what London and Washington say is an attempt to silence dissent in Hong Kong after pro-democracy protests in 2019 and 2020.

Britain says it is fulfilling a historic and moral commitment to Hong Kong people after Beijing imposed the security law on the semi-autonomous city that Britain says breaches the terms of agreements under which the colony was handed back to China in 1997. The UK government forecasts the new visa could attract more than 300,000 people and their dependents to Britain. Beijing said it would make them second-class citizens.

The scheme, which was first announced last year, allows those with BNO status to live, study and work in Britain for five years and eventually apply for citizenship.

BNO is a special status created under British law in 1987 that specifically relates to Hong Kong.

China says the West’s views on its actions over Hong Kong are clouded by misinformation and an imperial handover. — Reuters

Germany now ordering vaccines for 2022

BERLIN — Germany is ordering vaccines for 2022 in case regular or booster doses are needed to keep the population immune against variants of COVID-19, Health Minister Jens Spahn said on Saturday, amid growing frustration in Europe at the slow pace of vaccination.

Speaking at an online town hall of healthcare workers, Mr. Spahn defended the progress made on procuring and administering vaccines, saying 2.3 million of Germany’s 83 million people had already received a dose.

European governments have faced criticism over supply and production bottlenecks as vaccine makers AstraZeneca, Pfizer and Moderna have all announced cuts to delivery volumes just as they were expected to ramp up production.

Germany — Europe’s largest economy — has been crippled by a second lockdown introduced in November, and many in the general public are looking enviously at the faster pace of vaccination in Britain, Israel and the United States.

“We are now actually ordering further vaccines for 2022, to have at least some on hand,” Mr. Spahn said. “Nobody knows if we’ll need a booster… With production capacities now being extended, we’ll order vaccines as a precaution. If we don’t need them, good, but if we do then they’ll be available.” 

Some of Germany’s powerful regional premiers joined the chorus of criticism of the federal government on Saturday, ahead of Monday’s meeting of a new vaccination task force that will bring national and regional players around the same table with pharma companies and European Union (EU) representatives.

Bavarian premier Markus Soeder proposed new rules allowing the state to have more say in directing vaccine supplies to those who need them most.

“We need an emergency vaccine economy in which the state sets clear rules,” he told Die Welt newspaper, calling for authorities to consider authorizing Chinese and Russian vaccines for use in Europe.

Authorities reported 13,321 new infections in Germany on Saturday and 794 deaths, though the number of cases per 100,000 people over seven days fell by three to 91. The government says the number must be below 50 to prevent hospitals from being overwhelmed. — Reuters

Terrafirma says it is trading star player to be more competitive

By Michael Angelo S. Murillo, Senior Reporter

ADDITION by subtraction.

That seems to be the reason behind the decision of Terrafirma Dyip in trying to send star player CJ Perez to another Philippine Basketball Association (PBA) team; a move that is currently the center of much talk in the league.

On Friday, the Dyip rocked the PBA with its decision to send top player and league scoring leader Perez to San Miguel for three role players and the Beermen’s first-round pick in this year’s rookie draft set for March 14.

It was a decision that brought out mixed reactions, particularly from the fans, with some expressing their disagreement to the deal, viewing it as “one-sided” that needed to be revised if not disallowed altogether.

The deal that will send Mr. Perez to San Miguel for role players Matt Ganuelas-Rosser, Russel Escoto, Gelo Alolino and the Beermen’s rookie pick (no. 8) in this year’s draft was already sent to the PBA office and is in the process of being evaluated by the league’s trade committee.

Speaking on The Chasedown program on Cignal TV on Saturday, Terrafirma governor Bobby Rosales moved to explain their decision to trade Mr. Perez, saying it is a not popular move but something needed to be done from their end.

The PBA vice-chairman said Terrafirma is looking to find the needed pieces to be “complete” and competitive, and after reviewing their program, they came to a conclusion to make the tough decision to trade away their best player to see their recalibration through.

“The decision [to trade CJ] started after the bubble conference. We can say it was a disappointing showing for us. We were expecting good things as management thought we had the materials to at least be competitive. But it did not happen,” said Mr. Rosales, whose club finished last anew with a 1-10 record in the lone PBA tournament last year.

“So after the conference, the management was disappointed. So we reviewed our program. It was a long process for the management and the coaches. So we came to a conclusion that we still have missing pieces and we needed certain players,” he added.

Mr. Rosales admitted that getting players they need would not be easy and that they had to come up with a strategy that would give them more options.

“Without question, CJ Perez is a good player and it would be hard to compare him to other players. But the strategy was to complete the team. And to get something of value, you have to give away something of value,” he said.

The Terrafirma team official said they are high on the eighth pick they will be getting from San Miguel, in addition to the top overall pick they hold, considering how talent-rich this year’s rookie draft pool is.

“We have a lot of positions to fill and we have to look for ways to go about it and one of which is the rookie draft. Unfortunately, we have only one pick in the first round then we next pick in the third round. There are so many talents in the pool in this year’s draft and we don’t want to miss out on that,” Mr. Rosales said.

“We have a list of players we are looking at. But we know we are weak in the center position. And we need height and firepower.”

Terrafirma received trade feelers from other teams as well, Mr. Rosales said without elaborating, but nothing concrete came out of them.

Given the flak they have been getting from fans for their decision, Mr. Rosales said they believe it is a fair trade and they hope it works for them.

“Many will not agree with it and we respect their opinion, but it’s a legitimate trade that will go through the process.”