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Supply chain diversification, technology seen key to manufacturing survival

MANUFACTURING FIRMS will need to diversify supply chains and leverage technology to survive and thrive during and after the pandemic, according to a supplier of industrial components and tools.

“The pandemic highlighted the importance of diverse supply chains and strong relationships and cooperation to improve the region’s supply chain capabilities,” RS Components Corp. Philippine Country General Manager George R. Santiago told BusinessWorld via e-mail.

“We’ve seen these past months that manufacturers and businesses who equipped themselves with the right technologies and digital capabilities were able to react more quickly to handle disruption and shift ways of working,” he added.

The pandemic has muted global economic activity, forcing businesses to fast-track their technology and digitalization plans as physical distancing is enforced to curb the spread of the virus. This led to stringent measures imposed by governments such as lockdowns starting in the first quarter of 2020.

The manufacturing sector was among the most affected by these restrictions. According to Philippine Statistics Authority (PSA) data, the sector declined 11.5% in the first nine months of 2020, after a year-earlier expansion of 2.8%.

Gross domestic product declined 10% in the first nine months, with manufacturing accounting for 2.1 percentage points of the decline, according to calculations performed by BusinessWorld.

The PSA also estimated that the volume of production at factories declined for a ninth straight month in November, coming in at minus 10.8%. Capacity utilization has consistently averaged under 80% since March.

Exports of manufactured goods were down 12% as of November, the PSA’s trade data showed. Electronics, which accounted for 70.1% of manufactured goods and 58% of exported goods during the period, declined 8.8%.

With a tech-savvy and English-speaking workforce, manufacturing continues to be robust and plays a key role in the economy, Mr. Santiago said.

“The Philippines continues to be an attractive location for manufacturing and aftermarket services in Asia-Pacific and is equipped to handle increasing demand for export with an auto supply chain involving over 380 parts manufacturers. However, to create more value and remain competitive, investing in infrastructure and facilities must be a priority,” he said.

The pandemic has also underscored the importance of strong inter-country relationships, Mr. Santiago said, citing the interest of Japan to strengthen cooperation with Southeast Asia to make its own supply chain more resilient.

Notwithstanding these setbacks, net inflows of foreign direct investment (FDI) in the sector grew to $610.9 million from $215.96 million as of October, even as overall FDI net inflows declined 10.2% during the period.

“The low factory output we’ve witnessed in the past months resulted from low consumer demand and mobility restrictions. The recovery was not as smooth but as these figures stabilize, we’re optimistic about the manufacturing industry’s performance in the coming year,” Mr. Santiago said.

“The manufacturing sector has the potential to compete on a global scale, provided businesses take steps to develop a digital strategy and have the support in terms of establishing the right infrastructure and upskilling people,” he added. — Marissa Mae M. Ramos

Electric cooperatives borrow P439.98M in 2020

TWENTY electric cooperatives (ECs) borrowed P439.98 million from the National Electrification Administration (NEA) in 2020, the bulk of which went to funding the distribution utilities’ capital expenditures and working capital needs, the NEA said Sunday.

The NEA, which oversees the rural electrification program, provides financial assistance to ECs through its enhanced lending program.

In a statement, the NEA said that P311.90 million went to 12 ECs.

The remainder, P128.08 million, was handed out as calamity loans. Around P25 million went to First Catanduanes Electric Cooperative, Inc. or Ficelco to help rehabilitate its power distribution facilities, which were damaged by typhoons Quinta (international name: Molave) and Rolly (international name: Goni).

“The calamity loan, which bears an interest rate of 3.25% per annum, has a 10-year repayment term and one-year grace period,” the NEA said.

The totals were provided by the NEA Accounts Management and Guarantee Department.

The amount exceeds NEA’s 2020 lending target of P245 million. “The P311.903 million translates into (a) 127% accomplishment rate,” the NEA said.

On its website, the NEA said it has 14 financing options in its enhanced lending program for ECs. Some of these include regular calamity and concessional loans, equity financing schemes for ECs, and subsidy releases.

Last month, the NEA reported that over 12,000 rural sitios still did not have access to electricity. NEA Administrator Edgardo R. Masongsong has said the agency needs additional funding for the sitio electrification program, which he described as “crucial for socioeconomic development.” — Angelica Y. Yang

Creating long-term value with sustainability and climate-related disclosures

There has been a radical change in the investment market in recent years with investors measuring business performance with traditional financial factors, and the way companies manage risks related to environmental, social and governance (ESG) issues. Economies and businesses are now more cognizant of the importance of decarbonization strategies, value creation, and climate-related investments in achieving long-term sustainable growth.

Businesses that focus on ESG issues such as climate change are considered forward-looking and perceived as having a competitive advantage. Despite the economic pressures brought about by the ongoing pandemic, the philosophy of stakeholder capitalism has gained more support with these non-financial factors considered critical to business resilience and long-term recovery. This shift has increased the demand to make accounting for climate risks a mainstream measure of performance and not just a measure of corporate responsibility.

Companies committed to sustainability may have a better-defined margin and may achieve a lower cost of capital. Financial reports no longer just focus on short-term financial parameters alone, but also consider the long-term importance of investing in clean technologies. When business leaders take into consideration market mechanisms like carbon pricing and emission caps, which can result in financial incentives as well as the lasting positive engagement with stakeholders, they can see that ESG factors now have a direct impact on a company’s cash flows, financial position and financial performance.

CLIMATE-RELATED MATTERS IN FINANCIAL REPORTING
The integrity of financial statements that provide transparency on climate-related matters are becoming increasingly critical for efficient resource allocation and sound decision-making. International Financial Reporting Standards (IFRS) require businesses to report climate-related matters when their effect is material to the financial statements. According to “Effects of climate-related matters on financial statements” published by the IFRS Foundation in November, information is considered material if “omitting, misstating or obscuring it could reasonably be expected to influence the decisions investors make on the basis of those financial statements.”

For instance, the publication mentioned above states that companies must include in their report climate-related issues that may affect estimates of future taxable profits, estimates of recoverable amounts to assess impairment of goodwill and impairment of assets, levies imposed by governments, effects of climate-related matters on the measurement of expected credit losses and on the fair value measurements of assets and liabilities in the financial statements, among others. The use of narrative reporting or management commentary can likewise fill the gaps in financial statements.

CHALLENGES IN CLIMATE RISK DISCLOSURES
Unfortunately, despite the existing IFRS requirements and encouragement to adopt the recommendations of the Task Force on Climate-Related Financial Disclosures (TCFD), which provides a framework to help companies more effectively disclose climate-related risks and opportunities through their existing reporting processes, a number of publicly listed companies still lack comprehensive and transparent climate risk disclosures, simply adopting a “check box” approach in reporting. Businesses need to realize that for many investors, transparency, quality and depth of disclosure warrant credit and not criticism. In addition, disclosing material information on climate change scenario planning enhances risk management, helps execute strategies, and leads to long-term increases in shareholder value.

Although multiple disclosure frameworks and standards such as the Sustainability Accounting Standards Board, Global Reporting Initiative, International Integrated Reporting Council and the TCFD provide recommendations on climate risk accounting, there is still a lack of standardized metrics in ESG reporting. Investors require more information from the data presented to them while the complexity and costs of reporting ESG matters against multiple standards and frameworks are often frustrating to businesses.

This situation calls for developing and adopting structured and universal reporting standards to measure corporate sustainability performance. Standardization will not only improve the clarity, comparability and consistency of figures and information but will greatly enhance dialogue between investors and companies.

According to Erkki Liikanen, Chair of the IFRS Foundation Trustees, there is a growing demand for standardization and cooperability on sustainability reporting. A consultation paper on sustainability reporting was published by the Trustees of the IFRS Foundation on Sept. 30, and it sets out possible ways forward, including the plan to create a new separate Sustainability Standards Board. This entity will initially focus on climate-related risk disclosures and will work in parallel with the International Accounting Standards Board under the IFRS Foundation. Consultations are currently being conducted in order to determine global demand and develop possible interventions, with the aim of collaborating with existing national and regional initiatives to develop global standards in sustainability reporting.

Globally applicable standards will guide companies in identifying and mapping out financially material climate scenarios and sustainability topics, as well as in assessing their implications on business risk management. These standards will also minimize complexity and provide the primary users of financial statements (existing and potential investors and creditors) and other stakeholders (customers, suppliers and employees) with a qualitative discussion of ESG topics and key performance indicators (KPIs) that are material to the company’s operations.

In the absence of a globally accepted set of standards, EY and the Coalition for Inclusive Capitalism worked together in 2018 to prepare the Embankment Project for Inclusive Capitalism (EPIC) report to identify common metrics by which companies can measure long-term value. Leveraging the insights from 31 asset management participants from the US and EMEIA, the EPIC report focused on creating new metrics for demonstrating long-term value in four key areas, two of which were Society and Environment, and Corporate Governance.

Uniform standards on climate-related disclosures will also enhance business confidence and efficiency as there will be a consensus on what constitutes an ESG investment. A standard ESG lens will also help companies translate theory into action since businesses will be guided on how their commitment to ESG goals will impact society and the planet. These standards are critical in assessing and communicating climate risks and opportunities as well as in developing strategies to build long-term resilience while facilitating the transition towards a low carbon economy.

THE FUTURE OF SUSTAINABILITY REPORTING
The undeniable strong connection between ESG performance and financial risk and returns calls on the corporate sector to take a huge leap towards securing long-term success by creating more climate-resilient portfolios, integrating holistic and sustainable solutions to the investment process, and ensuring transparency and compliance with reporting requirements. Through these efforts, companies can effectively manage risks and generate sustainable, long-term returns. As stakeholders seek to understand how companies manage ESG risks, transparent, credible and compliant ESG disclosures will be essential in building confidence in what is reported.

Given the foreseeable impact of climate change, and the mounting pressure from investors, employers, leaders, consumers and policymakers to address it, companies, more than ever, are called upon to clearly and transparently integrate ESG considerations into their overall business strategy. As the global economy transitions to a decarbonized future, those who do not keep up will risk being outperformed by companies that embrace climate resiliency.

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

 

Benjamin N. Villacorte is a Partner of SGV & Co.

Gilas starts buildup for Feb. window

Final window of the FIBA Asian Cup Qualifier

By Michael Angelo S. Murillo, Senior Reporter

THE Philippine national men’s basketball team has begun preparation for the third and final window of the qualifiers for the International Basketball Federation (FIBA) Asia Cup set for February.

Gilas Pilipinas, currently leading Group A with a 3-0 record, has beefed up its coaching staff and set up camp on Sunday at the INSPIRE Sports Academy in Calamba, Laguna, with the end view of forming a formidable team and game plan to do well in the tournament to be held in a “bubble” setting at Clark City in Angeles, Pampanga.

The team is expected to be composed of Philippine Basketball Association (PBA) players and young Gilas stalwarts from the squad that went 2-0 in the second window in November in Manama, Jordan.

To help the team in its cause, the Samahang Basketbol ng Pilipinas (SBP) brought in PBA coaches Norman Black of the Meralco Bolts and Caloy Garcia of the Rain or Shine Elasto Painters to join interim head coach Jong Uichico, Gilas program director Tab Baldwin and assistant Sandy Arespacochaga in the Gilas brain trust.

Messrs. Black and Garcia are no longer strangers to Gilas, having served under it in different iterations of the team in the past.

Both coaches, who also led their respective teams in the PBA’s own tournament bubble last season, expressed excitement over the chance to work with Gilas once again and contribute in the team’s push to make it to the FIBA Asia Cup.

The two are the latest assistant coaches for Gilas in the qualifiers, following Alex Compton and Topex Robinson in the first window for then interim coach Mark Dickel, Mr. Baldwin, and Boyet Fernandez for Mr. Uichico in the second window.

Among the players early to enter the training camp at INSPIRE were Gilas cadets Isaac Go, Calvin Oftana, and Kemark Cariño, with fellow pool members Juan and Javi Gomez de Liaño, Matt and Mike Nieto, Dave Ildefonso, Justine Baltazar, Kobe Paras, and Rey Suerte also expected to enter on Sunday.

Dwight Ramos, who performed well in the second window, is expected to be due within the week as he is coming from California.

Kiefer Ravena of the NLEX Road Warriors, meanwhile, was among the first PBA players to enter the INSPIRE bubble.

Others tipped to join him include Roger Pogoy and Poy Erram of TNT, CJ Perez of Terrafirma and Japeth Aguilar of Barangay Ginebra. The invited PBA players are expected to arrive in the coming days depending on their availability.

The PBA said it is committed to helping SBP in forming the best team possible for the last window, lending players from its ranks.

“The PBA has been all-out in its support to SBP. Anything it wants, the league is willing to assist,” said PBA Commissioner Willie Marcial.

To preserve the integrity of the training bubble and guard against the spread of the coronavirus, all those participating will undergo required Real-Time Reverse Transcription Polymerase Chain Reaction (RT-PCR) testing and will need to quarantine themselves until the results come out.

Participants are to stay at INSPIRE for the month-long training.

Meanwhile, in the third window of the FIBA Asia Cup Qualifiers the Philippines will play three matches, two against Korea (2-0) and one versus Indonesia (1-2).

The SBP is expecting a tough run for Gilas in the window as the other teams are seen making a hard push to make it to the tournament proper. Indonesia, however, is already assured of a spot as it hosts the Asia Cup later this year.

Format in the qualifiers has the top two teams in each group, automatically gaining a place in the tournament.

Apart from Group A, Clark will also be the venue for matches in Group C, which has New Zealand (2-0), Australia (1-1), Guam (0-1) and Hong Kong (0-1).

Clark is one of the four venues selected by FIBA to host the final window, all to be done in a bubble, along with Tokyo, Japan (Group B); Manama (Groups D and F); and Doha, Qatar (Group E).

The SBP said the successful staging of the PBA of its own bubble from October till December in the area was considered greatly by FIBA in its decision.

“If not for the PBA bubble, maybe FIBA Asia wouldn’t have chosen the Philippines as host. They saw the level of hosting we did at the PBA bubble. And that experience in the PBA bubble will be the same experience in the FIBA Asia Cup — even better,” said SBP President Al Panlilio.

Tom Brady leads Buccaneers to postseason win over Washington

TOM Brady threw for 381 yards and two touchdowns to propel the visiting Tampa Bay Buccaneers to a 31-23 victory over the Washington Football Team on Saturday in an NFC wild card game.

Leonard Fournette added 132 yards from scrimmage (93 rushing, 39 receiving) and a 3-yard touchdown run for the fifth-seeded Buccaneers, who recorded their first playoff win since Super Bowl XXXVII on Jan. 26, 2003.

Tampa Bay’s next opponent will be determined by the result of the New Orleans-Chicago playoff game on Sunday. The Buccaneers would host the sixth-seeded Los Angeles Rams should the Bears win, or they’d visit the second-seeded Saints if New Orleans is victorious.

Washington’s Taylor Heinicke threw for 306 yards with a touchdown and added an 8-yard scoring scamper while starting in place of Alex Smith (calf strain).

Heinicke’s dive for the pylon trimmed Tampa Bay’s lead to 18-16 late in the third quarter, but the Buccaneers responded with Ryan Succop’s 38-yard field goal and Fournette’s touchdown run early in the fourth.

An 11-yard touchdown reception by Steven Sims Jr. was answered by Succop’s fourth field goal, a 37-yarder, to give Tampa Bay a 31-23 lead with 2:49 to play.

Washington turned the ball over on downs on its next possession, effectively ending the game.

Succop kicked a 29-yard field goal to open the scoring, and Brady tossed a 36-yard touchdown pass to Antonio Brown, who found a soft spot in the coverage for his fifth score in the last four games. The touchdown pass in an NFL playoff game made Brady (43 years, 159 days) to oldest accomplish the feat, eclipsing the previous mark held by Hall of Famer George Blanda (43 years, 108 days).

The extra-point attempt was blocked, however, keeping the Buccaneers’ lead at 9-0.

J.D. McKissic capped a 10-play drive by bolting up the middle for a 2-yard score, but Tampa Bay responded in short order. Chris Godwin beat one-on-one coverage from Ronald Darby for a 27-yard touchdown. and Succop added a 23-yard field goal late in the second quarter to extend the Buccaneers’ lead to 18-7. — Reuters

Sotto, Ignite to begin NBA G League campaign next month

IGNITE, the recently launched team for elite National Basketball Association (NBA) Draft-eligible players, begins its NBA G League campaign in February in a tournament “bubble” to be held at the ESPN Wide World of Sports Complex at Walt Disney World Resort near Orlando, Florida.

Coached by five-time NBA champion Brian Shaw, the team will be among 18 squads competing in the non-traditional shortened season of the NBA’s official minor league basketball organization, adjusted to adapt with the prevailing conditions with the coronavirus pandemic.

While in a typical season, Ignite would not have played a full NBA G League slate of games nor be considered a standard G League team for the purposes of league-wide standings. In the upcoming tournament, it is eligible to advance to the playoffs and contend for a championship.

“We’re excited to be a part of the G League schedule at Disney,” said Ignite head coach Brian Shaw in a release. “This is a unique opportunity for our players to showcase their development while gaining a high volume of experience quickly against the caliber of talent they’ll face every day in the NBA.”

One of the featured players of Ignite is Filipino standout Kai Sotto, who is trying to make a push to fulfill his dream of making it to the NBA.

He went to the United States in 2019 after playing for Ateneo’s juniors team to further develop his game.

Mr. Sotto joins an elite crew of top young prospects like Filipino-American Jalen Green, Jonathan Kuminga, Isaiah Todd, Daishen Nix, and Princepal Singh.

They have been training under Mr. Shaw in Walnut Creek, California, since August and have competed in four scrimmages leading up to the team’s official opener.

Also part of the squad are NBA and NBA G League veterans Amir Johnson, Reggie Hearn, Brandon Ashley, Cody Demps, and Bobby Brown.

“He is getting stronger, he is getting a better understanding of the game, he’s improving and I am impressed with his skill set for a guy his size,” the Ignite coach said.

“I’m excited to coach these young players. Our job as coaches is to develop these guys and teach them as best as I can from my experience of being a pro on and off the court. I’m excited. It’s going to be challenging because of the pandemic in terms of the protocol, but I’m looking forward to teaching them,” he added.

Aware that it is operating under extraordinary circumstances, the G League said it is hoping that its tournament bubble will also be a success just like the NBA’s when the latter held its own bubble to finish last season also at the Walt Disney World facility.

It has coordinated closely with all concerned and crafted protocols to preserve the integrity of the bubble.

“We worked closely with our teams, the Basketball Players Union, and public health experts to develop a structure that allows our teams to gather at a single site and safely play,” said NBA G League President Shareef Abdur-Rahim in a separate release.

Adding, “We are thrilled to get back to basketball and to fulfill our mission as a critical resource for the NBA in developing players, coaches, referees, athletic trainers, and front-office staff.”

Players, coaches, team and league staff living on the NBA G League’s campus at Walt Disney World Resort will be guided by comprehensive league-wide health and safety protocols, which are based on the core principles of social distancing, mask wearing, hand hygiene, and coronavirus testing.

The other participating NBA G League teams are Agua Caliente Clippers (affiliated with the Los Angeles Clippers), Austin Spurs (San Antonio Spurs), Canton Charge (Cleveland Cavaliers), Delaware Blue Coats (Philadelphia 76ers), Erie BayHawks (New Orleans Pelicans), Fort Wayne Mad Ants (Indiana Pacers), Greensboro Swarm (Charlotte Hornets), Iowa Wolves (Minnesota Timberwolves), Lakeland Magic (Orlando Magic), Long Island Nets (Brooklyn Nets), Memphis Hustle (Memphis Grizzlies), Oklahoma City Blue (Oklahoma City Thunder), Raptors 905 (Toronto Raptors), Rio Grande Valley Vipers (Houston Rockets), Salt Lake City Stars (Utah Jazz), Santa Cruz Warriors (Golden State Warriors), and Westchester Knicks (New York Knicks).

League format has the top eight teams advancing to a single-elimination playoff. The league said the complete 2021 game and broadcast schedule will be announced at a later date. — Michael Angelo S. Murillo

Chulani, co-founder of Ronda Pilipinas, passes away at 45

MOE Chulani, who co-founded Ronda Pilipinas with Dino Araneta, passed away yesterday due to cardiac arrest.

He was 45 years old.

Chulani was the driving force behind the LBC Ronda Pilipinas, which staged its 10th anniversary race in March last year.

He was also a member of the PhilCycling board and a former team manager of the Pasig Pirates of the defunct Metropolitan Basketball League.

National team stalwarts Ronald Oranza, George Oconer, and Jan Paul Morales are among the products of Ronda Pilipinas.

“He’s a loss in the cycling community. He’s very dedicated in cycling,” said Philippine Olympic Committee and PhilCycling president Abraham “Bambol” Tolentino.

No fans for Lightning, Raptors due to COVID surge

THE Tampa Bay Lightning and Toronto Raptors will play without fans in their home arena until at least Feb. 5 because of a surge in coronavirus disease 2019 (COVID-19) cases in the Tampa, Florida area.

The Lightning plays at Amalie Arena in Tampa, and have been joined there to start this season by the Raptors because of issues entering and exiting Canada amid the pandemic.

Vinik Sports Group, LLC, the parent company of the Lightning and the arena, announced the temporary fan ban in a statement on Saturday, adding “the organization will reassess the numbers with local health and government officials in the coming weeks before making any subsequent decisions.”

“We have worked tirelessly, putting every safety measure possible in place at Amalie Arena,” said Steve Griggs, the Vinik CEO. “However, as we review current data and COVID-19 modeling for the next few weeks in the Tampa Bay area, we do not believe it is prudent to admit fans inside the arena at this time.”

The Raptors have played three games in their Florida home with a limited number of fans. The Stanley Cup champion Lightning is scheduled to open their season at home against the Chicago Blackhawks on Wednesday, and about 4,000 fans were expected — less than 25% capacity.

Florida reported a record high 125,937 cases this week, according to the Johns Hopkins University of Medicine’s Coronavirus Resource Center. In Hillsborough County, where Tampa is located, cases have risen 20.03 percent over the past 14 days, the county reported.

Super Bowl LV is scheduled to be played on Feb. 7 at Raymond James Stadium in Tampa. Stadium capacity for the game has yet to be announced. — Reuters

Depleted lineups

Head coach Doc Rivers was most certainly being disingenuous when he called attention to the National Basketball Association’s decision to push through with the Sixers’ homestand against the Nuggets yesterday. “I don’t think we should [play], but it’s not for me to express that,” he argued. He just did, of course, with his convenient sidestep enabling him to steer clear of possible sanction from the Commissioner’s Office for speaking his mind on a development that, for all his protestation, followed standing health and safety protocols.

Not that Rivers was wrong in his assessment. Point guard Seth Curry’s positive test late last week triggered quarantine measures that sidelined eight players, but the subsequent clearance of three of the eight appeared to give the Sixers enough bodies for the set-to. Unfortunately, injuries to stalwarts Joel Embiid and Ben Simmons left them with seven and compelled them to activate otherwise-unavailable Mike Scott on paper. The turn of events prompted the bench tactician to “worry about player health on the floor.”

As things turned out, the Sixers saw no injuries, but had to ride three rookies hard en route to an unsurprising setback. Isaiah Joe, Tyrese Maxey, and Dakota Mathias wound up burning rubber for 45, 44, and 41 minutes, respectively, while regular starter Danny Green saw action for 36. Little wonder, then, that they failed to keep up as the contest progressed. A slight lead late in the second quarter turned into a double-digit deficit early in the third, and they got no closer until the final buzzer.

For pundits, Rivers’ lament is but a reflection of the harsh realities of getting a season under way amid a pandemic. If there’s anything yesterday showed, it’s that the NBA is bent on pushing through with its schedule as best it can, and willing to postpone matches only in the extreme. Operating in a bubble environment may be ideal in light of the still-spiking number of novel coronavirus nationwide, but logistical and cost considerations make the plan untenable at best.

Thusly, there will be more instances of teams penciling in losses as depleted lineups take to the floor. The hope is that the Sixers’ plight was but an offshoot of the increased interaction over the holidays, and that social distancing would once again rule as the calendar moves farther away from the turn of the year. Then again, uncertainty reigns and nothing can be etched in stone.

 

Anthony L. Cuaycong has been writing Courtside since BusinessWorld introduced a Sports section in 1994. He is a consultant on strategic planning, operations and Human Resources management, corporate communications, and business development.

Farm Consolidation: Saving the Filipino taxpayer P18 billion

The Philippines has secured a loan of $370 million intended to finance SPLIT (Support to Parcelization of Lands for Individual Titling), the Department of Agrarian Reform (DAR) program to subdivide Collective Certificate of Land Ownership Award (CLOA) into individual titles. The Collective CLOAS cover 1.36 million hectares of the 4.9m hectares awarded by the Comprehensive Agrarian Reform Program (CARP). It covers 750 thousand agrarian reform beneficiaries in 78 provinces.

There is a good reason to be dissatisfied with Collective CLOAS — the beneficiaries do not have secure land titles which facilitate many formal transactions; they have little incentive to adopt in-place technologies (such as irrigation) and new cultivation (say, tree planting) since one’s parcel today may be someone else’s tomorrow. A participating beneficiary under Collective CLOA cannot put his parcel up as collateral for a crop loan. No real property tax payment is made by beneficiaries without titles. Collective ownership is the open door to the tragedy of the commons. Financing will thus mostly come from informal lenders who are willing to accept risky usufruct payment in case of loan default. Needless to add, informal lending comes at an exorbitant interest rate which guarantees continued poverty.

It is hoped that when individual titles are finally constituted, beneficiary behavior will change towards greater productivity. But hard evidence that beneficiaries with individual land titles behave significantly differently is still scant for the Philippines. The evidence to the contrary are from foreign climes where CARP strictures do not apply (see e.g., Galang 2020). And there are reasons to believe that the behavior of titled small holders will not be any different here. First of all, access to formal banking sector financing at a lower interest rate will still be hampered because ownership of more than five hectares of farm land by banks or by anybody is legally prohibited by the  Comprehensive Agrarian Reform Law (CARL). Banks will not accept as collateral titles to lands they cannot own in case of loan default. So titled small holders still have to resort to informal lenders. Since technology adoption is costly and risky and cannot be home-financed away from the formal banking sector, no significant technology adoption will be forthcoming. This is an interesting area for research: the hypothesis being that, given the land ownership ceiling by CARP, titled small holders and as well as individual CLOA holders will fare no better than collective CLOA holders in terms of access to formal bank financing and overall land productivity!

A suggestion to this effect is clear from the result of the survey by the Philippine Statistical Research and Training Institute Survey (PSRTI, 2016) of agrarian reform beneficiaries (also cited to by Galang 2020, p. 15): the average farm income and average total household income of agrarian reform beneficiaries (ARBs) under Collective CLOAs are actually higher than the average farm income and total household income of ARBs under individual CLOAs! Galang’s own results contradict those of the PSRTI so the jury on the benefit of titled parcelization for which we are spending P17 billion is still out.

The biggest problem in the agricultural farm sector today is that most farms are too small to be economically viable and private capital is fleeing the sector because of the uncertainty and scale limitations imposed by CARP. Private capital will not weigh in when competitive scale requires hundreds, perhaps thousands, of hectares and none is available. As a result, the farm sector has become the ward of the state and/or of the informal lenders when it comes to capital. A prescription for persistent poverty!

Consolidation is now the byword in Asian agriculture (see, e.g., Le Thanh K 2017). The romantic Jeffersonian notion of small independent yeoman farmers, the cradle of virtue and morality, is now very costly baggage from the past. The People’s Republic of China, Taiwan, Vietnam, and Malaysia have programs to consolidate small landholdings into bigger more viable farm enterprises to attract formal sector financing and young and more dynamic actors to replace aging or dead farmers (see, e.g., Fabella, 2014). As usual, the Philippines, being more mired than most to old dead ideas is, to paraphrase Alexander Pope, “the last to put the old aside.” In 2021, aided and abetted by the World Bank, we are digging deeper into the old rabbit hole of parcelization which CARPER (Comprehensive Agrarian Reform Program Extension with Reforms or the Republic Act No. 9700) of 2009 explicitly mandated.

Former LANDBANK President Alex Buenaventura was ahead of his time in trying to make LANDBANK the intermediary between foreign investors and local ARBs to engender larger estates where ARB family members are first on line for hiring. But Buenaventura was fired before the program could meaningfully take off. Do not expect the private investors to do the consolidating: they would like to sign a long-term lease contract with one — repeat, one — credible consolidator like the Land Bank of the Philippines (LANDBANK) which will first iron out all the kinks with the ARBs and fashion a contract that protects the security of tenure and rights of farmers and their children. And the most convenient jump-off point for consolidation is lands awarded under Collective CLOAS.

Parcelization and titling is costly and painstaking because it involves much more than a cadastral survey. Stakeholders and claimants will dispute who gets what parcel. Features such as closeness to water, distance from the road, mabato or mabuhangin (rocky or sandy soil), all have profound economic implications for farming. In the process of parceling and titling, some, rightly feeling envy, will instigate roadblocks.

Unequal outcomes for households was why Deng Xiaoping was booted out by Mao Zedong in the 1960s in the wake of the Great Leap Forward debacle. That is why the government needs a P17-billion loan from the Wolf Bank to negotiate the parcelization route.

An alternative route to higher productivity is just to offer the whole consolidated Collective CLOA-covered farm for lease to a private firm. A consolidated area of 1,000 hectares from 1,000 ARBs may go for P25,000 per hectare per year and every farm household in the list gets an equal and riskless P25,000 per year, the equivalent of much more in risky returns. Equal allocation is what economists call “envy-free.” On top of that, the family members get hiring priority for stable jobs that open up. The 1,000 hectares will produce much more as a single unit than when cultivated as separate 1,000 one-hectare units (see Adamopoulos and Restucia 2018 for how shrinking farm size due to CARP reduced farm productivity). Formal bank financing will now flock the land. A LANDBANK or NDC can do this service.

LANDBANK writes long-term contracts with ARBs specifying their and their children’s rights and obligations and the private firm pays the land rental directly to LANDBANK with which LANDBANK pays the listed ARBs their rental claims and the real property tax to the municipality. If one reflects on this seriously, one realizes that this is no more than the famous Coase theorem in action.

And, voila, the Filipino taxpayer saves 17 billion!

References:

Galang, M. 2020. “Boosting agricultural productivity through parcelization of collective Certificate of Land Ownership Awards” PIDS Discussion Paper Series 2020-26.

Philippine Statistical Research and Training Institute Survey of Agrarian Reform Beneficiaries. 2016

Adamopoulos, Tasso and Diego Restuccia. 2019. “Land reform and productivity: A quantitative analysis with micro data,” NBER working papers 25780, National Bureau of Economic Research Inc.

Fabella R. 2014. “Luizhuan: Small steps to farm efficiency,” Businessworld Introspective, Dec. 16, 2014.

Le Thanh K. 2017. “Amending policies and laws to speed up land accumulation,” Vietnam Law and Legal Forum, Sept. 10, 2017 http://vietnamlawmagazine.vn/amending-policies-and-laws-to-speed-up-Land-accumulation-6044.html

The author thanks the FEF Agriculture Team for hints and comments. Errors are the author’s alone.

 

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

Gilda Cordero Fernando: The Rabble-Rouser

This is how Wikipedia introduces the rabble-rouser: “Gilda Cordero-Fernando (June 4, 1930 – August 27, 2020) was a Filipino writer, visual artist, fashion designer and publisher.”

Yes, Gilda or GCF was all that. But her life was richer, more complex than how Wikipedia describes her.

I had already written an essay for GCF more than 10 years ago, which was triggered by childhood memories. I described the essay as an unpublished eulogy for the living, which Gilda liked. It was a personal piece; it was about my connection with her and her family.

Upon her death, I submitted the untitled piece to the Philippine Daily Inquirer for publication. The Inquirer titled it “How I never returned Gilda Cordero Fernando’s book” (Oct. 18, 2020).

In different ways, GCF touched my life. I cannot forget, for example, how she comforted me upon the passing away of my wife Mae. A few weeks after Mae’s passing in end-August 2015, Gilda invited me, my mom Paula, sister Sanâ, and cousin Bobbie for a repast at her home. Her piece of advice, which she emphasized by repeating it, was: “Find an amusement, but never remarry.”

This time, I thought of seizing the opportunity to write about another dimension of GCF’s persona, which Wikipedia has missed.

After Christmas day, I received two separate messages from activist friends, Niva Gonzales and Lisa Dacanay. Niva and Lisa are among the organizers of the Ganito Tayo Noon (“This is how we were before”). Called GTN for short, Ganito Tayo Noon is an annual homecoming of activists who fought the Marcos dictatorship.

Niva and Lisa requested me to do a one-minute recorded tribute for GCF. A fixture of the GTN homecoming is a parangal (honor) to the anti-dictatorship activists who passed away in the previous year. Because of the pandemic, this year’s GTN homecoming was done through Zoom. Alex Padilla (a human rights lawyer and most competent, most honest retired civil servant) hosted the previous GTN events at the sprawling family compound in Antipolo.

A one-minute oral tribute for GCF, even if limited to her politics, could not fully capture who she was. But it was understandable to have a short tribute in light of the program’s time constraint and the fact that close to 40 departed activists were honored.

To make up for this limitation, I opted to write a longer written version of my tribute to GCF.

GCF was a superwoman. She had multiple identities. She was a storyteller, an essayist and columnist, a publisher and chronicler of Philippine life and culture, a 20th century ilustrada, a foodie, a bohemian, an organizer of out-of-this-world events, a theater producer, a visual artist, a fashion designer and even a fashion model for Bench, an antiquarian and art collector, a modern and kookie mom, a lola Mad, a second mom, and the crush of boys of my generation.

But I save for last what the GTN comrades would like to hear: GCF was a rabble-rouser. Yes, being a rabble-rouser is how her children proudly describe her.

She was a natural rebel. But no one but GCF herself could fully explain her development as a political activist. I asked GCF’s second son and my classmate Mol about this. Said Mol: “I do not remember… any semblance of an epiphany of my mom towards left-leaning or progressive persuasion. Kung baga, kinagisnan ko ganoon na siya (In other words, since I remember she had always been that way). Maybe it’s the DNA.”

I agree with Mol that one explanation is the DNA. The children of Gilda are likewise rebels in different forms and circumstances. Bey, the eldest son who passed more than two decades ago, was a student activist. He was a student leader representing the radical movement at the University of the Philippines. He was at the thick of the fight against the dictatorship in the early years of martial law. (Bey, as a fratman of Scintilla Juris, was also at the frontline of the rumbles, fighting his dad’s Sigma Rho fraternity, which was labeled reactionary then.)

Mol also said that his mom’s “early association with Manila’s literati likely fueled” her activism. After all, the intellectuals tend to be left and radical.

Mol’s “conjecture” is consistent with what his mom wrote in The Last Full Moon: Essays on my Life (2005): That she joined the protest movement because the writers and artists were there.

The title of a chapter in The Last Full Moon affirms the status of GCF as rebel: “Woman’s place is in the struggle.” In this chapter, GCF said: “Of the groups, the left, which I chose to join, was by far the most aggressive.” She explained her choice: “Perhaps I was tired of being a corporate wife, of having to fit into a mold of dressing smartly, swilling cocktails, and talking shallow. I felt at home in the protest movement….”

But GCF being a rabble-rouser was a different sort. Although she described the left as aggressive, she was far from being one. She found the slogans of the left like “lansagin” (dismantle)  and “ibagsak” (overthrow) “downright awful,” “artless,” and “humorless.”

GCF, the rabble-rouser, was relaxed, pleasant, fun loving, crazy, and adventurous. And her thinking was out of the box. Thanks to her, she refreshed the left’s image and made it look hip. An example of her creativity and kookiness was how she transformed a fashion show into a political statement on the state of the nation.

Reminiscent of the wit and irreverence of the First Propaganda Movement, GCF created the enigmatic Los Enemigos, which mocked the Marcoses and the dictatorship. She made political satire popular.

At a time when we are again fighting a repressive regime, arguably a regime more virulent than the Marcos dictatorship, GCF’s legacy serves to move us.

The left’s strategy and tactics are exhausted. Here, GCF reminds us to be creative and innovative. GCF inspires us to reimagine.

Remember GCF’s fighting words: “Go forth into the world and fight your just fight.”

 

Filomeno S. Sta. Ana III coordinates the Action for Economic Reforms.

www.aer.ph

PHL included among emerging powerhouse economies

According to the UK-based Center for Economics and Business Research, five ASEAN economies are poised to become economic powerhouses within 15 years. You will be happy to know that the Philippines is included in this list despite the economic blow of the pandemic. Vietnam, Malaysia, Indonesia, and Thailand have also made it to the magic 30 of largest economies by 2035.

Vietnam, the overachiever of the last two years, is seen to make the biggest gains in the next 15 years. The socialist nation is seen to jump 18 places from the 37th largest economy today to the 19th by 2035. Malaysia follows with a 12 place leap from 40th to 28th place. The Philippines is forecast to advance by 10 places from 32nd to 22nd place. Indonesia will jump by seven places from 15th to 7th place. Thailand will move four places up from 25th to 21st place.

By the year 2035, five ASEAN nations will be part of the world’s 30 largest economies, two countries shy of the European Union. Asia, collectively, will have 12 countries represented in the magic 30, making it the world’s most robust economic bloc.

What is driving ASEAN’s growth? Each nation has a unique story to tell.

Vietnam. A package of economic reforms under the Doi Moi program transformed Vietnam from a centrally planned economy to a market-driven, socialist state rooted in manufacturing.

In just 35 years (1986-2021), Vietnam made the transition from an economy reliant on subsistence farming to one that is newly industrialized. This was done by embracing trade liberalization, domestic deregulation, the aggressive pursuit of foreign direct investments, and massive investments in infrastructure and human capital.

From the get go, Vietnam sought to be the manufacturing center of Asia since it is the fastest way to modernize the nation whilst achieving economic prosperity. Manufacturing also has the capacity to absorb the millions of workers migrating away from agriculture.

The Vietnamese government was astute by creating the ideal conditions for manufacturing enterprises to thrive. Special attention was given to infrastructure and logistics, energy, telecommunications, and easing bureaucratic red tape.

The years between 2008 to 2018 were Vietnam’s golden decade. Its economy grew by an average of 6.07%, peaking in 2018 when it clocked-in growth of 7.1%. Unemployment fell to 2.2% in 2018 due to the continued influx of factories migrating away from China.

Malaysia. In 1971, Malaysia launched its New Economic Policy (NEP) designed to eradicate poverty and unite the country’s multi-ethnic society. NEP lasted for 20 years.

The Malaysian economy grew by an impressive 7.22% from 1971 to 1990. Investors from America, Europe, and Japan flocked to Malaysia for its relatively modern infrastructure and strategic position between Singapore and Thailand. Malaysia became a hub for textile manufacturing, electronics, modular furniture, and appliances. It also became a leading exporter of palm oil, rubber, petroleum, natural gas, and hardwood.

Under the command of PM Mahathir Mohamad, the National Development Policy (NDP) was formulated and launched in 1991. Its objective was to energize Malaysian industries to climb the value chain whilst making wealth more inclusive for all. It was in this era that Malaysia became a force in electronics, machineries and computers, and chemicals.

The NDP was replaced by the National Vision Policy (NVP) in 2001. The NVP aimed to transform Malaysia into a high income economy that specialized in finance, tourism, and high technology. The NVP has been generally successful but fell short of elevating the country to a high-income economy.

Indonesia. Our neighbor to the south is the largest economy in Southeast Asia. They have done well since the turn of the century having slashed poverty rates by half since 1999 and posting an average growth rate of 4.8% in the last two decades. Its enormous population and rising wealth have attracted foreign investors in droves.

Although Indonesia’s economy has become increasingly driven by manufacturing, they are still reliant on exports of crude oil, natural gas, rubber, coffee, coca and palm oil. They have done well in the use of their natural resources.

The growth of the Indonesian economy has trailed that of Vietnam and the Philippines due to infrastructure bottlenecks. To this end, President Joko Widodo put in place a multi-billion infrastructure program since 2014. From 2020 to 2024, however, Indonesia plans to spend a whopping $412 billion to modernize its infrastructure. This will give the country the bandwidth for higher growth.

Thailand. Despite sporadic political unrest, the Thai economy has managed to grow by an average of 4.01% over the last 20 years.

From an agricultural economy, Thailand rapidly developed into a manufacturing economy in the 1970s to the ‘90s specializing in textiles, light industries, and food processing. The 2000s saw Thailand migrate to big industries such as auto manufacturing and electronics. The Buddhist country aims to be a specialist in innovation and high technology in the next decade.

In 2019, Thai exports amounted to $245 billion, nearly half of its GDP. It is also the region’s tourism behemoth, having attracted 38.2 million visitors (No. 8 in the world) in 2019. Tourism revenues account for 17.7% of GDP.

Philippines. Unlike its ASEAN peers, the Philippine economy is driven by the service sector, not by manufacturing. It is among the world leaders in business process outsourcing and will continue to be so for the next 15 years, according to the Center for Economics and Business Research.

Massive infrastructure spending coupled with OFW remittances have fueled consumer spending. This, too, drives the economy.

By virtue of its young, English-speaking population, the Philippines is seen to continue its upward trajectory in the service sector all the way to 2035, albeit performing below its true potential.

Analysts believe that the Philippines can still become a player in heavy industries and technology if it is able to sort-out the impediments to attracting foreign capital. This includes an uncompetitive tax structure (the CREATE bill needs to be passed), shortage in PEZA industrial zones, bureaucratic red tape, expensive power costs, and the constitutional negative list for foreigners.

In addition, the Philippines has not leveraged on its natural resources the way its neighbors have. Despite its massive resources, the contribution of the mining industry to the economy is minuscule at only one-sixth of 1% of GDP. Ironically, the Philippines sits on the third largest cache of mineral resources in the world which includes gold, copper, nickel, limestone, marble, and chromite. All things told, its mineral resources are worth over a trillion US dollars in today’s prices. Since the massive closure of mines in 2017, the Department of Environment and Natural Resources has installed more than enough safety measures to ensure responsible mining. A presidential go signal is all it takes to unlock the potentials of the mining industry.

Also untapped is the Philippine’s maritime resources. Unknown to many, the Philippines has the fifth largest coastline at 36,289 kilometers; its maritime domain is massive at 2.2 million square kilometers; it is the world’s second largest provider of shipping crew and officers; it is (was) the fourth largest global shipbuilder (counting Hanjin); the Philippine Rise (Benham Rise) has an estimated reserve of 55.1 trillion cubic feet of natural gas and 5.4 billion barrels of oil; plus, the Philippine archipelago sits in the center of the world richest fishing grounds. These resources remain largely untapped.

With the right economic policy, the Philippines can be a significant player in international shipping, ship building and repair, ports and shipyards, logistics services, seafarers and crewing, maritime insurance, fisheries and aquaculture and offshore energy exploration, among others. Collectively, this is referred to as the “Blue Economy.”

The Philippines is by no means short of natural resources or talent to usher-in an age of rapid prosperity. What it is in shortage of is a leader with a clear vision, a plan, and the political will to realize it. Let’s hope that our next leaders in 2022 institutes reforms to make the country perform to its full potential.

 

Andrew J. Masigan is an economist

andrew_rs6@yahoo.com

Twitter @aj_masigan

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