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Ho Ho Ho! CREATE is coming to town

For Filipinos, Christmas is the most anticipated event of the year. Preparation for the festivities starts as early as September with Christmas celebrations lasting until January of the following year. While this year’s festivities will inevitably be different due to restrictions on gatherings, Filipinos can undoubtedly make the most of the situation and make the Christmas spirit come alive.

Known for our resilience, we usually rebound from setbacks, rise above the challenges, and recover. Even the pandemic and recent typhoons are unable to dampen the Filipino spirit. For us, Christmas must go on, and so will the CREATE bill, which aims to help enterprises bounce back from the pandemic, thereby create ripple effects to boost economic recovery.

The Senate version of the measure was approved on Nov. 26. On Dec. 7, the Committee on Ways and Means recommended to the Speaker of the House of Representatives the acceptance of the amendments introduced under Senate Bill 1357 or the Corporate Recovery and Tax Incentives for Enterprises Act (CREATE). The House still has to act on the recommendation. It is hoped that the bill will be signed into law by President Rodrigo R. Duterte before the year ends particularly as some provisions have retroactive effect.

Among the indispensable features of the CREATE bill is the rationalization of the fiscal incentives system. For years, various reforms have been undertaken to improve the management and provision of tax incentives.

The Philippines has been very generous in granting tax incentives with neither time limits nor thorough cost-benefit analyses. With CREATE, tax incentives will be performance-based, targeted, time-bound and transparent to ensure that every peso granted as a tax incentive yields a positive benefit to the country.

Under CREATE, a Strategic Investment Priority Plan (SIPP) is to be formulated every three years to identify priority projects and activities that will receive incentives, taking into account the size of the investment being contemplated, employment generation prospects especially in less developed areas, the potential for export, and the introduction of innovative processes and technologies.

The Fiscal Incentives Review Board (FIRB), or the investment promotion agencies (IPAs) under a delegated authority from the FIRB, are authorized to grant incentives pursuant to the Tax Code only to the extent of their approved registered project or activity under the SIPP. Approval of registered projects or activities of P1 billion pesos and below is to be delegated by the FIRB to the IPAs. To compel efficient processing, all applications for tax incentives are to be deemed approved if not acted upon within 20 days.

To qualify for the fiscal incentives, registered business enterprises must comply with the following: (i) they must be engaged in an activity included in the SIPP; (ii) they must meet the target performance metrics after an agreed time period; (iii) they must install adequate accounting systems that can identify the investments, revenue, costs and profits for each activity or establish a separate corporation for each registered project or activity; (iv) they must comply with e-receipting and e-sales requirement; and (v) they must submit annual reports of beneficial ownership of the organization and related parties.

Although some enterprises may find it challenging to comply with some of the foregoing conditions, particularly having a computerized accounting system with e-receipting, which will entail extra costs and resources, still these conditions are reasonably necessary if we are to implement a system to assess the net benefits of incentive granted to Philippine economy.

The income tax incentives under CREATE are as follows: (i) income tax holiday (ITH) for four to seven years followed by special corporate income tax (SCIT) of 5% based on gross income earned, in lieu of all taxes for 10 years; or (ii) regular corporate income tax (CIT) with enhanced deductions for 14 to 17 years. Thus, enhanced deductions can in no case be granted simultaneously with the SCIT. Enhanced deductions include additional deductions for depreciation, labor, training, research and development, domestic input expense, power expense, investment allowance and claiming of NOLCO for next 5 years.

The fiscal incentives are also available to projects or activities that were registered prior to effectivity of CREATE Bill. Firms enjoying ITH may continue to enjoy the same within the remaining ITH period. On the other hand, firms enjoying ITH and 5% gross income tax (GIT) after the ITH or enjoying 5% GIT only, may continue to enjoy these for 10 years. Qualified expansions or entirely new projects or activities may also qualify for a new set of incentives.

CREATE offers a total period of incentive availment of up to 17 years. The duration of income tax incentives depends on the category (basic, enhanced, advances, superior), which in turn is based on location and industry priorities.

Other fiscal incentives under CREATE are: (i) exemption from customs duties on imports of capital equipment, raw materials, spare parts or accessories directly and exclusively used in the registered project or activity, which are not produced or manufactured domestically in sufficient quantity at reasonable prices; and (ii) a VAT exemption on imports and VAT zero-rating on local purchases of goods and services directly and exclusively used in the registered project or activity by a registered enterprise located inside an ecozone or freeport.

CREATE also gives the President the flexibility to modify the mix, period or manner of availment of incentives for a highly desirable project involving a minimum investment P50 billion, or those that generate employment of at least 10,000, subject to certain conditions and the recommendation of the FIRB. In such cases the ITH is not to exceed eight years; thereafter, a 5% SCIT may be granted, provided that the total period of availment not exceed 40 years. Further, the President may also grant non-fiscal support incentives such as facilitation of registration and certification requirements from government agencies, logistical support, training support, product testing and certification with the recommendation of the FIRB.

As in any other grant of incentives, the grantee-enterprise should meet the reporting requirements, specifically: (i) the use of electronic systems for filing and payment with the BIR; and (ii) filing with the respective IPA and with the FIRB a complete annual tax incentives report and an annual benefits report within 30 calendar days from the statutory deadline for filing of returns and payment of taxes.

Non-compliance with reporting requirements and failure to use the electronic system for filing and payment of taxes to the BIR makes the investor liable for penalties (first offense — P100,000; second offense — P500,000). On third offense, the fiscal incentives are to be canceled.

Our resiliency has been tested many times, in many ways. Despite the lingering uncertainty brought by the pandemic, Filipinos’ high hopes for a better life have never wavered. As we usher in a new decade, Filipinos are eager for better times. With CREATE, it is hoped that the long-overdue fiscal incentives reform will bring a much-needed recovery boost which will allow us to thrive in a post-pandemic environment.

Let’s Talk Tax is a weekly newspaper column of P&A Grant Thornton that aims to keep the public informed of various developments in taxation. This article is not intended to be a substitute for competent professional advice.

 

Farrah Andres-Neagoe is a senior manager of Tax Advisory & Compliance division of P&A Grant Thornton, the Philippine member firm of Grant Thornton International Ltd.

pagrantthornton@ph.gt.com

The vaccines that could use a shot in the arm

IN A PANDEMIC, trust is everything.

Beijing and Moscow saw early the potential benefits of pulling ahead in the race to produce an effective inoculation against COVID-19. Apart from the public health benefits and the keen awareness in both governments of the need to be self-reliant, a clear win would validate top-down models of government and innovation. It would also mean a much-needed image boost, at home and abroad.

In the end, both have had success. Moscow in August, to great fanfare, became the first to grant regulatory approval for a vaccine, one of its two leading candidates. By then, Beijing had already allowed doses of one of its own vaccines to be given to its military. About a fifth of all shots listed by the World Health Organization as undergoing clinical trials are Chinese. Yet without more transparency about research and testing — and a little less propaganda —  neither country will earn the confidence needed to reap the full reward.

For an indication of the trust deficit, look at the way the market responded to Russia’s green light for its Sputnik V vaccine, or to news the flagship vaccine is more than 90% effective. They were yawns compared to the unbridled enthusiasm after Moderna Therapeutics published encouraging data in July, or indeed ongoing excitement as the vaccine from Pfizer, Inc. and German partner BioNTech SE goes through the US regulatory approval process. Last month, positive results for that inoculation from a large-scale clinical trial were enough to push the S&P 500, MSCI World, and the MSCI All-World indexes towards record highs, in no small part thanks to the robust evidence about the vaccine’s effectiveness.

China faced a higher trust hurdle from the start. It saw the first cases and there were questions from the earliest days of the outbreak over how swiftly it had shared information, perhaps missing opportunities to slow the spread. Even if it was not a repeat of 2002 and 2003, when Beijing took months to disclose the outbreak of Severe Acute Respiratory Syndrome, or SARS, wariness lingered. Then there’s the impact of past vaccine scandals, most recently over substandard inoculations in 2018. Controls have been overhauled since.

It’s no accident that Brazil’s president, Jair Bolsonaro — no stranger to mixing health policy and the demands of populist politics — in October criticized the Sinovac Biotech Ltd. vaccine being tested in his country by arguing people didn’t feel safe “because of its origin.” In a confusing set of events, the final-phase trial was suspended and then reinstated less than 48 hours later.

Russia’s plight has not been too different. The country has not been a vaccine research or production powerhouse, but an increasingly isolated government still saw the opportunity to boost its international standing and earn the sort of halo Soviet science did with the race to put humans in space. The first vaccine was, no surprise, named Sputnik V.

Yet with scarce data and plenty of government promotion, the dash for approvals and show over results has not translated into impressive diplomatic or domestic wins. For Russia, manufacturing hiccups haven’t helped at home, nor have accusations from several countries in July that Moscow-backed hackers tried to steal research. According to an October survey by the Levada Center, an independent pollster, 59% of Russians questioned said they would not take the vaccination. As Tatiana Stanovaya, head of political consultancy R.Politik put it to me, the Kremlin, which saw the vaccine as a question of pride and self-affirmation, simply overdid the hype. The result has been an acute lack of public trust.

Beijing and Moscow got to the finish line with impressive speed, but without the first mover advantages they had hoped for. Whatever happens next, they should consider the two specific reasons for the predicament.

The first is how the vaccine has been treated in early stages of testing. Everyone has cut corners, as breakthroughs that usually take years are happening over months. Too much is at stake. But there are questions in particular regarding extensive experimental use in both countries. China has injected thousands with unproven shots outside the trial process, many of them workers who may not have been at liberty to refuse. In Russia, scientists inoculated themselves and some of the country’s wealthiest submitted to the experimental serum too, as early as April. Testing cohorts have also been small.

Most important, though, is the question of transparency. Russia has published some information from its phase 1 and 2 studies for the Sputnik vaccine. Immediately after its first results were published, though, concerns were raised by a group of Western scientists, querying, for example, repeated patterns in the data that were not fully explained. Since, scientists from leading Russian universities have also asked for more information, further questioning methodology and data analysis. Even less is known about the second vaccine candidate. So too in China. The United Arab Emirates has said the Sinopharm vaccine showed 86% efficacy in Phase 3 tests, but more detail is required on side-effects and demographics. It could still receive China’s full approval later this month.

Russia and China are already reaching much of the developing world with their easier-to-store and likely cheaper vaccines. Beijing has joined COVAX, the WHO-backed scheme to distribute shots. Alibaba’s logistics arm, for example, has already established a cold chain route to Addis Ababa. Russian officials say orders have been placed for 1.2 billion doses. Humankind needs as much success as it can muster. It just needs a little more data too.

BLOOMBERG OPINION

Making agriculture recovery sustainable

 

Over the last five years, agriculture grew by a meager 0.9% per annum. This year is likely to be no exception, considering the impacts of the COVID-19 pandemic and climate change (such as the recent super typhoons Rolly and Ulysses).

So, can Philippine agriculture still grow by three to four percent in the medium term? And reduce rural poverty? Yes, it can, but it will require a paradigm shift.

What is the principal shift? To diversify resource use to broaden the economic base.

Today, more than half of the annual budget for agriculture and irrigation goes to rice. The crop occupies some 30% of physical area and with irrigation of almost 40% of annual harvested area. That leaves 60% for other crops.

Let us consider three factors for diversification: value per hectare, gestation period, and existing business models.

VALUE PER HECTARE
Value is composed of harvested area and unit value (price). The leading crops by area are palay (unmilled rice), coconut, and corn in that order. Far behind are banana, sugarcane, rubber, and cassava.

On gross value per hectare, the leaders are pineapple, banana, tobacco, and mango.

Offhand, what can be discerned? The top three crops in terms of area (palay, coconut, and corn) offer low value. They occupy some 87% of the area and account for 61% of the value. Banana and pineapple comprised 4% of area but contributed 27% of value.

As I have mentioned in my previous articles, productivity is a problem for many local crops.

GESTATION (TIME TO HARVEST)
Crops differ in gestation, i.e., the time from planting to harvesting. It is a consideration in making crop choices. Annuals take less than one year from planting to harvest. But perennials or “permanent” crops take longer. Net present value may be similar but the short gestation means faster cost recovery.

Technology, however, can short-circuit yield and gestation. To cite examples:

a.) Rubber can be tapped normally in six years. But the Sandique technology in North Cotabato can reduce gestation to 3.5 years using large planting materials, and also lead to increased yield.

b.) Coconut hybrids can be harvested in three years with higher density. It is also easier to harvest, especially for virgin coconut oil.

EXISTING BUSINESS MODELS
There are lessons to learn from the existing business models of our ASEAN peers. Some have financial support, like the rubber levy in Malaysia and Thailand. Malaysia has management-assisted consolidated schemes and Indonesia nucleus outgrowers program using corporations as extension, processing, and marketing hubs. Vietnam, with its strong research and extension, assists farmers in farm consolidation for mechanization. These models lead to higher harvest and exports and, in turn, reduced poverty.

WHERE TO?
Crop diversification is the way to go to make agriculture recovery sustainable. The decision on crop selection will be driven by either government support, the private sector, or a partnership. It can also result from a combination of the said factors plus such factors as market (domestic and export), prices, technology, availability of areas for planting, and investment cost.

Below are some decision analysis examples:

Rice

There is a market for import substitution. To be sustainable, it is necessary to use hybrid seeds, consolidate for mechanization and invest in mills with high recovery, among other things.

Coconut

There is a growing market for value-added products, such as coconut water, virgin coconut oil, coconut milk, and coconut cream. Proposed actions include replanting activities to replace old, senile trees; using hybrids; expanding areas; and promoting fertilization using recommended practices to boost yield levels.

Coffee

The domestic market is huge but supplied mostly by imports. To boost local supply, there is a need to pursue production expansion, improve yield levels through the use of good seedlings and good/best farm practices, and invest in mills to improve recoveries, among other things.

Diversification can also be guided by the following:

• Minding the enabling factors. On the policy front, this is access to land beyond the five-hectare limit under the agrarian reform program;

• Availing of disruptive technologies like high yielding seeds, large planting materials, etc.; and,

• Adopting good management to achieve economies of scale for higher yield and better quality.

Unfortunately, only a few small farmers can access these. The Department of Agriculture, the local government units, and the private sector can join hands to leverage skills and resources to help farmers achieve better productivity and higher incomes.

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

 

Rolando “Rolly” T. Dy is the Co-Vice Chair of the MAP AgriBusiness Committee and the Executive Director of the Center for Food and AgriBusiness of the University of Asia & the Pacific.

map@map.org.ph

rdyster@gmail.com

http://map.org.ph

Tourism, investment and NAIA modernization

At the BusinessWorld Economic Forum 2020 last month, Tourism Secretary Bernadette Romulo-Puyat and other speakers discussed the difficulties of the tourism sector in the current virus scare and lockdown environment and how they cope and plan for the near future. And at the 9th Arangkada Philippines Forum 2020 held by the Joint Foreign Chambers (JFC) of the Philippines this month, Tourism Undersecretary Benito Bengzon, Jr. narrated similar experiences and explained how the sector’s players intend to recover.

Even before the global and national lockdowns and travel restrictions, the Philippines was not getting enough international visitors, attracting only 8+ million in 2019 compared with the 15 to 40 million visiting our major neighbors in the ASEAN. One reason is that while visitors from Vietnam can go by land to Cambodia and Thailand and vice-versa, the Philippines can be reached only by plane or cruise ships.

So if we consider only airplane arrivals or take-offs, the Ninoy Aquino International Airport (NAIA) had few take-offs per day compared to other ASEAN airports except Ho Chi Minh (HCM) in pre-lockdown 2018. And many of these were domestic flights because we are an archipelago (see Table 1).

Another reason why we did not have many international visitors is that NAIA and other provincial airports are small and congested, because flight delays at NAIA (both arrival and take off) were common then. So there is an urgent need to expand and modernize the current NAIA — and also create new international airports near Metro Manila.

I checked the Public Private Partnership (PPP) Center to see the status of various international airport development projects. Two projects have been awarded: the one in Bulacan by San Miguel, and the one in Clark by Luzon International Premier Airport Development (LIPAD). The Mactan Cebu IA (MCIA) passenger terminal 1 has been completed. A very important project, the NAIA expansion, is still under prolonged regulatory review (see Table 2).

We focus on NAIA expansion. The first group that was given Original Proponent Status (OPS) was a “super consortium” composed of seven big conglomerates — Aboitiz InfraCapital, Ayala Infrastructure, Alliance Global (Andrew Tan), Asia Emerging Dragon (Lucio Tan), Filinvest (Gotianun), JG Summit (Gokongwei), and Metro Pacific (Pangilinan). A really big and rich group.

But after two years, negotiations were not fruitful and the government terminated the OPS status of the “super consortium,” and last July, the Department of Transportation asked Megawide to submit an unsolicited proposal to modernize the NAIA complex which the latter accepted. Not long after, Megawide received OPS status from the Manila International Airport Authority (MIAA).

With the lockdowns and with few flights and few passengers using the airport until late 2020, this could have been a good time to start the project, but instead, Megawide has been awaiting approval by the Investment Coordination Committee (ICC) headed by the National Economic and Development Authority (NEDA). Which will be followed by a Swiss challenge.

For various reasons, there have been campaigns, explicit and implicit, to delay if not kill the approval of NAIA rehabilitation and expansion. For what? To leave congested NAIA as it is for many years to come? Or to use more taxpayer money, including those from provinces and islands that do not even use NAIA? These are lousy alternatives since there is already an explicit desire by private corporations to spend their own money and resources to develop, expand, and modernize NAIA.

Passengers want more choices. The airlines too, and the restaurants and other businesses inside the airports. So, if we can have an expanded NAIA to use while the huge Bulacan airport is being constructed, plus the Sangley International Airport which is to be expanded and modernized by the Cavite provincial government and its partner corporations, plus the Clark Airport which is further expanding — these are all good. Good for the passengers and tourists, good for domestic and foreign investment, good for trade and commerce expansion.

The continued delay in the NAIA project approval and the Swiss challenge is not good. Not good for many lockdown-displaced jobless people who want more work opportunities, not good for Philippine tourism and investment promotion, not good for the overall economy.

NEDA ICC should not entertain the delay or kill the NAIA modernization project (which will not use taxpayers money). The failure of the “super consortium” to do the project was already bad for the country’s investment image. Delaying or killing this second chance will further worsen the situation.

 

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

minimalgovernment@gmail.com

Russia’s new guerilla media are going after Putin

SOME REMARKABLY audacious Russian-language investigations of President Vladimir Putin and his next of kin have hit the web in recent days. In the not-so-distant past, such explosive stuff would have, and did, cost editors their jobs and publications their livelihoods. The Kremlin considers these investigations part of an organized campaign. But if so, Putin himself is its unwitting number one organizer — not only because there’s plenty to investigate, but because his ostensibly successful campaign to control the Russian media is backfiring in a technological environment that has left Putin far behind. He must now contend with an emerging group of independent outlets that are both more nimble and less vulnerable to institutional pressure.

Up until recently, the private life of the Russian leader and his close relatives has been mostly a no-go zone for Russian media. Editors knew that entering it would have consequences. In 2008, the newspaper Moskovsky Korrespondent was hastily closed down by its wealthy owner, Alexander Lebedev, after it published allegations that Putin was about to marry former rhythmic gymnastics champion Alina Kabaeva and Putin himself angrily denounced the article as an “erotic fantasy.” In 2016, a series of stories about Katerina Tikhonova, who has been identified as Putin’s younger daughter by various media though the Kremlin has not confirmed her identity, and the Russia-related materials in the Panama Papers affair resulted in the dismissal of the top editors of RBC Daily, a leading Russian business newspaper. The paper’s owner, billionaire Mikhail Prokhorov, had his business premises searched by law enforcement agencies. After the editors were gone, the pressure ceased.

Now, the taboo has been broken spectacularly by two websites that have emerged in recent years — proekt.media and istories.media. Roman Badanin, the founder of Proekt, was one of the RBC managers who had to leave in 2016. The founders of Istories, a collective of investigative journalists whose leader, Roman Anin, doesn’t like to be called editor-in-chief, were involved in the original reporting on the Panama Papers and shared the 2017 Pulitzer Prize awarded for that effort.

Proekt fired the first shot with a report about a woman named Svetlana Krivonogikh, who went from working as a cleaner to a position of wealth and power as the owner of, among other things, Putin’s favorite ski resort near St. Petersburg and a stake in Bank Rossiya, in which some of Putin’s close friends also hold shares and where Putin himself keeps his salary account. The report alleges that Krivonogikh, who would not answer reporters’ questions, has a daughter born in 2003 who looks remarkably like Putin. A professional resemblance analysis is cited in the report; Proekt wouldn’t publish photos of Krivonogikh’s daughter because she’s a minor, but internet doxxers soon found the photos and put them out on Telegram channels for all to see. In 2003, of course, Putin was still married to the mother of his two previously known daughters.

Istories delivered its own salvo with a piece based on a year-long investigation into the hacked e-mails of Kirill Shamalov, who, between 2013 and late 2017 or early 2018, was married to Katerina Tikhonova. The e-mail archive contained everything from wedding photos and bills for the furnishings of two luxurious homes, one of them in Biarritz, France, to details of a sweet deal involving shares in the Russian petrochemical giant Sibur, which made Shamalov an instant billionaire. Bloomberg News reported in 2018 that as the marriage fell apart, Shamalov also lost most of his stake in Sibur.

Proekt added insult to injury with a story on Yury Kovalchuk, the billionaire and close Putin friend, and his business ties with Tikhonova, Kabaeva, Krivonogikh, and Maria Vorontsova, who has been identified by media as Putin’s oldest daughter.

Both publications have done highly professional, exhaustive investigative work. None of the specific allegations in the stories has been officially denied (or, for that matter, confirmed). Putin’s press secretary Dmitry Peskov has refused to comment on the substance of the stories, calling them “an information attack” and adding, “We know more or less who organizes this activity, this work.”

The Kremlin’s problem is that it cannot do much with that “knowledge.” Neither Proekt nor Istories has a wealthy Russian owner or backer. Neither is officially registered as a Russian media outlet. Both can easily uproot and move: They are small organizations with a handful of employees and corporate entities outside Russia (in Lithuania in the case of Proekt and in Latvia in the case of Istories). Both have made crowdfunding appeals, but both apparently receive support from Western foundations that promote independent journalism in the former Soviet Union or investigative journalism in general.

To Putin’s propagandists, who have investigated the funding of Proekt and similar media, a relationship with these non-governmental organizations is damning evidence of something akin to spy activity. But to the journalists themselves, the Western funding is pretty much the only way to support their dangerous work in Russia. Advertisers and wealthy Russian sponsors are out of the question because both succumb all too easily to Kremlin pressure. And it’s hard to rely entirely on crowdfunding: The accounts of organizations that are the most successful at it, such as opposition figure Alexey Navalny’s Anti-Corruption Foundation, are regularly frozen by the authorities or emptied out by expensive lawsuits brought by Kremlin allies.

An investigative media outlet in today’s Russia needs to be light on its feet and hard to pin down. The smaller its footprint in the physical world, especially in Russia, the better it can do its job — and the fewer no-go zones designated for the traditional media matter to it. The journalists who work in these small, flexible, mobile teams are technically savvy (the Istories website even has a page where its reporters share their knowledge of visualization, statistical, and programming tools). They can work from anywhere, and they can handle data that has been intentionally scrambled to defy analysis. They are creatures of a world deeply alien to Putin, who does not use the internet on his own and often appears to prefer the late 20th century to the modern version of reality.

At the same time, they continue Russia’s powerful guerilla tradition that helped crush Napoleon in 1812 and Hitler in the 1940s. The likes of Proekt and Istories are harder to fight than the “regular armies” of traditional media, but they can sting more painfully. Their reach is limited, of course, but the investigations do go viral on the social networks, and they add to the general public’s understanding of the regime’s nepotistic, mafia-like nature. This accumulated knowledge may not immediately threaten Putin’s hold on power, but it increases the gap between his system on the one hand and the young, the smart, and the underprivileged on the other.

Of course, the guerilla projects’ reporters do their job at considerable personal risk. At any moment, any of them can be subject to a surprise arrest, an attempt to plant drugs in a backpack or an apartment, a seemingly random beating. But sticking to the journalistic profession in Russia has long carried that kind of cost in traditional media, too. By bringing the older newspapers, websites, and other media outlets under its direct or indirect control, the Kremlin hasn’t increased reporters’ private risks, but it has taught the most stubborn of them to minimize institutional hazards. Now it’s paying a price — at least in the eyes of those Russians who keep their eyes open.

BLOOMBERG OPINION

US vaccine campaign launches with first shipments ‘delivering hope’ to millions

REUTERS/DADO RUVIC/ILLUSTRATION/FILE PHOTO

CARGO PLANES and trucks with the first US shipments of coronavirus vaccine fanned out from FedEx and UPS hubs in Tennessee and Kentucky on Sunday en route to distribution points around the country, launching an immunization project of unprecedented scope and complexity.

The inoculations, seen as pivotal to ultimately halting a surging pandemic that is claiming more than 2,400 US lives a day, could begin as early as Monday.

The first are likely to be at vaccination sites closest to any of the 145 initial shipment destinations nationwide, or those nearest the FedEx Corp. or United Parcel Service cargo centers that are relaying deliveries from the factory.

Governor Andy Beshear of Kentucky suggested the very first injections of the vaccine will be given in his state, home to the UPS Worldport sorting facility in Louisville — one of two distribution command centers. The other is the FedEx air cargo hub in Memphis, Tennessee.

“We now believe that the first individuals will be vaccinated here in the commonwealth tomorrow morning. We are less than 24 hours away from the beginning of the end of this virus,” Mr. Beshear wrote on Twitter on Sunday.

The coronavirus vaccine, developed by Pfizer and its German partner BioNTech, gained emergency-use approval from federal regulators late on Friday, clearing the way for distribution to begin a mere 11 months after the United States documented its first coronavirus disease 2019 (COVID-19) infections.

The monumental undertaking began early on Sunday with trucks carrying dry ice-cooled packages of vaccine — which must be kept at sub-Arctic temperatures — from Pfizer’s facility in Kalamazoo, Michigan, to UPS and FedEx planes waiting at air fields in Lansing and Grand Rapids.

TWO HUBS, MANY SPOKES
From there, the delivery jets whisked the shipments to UPS and FedEx’s respective cargo hubs in Louisville and Memphis, for distribution on planes and trucks to the first 145 of 636 vaccine-staging areas across the country. A second and third waves of vaccine shipments were due to go out to the remaining sites on Tuesday and Wednesday.

“Today, we’re not hauling freight, we’re delivering hope,” said Andrew Boyle, co-president of Boyle Transportation, which was hired by UPS to help ferry vaccine from the factory to a waiting plane in Lansing.

The precious cargo was escorted to airports by body-armor-clad security officers.

Boyle employee Bonnie Brewer, 56, said decades of experience hauling chemotherapies and other life-saving drugs prepared her for the historic run.

“It feels amazing,” Ms. Brewer told Reuters after the cargo was safely handed off.

Healthcare workers and elderly residents of long-term care homes will be first in line to get the inoculations of a two-dose regimen given about three weeks apart.

Public health officials have warned Americans not to become complacent about wearing masks and avoiding crowds in the meantime.

More than 100 million people, or about 30% of the US population, could be immunized by the end of March, US Operation Warp Speed chief adviser Dr. Moncef Slaoui said in an interview with Fox News Sunday.

That would still leave the country far short of herd immunity that would halt virus transmission, so masks and social distancing will be needed for months to control the rampaging outbreak.

Health officials will also have to overcome widespread hesitancy about the new vaccines, with many Americans concerned the record speed at which they were developed may have compromised safety.

“It is however critical that most of the American people decide and accept to take the vaccine,” Mr. Slaoui said. “We are very concerned by the hesitancy that we see.”

SPECIAL DELIVERY
The massive logistical effort is further complicated by the need to transport and store the Pfizer/BioNTech vaccine at minus 70 Celsius (minus 94 Fahrenheit), requiring enormous quantities of dry ice or specialized ultra-cold freezers.

Workers clapped and whistled as the first boxes were loaded onto trucks at the Pfizer factory. The long-awaited moment comes as the US death toll was approaching 300,000 and infections and hospitalizations set daily records. Some models project that deaths could reach 500,000 before vaccines become widely available in the spring and summer.

Mr. Slaoui said the United States hopes to have about 40 million vaccine doses — enough for 20 million people — distributed by the end of December. That would include vaccines from both Pfizer and Moderna, Inc. An outside Food and Drug Administration (FDA) advisory panel is scheduled to consider the Moderna vaccine on Thursday, with emergency use expected to be granted shortly after.

The Pfizer/BioNTech vaccine was found to be 95% effective in preventing illness in a large clinical trial. It is not yet known if it prevents infection or transmission of the coronavirus.

UPS and FedEx package delivery drivers are giving the vaccine priority over holiday gifts and other parcels, as health officials plead with the public to avoid holiday gatherings following a post-Thanksgiving spike in hospitalizations and deaths.

Both companies have expertise handling fragile medical products and are leaving little room for error. They are providing temperature and location tracking to backup devices embedded in the Pfizer boxes, and tracking each shipment throughout its journey. — Reuters

A stock trader’s guide to the global COVID vaccine rollout

As COVID-19 vaccines start to receive emergency approvals, the race is on to distribute the one product that billions of people across the world will want. That’s creating investment opportunities as traders examine the companies involved in the global rollout.

With multiple vaccine types, the distribution chains involve hundreds of businesses—from airlines to makers of freezers, vials, and disposable needles—and thousands of staff working to get shots from laboratory floors to the arms of populations around the world.

The world has never seen such a distribution puzzle—it’s been called the “largest and most complex logistical exercise ever.” Each of the vaccines nearing approval presents different challenges, from the ultra-cold chain required for Pfizer Inc. and BioNTech SE’s shot to the more mundane but equally challenging difficulties in getting inoculations such as AstraZeneca Plc’s across the developing world.

These are some of the sectors and companies in traders’ sights for their roles in the global vaccine rollout:

COLD STORAGE
All of the vaccine candidates require some degree of cooling, with Pfizer’s shot needing storage at around minus 70 degrees Celsius (minus 94 degrees Fahrenheit).

That “will be demanding but not insurmountable in developed markets,” HSBC Holdings Plc analysts wrote in a report last month. “Provision of cold storage facilities will be critical factors.”

That’s made freezers one of the hottest bets. In South Korea, freezer makers Daihan Scientific Co. and IlShinbiobase Co. are both up more than 340% this year, surging Tuesday after the government announced it had secured 44 million doses. Japanese consumer electronics and freezer box maker Twinbird Corp. has soared more than 250% this year, while in India, Snowman Logistics Ltd. is up 48%.

Germany’s Va-Q-tec AG has risen 195% in 2020 amid an agreement to provide thermal containers for vaccines for a “top global pharmaceuticals manufacturer” it didn’t identify.

In the US, Trane Technologies Inc. is up 36% this year, while Carrier Global Corp. has more than tripled since it was listed on the New York Stock Exchange in March. The two are “are positioned well to benefit from vaccine-driven cold chain demand,” a team of Citigroup Inc. analysts wrote Dec. 3.

DISTRIBUTION
It’s not just about keeping them cold: Moving the shots is also a humongous task. FedEx Corp. and United Parcel Service Inc. are adding facilities and refrigerated trucks—though the two are already struggling to keep up with a surge in demand for deliveries and it’s still unclear how long these cold chains will be required for.

HSBC also expects Turkish Airlines, Air France-KLM, Deutsche Lufthansa AG, and the Gulf carriers to be “highly involved” in the distribution chain, sustaining an already thriving cargo business—but cautioned it wouldn’t be enough to overcome passenger losses in the troubled airline business.

Getting the vaccine down the last mile could also boost demand for truckmakers Paccar Inc., Navistar International Corp., and CNH Industrial NV, as well as engine supplier Cummins Inc., analysts at UBS Group AG wrote.

US pharmacy chains including CVS Health Corp. and Walgreens Boots Alliance Inc. are expected to benefit from partnerships with the government to administer the shots. Both stocks are up more than 20% from the Oct. 30 announcement of the arrangement. Morgan Stanley sees an $8.5 billion sales opportunity for distributors and suppliers.

Among US drug middlemen, McKesson Corp. is likely to see the biggest boost to earnings as the main distributor for most shots. JPMorgan Chase & Co. analysts have highlighted rivals AmerisourceBergen Corp. and Cardinal Health Inc. among companies that could provide support.

And one stock to watch for all vaccine types is Germany’s Gerresheimer AG. The maker of specialty glass and plastic products including vials has risen 33% this year.

PFIZER/BIONTECH
Pfizer and BioNTech’s vaccine was the first to report positive data from a late-stage clinical trial. The UK has already begun rolling it out, and the US granted an emergency use authorization late Friday. Pfizer has risen more than 20% since the end of October, while BioNTech has added nearly 50%.

Despite the cold-chain complications, Pfizer has first-mover advantage, which is helping to lift its partners. Croda International Plc rose to a record after an agreement to supply Pfizer with the novel excipients used to make its vaccine, while Indian specialty chemical makers that supply Pfizer, including Aarti Industries Ltd. and Suven Life Sciences Ltd., have surged.

MODERNA
Using the same messenger RNA technology as Pfizer, Moderna Inc. one-upped its rival with an equally effective that can be stored at regular refrigerated temperatures. A US Food and Drug Administration advisory panel will scrutinize Moderna’s shot at a meeting on Dec. 17.

A key stock to watch is Moderna’s production partner Lonza Group AG. Shares have risen more than 50% in 2020.

ASTRAZENECA
While the shot developed by AstraZeneca and the University of Oxford is based on more familiar technology, confusion over trial results mean it’s headed for an additional global test.

But the Astra vaccine will still be closely watched as it’s expected to meet the demand of middle- and low-income countries. Oxford Biomedica Plc is set to be the manufacturing partner, with shares up 35% in 2020.

THE UNKNOWN
As the rollout begins there may still be plenty of swings in stock prices to come. With millions getting injected, how will markets react to reports of sickness or deaths among those who have received the vaccine, even without a link to the shot?

With unknowns like the length of the immunity from these vaccines, it’s unclear if this will be a one-time job or a yearly jab—and therefore if this is temporary boost to earnings or an ongoing benefit for the companies involved.

And there are further vaccines to come, from China’s Sinopharm, Johnson & Johnson, and others, which may open more investment avenues. — Gearoid Reidy and Morwenna Coniam/Bloomberg

Sport shows its resilience in spite of virus pandemic

LONDON — When Yoshiro Mori, president of the Tokyo Olympics organizing committee, claimed defiantly in February that the greatest show on earth would go ahead in spite of a looming pandemic, few realized what wishful thinking that was.

Weeks later, with the novel coronavirus engulfing the planet, the mighty Olympic juggernaut was stopped in its tracks and the sporting calendar disintegrated.

In many ways, the announcement on March 24 that the Games was postponed until 2021 came as a relief for the thousands of athletes left in limbo as Tokyo organizers and the International Olympic Committee (IOC) held out for a medical miracle.

It was the first time a modern Olympic Games had been delayed in its 124-year history.

The cancellation of a two-week sporting jamboree, albeit one originally costing $12.6 billion, pales into insignificance compared to the toll of COVID-19 on lives and livelihoods.

The year is ending with vaccines offering hope of containing the virus but more than 1.5 million people have died from the virus and economies around the world are in turmoil.

A bunch of sports men and women forced to put their gold-medal dreams on hold appears trivial by comparison, yet the crisis has emphasized sport’s benefit to society and not just because of its estimated $756 billion annual value.

The Olympic Games, for all its faults, doping scandals and mind-boggling budgets remains, on the whole, a showcase for the human spirit, inspiring the world’s youth.

Sport’s stirring response to the Black Lives Matter protest also displayed its power to advance

social justice.

By the time the Olympics succumbed to the inevitable delay, an eagerly-awaited sporting year was already unravelling.

DOMINO EFFECT
A week before the Games were postponed, the European Championship soccer tournament, second only to the World Cup in size, was rescheduled until 2021 as UEFA accepted the futility of staging an event across 12 cities during a pandemic.

“The thought of celebrating a pan-European festival of football in empty stadia, with deserted fan zones, while the continent sits at home in isolation, is a joyless one,” said Aleksander Ceferin, head of the sport’s European governing body.

Every major domestic soccer league ground to a halt, while iconic events fell like dominoes.

For the first time since World War II, there was no Wimbledon tennis championships. The revamped Fed Cup and Davis Cup finals both bit the dust as did city marathons from London to Boston.

Golf’s Ryder Cup and British Open were cancelled, while the Masters was shunted to a spectator-less Augusta in Autumn, long after the azaleas had bloomed.

The Formula One season stalled on the grid in Australia where cricket’s T20 World Cup was postponed until 2021.

The NBA and NHL seasons were both suspended for more than four months, while MLB clubs cancelled more than 1,500 games, resulting in the shortest regular season on record.

The list of disruptions was endless and the financial implications were enormous.

SPORTING MEMORIES
Yet out of the chaos, federations, event organisers, and athletes displayed ingenuity and resolve to still provide incredible sporting memories in the darkest of years.

Spanish tennis player Rafa Nadal produced an extraordinary display to thrash Novak Djokovic and win a jaw-dropping 13th French Open title after a gloomy and cold fortnight in Paris at a delayed tournament in October.

It drew Nadal level with Roger Federer on 20 Grand Slams.

That a delayed Tour de France reached Paris without a major COVID-19 outbreak was a triumph in itself. Yet it provided one of the most astonishing finishes ever as Slovenian Primoz Roglic saw the yellow jersey slip from his grasp a couple of kilometers from glory with compatriot Tadej Pogacar winning an epic race.

Europe’s soccer leagues resumed behind closed doors with Liverpool claiming their first English title for 30 years, while the business end of the Champions League from the quarter-final stage was condensed into 11 days in Portugal with Bayern Munich beating Paris St-Germain in the showpiece match.

England won the longest Six Nations rugby championship ever staged — nine months after an opening-day defeat by France.

The Super Bowl, played in front of 62,000 fans just over a month before a pandemic was declared, witnessed a fairytale finish as the Kansas City Chiefs clawed back a 10-point deficit heading into the fourth quarter to beat the San Francisco 49ers and claim their first title for 50 years.

The LA Lakers captured a record-equalling 17th National Basketball Association (NBA) Championship by beating Miami Heat after the season resumed in July in a fan-less Disney World biosecure bubble while the Dodgers snapped a 32-year title drought in the Major League Baseball (MLB).

The year was book-ended by the death of two sporting icons — NBA great Kobe Bryant who was killed in a helicopter crash in January, and Argentina soccer maestro Diego Maradona who passed away aged 60 in November.

After so much heartache, there is hope that 2021 will restore a semblance of normality and that, in the words of the IOC and Tokyo organisers on that sombre day in March, the Olympic flame will become a light at the end of the tunnel. — Reuters

US Women’s Open final round suspended

RAIN forced play to be suspended on Sunday shortly after the final round of the US Women’s Open began.

Therefore, a champion will be determined on Monday when competition in the final major championship of the year resumes at Champions Golf Club’s Cypress Creek course in Houston.

The leaders were unable to tee off as thunderstorms moved in on the golf course.

Japan’s Hinako Shibuno, who led after the second and third rounds, holds a 1-shot lead over Amy Olson. Shibuno sits at 4-under-par 209 for three rounds.

Twenty-four of the golfers didn’t start their rounds Sunday, or failed to record at least one hole finished. More inclement weather was anticipated when the decision was made to halt play for the rest of the day.

Play was suspended in the morning because of dangerous weather. Even before that, final-round tee times had been adjusted following Saturday’s third round because of weather-related concerns, meaning some golfers began on No. 10 for the final round.

The suspension didn’t come as a surprise for some of the golfers. The conditions were a topic following Saturday’s play.

“I’m not necessarily sure,” Olson said regarding the potential conditions. “Probably, playing long favors me, but I just want it to play fair. That’s kind of the ultimate hope and generally, the US Open does that.”

Only four golfers started the final day with an under-par score for the tournament — and none of those golfers hit a shot Sunday. Thailand’s Moriya Jutanugarn and Korea’s Ji Yeong Kim2 will begin final-round play at 1 under.

The most golf played Sunday was six holes, with two entrants making it one-third of the way through their rounds.

Gabriela Ruffels of Australia and Seon Woo Bae of Korea were 2 under in play Sunday for the best scores to that point, completing four and five holes, respectively. But they’re among the group tied for 25th place at 4 over. — Reuters

Spain could develop coronavirus herd immunity by end of summer 2021, minister says

MADRID — Spain should achieve herd immunity from COVID-19 by the end of summer 2021 if enough people are vaccinated by then, the health minister said in an interview published on Sunday.

Health Minister Salvador Illa said a vaccination program will start in January and by the end of the summer more than two-thirds of the population of 47 million should be vaccinated.

“In Europe, even if it is not the final end, we will be in a very different stage. That is why I think we are at the beginning of the end with this time horizon that I say, from five to six months,” he told Publico newspaper.

Asked if this meant that Spain would achieve herd immunity, Mr. Illa replied: “Yes. It is what the technicians call that, that people have immunity either because they are vaccinated or because they have had the disease.”

However, Mr. Illa cautioned Spaniards against dropping their guard during the Christmas period. Spain has been one of the worst-hit countries in Europe by coronavirus.

New cases rose by 10,519 to 1,730,575 on Friday, according to health ministry data, while the number of deaths increased by 280, bringing the total to 47,624. — Reuters

South Korea orders schools to shut as COVID-19 cases spike

South Korea ordered schools to close from Tuesday in the capital Seoul and surrounding areas as it battles its worst outbreak of novel coronavirus since the pandemic began, surpassing the previous peak in February.

Schools in the capital region would move classes online until the end of the month, in the latest ratcheting up of social distancing measures which so far have failed to reverse the spike in infections.

The school closure is a step towards the imposition of Phase 3 social distancing rules, a move that would essentially lock down Asia’s fourth-largest economy.

Prime Minister Chung Sye-kyun said such a step required careful review, as the government comes under mounting pressure to do more to step the rise of infections.

“The government will not hesitate to make the decision to upgrade to Phase 3 if it is considered necessary as it takes into account the opinions of related ministries, local governments, and experts,” he told a meeting of health officials according to a transcript from his office.

The Korea Disease Control and Prevention Agency (KDCA) on Monday reported 718 new coronavirus cases, down from the record daily increase of 1,030 a day earlier. Of the new cases, 682 were locally transmitted, it said.

Most of the new cases were in Seoul, the neighboring port city of Incheon, and Gyeonggi Province, home to over 25 million people.

South Korea’s total infections now stands at 43,484, with 587 deaths.

The government launched a massive tracing effort involving hundreds of troops, police, and officials to help track down virus carriers.

Some experts said the government and the public needed to do more.

“This is the time to send an impactful message to the public, so that they can take voluntary actions,” said Kim Dong-hyun, president of Korean Society of Epidemiology and a professor at Hallym University College of Medicine.

Under a Phase 3 lockdown, only essential workers would be allowed into offices and gatherings would be capped at less than 10 people. — Sangmi Cha/Reuters

Hyundai Completes ‘Power Trio’ with Class-3 DOTR Certification

Hyundai Asia Resources, Inc. (HARI), the official distributor of Hyundai Trucks and Buses in the country, received from the Department of Transportation (DOTr) the Certificate of Compliance (COC) from the Department of Transportation for its HD50S Class 3 Modern Jeepney, marking another milestone in the company’s staunch support for public transport modernization.

With COC’s already given to Hyundai H-100 Class 1 and Hyundai HD50S Class 2 last year, this latest certification gives HARI the distinction of being the first and only brand with a full lineup of modern jeepneys that meet Philippine National Standards (PNS).

The Hyundai HD50S Class 3 Modern Jeepney, which first debuted in February this year, is powered by a 2.9-liter Euro 4-compliant CRDi engine that provides better fuel efficiency, reliability, and cleaner emissions. It is designed for enhanced stability and power-to-weight ratio, boasting a 3,415-millimeter wheelbase. The vehicle also features roof-mounted air conditioning, AFCS, Wi-Fi, GPS tracking, CCTV cameras, a 7-inch monitor, and a speed limiter. It can accommodate 22 seated passengers as well as up to 10 standing commuters.

STABLE. EFFICIENT. AND EVEN COVID-READY. The Hyundai HD50S Class 3 Modern
Jeepney has been designed and tested to provide mass mobility options for the Filipinos even
this time of the pandemic.

Since then, Hyundai’s new commuter workhorse has been field-tested almost on a daily basis in support of the government’s COVID-19 mobility programs.

“The pandemic has stressed the need to modernize and fortify public transport in the country. Using our modern jeepney platforms, we were the first to roll out Ligtas Biyahe (COVID-ready) variants that were utilized and proven effective in the government’s Libreng Sakay for front liners. We need to reach a critical mass so we can keep the majority, if not all, of the riding public safe and secure,” HARI President and CEO Ma. Fe Perez-Agudo said.

The Hyundai Modern Jeepney’s Ligtas Biyahe variant boasts of the most stringent safety features, such as contactless payments, social distancing with individualized seating, and plastic dividers.

Since their launch last year, HARI has been receiving numerous orders for the Modern Jeepney shuttles, not just from the country’s major transport groups, but also from private companies and LGUS.

“Filipinos require more mass mobility options to get to their workplaces, get essentials, and to reach out to their families in these trying times. Gradually and with stricter protocols, public transport capacity must be increased to revive the economy. We strongly believe that Hyundai Modern Jeepneys can be part of that solution,” Ms. Agudo added.