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Construction spending of 5% of GDP seen as recovery ‘magic number’ — Chua

A CONSTRUCTION spending level equivalent to 5% of GDP will be the “magic number” that will likely drive an economic recovery, Acting Socioeconomic Planning Secretary Karl Kendrick T. Chua, said at a construction industry conference.

Speaking at the forum arranged by the Construction Industry Authority of the Philippines Wednesday, Mr. Chua said he expects a pickup in the sector with the government planning to ramp up spending on infrastructure projects to P1.12 trillion in 2021 and P1.018 trillion in 2022, equivalent to 5.5% and 4.5% of gross domestic product (GDP), respectively.

“The magic number that we are targeting is 5% (of GDP), which is sufficient (for the) economy to rebound strongly. That translates to a lot of jobs,” Mr. Chua said.

“The government is committed to increasing the infrastructure spending as a way to help the economy recover and to stimulate more demand and to prepare the economy for upper-middle-income status,” he added.

Mr. Chua said the National Economic and Development Authority (NEDA), which he heads, supports policies that open up the construction industry to foreign investment and promote more competition.

The Supreme Court recently struck down rules hindering the licensing of foreign contractors. House Bill 7337 also proposes to relax rules on foreign ownership in the construction industry.

“The NEDA supports, in principle, (policies that will) open the sector to more competition so we can get the best value for the people in terms of quality… In general, the position of NEDA is to have a more level playing field across industries, across size, across industries, and nationalities, subject to the usual caveats,” he said.

This year, however, Mr. Chua said infrastructure spending has been lower than usual due to budget cuts after funds were realigned to fund urgent pandemic spending. The budget for infrastructure for 2020 was cut by 21% to P785 billion or 4.2% of GDP. The initial budget was P989 billion.

Government spending on infrastructure fell 33% to P153.5 billion in the third quarter, but exceeded the reduced target for the period by 12%.

He said the construction industry overall should post a stronger rebound in the fourth quarter after posting a 39.8% year-on-year decline last quarter.

The sector has been a major contributor to economic growth, he said, with construction gross fixed capital formation accounting for nearly P3 trillion in real terms, or 1.8 percentage points of the 6.6% average GDP growth over the past four years.

“It is important to see a more solid recovery especially in the last two years (of the administration),” he said.

He said new jobs generated by the industry next year will be substantial, with government infrastructure projects in themselves creating 1.7 million direct and indirect jobs.

To address the funding needs of construction companies, First Metro Investment Corp. Chairman Francisco C. Sebastian said more firms should tap the capital markets to raise funds for expansion by issuing shares or bonds.

Mr. Sebastian said the financial sector is ready to support the industry, but companies have had “very little involvement” in the stock and bond markets.

He said there are only four publicly listed construction companies — DMCI Holdings, Inc., Megawide Construction Corp., D.M. Wenceslao & Associates, Inc., and EEI Corp. — out of the 274 listed companies on the bourse.

He said overall, fundraising via corporate and government bond issues as well as preferred shares rose 83% from a year earlier to P1.155 trillion in the first nine months of 2020 despite the COVID-19 pandemic. He said the total could double the year-earlier level by year’s end.

“Being a public company can become a realization of your vision, and could open your company not just to long-term sustainability and financial success but even future growth well beyond the construction business,” Mr. Sebastian said.

Speaking at a separate forum Wednesday, BDO Capital and Investment Corp. President Eduardo V. Francisco said banks have enough capital and the financial markets are awash with cash to fund big-ticket infrastructure projects, after the Bangko Sentral ng Pilipinas cut benchmark interest rates and their reserve requirement ratios.

“Maybe the question more is are there enough projects and are the projects bankable… projects have to be bankable and feasible unless there’s a government guarantee because if the government doesn’t give a guarantee, why will (investors) put up their equity, when there’s not enough usage, there’s not enough support?,” Mr. Francisco added. — Beatrice M. Laforga with Jenina P. Ibañez

Property price slowdown emerging risk for banks

THE property market could emerge as a risk to the banking sector if prices stall, while an increase in bad loans overall in 2021 is not likely to significantly threaten bank profits because of aggressive provisioning by many banks early on, Fitch Ratings said.

“We expect the deterioration in reported asset-quality metrics to accelerate in 2021 as debt moratoria mandated by regulations expire in December 2020, though the impact on profitability is likely to be cushioned by the banks’ pre-emptive general provisioning in the preceding year,” Fitch said.

“[A] sustained or significant decline in property prices would have wider repercussions on the banks’ balance sheets — given the sector’s high correlation with the broader economy and as it accounts for 20% of the banks’ loan portfolios,” Fitch said in a report.

According to the central bank, home prices rose by a record 27% year on year in the second quarter, driven by the luxury home segment.

“A moderation in Philippine property prices, which have appreciated strongly in recent years, is likely as remittance flows ebb and job market conditions remain weaker than pre-pandemic levels,” Fitch said.

At the end of September, the industry’s non-performing loan (NPL) ratio rose to 3.4%, the highest level since the 3.42% posted in May 2013. Bad loans rose 60% year on year to P364.762 billion.

The NPL ratio is expected to hit 4.6% by the end of 2020, according to the central bank.

Fitch Ratings said banks in the Philippines, Indonesia and Thailand will reap the benefits from their “superior” capital and leverage positions compared to their peers in India, China, Vietnam, and Sri Lanka.

The banking industry’s capital adequacy ratio was 15.4% on a standalone basis and 16% on a consolidated basis at the end of 2019, both above the 10% minimum requirement. — Luz Wendy T. Noble

Open-pit ban, mining permit freeze seen holding back industry’s GDP contribution

MINING INVESTMENT has been hindered by inappropriate policy, including the freeze on new mineral production sharing agreements and the current ban on open-pit mining, preventing the industry from contributing to the economy, the head of the mining industry association said.

At the 9th Arangkada Philippines Forum Wednesday, Chamber of Mines of the Philippines Chairman Gerard H. Brimo said: “The industry has been stymied by policy problems, resulting in no new investments and therefore no growth.”

Citing 2019 data from the Mines and Geosciences Bureau, Mr. Brimo said the metallic mining industry accounted for 0.6% of gross domestic product (GDP), equivalent to P124.5 billion, and around 6.3% of exports at $4.38 billion.

“For such a highly-mineralized country, the large scale metallic mining sector does not substantially contribute to the national economy,” Mr. Brimo said.

Mr. Brimo said the open-pit mining ban deprives the country of export receipts, tax revenue, and social programs.

“The open-pit mining method is practiced all over the mining world. For most types of near-surface mineral deposits, there is no alternative,” Mr. Brimo said.

Mr. Brimo said the three open-pit mining projects that are on hold include the Tampakan Copper Project of Sagittarius Mines, Inc., the King-King Copper-Gold Project of Nationwide Development Corp. and St. Augustine Gold & Copper Ltd., and the Silangan Copper and Gold Project of Philex Mining Corp.

“The three pending projects, all located in Mindanao, can bring the industry’s contribution to exports to 9% and total contribution to GDP to 1.5%,” Mr. Brimo said.

Separately, Cargill Philippines, Inc. Corporate Affairs Director Christopher A. Ilagan said the agribusiness industry should focus on organic and free-range exports while participating in the e-commerce revolution.

Mr. Ilagan said at the same forum: “Efforts should also be done for improved data collection and analytics to support agricultural production and market systems, while also allowing for a more effective targeting of government support programs in the agriculture sector.” — Revin Mikhael D. Ochave

BIR collects P548M from firms shut down for tax violations

THE Bureau of Internal Revenue (BIR) said it collected P548 million in the nine months to September from establishments temporarily closed down for failing to register or pay taxes in arrears, the Department of Finance (DoF) said in a statement Wednesday.

The DoF said the taxes were collected from 178 commercial establishments temporarily closed down under “Oplan Kandado.” The nine-month tally was equivalent to 28.5% of the year-earlier level of P1.92 billion, when the BIR was able to close 743 establishments.

The DoF said there is potentially P338 million worth of collectable tax liabilities from the 14 pending cases at the Court of Tax Appeals; as well as from the 72 complaints filed before the Department of Justice involving an estimated P3.4 billion worth of tax obligations.

The bureau’s Run After Tax Evaders (RATE) program aims to promote voluntary tax compliance among businesses by intensifying the campaign to go after tax evaders.

Last year’s results from the Oplan Kandado and RATE program, which seeks to encourage compliance, showed significant improvement from 2018. Oplan Kandado collections rose over 200% from the P799.47 million generated in 2018, RATE cases rose 66% from the 209 complaints filed in 2018.

The BIR’s total tax collections fell 9.91% to P1.443 trillion in the nine months to September as the pandemic hindered consumption and business operations. — Beatrice M. Laforga

Most household workers receive no social welfare benefits — DoLE

MORE THAN four-fifths of the 1.4 million domestic workers in the Philippines do not receive social welfare benefits they are entitled to under the law, the Labor department said, citing a study.

In a briefing Wednesday, the National Wages and Productivity Commission (NWPC) cited results of its first survey on domestic workers, completed in partnership with the Philippine Statistics Authority and the International Labor Organization.

The survey found that out of the total 1,400,132 domestic workers participating in the study, 83% did not receive social benefits. Of these, 79.2% or 1.1 million do not have Social Security System payments made on their behalf; 80.7% or 1.1 million do not have PhilHealth; and 87.6% or 1.2 million are not enrolled in the government’s housing fund, known as PAG-IBIG.

However, 57% of domestic workers receive “other” benefits such as gifts, transportation, interest-free loans, paid leave and others. The remainder said they do not receive benefits other than their wages.

The study also reported that 1.3 million household workers also worked without any written contracts or were not aware of the legal requirement to work under contract. Only 2.5% or 35,455 have signed contracts with their employers.

The survey is the first of its kind, NWPC Director Maria Criselda R. Sy said in the briefing, “This will be the first baseline (study) when it comes to the profile of the kasambahay (domestic workers) in the Philippines.”

She added that this survey also aims to make employers aware of household workers’ rights under Republic Act 10361 or the Kasambahay Law. Many domestic workers and employers are not aware of the law.

“There are penalties (for not following the law) but our problem is the advocacy here that everyone should be aware,” Bureau of Workers with Special Concerns (BWSC) Director Karen Perida-Trayvilla said.

Both NWPC and the BWSC are pushing for a unified registration system for social welfare applications for domestic workers. Ms. Perida-Trayvilla said the department has spoken with the social welfare agencies but talks have not progressed.

Ms. Sy said the NWPC is also planning on providing incentives to employers who offer written contracts for domestic workers. — Gillian M. Cortez

Mangroves seen more beneficial to seaside residents than fish farms

MANGROVES are more beneficial to fishing communities than fish farming, which employs few workers, a marine scientist said at an online forum organized by Oceana Philippines.

Dr. Jurgenne H. Primavera said Wednesday that mangroves bring more socio-economic opportunity and protection from storms and flooding.

“With mangroves, there is social equity. Many more people will benefit, including small-scale fishers. In contrast, the fish pond industry employs very few full time workers… and seasonal (ones),” Ms. Primavera, a mangrove expert, said.   

Citing a Zoological Society of London study, she said mangroves generate fishing and forestry products, benefiting small-scale fishing communities along the coast.

“Fish ponds (are for) food security,” she said, citing the intensive farming of milkfish and tilapia.

“Pero iyon lang (That is all),” she said, noting the absence of other benefits.

Ms. Primavera added that she did not foresee “any massive displacement of fishpond workers,” should fish farms be repurposed for the cultivation of mangrove forests.

The Oceana forum was examining the issue of converting fish farms back to mangrove forests.

According to Wetlands International, 71% of the wetlands in Manila Bay have been cleared and used for aquaculture. Oceana said these fish farms have since been abandoned and unutilized in recent years.

“Under the amended Fisheries Code, these should revert to the public domain for mangrove reforestation. Due to the lack of enforcement, however, these properties have remained in the possession of private entities, thus depriving us, especially the poor fisherfolk, of the benefits of having mangrove forests,” Oceana said in a media advisory.

Ms. Primavera said the ideal mangrove to fish farm ratio should be 4 to 1.

“For sustainability, no more than 20% of a given mangrove area should be converted to ponds,” she said.

Non-profit organization Forest Foundation Philippines described mangroves as important ecosystems which are crucial for mitigating climate change.

“A hectare of mangrove forests can store up to five times more carbon than most tropical forests around the world. This is, in part, due to the deep, organic rich soils in which they thrive. However, like most forest types, the areas of mangrove forest have been in decline,” the group said on its website. — Angelica Y. Yang

PHL bans poultry imports from parts of Denmark, the Netherlands, France

THE PHILIPPINES has issued a temporary ban on poultry imports from parts of Denmark, the Netherlands, and France after outbreaks of the H5N8 highly pathogenic avian influenza virus.

In three separate memorandum orders, Agriculture Secretary William D. Dar suspended the imports of domestic and wild birds and their products including poultry meat, day-old chicks, eggs, and semen from Randers, Denmark; Gelderland and Groningen in the Netherlands; and Haute-Corse, France.

The ban effectively suspends the processing, evaluation, and issuance of sanitary and phytosanitary imports clearances for such commodities.

Mr. Dar said Denmark reported its Randers outbreak among broiler poultry in a Nov. 17 report to the World Organisation for Animal Health (OIE).

The Netherlands reported its outbreak to the OIE on Nov. 7, 13 and 17.

France reported its Haute-Corse outbreak to the OIE on Nov. 16.

According to Jesus C. Cham, president of the Meat Importers and Traders Association, the bans are not expected to significantly affect meat imports.

He added that the three bans are “fine” as long as they are regionalized and not a blanket ban.

“New (import) orders will not arrive this year so it will be a problem for next year. However, as winter ends, bird flu should likewise diminish,” Mr. Cham said via mobile phone. — Revin Mikhael D. Ochave

A chance to claim: Deductibility of expenses not subject to withholding tax

A month before 2020 ends, people are beginning to experience some level of normalcy, returning slowly to pre-pandemic life, and looking for a reset button to make up for losses.

The same goes for the Bureau of Internal Revenue (BIR), the chief agency responsible for the government’s funds. While it managed to exceed its reduced collection targets, the BIR is still aggressive in its efforts to collect taxes via tax audits.

One common issue that the BIR raises during a tax audit is deficiency withholding tax, which usually arises from discrepancies between expenses recognized in the taxpayer’s Audited Financial Statements (AFS) or Income Tax Return (ITR) and those reported in the withholding tax returns. These discrepancies are easy for the BIR to spot but often difficult for taxpayers to refute or justify.

Effectively, a deficiency withholding tax assessment will also result in a deficiency income tax exposure since the related deductible expense will also be disallowed. This principle is based on Section 34(K) of the Tax Code, which states that an expense will be allowed as a deduction for income tax purposes only if it is shown that the tax required to be deducted and withheld therefrom has been paid to the BIR. Nonetheless, this issue of deductibility may not be too critical. Under Section 2.58.5 of Revenue Regulation (RR) No. 2-98, as amended by RR No. 14-2002, a taxpayer with withholding tax deficiencies will still be allowed to claim the related expense as an income tax deduction as long as the deficiency withholding tax and corresponding penalties are settled during an audit/investigation or reinvestigation/reconsideration.

Consistent with these rules, the Court of Tax Appeals (CTA) has ruled that a deduction is allowed even if no tax was withheld only if the corresponding deficiency withholding tax was paid during the audit/investigation or reinvestigation/reconsideration, and not after its conclusion. In CTA Case No. 9349 dated May 30, 2019, the Court did not set aside the issue of the disallowance of expense even if the taxpayer paid the deficiency withholding tax after the receipt of the BIR’s Final Decision on Disputed Assessment (FDDA). Having paid the withholding tax deficiency after the assessment, the deduction can no longer be allowed under the withholding tax regulations.

However, in CTA Case No. 9531 dated Sept. 6, 2019, the Court went even further and held that the audit/investigation or reinvestigation/reconsideration had already been concluded when the Formal Letter of Demand (FLD) or FDDA was issued.

With all due respect, the CTA ruling needs re-examination. It appears that the Court may have been inadvertently written the FLD as equivalent to the FDDA. As most readers would probably know, an FLD is issued together with the Final Assessment Notice (FAN), to which a taxpayer is given 30 days upon receipt to file an administrative protest for reconsideration or reinvestigation. I say there appears to be a mistake because in this case, the CTA only disallowed the expenses where the deficiency expanded withholding tax (EWT) were paid after the issuance of the FDDA and no longer included the related expenses where the EWT was initially paid after the taxpayer filed its protest to the FLD.

Clearly, the CTA’s position is still reckoned starting from the point of the FDDA only. Unless the taxpayer is confident in refuting the deficiency withholding tax assessment, it is prudent to settle the deficiency at least before the issuance of the FDDA to be able to claim the related expense.

It may also be helpful for taxpayers with ongoing tax assessments with the BIR for taxable years prior to 2018 to know that Section 2.58.5 of RR No. 2-98 was earlier amended by RR No. 12-2013. According to RR No. 12-2013, no deduction for income tax purposes may be allowed where there was failure to withhold tax notwithstanding subsequent payment of such withholding tax at the time of audit investigation or reinvestigation/reconsideration. However, in 2018, the BIR issued RR No. 6-2018 which revoked RR No. 12-2013 and reinstated the provisions of Section 2.58.5 of RR No. 2-98.

So, should the favorable RR No. 6-2018 be applied to tax audits covering taxable years before the regulation was issued in 2018? The answer should be yes. Under Section 246 of the Tax Code, the revocation, modification or reversal of any rules and regulations promulgated by the Tax Code or the Commissioner does not have retroactive application if prejudicial to the taxpayer. RR No. 6-2018, on the contrary, is beneficial to taxpayers and should thus be retroactively applied. Notably, the CTA cases I mentioned pertain to tax assessments covering taxable years before 2018, in which the Court never mentioned or applied RR No. 12-2013.

While the BIR is tasked to collect funds for the government, it must seriously consider the plight of taxpayers who are struggling to survive the pandemic and recent calamities. The BIR must likewise balance its duty with the general welfare of the public. As for the taxpayers, this is not the time for their money, which could otherwise be used for subsistence, to go wasted on tax deficiency payments that can be avoided if they are fully aware of the requirements of the tax laws.

The views or opinions expressed in this article are solely those of the author and do not necessarily represent those of Isla Lipana & Co. The content is for general information purposes only, and should not be used as a substitute for specific advice.

 

Nestine P. Buisan is a Senior Associate at the Tax Services Department of Isla Lipana & Co., the Philippine member firm of the PwC network.

nestine.p.buisan@pwc.com

OPEC’s lost its team spirit

OPEC’s historic output agreement may be teetering on the edge of collapse. It wouldn’t be in the interest of a single cartel member, but then nor was letting that last deal implode in March. Ignoring the risk of another breakdown seems blinkered.

What was meant to be a pretty straightforward meeting of the Organization of the Petroleum Exporting Countries (OPEC) broke up spectacularly on Monday. So they pushed back a gathering with their OPEC+ allies from Tuesday to Thursday in order to allow themselves more time to try to reach agreement internally first.

It’s hard to believe things are so tense given there appeared to be little argument over the need to delay a planned tapering of the output cuts while economies are still roiled by the coronavirus. Adding 1.9 million barrels a day of supply to the market from the start of January would be a reckless gamble given the recovery in oil demand remains patchy. Bloated stockpiles of crude and refined products need to be drawn down before pumping more oil.

The disagreement is more fundamental to the group’s inner workings. It appears to hinge on conditions demanded by the United Arab Emirates that OPEC’s de facto leader, Saudi Arabia, finds unacceptable: That all the countries that have failed to comply with their targets so far continue to make up for it next year.

It’s no secret that the UAE is unhappy with its own output quota, which it regards as tougher than those imposed on fellow members, and that it’s eager to utilize more of its newly installed production capacity before oil demand starts to wane again.

The real sticking point is its demand that those non-compliant countries continue to make deeper compensatory cuts next year. And that’s a long list, which includes Iraq, Russia, Gabon, Nigeria, and Kazakhstan.

On the surface, it’s difficult to see why that’s contentious. Saudi Arabia’s Energy Minister Abdulaziz Bin Salman has been at the forefront of insisting on compensation cuts from laggards. He very publicly reprimanded his Emirati counterpart, Suhail Al-Mazrouei, for the UAE’s own overproduction in July and August. And that seems to be part of the problem. The Emiratis quickly made up for their transgression with deeper cuts in September and October, but others failed to do so. Now it appears Saudi Arabia is willing to give them a free pass.

Keeping Russia and Iraq on board with the deal, even if they’re not fully complying, may be better than losing them altogether by pushing them too hard. Russia, by far OPEC’s largest external ally, hasn’t even been asked to acknowledge its over-production, let alone compensate for it.

The longer it goes on, this latest OPEC+ deal, for all the dressing up with full compliance and compensation cuts, is starting to look like the OPEC deals of old, where the rich countries of the Arabian Peninsula carried a disproportionate share of the burden, while their poorer partners often ignored their own quotas.

The UAE maybe just may be getting tired of its support for the status quo being taken for granted.

The current wisdom among traders and analysts is that a compromise will be found. The OPEC+ meeting’s delay certainly suggests that’s what they’re trying to do. But that view seems based, at least in part, on an assumption that the group will do almost anything to avoid a repeat of the collapse of the previous deal in March.

However, the risk of the deal breaking down, though perhaps relatively small, is not negligible and the price of failure is huge. Last time the OPEC+ deal collapsed, crude prices soon followed as producers opened the taps to compete with each other for markets. Setting aside West Texas Intermediate’s brief, but spectacular dive below zero, prices still went as low as $10 a barrel.

The slump may not be as severe a second time around. Demand isn’t collapsing, coronavirus vaccines are on the way and producers may still show some restraint, even without an agreement. But a drop of $10-$15 a barrel is easily possible.

Nobody thought the first OPEC+ deal would fall apart — until it did. And nobody seems to think this one will collapse either. Let’s hope they’re right. 

BLOOMBERG OPINION

Christmas in the New Normal

UNLIKE Scrooge of Charles Dickens’s “Christmas Carol,” we should not need ghosts of Christmas Past, Present, and Future to jolt us into celebrating this season, even with social distancing.

Yes, the Christmas rules apply regardless of the GDP levels going down.

It’s the special cuisine that defines Christmas, like the turkey in some other celebrations. Still, food consumption is bound to go down with the lack of redundancy from attending several Christmas parties in the month of December, sometimes on the same day. With the ban on in-person gatherings of over five persons (expected to be breached with caroling instead of birthday singing), sitting around a table with frequent buffet visits is to be skipped this year.

Office parties have been banned, a practical excuse for cost-cutting. There are cases, however, of using restaurants up to their allowed capacity to hold socially distanced parties. Nobody said anything about the patrons not knowing each other when they enter the premises allowed to seat up to 50-60% capacity.

Certain food items mark this time of the year.

Edam cheese which in other countries — like the Netherlands which makes it — does not always come in a red ball of inedible but non-toxic wax. This item makes a prominent appearance for the season in the gift grocery basket and the dining table. (Now, not all red-balled cheeses are edam.) Softer cheeses, like Camembert or brie are not as photogenic. They blend with the napkins.

Food selection defies all prescribed dietary rules and focus on high carbohydrates (pasta, paella), high sugar (leche flan, food for the gods), fatty (oxtail in peanut sauce, callos, lechon), salty (ham, cheese), and irresistible (all the above). The deleterious effects on the aorta and vena cava of the food intake are psychologically suspended. Even this list of forbidden pleasures will be trimmed down with fewer mouths around the table.

The guest lists for the seasonal meals are fixed and may be added to, but not subtracted from. Anyway, the invitations will be virtual with an agreed-upon time. It’s strictly consuming your own food and wine, no sharing required.

Gift-giving is another cultural requirement for the season.

Food again makes its appearance. It is considered the most ideal gift for passing on to others since it has an expiry date and is often too much to consume in the narrow time window when it comes in a flood, delivered by motorcycle messengers. (Though this time, the food may not come at all.)

Gift-giving does not get affected by the rules of the new normal. Though this will be lessened. Some companies have sent out e-mails to their suppliers to forego gift-giving to their executives (unless you insist and send it to their homes) and donate the intended budget for relief work instead. (The sum of P2 million has been donated to the typhoon victims in your name — please don’t check.)

Still, the gift list for this particular year is apt to be shorter with lost jobs, closed companies, and the sober spirit for the season. Will a vaccine trial certificate make a good gift? (You have been designated in the trial group as the recipient of the placebo treatment.)

It seems necessary to believe that gifts are bought with an intended recipient in mind — that when one receives a gift, she is convinced she is its originally intended recipient. It is breaking unwritten social rules to pass on as original a gift one has received for herself. Still, the recycler is forgiven if the gift, even if second-hand, is nonetheless useful to the second recipient, whether it was as useful to the first. (I already have a Birkin Bag.) Cash, which is fungible, is an example of a recyclable gift with no onus attached, but it cannot be in very shiny coins — unless of the rare variety measured in ounces. An expensive watch is another.

Certain items cannot be recycled. These include monogrammed shirts (unless the intended recipient has the same initials), dusty books, used clothes, oil portraits (unless the recipient is a twin of the same sex), and shoes.

Food and gifts (whether original or recycled) characterize the season. Sometimes, we forget that both forms of sharing are meant to be expressions of affection. In the effort to make good social impressions, this celebratory message of love and peace can be lost.

In the new normal, Christmas is still a season of love… from a distance.

 

Tony Samson is Chairman and CEO, TOUCH xda

ar.samson@yahoo.com

A recession ends, but the shakeup is just starting

AUSTRALIA’S recession is technically over, but far from buried. Deep scars in economics and politics won’t be easily overcome, no matter how many campfire stories leaders tell about the three-decade expansion that ended with the pandemic. They’ll have to struggle mightily to achieve half as good a result over the next 30 years.

Some of the hurdles to a well-rounded comeback are shared with other economies, such as elevated unemployment and the prospect of a lasting change in consumer behavior. The more corrosive obstacles are closer to home: a region where growth was off the boil long before COVID-19 (coronavirus disease 2019); a greatly diminished flow of immigrants; and a breakdown in relations between the federal government in Canberra and rebellious state administrations.

The latest gross domestic product (GDP) numbers landed Wednesday against this sobering context. The economy grew 3.3% in July to September from the previous quarter, the Australian Bureau of Statistics reported. That followed slides of 7% and 0.3% in the first and second quarters, respectively. Like most countries, Australia defines a recession as two consecutive quarters of contraction. From a year ago, growth was down 3.8%.

That’s a more robust bounce than the initial revival from the last downturn in 1991. The current spurt was enabled by muscular fiscal and monetary stimulus and a lifting of crippling lockdowns. Social distancing rules have been eased. Prime Minister Scott Morrison hopes to relax curbs on travel by the year-end holiday break.

This masks an international backdrop that’s nowhere near as promising as three decades ago. Back then, Australia was emerging into an advantageous Asian and global environment. China drove demand for raw materials and, eventually, sent capital and tourists Down Under. Southeast Asia clocked giddying growth rates until the 1997-98 financial crisis. The US was buoyed by a technology revolution and, with the end of the Cold War, presided over an economic and financial architecture that encouraged unfettered flows of capital and goods.

All Australia really had to do was not get in the way. The long, recession-free years that followed saw the country withstand the global financial crisis of 2007-2009. Federal Reserve Chair Jerome Powell mused two years ago at an Economic Club of New York lunch (I was there and struggled not to roll my eyes) that the business cycle had ceased to exist in Australia.

It won’t be so easy this time.

Global GDP will shrink 4.4% this year and rebound 5.2% in 2021, the IMF says in an assessment loaded with caveats and risks. World travel is crippled. China’s economy may be up and running, but these are the years of 5% to 6% growth, not double digits. Relations have soured to their lowest ebb since the 1970s, with Beijing imposing a raft of restrictions on Australia’s exports of wine, coal, copper, and barley.

A largely unsung hero of Australia’s expansion has been immigration, helping the population grow at an average annual rate of about 1.5% over the past two decades. Just under 30% of Australians were born overseas, compared to around 14% in the US, according to Pew Research Center. Uncertainty over when borders will reopen and the rate of new arrivals weigh on the economic outlook. “If population growth is to be noticeably slower in a post-COVID world, the trajectory for our economy will look different, too,’’ Philip Lowe, governor of the Reserve Bank of Australia (RBA), said in a recent speech.

It’s tough enough for even Australians to get into the country now, Lowe quipped. It’s also tricky to move around once inside. This gets to a simmering challenge on how Australia is governed. After early unity, the pandemic has created enormous strain between Morrison’s federal government and the leaders of the six states and two territories. The independent streaks they’ve shown in shutting internal borders and operating their own variations of distancing and lockdowns has long-term effects.

The states have been largely able to do their own thing because of compromises hatched at Federation in 1901. States kept control of hospitals, schools, police, and degrees of interstate commerce. For much of the last century, state power retreated, especially after World War II, when federal income tax was hiked. State income tax was phased out and replaced by grants. Canberra had power of the purse; the states basically did what they were told. Former Prime Minister Paul Keating observed: “Never get between a premier and a bucket of money.”

The states are learning that defying Canberra can have a different kind of payoff. Closing borders has proven popular; local voters don’t want COVID-19 coming in. Queensland Premier Annastacia Palaszczuk looked like she’d lose her bid for re-election. Then the virus came along. She proceeded to run one of the toughest border regimes of the pandemic, and easily saw off her challenger. Western Australia Premier Mark McGowan, who has effectively sealed off half the continent, is the most popular politician nationally. His approval rating approached 90% a few months ago.

Secession is a stretch*, but more contested and fractured politics is in Australia’s future. McGowan says he doesn’t favor a break, but has proudly talked of his forging an “island within an island — our own country.’’ Thumbing your nose at those no-good Canberra politicians has never been unpopular in some states, but the pandemic gave that approach more potency.

When COVID-19 recedes, I’d love to see Morrison or a successor stare down recalcitrant provinces: You like it so much by yourself, fine. Pay for your own military, negotiate your own treaties, establish your own central bank, and run economic policy, and so on. You’ll never hear a state leader acknowledge this, but the RBA helped keep provincial borrowing costs low this year by purchasing state debt as part of its quantitative easing program.

The coronavirus slump will live on, beyond quarterly math. It would be sad if Australia becomes more insular and risk averse, growing slower and less resilient to swings in fortune.

*In 1933, Western Australians did actually vote to secede, but the split required assent from the UK parliament, which wasn’t given. The issue lost momentum and was drowned out by World War II.

BLOOMBERG OPINION

Aspire Corporate Plaza set to open in December 2020

On Nov. 30, boutique developer Golden Bay Land Holdings finally completed the construction phase of its first commercial property: the Aspire Corporate Plaza. The iconic new structure, boasting modern architectural innovation at the heart of the Macapagal Bay Complex in Pasay City, is set to welcome its first set of tenants starting this month.

Among the businesses set to make Aspire their new home are several local and multinational companies from the manufacturing, trading, services, I.T., and food industries. Aspire will be managed by KMC Savills, a global property management firm with a trustworthy record of managing and maintaining various properties. Top-notch services like security, housekeeping, building maintenance system will be the primary focus of the property management team.

Jardin Brian B. Wong, the 30-year-old Chief Operating Officer of Golden Bay Land Holdings, developer of Aspire Corporate Plaza, has been trained in business as early as age six. He currently leads this rising company with values and principles of humility, perseverance, compromise, and smarts.

“As we developed the property, we also thoroughly planned the operations of the building by integrating all major functions into a dedicated BMS (Building Management System), which will supervise and monitor major control points such as building pumps, generators, security and visitor management system, sewage treatment plant, and more,” says Jardin Brian B. Wong, Chief Operating Officer of Golden Bay Land Holdings.

Persistence amid the pandemic

Despite gargantuan challenges brought by the COVID-19 pandemic, Golden Bay successfully completed its mission to bring innovation to office building architecture by generally upgrading the features expected out of a Grade A Premium office building.

“Time, effort, and strategic thinking was invested by all of the designers, architects, and development team for all the common areas. As a result we have a better parking system (carousel system made by MHE Demag, a German company) and a well thought of Sky Garden that serves as an informal meeting area for businessmen and doubles as a recreation zone for employees and visitors alike. We also feature a best-in-class integrated Building Management System that monitors electricity usage, water tank system levels, elevator usage, and security system,” says Wong.

Many of the building’s features can be characterized as “very generous” as they exceed common standards when it comes to existing building designs. Features like number of elevators (seven high-speed elevators as compared to four for buildings of the same size), hallway width (2 meters as compared to the usual 1.5 meters), and other upgraded designs have been incorporated to make an elevated office experience possible for anyone walks in the confines of Aspire Corporate Plaza.

As the ongoing global pandemic has changed different aspects of our lives, including the way we move in public spaces, Golden Bay also took into consideration health safety and social distancing as continued and completed construction.

“Throughout the construction stage, there was a constant process of reviewing existing plans and features vis-a-vis the expected actual usage of all building systems in the development. Changes had to be made due to the COVID-19 pandemic. Provisions such as touch-less entry of registered tenants, as well as repeat visitors, was made possible due to the quick decision of the management. Mid-way through the project, we procured facial recognition devices in addition to standard RFID card and fingerprint mechanisms, and matched them with a customized visitor management software that can be accessed through a touch screen directory panel,” Wong added.

Paving the way for economic revival

Having persisted and succeeded amid all obstacles, the 3,500sqm Aspire Corporate Plaza not only stands tall as a symbol of architectural innovation in Metro Manila and the Philippines, but also as a beacon of hope for the country’s future.

“We think that it is vital as a company to remain positive about the general outlook of our economy. We have an informal tagline that basically says ‘We Aspire to Inspire,’ and we feel that we have a unique opportunity to lead by continuing to invest in high value and high impact projects that not only deliver optimal results to the bottomline of the company but ultimately yield a positive impact on the society. Business must continue to innovate, opening up the possibilities to use more eco friendly practices and materials that deliver lesser emissions to the environment. It is also imperative to continue to listen, nurture and invest in our own workforce so that they may contribute to our ultimate goal of offering nation building projects,” says Wong.

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