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Return to pre-pandemic debt could pose growth risk

DETERIORATING public finances across Asia will be difficult to reverse, with any attempts to return to pre-pandemic debt ratios posing a risk to growth, ANZ Research said.

“Governments can afford to maintain expansionary fiscal policies and some are doing so,” ANZ Research analysts said in a note.

“We further estimate that restoring public debt ratios to pre-pandemic levels is an exceptionally tall order. It will require governments to run primary surpluses on a scale that will severely hurt growth,” according to Sanjay Mathur, ANZ research chief economist for Southeast Asia and India, and economist Krystal Tan.

The Philippines’ fiscal position will likely continue to weaken in 2021, though its larger budget deficits and debt levels are unlikely to harm macroeconomic stability, they said.

“Based on this fiscal stance, the public debt ratios (in Asia are) likely to continue to rise in 2021. In Malaysia, the debt ratio will remain above 60% of GDP (gross domestic product) and in the Philippines, it will exceed its 50% threshold,” Mr. Mathur and Ms. Tan said.

The government expects the Philippine debt-to-GDP ratio to hit 53.9% and 58.3% this year and in 2021. These are still below the threshold of 70% deemed safe by the International Monetary Fund but are much higher than the record low of 39.6% in 2019.

The budget deficit is expected to grow to P1.815 trillion this year, equivalent to 9.6% of GDP, before receding to P1.749 trillion or 8.5% of GDP next year. The budget deficit in 2019 was P660.2 billion or 3.4% of GDP. — Luz Wendy T. Noble

Commercial launch of ‘Golden Rice’ expected by 2023

THE COMMERCIAL propagation of Golden Rice is projected to begin by 2023, according to the Philippine Rice Research Institute (PhilRice).

PhilRice Senior Rice Research Specialist Reynante L. Ordonio said the institute’s timetable for Golden Rice still hinges on the length of the application process for the genetically modified variety, which still has to hurdle other clearances.

“There are still other processes that need to take place such as varietal registration. Our (is) that commercial propagation will happen by 2023,” Mr. Ordonio said during the virtual opening ceremony for the 16th National Biotechnology Week Monday.

Golden Rice has been modified to contain beta-carotene, a source of Vitamin A, and can be grown like inbred rice. It is designed to address Vitamin A deficiency in children by providing 30% to 50% of the nutrient requirement.

PhilRice recently announced the opening of the 60-day period for public comment, a prerequisite in the process of determining the variety’s biosafety.

Mr. Ordonio said the list of provinces that will be tapped for the pilot deployment of Golden Rice has yet to be finalized.

He said Quirino, Catanduanes, and Samar are viewed as candidates for hosting pilot programs.

“The list is not yet final. A lot can still happen before its commercial propagation is reached,” Mr. Ordonio said.

According to PhilRice, Vitamin A deficiency is a public health issue that affects around 17% of Filipino children aged five and below.

In December, Golden Rice received approval from the Bureau of Plant Industry for direct use as food and feed or for processing. — Revin Mikhael D. Ochave

Donations and losses during calamities

In recent weeks, the Philippines, mainly Luzon, was ravaged by a series of typhoons that left the Bicol Region in ruins and submerged the Cagayan Valley in floods. Homes and livelihoods were lost because of these calamities.

The sincere outpouring of disaster-relief donations from various sectors of the community has continued even in the midst of the COVID-19 pandemic.

However, kind-hearted donors should be mindful of the tax consequences of such donations and the penalties for failing to course the donation through authorized channels.

DONATIONS
Donations are generally subject to donor’s tax at the rate of 6% on the total gifts made in excess of P250,000 during the calendar year.

For donations to be exempt from donor’s tax, there are authorized channels provided by our Tax Code and Special Laws. Donations, whether from domestic or foreign entities, or a non-resident non-citizen of the Philippines, can be exempt from donor’s tax if made to 1.) national government, or any of its agencies when not conducted for profit or to any political subdivision of the Government, and 2.) any educational, charitable, religious, cultural or social welfare corporation, institution, foundation, trust or philanthropic organization or research institution or organization, subject to the condition that not more than 30% of the donation be used for administration purposes.

Further, the Tax Code provides the definition of a “non-profit educational and/or charitable corporation, institution, accredited non-government organization, trust or philanthropic organization and/or research institution or organization” as a school, college or university and/or charitable corporation, accredited non-government organization, trust or philanthropic organization and/or research institution or organization, incorporated as a non-stock entity, paying no dividends, governed by trustees who receive no compensation, and devoting all its income, whether students’ fees or gifts, donation, subsidies or other forms of philanthropy, to the accomplishment and promotion of the purposes enumerated in its Articles of Incorporation.

As for other channels such as the Philippine Red Cross, the Philippine Red Cross Act of 2009 (Republic Act No. 10072) expressly exempts such donations from donor’s tax, and they are deductible from the donors’ gross income for income tax purposes.

Also, donations to non-government organizations (NGOs) are exempt from donor’s tax provided such organizations are accredited with the Philippine Council for NGO Certification (PCNC).

Another case of donation is the assistance given by employers to their employees. Sad to say, this is not exempt from tax as any benefit received by an employee from his employer is generally considered compensation subject to tax. Only the benefits specifically provided under the laws and regulations issued by the Bureau of Internal Revenue (BIR) can be exempt. Assistance provided by employers to employees due to calamities is not exempt from taxation because they are not included in the exemption list. The BIR has been consistent in its rulings that any kind of assistance given by the employer to its employees due to calamities is not considered a tax-exempt benefit. The employer should either withhold tax from the rank-and-file employee or shoulder the fringe benefits tax in case of managerial/supervisory employees.

While many Filipinos are doing everything they can to provide assistance to the typhoon victims, business owners on the other hand are estimating their losses in terms of goods being washed out and factories submerged in flood waters or destroyed by strong winds.

LOSSES
For taxpayers engaged in business, the losses actually sustained during the taxable year and not compensated for by insurance or other forms of indemnity are allowed as deductions if such property is connected with the trade, business or profession, and if the loss arise from fires, storms, shipwreck, or other such events, or from robbery, theft or embezzlement.

For the losses to be deductible for income tax purposes, the following should be present:

• They must be related to trade, business, or profession;

• They must be actually sustained during the taxable year;

• They must not be compensated for by insurance or other forms of indemnity; and

• They must file their claim of loss within 45 days after the event.

In claiming the deduction for losses, the affected taxpayer must comply with the following requirements imposed under existing regulations, Revenue Regulations No. 12-77 as amended by RR 10-79 and Revenue Memorandum Order No. 31-09:

1. Declaration of loss should be filed within 45 days after the event with the Revenue District Officer (RDO) which has jurisdiction over the taxpayer’s place of business. The sworn declaration of loss must contain, among other things, the following information: Nature of the event that gave rise to the loss and time of its occurrence; Description and location of the damaged properties; Items needed to compute the losses such as: (a) cost or other basis of the properties;  (b) depreciation, if any; (c) value of the properties before and after the event; and (d) cost of repair; and Amount of insurance or other compensation received or receivable.

2. The declaration of loss should be substantiated with evidence which the taxpayer should gather immediately after the occurrence of the casualty or event causing the loss. These include the following documents which should be kept by the taxpayer for BIR verification: photographs of the property taken before and after the monsoon rains showing the extent of the damage sustained; documentary evidence for determining the cost of valuation of the damaged properties such as purchase contracts and deeds, receipt bills for improvements, competent appraisals of the property before and after the casualty, cancelled checks, vouchers, receipts and other evidence of cost; insurance policies; and, if applicable, police reports, in case of robbery/theft during the typhoon and/or as a consequence of looting.

Now more than ever, as we all try to navigate this new reality, taxpayers, whether as donors or entities incurring losses, must be prepared and must take immediate action when calamities occur. Preparation of documentation is necessary to avoid unnecessary consequences or implications.

Once again, our country’s unity is being tested. There a lot of work and rebuilding to do — it will take a while before we can all stand on our feet. Various organizations have launched assistance programs, relief operations, fundraisers and medical missions. Any amount goes a long way, as long as the intent to help is there.

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.

 

Ed Warren L. Balauag is a manager of Tax Advisory & Compliance division of P&A Grant Thornton, the Philippine member firm of Grant Thornton International Ltd.

pagrantthornton@ph.gt.com

Quo Vadis

THE SOUTH CHINA SEA, as we know, is of tremendous economic and geostrategic importance: it is where a quarter of international trade goes through and where more than half of the world’s oil tankers and merchant ships pass every year. The South China Sea is part of an area that has long been known to be the “greatest concentration of marine life on the planet,” where the highest concentration of this biodiversity is in the Philippines.

Located in the Spratlys are the breeding grounds of fish and other marine life that give food and sustenance to the people of Southeast Asia over centuries. Traditional fishermen and their families have lived throughout these years relying on their fish catch from these waters.

Based on the 2016 Arbitral Award, we know that this rich biodiverse region was mercilessly destroyed by China through its illegal reclamation and artificial-island building in the Spratlys. Beginning in 2013, Chinese dredgers pulverized the coral reefs in the Spratlys and used these dead coral reefs and other sediments to create dry land. Given the wanton destruction of these fish homes in the Spratlys, scientists are now warning that this has accelerated one of the world’s worst fisheries collapse that may lead into mass starvation in the region.

John McManus, a world-renowned marine scientist, ominously warned: “What we’re looking at [in the South China Sea] is potentially one of the world’s worst fisheries collapses ever… We’re talking hundreds and hundreds of species that will collapse, and they could collapse relatively quickly, one after another.”

ACTIONS TO BE TAKEN
At this point, what can we do?

It seems obvious that we should protect and rebuild the remaining marine life in the South China Sea. The suggestion of Justice Antonio Carpio and other marine biologists to immediately declare the Spratlys as a “Marine Protected Area” is well-taken.

If countries bordering the South China Sea agree to declare the Spratlys a “Marine Protected Area,” this will give the marine life in that area some “breathing space” to heal. We therefore urge our countrymen, the Philippine Government and our ASEAN neighbors to help us in this endeavor. This also means that we should push back on any destructive reclamation and militarization activities in the Spratlys. If these are not done, Southeast Asia will suffer one of the worst environmental catastrophes in history that will permanently deprive us of our food and livelihood.

Equally important is to demand accountability from the main perpetrator of the environmental destruction in the South China Sea — China. As cited in the Arbitral Award: “The overall damage to the coral reefs within the Greater Spratly Islands covers at least 124 km2, of which the [People’s Republic of China] is responsible for 99%.”

If we do not demand accountability, we embolden rogue countries like China to commit the same malevolent acts in the future, including China’s planned reclamation of Scarborough Shoal — another rich traditional fishing ground of Filipinos, the Vietnamese, and even the Chinese. It is imperative that we exert all efforts to prevent China from committing another disastrous crime by reclaiming Scarborough Shoal.

DUTY OF EVERY CITIZEN TO PROTECT THE SOUTH CHINA SEA
The protection of our environment is a duty not only of governments, but every citizen of this planet. Due to the interconnection of natural ecosystems, an environmental disaster in one area inevitably spills over to other parts of the globe. This is especially true in the rich biodiverse region of the South China Sea.

Even the Philippine Constitution provides that every Filipino, as part of the Philippine State, shall protect the nation’s marine wealth.

ICC FILING ON CHINA’S CRIMES AGAINST HUMANITY
For our part, on March 13, 2019, former Ombudswoman Conchita Carpio Morales and I — with Justice Antonio Carpio as our counsel — submitted a Communication to the Office of the Prosecutor of the International Criminal Court (ICC) to show that Chinese President Xi Jinping, Foreign Minister Wang Yi, and former Chinese Ambassador Zhao Jinhua, among others, committed Crimes Against Humanity by, among others, 1.) illegally blockading the traditional fishing grounds like the waters around Scarborough Shoal and the Spratlys, and, 2.) causing the near permanent destruction of the marine environment of the South China Sea.

ICC CASE AS PRIVATE SECTOR INITIATIVE
We consider this private sector initiative as our contribution to what should be a global effort to protect the South China Sea and to demand accountability from China.

We are delighted to know that there are now non-governmental organizations and individuals who have made the protection of the South China Sea as their advocacy. We are also heartened to know that, as of now, more than 98,000 individuals have signed an online statement of support for our ICC Case.

INTEGRATED APPROACH TO THE SOUTH CHINA SEA ISSUE
We should continue to explore ways that complement our efforts to protect the South China Sea and demand accountability from China.

The countries bordering the South China Sea are victims of China’s wanton environmental destruction in the Spratlys. Governments and citizens of these countries can file cases before their own courts especially against Chinese state-owned enterprises such as China Communications Construction Company which operate in their respective territories and which are linked to the illegal reclamation and island-building in the Spratlys.

For the Philippines alone, the University of the Philippines Marine Science Institute conservatively estimated that we are losing at least $662 million annually from our damaged reef ecosystems due to China’s reclamation activities and illegal fishing operations. This sums up to $4.634 billion since the start of 2014 (around the time China started dredging) until this year. This money can be used to save our fish and rehabilitate the marine ecosystem destroyed by China in our waters.

The countries bordering the South China Sea have the right to seize assets and properties owned by Chinese State in their territory as compensation for the crimes committed by the Chinese State against their people.

RIGHT MAKES MIGHT
We should not allow China to commit the perfect crime: to let China be simply because it is a superpower. To allow a superpower to commit abuses is to magnify such abuses because the superpower realizes that, with its resources and influence, it has no constraints in the world.

If we do not speak out against these abuses, then not only is China to blame but also ourselves. By speaking out against abuses, we show the world that we are enlightened humans who remain guided by morals and reason and not by the law of the jungle.

 

Ambassador Albert F.  Del Rosario is the Chair of the ADR Stratbase Institute.

Country’s vaccination program politicized

On April 15, 2018 Senator Richard Gordon, chairman of the Senate Blue Ribbon Committee, released his report recommending charges of graft and violation of the government ethics code against former President Benigno Aquino, former Health Secretary Janette Garin, former Budget Secretary Florencio Abad, and seven other former health officials for allegedly conspiring to approve the government purchase of the anti-dengue vaccine Dengvaxia.

“The confederacy to procure and inject en masse was not merely ill-advised, or unwise. It was criminal. The greatest sin and transgression of Aquino was to put the lives of Filipino children in grave peril. He simply did not care. He was insensitive and did not have compassion,” the report said.

Other signatories of the report were Senators Ralph Recto, Manny Pacquiao, Win Gatchalian, Tito Sotto, Gregorio Honasan, Juan Miguel Zubiri, JV Ejercito, Nancy Binay, and Grace Poe.

Mr. Aquino repeatedly explained during his appearance before the Blue Ribbon Committee that he approved the purchase of the vaccine in response to the dengue outbreaks that had resulted in numerous deaths. He rejected insinuations of corruption in the purchase of Dengvaxia.

The risk of dengue illness is present throughout the Philippines, with transmission occurring year-round. Transmission peaks during the rainy season — from May to November. Dengue infection is characterized by flu-like symptoms which include a sudden high fever. Complications can lead to circulatory system failure and shock, and can be fatal.  Severe dengue fever has been a major cause of severe illness and death in children. There is no antiviral treatment available.

The development of a safe and efficacious dengue vaccine capable of preventing clinically significant disease eluded vaccine developers for almost 70 years. The only licensed dengue vaccine is Sanofi Pasteur’s Dengvaxia, which has been registered in 20 dengue endemic countries, including the United States and European Union (EU) nations. Sanofi Pasteur had high hopes for Dengvaxia, the development of which had taken 20 years and cost around $1.8 billion. Officials predicted that the vaccine would bring down infection rates by 24% within five years.

In December 2015, President Benigno Aquino met with Sanofi Pasteur executives in Paris. Because dengue is epidemic in the Philippines, he approved the commercial sale of Dengvaxia in the country. The government spent $67 million on Dengvaxia and got underway a mass immunization program with the aim of vaccinating a million students by the end of 2016. About 700,000 individuals were inoculated at least one dose of the vaccine.

In November 2017, Sanofi Pasteur disclosed that Dengvaxia posed risk to individuals, mostly schoolchildren, who have not had a previous dengue infection. This prompted the Department of Health to suspend the vaccination program in schools, giving rise to a political controversy over whether the program was run with sufficient care and who should be held responsible for the alleged harm to the vaccinated children.

But in September 2019, the Philippine Medical Association urged the government to allow the use of Dengvaxia on willing patients and on those who have been exposed to dengue, as cases soared to more than 208,000. Since the World Health Organization recognized the use of the vaccine as a preventive measure, the organization of physicians recommended that Dengvaxia be given to “individuals who are interested, willing, and aware of the benefits and possible risks of the vaccine.

“Clinical trials and studies have shown that the dengue vaccine will help individuals who had previous dengue infection from getting severe disease,” the group said.

For 10 months now we have been faced with a more massive source of serious infectious disease. The coronavirus SARS-Cov-2 which causes COVID-19 has infected 418,818 individuals and caused 8,123 deaths as of this writing (last Sunday).

On Oct. 15, President Rodrigo Duterte announced that the government has secured the source of funds for the acquisition of vaccines for the COVID-19 mass vaccination. “I have the money already for the vaccine but I will look for more because you know there are now 113 million Filipinos. To me, ideally, all should have the vaccine without exception,” the President said in a televised address.

The President had previously indicated that the vaccine would likely be sourced from China and Russia, having expressed his trust on the vaccines being developed by those countries.

The announcement that several pharmaceutical companies, including the American giant Pfizer, have developed safe and efficacious vaccines against COVID-19 thrilled leaders of nations. Last Thursday, the President announced that the Philippines will enter into advance market commitments (AMCs) with private manufacturers of anti-COVID-19 vaccines after approving the conduct of negotiations and the signing of AMCs, including authorizing advanced payments for negotiated terms.

Presidential Spokesperson Harry Roque explained that the process for AMCs would include the signing of a Confidentiality Data Agreement, negotiation and signing of AMCs, registration with the Food and Drug Administration (FDA) through Emergency Use Authority (EUAs), advance payment based on negotiated terms, and mobilization and delivery.

National Task Force against COVID-19 Chief Implementer Carlito Galvez explained the various modes of vaccine financing that include direct procurement, multilateral loans, bilateral loans, and private sector financing through tripartite agreement with the government, the pharmaceutical company, and the private sector company.

On the issuance of EUAs, Task Force head Galvez said that EUAs can shorten the process of getting an approval with the FDA from six months to only 21 days. He assured that although the EUAs will skip some processes in vaccine approval, the Philippines’ vaccine expert panel and ethics review board, as well as the FDA, will be conscientious in their evaluation of the vaccines. He said that through collaborative regulatory evaluation with other countries, the Philippines can be assured that once the vaccine has been approved by FDAs with stringent commissions, its safety is most likely assured.

According to the procurement law’s implementation rules and regulations, advance payments should only be made after the President has approved them and cannot reach 15% of the contract value, unless otherwise ordered by the President. In addition to acquiring vaccines supplied by private companies, advance payments are still expected to procure vaccinations from the COVAX Global Alliance for Vaccination and Immunization, which is intended to guarantee adequate doses for 20% of the population of the participating countries.

However, not everyone is thrilled about China’s fast development of a vaccine as it has had scandals over substandard vaccines in the past. While the vaccines developed by Pfizer and Moderna looked very promising, experts say it may be too soon to discount the possibility of adverse long-term effects. There are many other questions about them like the length of the immunity they render and their efficacy among the young and elderly that remain unanswered.

The silence of Senators Sotto, Gordon, Recto, Pacquiao, Gatchalian, Zubiri, and Poe, who all found anomalous the purchase of Dengvaxia, on this planned advance payment for the massive purchase of anti-COVID vaccines is deafening. What matters to them is the political color of the powers that be, not the health of the people.

 

Oscar P. Lagman, Jr. is a retired corporate executive, business consultant, and management professor. He has been a politicized citizen since his college days in the late 1950s.

Senator Recto’s tax cut plan shadows Reagan, Thatcher, and Trump tax cuts

“Government does not tax to get the money it needs; government always finds a need for the money it gets…. Whenever we lower the tax rates, our entire nation is better off.”

— former US President Ronald Reagan

Tax competition in the ASEAN is real and actual, not fictional. Vietnam and Thailand have corporate income tax (CIT) of only 20% while the Philippines has 30%. Last year, Vietnam and Thailand had merchandise exports that were nearly four times that of the Philippines. In addition, they have graduated CIT rates down to zero or 10%, and their VAT (value-added tax) rates are only 10% and 7%.

Indonesia’s CIT was 25% until 2019, cut to 22% in 2020, and to 20% by 2022. The foreign direct investments (FDI) inward stock (net of FDI inflows minus outflows through the years) in 2019 of Thailand and Indonesia were nearly three times those of the Philippines (see Table 1).


If we further consider Singapore with only 17% CIT and 7% VAT/goods and services tax, the above numbers validate Reagan’s statement that lower taxes result in a better economy, all other things being equal.

In the proposed Corporate Recovery and Tax Incentives for Enterprises (CREATE) bill now in the Senate, the plan is to cut the Philippines’ CIT to 25% immediately and further down to 20% by 2027. Fiscal incentives like special CIT (SCIT) and gross income earned (GIE) are also revised.

Now Senate President Pro-Tempore Ralph G. Recto has proposed more liberal fiscal incentives and deeper tax cuts as he sees the degree of tax competition in the ASEAN. To save space, here is a summary of contentions on reforming the fiscal incentives (see Table 2).


With a high CIT even at 25%, high VAT 12%, high withholding taxes (dividends, interest income, and royalties), keeping the 5% GIE (about 3% goes to national and 2% goes to local government) forever is a good compromise.

And tax tax tax lover Action for Economic Reforms (AER) quickly attacked Sen. Recto. In a column “Ralph Recto, the Donald Trump of the Philippines?” (BusinessWorld, Nov. 16, 2020), AER Convenor Men Sta. Ana criticized the Senator that he “does not grasp the idea of taxes being a creator of wealth.”

“Taxes being a creator of wealth,” this formulation is next to socialistic thinking. If the illogic is extended, it would say that more taxes mean more wealth creation, a dangerous invitation for tax-hungry legislators, bureaucracies, and welfare-dependents out there.

The Senator also proposes two-tiers of CIT. Tier 1, companies with total assets not over P100 million, their first P5 million taxable income will pay only 20% while profits above P5 million will be taxed 25%. And Tier 2, companies with total assets over P100 million will also pay 25% CIT. That 20% CIT proposal is very good.

Furthermore, the Senator proposes other liberal provisions: 1.) raise the threshold VAT exemption on housing for residential lots from P1.5 million to P2.5 million, and for house and lot from P2.5 million to P4.2 million; 2.) suspend the minimum CIT (MCIT) from 2020 to 2022 and cut rate from 2% to 1% from 2023 onwards; and, 3.) just 1% income tax for private, non-profit educational institutions and hospitals for three years.

Good proposals by the good Senator. So is he the “Donald Trump of the Philippines” as sensationalized by AER?

To help answer this question, consider two other leaders.

Ronald Reagan was the President of the United States from 1981 to 1988. The integrated tax rates on corporate profits as computed by the Tax Foundation (US) was 88.7% in 1981, he immediately introduced tax cuts and it went down to 79% in 1982, 59.6% in 1988 at the end of his second term.

Margaret Thatcher was Prime Minister of the United Kingdom from 1979 to 1990. The integrated tax rates on corporate profits in the UK was around 83% in 1979, she later introduced tax cuts and it went down to 68.6% in 1984, and further down to 47.2% in 1990 at the end of her term.

From 1981-1988, the average yearly GDP growth of the US was 3.5% and the UK was 3.3%. In contrast, their neighbors grew slow over the same period: Canada 3%, France 2.2%, Italy 2.1%, Germany 1.7%.

Donald Trump is the first US President to continue Reagan’s tax cut. Trump inherited the high CIT 35% in 2017 and introduced tax cuts to 21% by 2018. From 2017-2019, the average yearly GDP growth of the US was 2.5%, higher than fellow rich countries with no tax cuts: Canada 2.3%, France 1.9%, the UK 1.6%, Germany 1.5%, Japan 1%, Italy 0.9%.

The Senate and later the Bicameral Committee should consider deeper tax cuts, more liberal and longer fiscal incentives in crafting a future CREATE law. These will help attract more investors and keep those who are already here.

 

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

minimalgovernment@gmail.com

Shared Prosperity: The business groups’ response to inequality and the pandemic

A historic event in the annals of Philippine Business happened on Nov. 5. In that event, 26 of the country’s largest business and professional associations signed a Covenant for Shared Prosperity. The signatories to this covenant included the Management Association of the Philippines (MAP), the Makati Business Club, the Financial Executives Institute of the Philippines, the Philippine Chamber of Commerce and Industry, the Bankers Association of the Philippines, the American Chamber of Commerce of the Philippines, the European Chamber of Commerce of the Philippines, the Institute of Corporate Directors, the Institute for Solidarity in Asia and 17 other associations. They are called the Philippine Business Groups (PBGs). Combined, they represent thousands of businesses and an even greater number of individual member-professionals committed to national development.

THE GLOBAL ISSUE OF INEQUALITY AND INCLUSIVITY
Even before the COVID-19 pandemic, many in the local business have been struggling with how the country, in general, and the Philippine Business, in particular, should respond to the Global Problem of Inequality and Inclusivity. As if this was not enough, the COVID-19 pandemic came and has shaken the very foundations of the global society and economy with the Philippines being one of the worst-hit countries. In the country, hundreds of thousands had been affected and thousands have died because of COVID-19.

Just as bad, if not worse, tens of thousands of businesses, particularly MSMEs, have closed down, millions have lost their jobs and the economy received a terrible beating, contracting by 16.5% in the second quarter alone. There are reports of 40% of Filipino families going hungry and the poverty line going back up to the high 20s (and may have already breached 30%). Homeless people and beggars can now be seen in certain streets of Makati. Petty crimes, like phone and bag snatching and car break-ins, had likewise been reported. The Philippines is sitting on a social volcano waiting to erupt.

The PBGs realize that the country, like many other countries around the world, is suffering from gross inequality, not only in economic and financial terms but also in the social, environmental and political aspects of our national life. This gross inequality in the global society has been there for generations fueled by greed; illegal and unethical practices; callousness to the needs of the communities, especially those at the bottom of the pyramid; and indifference to Mother Earth by some.

Oxfam, a confederation of 20 independent charitable organizations focusing on the alleviation of global poverty founded in 1942, has come up with the disturbing report on the global disease of inequality summarized as follows:

1. The world’s richest 1% have more than twice as much wealth as 6.9 billion people combined.

2. Almost less than half of humanity is living on P275/day while 735 million people are living in extreme poverty on less than P50/day.

3. Only four cents out of $1 of tax revenue comes from taxes on wealth. The super-rich avoid as much as 30% of their tax liability.

4. 258 million children will not be able to attend school while for every 100 boys, 121 girls are denied the right to education.

5. Every day, 10,000 people die because of lack of access to affordable healthcare. Each year, 100 million people are forced into extreme poverty due to healthcare costs.

6. Men own 50% more of the world’s wealth than women and the 22 richest men have more wealth than all the women of Africa.

7. The unpaid care work of women is estimated at $10.8 trillion/year. Inequality is sexist.

It is safe to assume that, proportionately, our country is not very far, if not worse, from the terrible global problem of inequality. Our poverty incidence, for one, is among the highest in the region.

The PBGs believe that a way to address inequality in all its forms in society and to enhance the dignity of human beings and thus achieve inclusive development is for Philippine Business to collectively mobilize their human, technical, economic and financial resources to ensure ethical wealth creation and the sharing of prosperity with all their stakeholders.

Colleges and universities offering business and business-related courses are also encouraged to inculcate and emphasize among their students — current and next generation of managers — the principles and practices of sharing prosperity.

THE COMMITMENTS OF THE PBGS
In the Covenant for Shared Prosperity, the PBGs then pledged and signed the commitments to the following stakeholders:

1. Commitment to Employees: Recruit, train and develop employees and managers to be the best that they can be irrespective of gender, alma mater, age, ethnicity and religion; provide just compensation and benefits; promote meritocracy and encourage work-life harmony;

2. Commitment to Customers: Provide only quality products and services that are of continuing value to customers;

3. Commitment to Suppliers: Treat the goods, service, and funds providers fairly, ethically and with respect as they, in turn, are expected to treat their own suppliers in their supply chain the same way;

4. Commitment to the Community: Be actively involved in the communities where they operate in, with particular attention to the needs of the disadvantaged in those communities;

5. Commitment to the Environment: Protect and preserve the environment for the benefit of current and future generations by employing environment-friendly technologies in all aspects of business operations; and,

6. Commitment to Stockholders: Deliver reasonable and just returns to and fair treatment of the controlling and non-controlling shareholders.

WHAT NEXT?
Many are probably asking: After the signing of the Covenant, what’s next? How will the PBGs operationalize the Covenant that they signed?

Four suggestions were offered:

1. Right after the Nov. 5 Convocation, each association which joined to sign the covenant, shall, in turn, ask their thousands of member-companies and individual members to also sign the Covenant. They can use the remainder of the year to do this. By the first week of January 2021, the PBGs will submit the names of companies and individuals in their associations who have signed the covenant to the Secretariat for Shared Prosperity for consolidation.

2. In the next five months or on or before March 2021, the signatory-associations and their member-companies shall issue six policy statements that embody the commitments of these member-companies to their respective six stakeholders, namely: employees, customers, suppliers, community, environment and shareholders.

3. By June 2021 (or in eight months), all the signatory-associations and their member-companies shall develop metrics to measure how they are performing against their commitments to their six stakeholders. The suggestion is to study for adoption the 21 metrics on shared prosperity as developed by the World Economic Forum (with the help of PwC, Deloitte, EY, KPMG).

4. By December 2021 (or a little over a year from today), each signatory shall report on how each of them have performed using the said locally adopted and adjusted metrics.

It has been said that the ultimate end of corporate governance advocacy is Sharing the Prosperity; that is, to help companies create wealth ethically and to share that wealth, like good stewards, to eradicate poverty. The greatest problem of our country, with apologies to President Duterte, is NOT drugs nor corruption. It is poverty — poverty of the stomach, poverty of the mind and poverty of the spirit — as MAP member Oscar Torralba defined Philippine poverty. Almost 30 million Filipinos are living in subhuman conditions below the poverty line. This is criminal. This is not acceptable.

We all know that the ultimate solution to poverty is jobs, jobs, and more jobs. Corporations can help create more jobs — by governing well because good governance enables companies to earn more and grow bigger faster, thereby creating more jobs.

When people have jobs, they don’t go hungry.

When people have jobs, they can afford to go to school or send their children to school.

When people have jobs, they don’t despair — they can hope, they can dream.

Jobs feed the stomach, jobs feed the mind, and jobs feed the spirit.

 

Rex C. Drilon II is member of the MAP Shared Prosperity Committee, Chair of the Institute of Corporate Directors (ICD) and Vice-Chair of the Institute for Solidarity in Asia (ISA)

map@map.org.ph

drilonrc2@gmail.com

http://map.org.ph

Americans may get COVID-19 shots by mid-Dec.

US HEALTHCARE workers and others recommended for the nation’s first coronavirus disease 2019 (COVID-19) inoculations could start getting shots within a day or two of regulatory consent next month, a top official of the government’s vaccine development effort said on Sunday.

Some 70% of the US population of 330 million would need to be inoculated to achieve “herd” immunity from the virus, a goal the country could achieve by May, according to Dr. Moncef Slaoui, chief scientific adviser for “Operation Warp Speed.”

Mr. Slaoui said the US Food and Drug Administration (FDA) would likely grant approval in mid-December for distribution of the vaccine produced by Pfizer, Inc, and German partner BioNTech, launching the largest inoculation campaign in US history.

The FDA’s outside advisers are slated to meet on Dec. 10 to review Pfizer’s emergency-use application for its vaccine, which the company said was found to be 95% effective against infection from the highly contagious respiratory virus.

A second pharmaceutical company, Moderna, Inc. is expected to seek separate approval later in December for its COVID-19 vaccine.

Appearing on several network news shows on Sunday morning, Mr. Slaoui sketched out a timeline for getting the initial doses of the Pfizer vaccine from FDA authorization into the arms of those who will be first in line to receive it.

“Within 24 hours from the approval, the vaccine will be moving and located in the areas where each state will have told us where they want the vaccine doses,” Mr. Slaoui told NBC’s Meet the Press.

“So I would expect, maybe on day two after approval on the 11th or 12th of December, hopefully the first people will be immunized across the United States,” he said on CNN’s State of the Union program.

Once emergency-use approval is granted, Slaoui said, the US Centers for Disease Control and Prevention (CDC) and an advisory panel on immunization practices will recommend who should receive the vaccine first.

Mr. Slaoui said they are likely to include doctors, nurses and “front-line” emergency medical personnel, as well as individuals considered to be at the highest risk of severe illness and death from the virus, such as the elderly.

Public health authorities in each state will be responsible for administering the vaccine roll-out, with the first doses distributed to the states proportionate to their populations, he said.

President-elect Joe Biden and his advisers have voiced concern that President Donald Trump’s continued refusal to share vaccine data and distribution plans with Mr. Biden’s transition team could cause delays after the next administration takes office on Jan. 20.

Mr. Slaoui said he hoped for a smooth hand-off and did not expect the vaccination effort to be derailed. Details on the timeline emerged as coronavirus infections rage further out of control across the country, besieging hospitals with mounting numbers of COVID-19 patients.

The crisis prompted state and local government leaders nationwide to re-impose restrictions on social and economic life in hopes of breaking the transmission cycle.

On Sunday, Los Angeles County health officials announced that outdoor service at restaurants, bars and wineries would be banned for at least the next three weeks as the daily number of new coronavirus cases surpassed a five-day average of 4,000.

The new measure, restricting eateries in and around the nation’s second-largest city to takeout and deliveries only for the first time since late May, goes into effect on Wednesday.

Health experts worry that the surge will only worsen, as millions of Americans prepared to travel and congregate in family groups for Thanksgiving celebrations, despite warnings that they stay home to avoid spreading the disease.

Many people were scrambling to get tested before Thursday’s holiday, leading to long lines at screening sites in New York City and elsewhere. Most pharmacies offering COVID-19 tests in suburban Chicago were fully booked. “I believe COVID rates will increase just as I believe most New Yorkers will put on weight,” New York Governor Andrew Cuomo lamented at a Sunday press conference.

The United States surpassed 12 million COVID-19 cases on Saturday, as the nation’s death toll climbed to more than 255,000 since the pandemic began. Coronavirus hospitalizations have increased nearly 50% over the past two weeks. — Reuters

HK-Singapore bubble delay hits travel rebound hopes

THE SHELVING of the Hong Kong-Singapore travel bubble shows just how delicate the process of reopening borders is — even for places that have largely contained the coronavirus.

The cities’ virus outbreaks are far less intense than in places such as the US and Europe, but a recent uptick in cases in Hong Kong proved enough to delay the start of the air corridor between the two financial hubs by two weeks, dashing the plans of those who booked flights that were due to begin Sunday.

The bubble between Hong Kong and Singapore was heralded as a pandemic world-first, allowing people to travel to and from the two places without the need for quarantine. Authorities are reviewing a new launch date.

“This is a sober reminder that the COVID-19 (coronavirus disease 2019) virus is still with us, and even as we fight to regain our normal lives, the journey will be full of ups and downs,” Singapore Transport Minister Ong Ye Kung said Saturday.

The two sides agreed that the bubble would be suspended if local infections exceeded five on a rolling seven-day average. That wasn’t even met in Hong Kong before the decision, but the recent jump in infections there was enough for authorities to apply the brakes, handing another setback to the aviation and travel industries of the two cities, which had some of the region’s busiest airports before the pandemic.

Strict border curbs have helped Asia contain the coronavirus better than other parts of the world, with countries from China to New Zealand limiting the entry of travelers and imposing mandatory quarantines as a way of stopping the virus at their doors. But the approach — which has seen some all but eliminate COVID-19 — has come at a heavy cost, decimating tourism with cross-border travel basically paralyzed.

While in-country containment of the virus has resulted in the world’s 10 busiest domestic air travel routes now all being in Asia, according to OAG Aviation Worldwide Ltd., Hong Kong’s Cathay Pacific Airways Ltd. and Singapore Airlines Ltd. continue to struggle as they have no domestic travel market to fall back on. Cathay’s shares slid as much as 6.6% on Monday and Singapore Airlines dropped 1.7%

Even if the Hong Kong-Singapore corridor opens, the boost to the two aviation hubs will be limited, said Rico Merkert, professor of transport at the University of Sydney’s business school. Singapore Airlines and Cathay will continue to struggle because they can’t funnel onto the route those travelers who would normally arrive from Europe and the US, he said.

“Without that feeder traffic, those bubbles will at best be limited to the local population,” Mr. Merkert said. “International travel is going to remain a tricky affair.”

Cathay had described the bubble as “a hugely encouraging development and an important first step in the return of regular international air travel to and from Hong Kong,” as well as a “milestone showcase” for other travel bubbles. Cathay’s traffic numbers for October slumped 98.6% from a year earlier to just 38,541 passengers. Singapore Airlines carried 35,500 passengers last month, down 98.2%.

“Bubbles provide a little bit of incremental additional international traffic in the interim period until the pandemic ends,” Sobie Aviation founder Brendan Sobie said on Bloomberg Television, adding that the impact of the bubble plan is mostly symbolic. A full recovery in air traffic will still take a few years, even with a vaccine, though bubbles will help get the process moving, he said.

An increase in cases in either Singapore or Hong Kong was always a risk for those who booked tickets when the bubble plan was announced on Nov. 11. It’s still possible to travel between the two cities, but a mandatory quarantine applies on both sides.

“That is the main deterrent, I have no interest in sitting in a hotel room for two weeks — it’s not healthy,” said Mungo Paterson, 42, a Briton living in Hong Kong who booked a Dec. 7 flight to Singapore shortly after the bubble plan was made public. 

“I was excited when they announced it, I thought ‘here we go,’” said Mr. Paterson, who planned to go to Singapore for work and to see his sister and her family. “I’m now holding off confirming until Dec. 2. I think there’s a 50-50 chance the flight will happen.”

NEW INFECTIONS
After a long lull with just a handful of cases a day, the deteriorating situation in Hong Kong prompted the government to impose tighter social-distancing rules and to close schools again. The city reported 68 new infections Saturday, with all but seven locally transmitted, a sign the virus is spreading in the community. To encourage people to take virus tests, the government plans to offer a payment of HK$5,000 ($645) to anyone who tests positive.

Cathay and Singapore Airlines were due to fly a return trip each on Sunday and then three or four a week until starting daily services next month. Passenger numbers were to be limited to 200 per flight. After the suspension, the carriers offered refunds or seats on non-travel bubble flights, which require passengers to undertake quarantine. The bubble would replace that with virus tests and a condition that arrivals can’t have traveled internationally in the previous 14 days.

Hong Kong and Singapore’s economies are heavily reliant on tourist and transit travel, and Transport Minister Ong has warned that the closing of borders puts Singapore’s very future at stake. The city-state has agreements with a handful of countries allowing business or essential travel under certain circumstances, but none reached the stage of the plan with Hong Kong. Singapore reported 12 new COVID-19 cases on Sunday, all of them in travelers coming from overseas.

Global coronavirus infections topped 58 million over the weekend, with daily increases in the US nearing 200,000, yet it took fewer than 100 local cases in Hong Kong for the bubble plan to be put on ice.

Singapore and Hong Kong have said they hope their agreement can be a model for other nations trying to open up, but the delay further clouds the outlook for anyone with ambitions for travel, not just between those two cities, but everywhere else too. Air traffic globally is expected to be at just 33% of 2019 levels at the end of this year, and “hopefully” at 50% to 60% by the end of 2021, Alexandre de Juniac, director general of the International Air Transport Association, said Friday. — Bloomberg

US drafts list of 89 Chinese firms with military ties

THE TRUMP administration is close to declaring that 89 Chinese aerospace and other companies have military ties, restricting them from buying a range of US goods and technology, according to a draft copy of the list seen by Reuters.

The list, if published, could further escalate trade tensions with Beijing and hurt US companies that sell civil aviation parts and components to China, among other industries.

A spokesman for the US Department of Commerce, which produced the list, declined to comment. The Chinese foreign ministry did not immediately respond to a request for comment.

Commercial Aircraft Corp. of China Ltd. (COMAC), which is spearheading Chinese efforts to compete with Boeing and Airbus, is on the list, as is Aviation Industry Corporation of China (AVIC) and 10 of its related entities.

The list is included in a draft rule that identifies Chinese and Russian companies the US considers “military end users,” a designation that means US suppliers must seek licenses to sell a broad swath of commercially available items to them.

According to the rule, applications for such licenses are more likely to be denied than granted.

US President Donald Trump has stepped up his actions in recent months against China. Ten days ago, he unveiled an executive order prohibiting US investments in Chinese companies that Washington says are owned or controlled by the Chinese military.

The pending list comes after the Commerce Department expanded the definition of “military end user” in April.

The April rule includes not only armed service and national police, but any person or entity that supports or contributes to the maintenance or production of military items — even if their business is primarily non-military.

The export restriction applies to items as disparate as computer software like word processing, scientific equipment like digital oscilloscopes, and aircraft parts and components.

In terms of aircraft, the items include everything from brackets for flight control boxes to the engines themselves.

News of the list comes at a sensitive time for the US aerospace industry as Boeing seeks Chinese approval of its 737 MAX after it was cleared by US regulators last week. In March 2019, China was the first nation to ground the jet following two fatal crashes and it is already expected to wait months to lift the ban. A spokesman for Boeing declined to comment.

Washington trade lawyer Kevin Wolf, a former Commerce official, said Commerce had shared the draft rule with a technical advisory committee of industry representatives, and it should have been kept confidential.

Mr. Wolf said the rule and list still could be modified and that the clock was running out for it to go into effect under the Trump administration since it would need to be cleared and sent to the Federal Register, the official US publication for rules, by mid-December.

In the draft rule seen by Reuters, the Commerce Department said being able to control the flow of US technology to the listed companies was “vital for protecting US national security interests”.

But a former US official who did not want to be identified, said “merely creating a list and populating it is a provocative act.” An aerospace industry source said it could spur China to retaliate.

The inclusion of COMAC would come as a surprise to at least one major US supplier, which had determined the company was not a military end user, the industry source said.

A list also would provide European competitors with an opening to promote their manufacturers, by pointing out they do not have to clear such hurdles, even if the US grants the licenses, the industry source said.

General Electric Co. (GE) and Honeywell International, both supply COMAC and have joint ventures with AVIC.

A GE spokesperson said its global joint ventures operate in compliance with all laws, and that the company has worked to obtain licenses related to military end users.

A Honeywell spokeswoman declined to comment.

Besides the 89 Chinese listings, the draft rule also designates 28 Russian entities, including Irkut, which is also aiming to break into Boeing’s market with its MC-21 jetliner development.

The 117-company list is “not exhaustive,” the draft rule said, and is considered an “initial tranche.” — Reuters

Young Gilas crew looking to get the job done in Manama, Bahrain

THE Gilas Pilipinas men’s team left for Manama, Bahrain, at the weekend to go into battle in the November window of the International Basketball Federation (FIBA) Asia Cup qualifiers set for later this week.

Composed of amateur and collegiate stars, the team admits that a tough challenge lies ahead, but it is determined to get the job done and give the country’s push in the tournament a boost and to build momentum for future windows.

“This is a good opportunity to showcase what our young players can do, but we are out to compete and win,” said the Samahang Basketbol ng Pilipinas as it set its goals for the team competing in Bahrain.

Fourteen players are included in the Gilas pool for the tournament, namely: Kobe Paras, Juan and Javi Gomez De Liano, Jaydee Tungcab, Dwight Ramos, Dave Ildefonso, Will Navarro, Justine Baltazar, Calvin Oftana, Kenmark Carino, Isaac Go, Matt and Mike Nieto, and Rey Suerte.

Allyn Bulanadi and naturalized player candidate Angelo Kouame were part of the pool but could not join the team with the former injured and the latter still awaiting his papers.

Coach of the team is veteran Jong Uichico, supported by SBP program director Tab Baldwin, assistant coach Boyet Fernandez, and skills coach Alton Lister.

The team is to face Thailand twice in the November window – first on Nov. 27 and second on Nov. 30 at the Khalifa Sports City stadium.  

The Philippines (1-0) was supposed to take on South Korea as well but the Koreans chose not to compete in the window because of concerns over the coronavirus pandemic. It remains to be seen if there would be sanctions handed down because of their decision.

“We are now in the process of preparing them for the international game. They’re young so we’re trying to make it simple for them given the limited time we have,” said Mr. Uichico, also the head of the SBP coaches academy.

For Mr. Go, a draftee of the Terrafirma Dyip in the Philippine Basketball Association but currently on loan to the national team, there is pressure as they go into battle but they are using it as added motivation to do well.

“There is pressure, of course, since we are representing the country but we are working to improve and be ready,” the former Ateneo star said.

The Philippines is currently in second place in Group A of the qualifiers, behind South Korea (2-0). Other teams in the group are Indonesia (0-2) and Thailand (0-1). The top two teams in the group at the end of the qualifiers advance to the FIBA Asia Cup set for August next year.

PLDT, SMART RALLY BEHIND GILAS
Meanwhile, the country’s largest integrated telco PLDT and its wireless arm Smart Communications, Inc. are rallying behind Gilas Pilipinas with connectivity as it represents the Philippines in the FIBA Asia Cup 2021 qualifiers.

In a statement, the groups said GIGAROAM will power the Gilas Pilipinas team’s data roaming connectivity in Bahrain. With Smart’s global coverage and flexible data roaming plans, the team will be able to stay online, accessing their favorite apps, sites, and connect with their fans on social media during their stay abroad.

Aside from that, the members will also be able to enjoy 100 minutes of on-net calls to their relatives back home via Free Bee, powered by PLDT Global. — Michael Angelo S. Murillo

Leading Barangay Ginebra expecting a tougher stand from Meralco in Game Four

By Michael Angelo S. Murillo, Senior Reporter

WHILE they are ahead, 2-1, in their best-of-five PBA Philippine Cup semifinal series, the Barangay Ginebra San Miguel Kings know that their job is not done and have to deal with a Meralco Bolts crew they expect will put up a tougher stand in their next game.

The Kings reclaimed the series lead on Sunday after taking Game Three, 91-84, putting them on the brink of another finals appearance in the Philippine Basketball Association (PBA).

Barangay Ginebra came out with more bounce and consistency in their attack than in Game Two, where they were outlasted by Meralco.

It was a balanced thrust for the Kings, led by Stanley Pringle, who finished with 24 points, nine rebounds and six assists.

Big man Prince Caperal had 15 points for Barangay Ginebra, with LA Tenorio and Japeth Aguilar having 12 each. Joe Devance was the other Kings in double digits with 10 points.

The Kings led, 27-12, at the end of the first quarter and never relinquished the driver’s seat after.

A win away from the finals, Barangay Ginebra coach Tim Cone said that while they welcome where they are right now, they are not getting ahead of themselves, believing Meralco still has a lot of fight in it and cannot be easily discounted.     

“It’s a ping-pong match. You have good teams playing. It’s not easy to roll over Meralco, They’re going to come back,” said Mr. Cone following their Game Three victory.

“[Meralco coach] Norman [Black] is one of the best coaches in the PBA. He has been through many battles on the court. They have a young developing core, which would only get better,” he added.

The most winning PBA coach went on to say that given what they expect to be a tougher fight from Meralco as it tries to keep its season alive, it is a good thing that there is a gap of two days before they return to the court.

Mr. Cone said they would use it to rest and prepare a battle plan against what the Bolts would bring.

“It takes a lot to win games. There are no easy adjustments. No easy process, but we get two days off and we will use it to build a good force to beat what we know will be a great force in the next game.”

Game Four of the semifinal series between Barangay Ginebra will be played on Nov. 25 at 3:45 p.m. at the Angeles University Foundation Sports Arena in Pampanga.

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