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How FIST will help revive the economy

(Second of two parts)

In last week’s article, I touched on the basic features and provisions of Republic Act No. 11523, also known as the Financial Institutions Strategic Transfer (FIST) Act. The FIST Act aims to buoy struggling economy by increasing liquidity in the financial system. The law will serve as a catalyst for more efficient and less costly transfers of non-performing assets (NPAs), from the custody of the financial institutions (FIs) to FIST corporations (FISTCs), and ultimately to end-users, by granting certain tax and fee privileges on such transactions.

Unquestionably, the concept and spirit of the law is going to be a boon for the ailing economy. Now, the ball is in the court of the regulators who need to draft implementing rules and regulations, to ensure that the vision of the law is fully actualized. These are the factors they need to be considered.

BUSINESS REGISTRATION
The law introduces a special type of corporation called FISTCs, which will serve as the main channel for transferring NPAs, in the process allowing banks to free up capital that can be reinjected into the financial system. However, in the Philippine context, the added compliance requirements are often burdensome. Entities entitled to privileges granted by the government are generally subject to more stringent, voluminous, and confusing registration processes, and periodic compliance requirements. While we can lean on the Ease of Doing Business and Efficient Government Service Delivery Act of 2018, there are still gaps, which will produce bottlenecks at various government agencies.

To maximize economic opportunity and to ensure that challenges are dealt with in a timely manner, re-infusion of funds into the financial system must happen as early and as seamlessly as possible. This can be achieved if the guidelines to be issued by regulators are as clear as possible as to the following, among others: (1) what is required of FISTC incorporators; and (2) the roles and responsibilities of government agencies.

Since the Philippines is still not COVID-free, it is key for the government to establish an online portal and/or one-stop shops specializing in the processing of FISTC applications.

PERIODIC COMPLIANCE REQUIREMENTS AND TAXATION
Another area that may need to be clarified is the periodic compliance requirements. Among the issues are:

1. Will FISTCs be required to submit an inventory list to the Bureau of Internal Revenue (BIR)? If yes, how and in what form?

2. Are there any additional financial statement disclosure requirements for FISTCs and the FIs transacting with them?

3. What are the additional reportorial requirements, if any, for FISTCs and/or FIs as the regulators strive to monitor potential abuses in the grant of privileges?

It would also be beneficial if the BIR were to issue comprehensive rules and regulations clarifying the taxation of FISTCs and the transactions covered by the FIST Act. Taking a step further — will FISTCs be subject to value-added tax (VAT) or gross receipts tax (GRT) for any income derived from transactions not covered by the tax privileges and those earned after the lapse of the tax privilege period?

AN OPEN MARKET ENABLES A STRONG FOOTHOLD IN THE ASEAN REGION
In last week’s article, I mentioned that another key to the success of the FIST Act is participation from the global market. Inflows of foreign capital will inevitably raise the liquidity level of our financial system. However, there are potential deterrents that may pose hurdles to attracting foreign investments.

Consistent with our Constitution, the law provides that if the FISTC acquires land, at least 60% of its outstanding capital must be owned by Philippine nationals. This limitation may hinder potential foreign investment since there are markets in the ASEAN region that are more open to foreign participation.

For instance, Singapore generally has fewer restrictions when it comes to acquiring commercial and residential property. There are certain approvals required for acquisitions made by foreigners under Singapore’s Residential Property Act but no outright prohibition. It is likely that ASEAN governments are drafting laws and stimulus packages similar to the FIST Act, as they endeavor to ensure economic recovery, growth and stability during the pandemic and beyond. Should they espouse less restrictive measures, the Philippines may be at a disadvantage when it comes to attracting foreign investment.

It may just be a coincidence but brewing talk about easing the Constitutional limits on foreign ownership may be vital in strengthening the Philippines’ viability in attracting foreign investment in ASEAN. The Philippines has consistently been lagging neighbors like Malaysia and Vietnam in generating foreign direct investment (FDI).

COLLABORATIVE EFFORT FROM ALL STAKEHOLDERS IS KEY
Enacting the FIST law is a major milestone that gives hope for reviving the Philippine economy in the wake of the pandemic. The foregoing issues are just some of the many that need to be addressed to fully actualize the vision of the FIST Act. Foremost is the need for open dialogue between regulators and the business sector as the former draft a comprehensive set of rules and regulations. Such dialogue will aid in stabilizing the financial system and make it more agile in responding to opportunities and seeing off threats in the years to come.

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.

 

Gabriel Eroy is a Manager at the Tax Services Department of Isla Lipana & Co., the Philippine member firm of the PwC network.

(02) 8845 2728

gabriel.eroy@pwc.com

Sinovac vaccines may arrive this week; gov’t readies rites

THE FIRST batch of Sinovac vaccines donated by China has been prepared for delivery and may arrive in the Philippines as early as this week, according to a top company official.

“We just need to finalize procedures with Customs, then we can fix the date of the flight,” Sinovac Biotech Ltd. General Manager Helen Yang told a televised news briefing hosted by the presidential palace on Wednesday.

President Rodrigo R. Duterte wants to personally welcome the arrival of the 600,000 vaccine shots, his spokesman Herminio “Harry” L. Roque told the briefing. A small ceremony may be held.

“We are Filipinos and we show our debt of gratitude,” he said in Filipino. “In times of need, our friend China was the first to send us the vaccines.”

Mr. Roque said China was the first to help the Philippines during the Marawi siege by sending guns. “It’s not bad to show your appreciation,” he added.

Of the initial batch of vaccines, about 100,000 will be used to immunize soldiers. The rest will be used to inoculate other priority sectors such as medical frontliners.

Mr. Roque said health workers would be allowed to take the Chinese vaccine shots. “Not recommended does not mean it’s prohibited.”

He said the President was initially puzzled why the Sinovac vaccine had not been recommended for health workers.

Food and Drug Administration (FDA) Director General Rolando Enrique D. Domingo earlier said the Chinese shot was not recommended for medical frontliners since its efficacy only reached 50.4% among them based on trials in Turkey.

The efficacy of Sinovac, on the other hand, ranged from 65.3% to 91.2% in patients aged 18 to 59 years based on trials in Indonesia.

Mr. Roque said the President had summoned the FDA official to the Cabinet meeting on Feb. 22 to explain why the Sinovac vaccine had not been recommended for medical frontliners even though it met the 50% efficacy threshold set by the World Health Organization.

Mr. Duterte was initially “perplexed,” Mr. Roque said, adding that he respects the opinion of experts.

The Department of Health (DoH) reported 1,557 coronavirus infections on Wednesday, bringing the total to 566,420.

The death toll rose by 22 to 12,129, while recoveries climbed by 392 to 523,321, it said in a bulletin.

There were 30,970 active cases,  88.5% of which were mild, 5.9% did not show symptoms, 2.5% were critical, 2.4% were severe and 0.8% were moderate.

More than 8.1 million Filipinos have been tested for the coronavirus as of Feb. 22, according to DoH’s tracker website.

The coronavirus has sickened about 112.7 million and killed almost 2.5 million people worldwide, according to the Worldometers website, citing various sources including data from the World Health Organization (WHO).

About 88.3 million people have recovered, it said.

Meanwhile, Mr. Roque said the Executive branch would leave it to the Ombudsman whether to investigate government officials who used unregistered coronavirus disease 2019 (COVID-19) vaccines made by another Chinese drug maker, Sinopharm Group Co. Ltd.

Ramon T. Tulfo, Jr., the country’s special envoy to China, admitted having been vaccinated with the Sinopharm drug, which had not been approved for emergency use in the Philippines.

The case would be referred to the agency’s regulatory enforcement for investigation, Mr. Domingo separately told a televised news briefing.

Health Undersecretary Maria Rosario S. Vergeire told a separate news briefing they would include the case in their probe of illegal vaccinations. — Kyle Aristophere T. Atienza and Vann Marlo M. Villegas

Include teachers in vaccine priority list, government asked

A SENATOR wants the government to include teachers among the priority in its coronavirus vaccine program in time for a possible reopening of physical classes in August.

Senator Sherwin T. Gatchalian noted that in Indonesia, public workers including teachers are second among the priority list after health workers.

“The Indonesian experience is something that we can study, but definitely, vaccinating teachers and putting them on the priority list is a must,” he told a Senate hearing on Wednesday.

Mr. Gatchalian, who heads the Senate basic education committee, said the Education department should lobby for teachers’ inclusion.

Education Undersecretary Nepomuceno A. Malaluan said they could hold a poll among teachers to find out whether they want to be among the first to get vaccinated.

Health workers on the frontline are the priority among population groups for vaccination, followed by senior citizens, persons with co-morbidities, frontline personnel in essential sectors and indigent groups.

Also listed were teachers, social workers, government workers, other essential workers, socio-demographic groups at significantly higher risk and migrant Filipino workers.

Some senators also pushed for the pilot testing of face-to-face classes.

Senator Francis N. Pangilinan said Education officials could start with no more than a thousand students in physical classes.

“We need to experience it now, we need the lessons drawn now because we don’t have the luxury of time,” he told the hearing.

Senator Maria Lourdes Nancy S. Binay said the pilot test could be held in areas with few coronavirus cases such as the provinces of Batanes and Siquijor.

“This is a good way for our scientists to study what can be done to mitigate  the effects of COVID,” Mr. Gatchalian said.

President Rodrigo R. Duterte this week rejected a fresh push to hold face-to-face classes until people get vaccinated. In December, he rejected the pilot test that would have been held last month.

Meanwhile, the National Government vowed to help local governments boost their ability to cope with a prolonged lockdown.

This would allow them to better distribute stimulus funds provided by several laws including this year’s national budget, presidential spokesman Herminio “Harry” L. Roque, Jr. told an online news briefing.

He said the government would also facilitate the reopening of more industries in areas under a general community quarantine. — Vann Marlo M. Villegas and Kyle Aristophere T. Atienza

Legitimate children may use their mom’s surname, SC rules

LEGITIMATE Filipino children can use the surname of their mother as their own, according to the Supreme Court (SC).

In a 15-page decision written by Justice Marvic F. Leonen, the tribunal said this is in keeping with the Constitution, which tells the state to ensure the fundamental equality of women and men before the law.

The trial court gravely erred when it held that legitimate children cannot use their mother’s surname because it “treated the surnames of the petitioner’s mother and father unequally.”

“This is guaranteed by no less than the Constitution, a statute and an international convention to which the Philippines is a party,” the court said.

It reversed trial and appellate court rulings that rejected Anacleto B. Alanis III’s plea to change his surname to Ballaho, the surname of his mother who single-handedly raised him and his siblings.

The tribunal noted that while legitimate children would “principally” use the surname of their father under the law, principally does not mean exclusively.

“Patriarchy becomes encoded in our culture when it is normalized,” the high court said. “The more it pervades our culture, the more its chances to infect this and future generations.”

The court favored Mr. Ballaho even if he failed to appeal the adverse ruling on time. “In the exercise of its equity jurisdiction, this court may choose to apply procedural rules more liberally to promote substantial justice,” it said. — Bianca Angelica D. Añago

Manila raises alert level in Myanmar after coup

The Philippines on Wednesday raised the alert level in Myanmar after a military coup, allowing only workers with existing contracts to go to the country.

In an advisory, the Department of Foreign Affairs raised the alert to Level 2 for the safety of 1,273 Filipinos there.

“This entails restriction of nonessential movements, avoiding places of protest and preparation for possible evacuation,” it said in a statement. “Only returning workers with existing contracts shall be allowed to travel to Myanmar.”

DFA also reminded Filipinos in Myanmar to be careful, monitor developments and avoid places of protests.

Alert Level 2 is raised if there are “real threats to life, security and property of Filipinos due to internal or external threats,” according to the DFA website.

DFA last week repatriated 139 Filipinos from Myanmar due to COVID-19 and the political situation there. More than 500 Filipino workers in Myanmar have come home since March amid a coronavirus pandemic.

Protests were staged in Myanmar after its military declared a coup against its government this month.  Myanmar leader Aung San Suu Kyi and other officials were detained. — Vann Marlo M. Villegas

OFW group slams nurse deployment-for-vaccine proposition to UK, Germany

AN alliance of overseas Filipino  (OFWs) workers slammed recent statements by Labor officials offering to lift the cap on the deployment of healthcare workers to the United Kingdom and Germany in exchange for COVID-19 vaccines from the two countries.

In a statement on Wednesday, Migrante International said such a proposition is a “desperate move” on the part of government that exploits overseas workers to make up for its shortcomings in implementing the coronavirus disease 2019 (COVID-19) vaccination program.

“(I)t has failed to safeguard the Filipino people from the COVID health crisis, and address the worsening economic crisis that has brought about historic levels of unemployment and poverty in the country,” the group said.

In a briefing on Tuesday, International Labor Affairs Bureau Director Alice Q. Visperas said Labor Secretary Silvestre H. Bello III proposed to the two countries that the Philippine government will lift the current deployment cap on healthcare workers in exchange for COVID-19 vaccines.

Ms. Visperas said the vaccines from this arrangement would be used for displaced OFWs and those who will leave the country for work.

The presidential palace on Wednesday welcomed the Labor department’s statement, saying it is consistent with the national government’s policy to secure more vaccine supplies.

“Nag-order po tayo ng sapat, sobra sobra pa, 90 million, sinobrahan pa nga natin. Pero siyempre kung mas maraming supply ang makukuha natin, bakit hindi? (We have ordered enough, even in excess at 90 million doses. But of course if we can get more supply, why not?),” Presidential Spokesperson Harry L. Roque, Jr. said in a televised press briefing.

Mr. Roque, however, said the President has yet to be informed of the proposal.

“This is an idea of Secretary Bello. We welcome this because more is better than less,” he said in a mix of English and Filipino.

The Philippine government banned the deployment of nurses at the start of the lockdown in mid-March last year, but later eased the restriction based on the employee’s contract signing date.

NOT LINKED

The UK’s envoy to the Philippines, meanwhile, said their government will not be “linking” vaccine access to the recruitment of nurses.

“I’d say that we’ve got no plans to link vaccines with those conversations around the recruitment of nurses,” British Ambassador to the Philippines Daniel R. Pruce told reporters in a roundtable meeting.

Mr. Pruce said the UK has made a “very empathic commitment” of providing surplus vaccines to the World Health Organization under the global initiative for equal access to vaccines.

“That’s really where the situation is now. And obviously our discussion with the  government on both healthcare workers and wider COVID response issues continue. But I think that encapsulates where the  specific issue stands at the moment,” he said.— Gillian M. Cortez, Kyle Aristophere T. Atienza, and Vann Marlo M. Villegas

Nationwide round-up (02/24/21)

COVID vaccine law exempts gov’t workers from liability

GOVERNMENT officials and workers involved in the inoculation of individuals who will experience adverse effects from the coronavirus vaccines will be exempt from liabilities under the proposed law that provides for an indemnity to affected patients. “They are free from liability unless there was negligence or gross negligence or there is a willful intent,” Quirino Rep. Junie E. Cua said on Wednesday. He explained that such clause is needed because health workers would otherwise “be afraid to administer (the vaccines).” The House of Representatives on Tuesday evening adopted the Senate version of the proposed Emergency Vaccines Procurement Act. The measure will skip the bicameral conference and will only need the signature of the President for it to become a law. The measure will expedite the procurement and administration of coronavirus disease 2019 (COVID-19) vaccines. The proposed measure also provides for a P500-million fund to compensate vaccine recipients who might require confinement due to side effects, incur a disability, or die. — Gillian M. Cortez

BI warns vs fake immigration officers

BUREAU of Immigration Commissioner Jaime H. Morente warned against individuals pretending to be a bureau officer and offering to fix travel documents for a fee. In a press release on Wednesday, Mr. Morente reminded overseas Filipino workers (OFWs) to “not fall prey to these predators.” He added, “They are sweet-talkers that will entice you to attempt to work illegally, but we (already have) measures in place to prevent that from happening.” He cited that the bureau received a complaint in December regarding an OFW who wanted to leave for Dubai under a tourist visa, but a certain “James” who claimed to be an immigration officer collected money in exchange for arranging his documents. The complainant transferred a total of P75,000 to the suspect. Mr. Morente said they have confirmed that they have no such employee and have already identified the suspect. “I have instructed our Travel Control and Enforcement Unit and Intelligence Division to coordinate with the NBI (National Bureau of Investigation) and ensure that this person faces the harshest penalties of the law,” Mr. Morente added. — Bianca Angelica D. Añago

Regional Updates (02/24/21)

 

1st typhoon’s toll: 1 child died, 4 missing, over 23,000 families still displaced

STORM Auring, the first typhoon to hit the Philippines this year, left one person dead, two others injured and four still missing as of Wednesday morning, the national disaster management agency reported. Defense Undersecretary Ricardo B. Jalad, the executive director of the National Disaster Risk Reduction and Management Council (NDRRMC), said the casualty was a six-year-old child who drowned in Claver, Surigao del Norte. “The (four) missing, three of these are fishermen who ventured out to the sea in Bislig,” he said at the briefing Tuesday night in Tandag City, Surigao del Sur where President Rodrigo R. Duterte and several Cabinet members were present. Almost 50,000 families were affected, mainly in the Surigao provinces in the country’s south, when the tropical storm swept through over the weekend. NDRRMC said 23,359 families composed of over 87,000 individuals were still staying in evacuation centers or with relatives as of Feb. 24. Of the 64 flooded areas across the eastern side of the archipelago from Bicol to the Caraga regions, water has yet to subside in 18 areas. NDRRMC recorded 679 affected houses, with 226 totally destroyed and 453 partially damaged. Auring, with international name Dujuan, caused minimal damage to public infrastructure with only Surigao del Norte province reporting a P2.8 million cost on flood control and water facilities. The storm moved slowly over the Philippine sea and weakened into a tropical depression before making landfall over Batag, a small island in central Philippines. Relief operations are ongoing using prepositioned food and non-food items in the regions. Additional supplies were being shipped from the central social welfare office on Wednesday. Department secretaries also assured assistance on emergency employment, agriculture, and for small and medium enterprises. — MSJ

Another 4,047 hogs delivered to Metro Manila

ANOTHER 4,047 live hogs and 24,368 kilograms of pork carcass have been delivered to Metro Manila as part of government initiative to augment supply, the Department of Agriculture (DA) said. In a report on Feb. 23, the DA said that around 66.2% or 2,677 heads of the supply that arrived were sourced from the region of CALABARZON (Cavite, Laguna, Batangas, Rizal, and Quezon). Other sources were Bicol Region at 530, and Oriental Mindoro at 400 heads. “[The] Cordillera Administrative Region (CAR), Cagayan Valley, Eastern Visayas, and CARAGA have no shipments since they reported that the hog supply in their areas are insufficient,” the DA said. “Ilocos Region and Central Visayas were not able to transport to Metro Manila on Feb. 23 since majority of their shipments were delivered to other areas such as Pampanga, Bulacan, and Negros Oriental,” it added. Since the implementation of the price ceiling on Feb. 8, the DA said that a total of 73,365 heads of live hogs and 439,852 kilograms of pork carcass have arrived in Metro Manila. — Revin Mikhael D. Ochave

PHL mayor named among ‘anti-corruption champions’ in new United States gov’t award

PASIG City Mayor Victor N. Sotto — @VICOSOTTO

PASIG City Mayor Victor “Vico” N. Sotto has been named an “International Anti-corruption Champion,” a new award launched on Feb. 23 by United States Secretary of State Antony J. Blinken in recognition of individuals across the world “who have demonstrated leadership, courage, and impact in preventing, exposing, and combating corruption.” In a note posted on the US State Department’s site, Acting Assistant Secretary James A. Walsh described Mr. Sotto as “a standard-bearer for a new generation of Philippine politicians who prioritize anticorruption and transparency initiatives in their election campaigns and in office.” The 31-year old mayor, a former councilor of the city, won his current post in the 2019 elections after beating “an incumbent mayor whose family had ruled the city for 27 years,” Mr. Walsh wrote, “Sotto has sought to solidify his reputation as a fresh voice with a new, more transparent approach to governance.” Mr. Sotto joins 11 others in the first batch of awardees. They are: Ardian Dvorani (Albania), Diana Salazar, (Ecuador), Sophia Pretrick (Federated States of Micronesia), Juan Francisco Sandoval Alfaro (Guatemala), Ibrahima Kalil Gueye (Guinea), Anjali Bhardwaj (India), Dhuha A. Mohammed (Iraq), Bolot Temirov (Kyrgyz Republic), Mustafa Abdullah Sanalla  (Libya), Francis Ben Kaifala (Sierra Leone), and Ruslan Ryaboshapka (Ukraine). “As President (Joseph R.) Biden has emphasized, our commitment to truth, transparency, and accountability is a mission that we must live at home and exemplify abroad.  I commend the dedication of these 12 brave individuals to these same ideals,” Mr. Walsh said in a statement. — MSJ

Pilipinas Shell provides solar-powered street lights in Batangas

PILIPINAS Shell Petroleum Corp. has installed 16 solar-powered street lights along the Batangas-Tabangao-Lobo road covering the village of San Isidro, the company announced Wednesday. “A community’s progress rests on an effective partnership between government, starting with the barangay, and the private sector,” said San Isidro Barangay Chairman Andres B. Malibiran. The Batangas City police station commander, Lt. Col. Gerry M. Laylo, said the lights also contribute to maintaining peace and order. Pilipinas Shell has a solar farm in Tabangao, which has been supplying power to the listed oil company’s import terminal since December. The street lighting project was under the Save, Invest and Nurture Access to Green Energy and Technology program led by Pilipinas Shell Foundation, Inc. — Angelica Y. Yang

Doing good while doing well: Fact, fiction, or an aspiration?

If investing in only good firms — firms that pay their employees properly, do not pollute, have a strong number of women and minorities in leadership positions, et cetera et cetera — made people richer, then the world would be a much better place. Yet despite so many calls for people to change their consumption behaviors — stop plastic use or avoid fast fashion, buy fair trade or organic, boycott this or that company, shift to renewable energy — the fact is that people have yet to completely dedicate themselves to a life of being truly responsible for their actions, whether direct or indirect, because there seems to be no extrinsic benefit; or if there is, it is negligible. And knowing consumers’ behaviors, investors are wary about putting all their money in good firms since that’s not what sells. Our society has become so framed in capitalism that it is difficult to not require what we in business schools term exactly that: a business case. “Tell me why I should invest in good firms,” is another way of saying: “I know this company is nice and all that, but will it make me money?”

As such, asset managers actually asking what should be urgent and obvious questions when they probe a company’s environmental, social, and governance practices, are often seen as controversial. The practice of asset management is a widely acceptable means of investing current wealth in anticipation of higher expected future returns. The idea behind asset management is that it is more effective and less risky to pool money — “assets” — from several individuals or organizations and to outsource the collective management of these assets to a specialized firm. This allows risks to be spread across a diversified portfolio of assets, which would otherwise be more expensive to do individually due to high transaction costs. The onus is that an efficient portfolio can only be created through specific combinations of risk and return. The investor would (or should) then want to select one of those portfolios which give rise to the efficient combinations of the two. This theory — Markowitz’s Modern Portfolio Theory — is arguably the most strongly manifested theoretical underpinning in the practice of asset management. Highly sophisticated tools are available for asset managers to use to create an efficient portfolio and the performance of a fund is judged on whether it is able to achieve a return above a previously identified benchmark (usually a market index such as the S&P 500 in the US, the MSCI Index in Europe, or the PSEi in the Philippines).

Traditional asset managers are tasked to make money for their investors. They are not hired to make moral or ethical choices. Engaging in responsible investment — even if it sounds nice on paper — still gets eye rolls in the industry; because by accepting Responsible Investment as Mainstream, the very core theory of Finance, that of Risk Diversification, gets threatened. Another issue is the time horizon of markets. By selecting assets based on sustainability issues of a longer-term nature, one might be missing out on opportunities in the short run.

The bottleneck ultimately lies in financial persons and particularly asset managers still “looking at sustainability with a financial lens,” but that is the archetype we must work with and elaborate if we are to make any changes. If they care about risk and return, well then we must introduce new sources of risk and return.

And here is the best pitch of that so far: Responsible Investing (RI) has risk-reducing benefits which appear as a by-product of the information depth and reputational benefits that occur because of probing deeper into the sustainability practices of a firm. Proponents posit that by having more information, they can make better decisions and select more stable and predictable firms that will survive the test of time and be able to address the complex problems our world faces. In my research work on European equity RI mutual funds, I found empirical evidence to show that while limiting the investable universe increases idiosyncratic (specific) risk due to portfolio diversification issues, engaging in substantive RI can be risk-reducing since informational benefits allow fund managers to be more selective.

So maybe in the short-term, one will make money by investing in the firm that outsources the cheapest labor using the most polluting form of low-quality production by sheer amount of volume and margins. But in the long term? We know that such firms will not withstand the test of time. There will be cracks in their leadership, cover-ups that regulators will find out about, and a market audience that will be increasingly educated and agile with information now commoditized from digital and social media outlets that will make them short-lived in a future filled with people who have begun to question the status quo. Doing good while doing well: Fact, fiction, or an aspiration? Neither of the three. Looking beyond financial theories and into the horizon, it is investors’ only remaining choice.

 

Daniela “Danie” Laurel is a business journalist and anchor-producer of BusinessWorld Live on One News, formerly Bloomberg TV Philippines. Prior to this, she was a permanent professor of Finance at IESEG School of Management in Paris and maintains teaching affiliations at IESEG and the Ateneo School of Government. She has also worked as an investment banker in The Netherlands. Ms. Laurel holds a Ph.D. in Management Engineering with concentrations in Finance and Accounting from the Politecnico di Milano in Italy and an MBA from the Universidad Carlos III de Madrid.

Breathing space

Tough call not to ease quarantine restrictions come March 1. Businesses and consumers have been hurting, and the economy is in the doldrums. But the number of daily cases of COVID-19 (coronavirus disease 2019) seems to be on the uptrend, again. So, I can understand why the President opted not to shift the entire country into the most lenient quarantine status just yet.

He wants more time to decide on the shift, he said. At least, until after the government starts the COVID-19 vaccine rollout. But while he may seem to have been guided by science and data on the matter, and his decision seems to appease a number of medical experts, I suspect the President is really acting more on gut feel, and perhaps, just being practical.

Question is, can Modified General Community Quarantine or MGCQ really wait until after the vaccine rollout starts? I doubt Socioeconomic Planning Secretary Karl Chua would have suggested the shift by March 1 unless it was absolutely necessary. MGCQ will perhaps allow government economic managers some breathing space, by shifting the burden of boosting economic activity more to the private sector.

Data indicate an uptrend in COVID-19 daily cases. Data also indicate that the economy is in a worse state than previously forecasted. But I have not seen data that indicate the repercussion or consequences of delaying nationwide MGCQ by two to three months. Again, if the shift is not crucial, would NEDA (National Economic and Development Authority) have recommended it? Would Metro Manila mayors have pushed for it?

My concern is that the President has opted to link his decision on the matter to the vaccine rollout, which does not seem to have a definite timetable. Meantime, everybody is waiting to exhale, so to speak. Businesses, investors, consumers, and everybody else will be holding their breaths for another two to three months, maybe even more.

Public health and safety get priority over the economy, and perhaps rightly so. However, public health and safety cannot easily be assured unless the government is prosperous enough to spend on programs, and unless businesses are profitable enough to actually pay taxes, or to spend for health and safety programs themselves. It takes money to implement even minimum health standards and protocols against COVID-19.

CNN Philippines reports that health workers are relieved by the President’s decision, since it gives them more time to prepare for the shift to MGCQ, when COVID cases are anticipated to go up. Parents are perhaps just as relieved by the President blocking the initiative to allow face-to-face classes for now, or his decision not to allow younger teens to leave their homes.

Without doubt, there are risks to shifting to MGCQ prior to the vaccine rollout. But, I believe, it is likewise risky to delay MGCQ until after the vaccination program starts. For the simple reason that no one really knows when vaccines will arrive, and when and how the government will distribute them. Perhaps the timetable should not depend on the vaccine rollout?

It is number crunching time for NEDA as well as all agencies involved in vaccine procurement and distribution. Decision-makers need reliable and credible data based on simulations and forecasts to estimate the consequences and implications of delaying the shift to MGCQ, and making the vaccine program the precondition to it.

We also need to see data and estimates from health/medical and statistical experts, from scientists, on the consequences and implications to public health and safety. Decision-makers need to see everything in numbers, and all data and information that serve as bases for decisions should be made public.

My take on the matter is that COVID-19 is not about to go away, and all we can do at this point is to live with it, while taking precautions. And while I am for the gradual and safe reopening of the economy, public health and safety should always come first. Of course, this is from the viewpoint of one who follows health protocols, and avoids unnecessary “exposure” by being more discerning as to when to go out, and to where.

For almost a year now, my family has managed to stick to only “essential” travel out of the house. And perhaps we have to wait for another year to pass before it is “almost” business as usual for us. But we count ourselves lucky that we can actually afford to avoid leaving the house unless absolutely necessary. Work and school can be done from home.

However, most people are not as lucky. In fact, an overwhelming majority of Filipinos need to go out of their homes to earn a living. To them, leaving the house is not an option but a necessity. Sadly, as we delay the shift to MGCQ, it remains difficult for many to resume full-time work, and earn sufficient wages to cover all their expenses. They, too, need a breather from lockdown.

While COVID-19 is a threat to their health, maybe they are more concerned with the quarantine’s threat to their livelihood and subsistence. With or without the vaccine, life must go on for them. The government is no longer in a position to assist them. And now with rising food prices, it has perhaps come to that point that they would willingly face COVID-19 and take their chances with it, just so they get a fair chance to fight poverty and hunger.

 

Marvin Tort is a former managing editor of BusinessWorld, and a former chairman of the Philippines Press Council

matort@yahoo.com

Australia is right. Facebook should pay up

FACEBOOK, INC. went on the offensive last week, banning Australian news organizations from posting links to their work on the social media giant’s platform. Facebook, which also blocked users from sharing the links, punched back after the Australian government proposed a law requiring it to pay publishers when links to their content appear on its site.

The move was gutsy — and brazen. In addition to blocking larger, traditional publishers in Australia, it also cut off sites offering public health information, assistance for victims of domestic violence, the national weather service and other niche providers. Facebook has endured years of criticism for its privacy practices, for a muscular presence so ubiquitous it has invited federal and state antitrust lawsuits, and for allowing disinformation and extremism to flourish on its feeds, undermining democracy. Most companies might walk softly amid all of that. Not Facebook.

“The proposed law fundamentally misunderstands the relationship between our platform and publishers who use it to share news content,” said William Easton, managing director of Facebook’s operations in Australia and New Zealand. “It has left us facing a stark choice: attempt to comply with a law that ignores the realities of this relationship, or stop allowing news content on our services in Australia. With a heavy heart, we are choosing the latter.”

Cutting off publishers seeking compensation for expensive work that helps Facebook build and retain its audience — even as it helps publishers build and retain theirs — has already attracted attention outside of Australia and is likely to open another front in the Facebook wars. It’s also revivified the debate over the internet’s broader character and future.

Sir Timothy Berners-Lee, the computer scientist who invented the World Wide Web, has argued that requiring payment for news links will wreak havoc on a global network that has thrived on freely exchanged information. On the other side of the argument are people like Representative David Cicilline, a Rhode Island Democrat, who is chairman of a House Judiciary subcommittee focused on antitrust issues.

“If it is not already clear, Facebook is not compatible with democracy,” Cicilline tweeted last week after Facebook imposed its Australian ban. “Threatening to bring an entire country to its knees to agree to Facebook’s terms is the ultimate admission of monopoly power.”

Facebook doesn’t see it that way.

Easton noted that Google, the Alphabet, Inc. subsidiary, sweeps up content publishers don’t willingly provide, whereas publishers enthusiastically pursue Facebook for its reach. (Google agreed last fall to begin compensating publishers for their work and is also subject to the Australian proposal.) He said publishers benefit more from the relationship than Facebook, noting that the platform generated about 5.1 billion “free referrals” to Australian news outlets last year worth an estimated A$407 million ($320 million). Easton also reminded publishers that while it recognizes that “journalism is important to a democratic society,” it’s not very important to its bottom line. “The business gain from news is minimal,” he said. “News makes up less than 4% of the content people see in their News Feed.”

That largely makes sense to Mike Masnick, the founder and editor of Techdirt, a blog that covers technology’s intersection with business and economic policy. “Look, I get it, Facebook is a terrible, terrible company and deserves lots of blame for lots of bad things that it does. But this ain’t it,” he wrote. “The simple facts of the situation are that Australia — pushed heavily by Rupert Murdoch — has decided to put in place a plan to tax Google and Facebook for any links to news.”

Masnick says Australia’s proposal undermines an open internet, requires Facebook and Google to carry the burden of notifying publishers of daily algorithmic changes (which will only compel publishers to try gaming algos more than they already do), and turns Facebook into a publishing pinata — damned for both what it does and doesn’t do. On top of all of that, “a bunch of lazy newspaper execs who failed to adapt and to figure out better internet business models not only want the traffic, they also want to get paid for it.”

Masnick used bold type for that last bit, and I left it as such for a couple of reasons. First, Masnick asks readers at the end of his blog post to donate money or subscribe, so he also wants to get paid for it. (I work for a company that, like The New York Times, Wall Street Journal, Washington Post, CNN, NBC and others, also wants to get paid for it, so I come to this topic with baggage.) And second: How to sustainably fund news-gathering and publishing is the broader existential issue informing this head-butting, highlighted by the distinct role independent reporting plays in keeping the public educated and alert.

News organizations long ago misread what the internet’s arrival meant for their business models. They also made the fundamental mistake of posting hard-won content online for free. Seeing the web as just another information channel, rather than as a revolutionary reordering of communication and distribution, they underestimated how abruptly and monumentally audiences and advertising would flee.

Rupert Murdoch didn’t. His premier properties have always rejected the idea that what they funded should exist free of charge. Given that Murdoch is the steward of Fox News, an openly damaging and propagandistic outfit that serves his political and financial interests more than the public, he’s a horrid ambassador on this topic. But he isn’t a newcomer to the debate in Australia, and his philosophy has a track record.

With advertising revenue gutted, print publications have had to look to pricier subscriptions, paywalls, or philanthropy to fill the financial void. Masnick and other smaller publishers can theoretically thrive on small donations. Large news organizations can’t. So it’s not irrational for publishers to want a bigger cut of the action that Facebook and Google enjoy from news without spending much to gather it. Some news organizations can monetize the traffic Facebook sends back to them. Many can’t, in part because they’re smaller, traffic is episodic, or readers are more loyal to Facebook and its brand — rather than news organizations themselves — as their primary media conduit.

Although news may not be a huge content category for Facebook, there’s money there. Audience engagement spikes during crucial news cycles, and news content often dominates discussions among Facebook users. News matters to Facebook because it matters to its audience — and to some of its regulators. News is engaging and viral, and Facebook prizes both, traffic and advertising data aside.

Sharing knowledge and information may be a special province on the web, but media is sourced in myriad ways. News publishers (unlike, say, libraries or academic institutions) aren’t, for the most part, publicly subsidized for the information they collect and disseminate. As long as they are privately funded, and until that structure changes, charging readers and viewers for the work is reasonable — as is charging other platforms that piggyback on that work.

As my colleague David Fickling has pointed out, the money at stake in Australia is relatively modest for Facebook, which has only agreed to token revenue sharing arrangements with publishers elsewhere. Google threatened to pull its search service from Australia before relenting and agreeing to compensate publishers. Australia’s plan may be heavy-handed, and it opens a can of worms around which links Facebook, or anyone else, should pay for (read Benedict Evans, Paying for news — Benedict Evans (ben-evans.com)). But if being heavy-handed also brings Facebook to the bargaining table to craft an alternative, so be it. Perhaps Mark Zuckerberg will pull up stakes Down Under, but I doubt it.

Yes, Cicilline is overstating things when he equates a Facebook news blackout with bringing Australia to its knees. But his concern for news-gathering, and suspicion of Facebook, are entirely warranted. News publishers — in Australia and elsewhere — will continue losing a sizable share of their audience if Facebook cuts them off, and I suspect that Facebook would consider funding news-gathering itself if the current supply eventually evaporates.

Facebook is a publisher, not just a technology platform. It plays a role in society that extends beyond its income statement. And it should pay up for what it publishes.

BLOOMBERG OPINION

A simple matter of influence

IN THIS AGE of social media and virtual meetings, how many times do we hear the appellation of “influencer”? Was there even such a word before blogs and followers became faddish? From the old-fashioned celebrity endorser, we now encounter advice-givers who influence decision-making for individuals or herds. The recent stock market assaults in the US involved influencers going wild with their herd instructions that made certain stocks shoot up or crash down.

Influencers are often subjective and may themselves be influenced to promote certain opinions. Moving together, mercenary influencers are referred to as trolls. And they can be a collective, or a “troll farm,” under the employ of subjects with their own agenda. In the coming political exercise, these opinion farms will mushroom and clash with one another.

Giving advice can be quite private (and not necessarily socially distanced), especially when the one soliciting it is a high-profile personality.

A leader, whether political or corporate, tries to project an image of control. (I alone make the important decisions.) He does not want to look like a puppet whose strings are being pulled by advisers, especially those who don’t bother to hide their influence peddling. This Greek Chorus (sometimes masked) does not leave the stage and manages to steal the scene, especially in a tragedy.

When always seen at a leader’s side, advisers display their clout publicly. They may lean close to the boss before a speech, and whisper — there’s a broccoli bit stuck in your front teeth. (And he isn’t even the ghost-writer.) Such public posturing can be irritating for the chief who wants the spotlight to be only on him.

Leaders put arrogant advisers off-balance by exiling them to the doghouse. They are excluded from certain meetings — I needed to talk with other people about you. They are publicly ridiculed (is he wearing his tight shirt again?) just to make the point that they are dispensable.

Advisers need to move in the orbit of the planet they are influencing. It is important for them to observe some rules. Advisers too need to be advised on how to behave.

When asked for an opinion, take some time to reply. Showing some hesitation denotes respect — I want to provide a considered opinion. It’s good to repeat the question, to ensure that the right issue is being addressed.

If there is already a group around the leader (especially in a virtual meeting), it is best to avoid shallow remarks — yes, that problem keeps coming back like a stray cat.

In a one-on-one situation, waiting for an idea to poach (or summarize) is not possible. It is best to give parables and platitudes (yes, three is better than two) and probe to check what the boss is looking for.

There is seldom a need to give a straightforward answer to a question posed, unless it is only to provide a home address. (Is he sending you a gift?)

Never be limited to just one course of action like sacking somebody, even if the person is at the top of a hate list. Presenting a menu allows more flexibility (Maybe, send him on a study leave for an online course?) It is advisable to present an analysis of the situation and the implications of certain options — true, he seems to be indispensable with his ongoing project. But, is he still with the home team? Using sports metaphors allows some room for error — it was a bad call.

In case of a controversial suggestion the leader is sure to be upset about, like accusing his relative of some wrongdoing (he steals rolls and rolls of toilet paper), it is best to present the infraction as a news item, somebody else’s suggestion, or something overheard in the executive lounge — they say his pockets are always bulging, even when there is no object of desire.

Never put advice on e-mail or a phone message. This is sure to be forwarded to the object of scorn with a little twist of the knife — what do you think of this accusation? Also, e-mails can’t really be deleted. They reside in the ether and can be fished out by cyber-detectives to nail you later. It’s part of “forensic accounting.”

Is giving advice a simple matter of influence? Not always. Changes in leadership and even moods can upset the value of advice… and the one giving it.

 

Tony Samson is Chairman and CEO, TOUCH xda

ar.samson@yahoo.com

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