Facebook Instagram Linkedin Twitter Youtube
Home Blog Page 8145

DoE urges power conservation to save money during recession

THE Department of Energy (DoE) said electricity consumers need to be “mindful” of their power consumption during tough economic times, and reminded them of the need to save money.

The Philippines recorded its first recession in almost three decades with its economy contracting by 16.5% in the second quarter.

With the threat of more job losses during the ongoing public health crisis, regulating power usage can help in household budget management, according to Energy Secretary Alfonso G. Cusi.

“As the nation battles the economic recession, there is a need to be conscious of our expenditures. Napakahalaga ng pagtitipid para sa ating lahat sa mga panahong ito (Saving is really important during this time),” he said in a recent virtual briefing.

Consumers staying at home to prevent contracting the novel coronavirus have registered increased electricity usage, while power demand from the commercial and industrial sectors remains low.

The DoE earlier noted a 40% uptick in power demand from residential consumers in the Luzon grid during the strictest form of lockdown between March and May.

“(I)t doesn’t mean that because we have all the supply, pwede tayo magkaroon ng (we can have the) luxury of not controlling our electricity use,” Mr. Cusi said. — Adam J. Ang

DENR pushes for new bureau to specialize in environmental law enforcement

A NEW bureau to oversee compliance with environmental law, for which legislation has been filed in the House, has drawn expressions of support from the Department of Environment and Natural Resources (DENR).

Environment Secretary Roy A. Cimatu said that an Environmental Protection and Enforcement Bureau (EPEB) will work with law enforcement agencies and the Armed Forces of the Philippines as well as government prosecutors.

According to Undersecretary Jim O. Sampulna, the EPEB will address the gap in the enforcing environmental laws, while also allowing the DENR to focus on conservation and protection.

The DENR recently evicted illegal occupants within the Upper Marikina Watershed and Masungi Wildlife Sanctuary in Baras, Rizal.

Mr. Sampulna, along with Environmental Protection and Enforcement Task Force Executive Director Nilo B. Tamoria and other government officials, led the demolition of illegal structures and barbed wire fences in the area.

“Occupying or dwelling in any public land within a protected area without clearance from the concerned Protected Area Management Board (PAMB) is strictly prohibited under Republic Act 11038 or the Expanded National Integrated Protected Areas System (ENIPAS) Act of 2018,” Mr. Sampulna said.

Mr. Sampulna added that the law also bans the construction and maintenance of any structure, fence, or enclosure within a protected area without securing clearance from the PAMB and necessary permit from the DENR.

“Violators of these ENIPAS law provisions could face a fine ranging from P200,000 to P1 million or imprisonment from one year but not more than six years, or both,” Mr. Sampulna said.

DENR said protected areas such as the Upper Marikina watershed and Masungi Wildlife Sanctuary are classified as environmentally critical areas and are seen as major sources of biodiversity.

Disturbances to such areas threatened flora, fauna, and water resources which could affect the food and water supply.

Mr. Sampulna said House Bill No. 6973, which backs the creation of EPEB, was filed by Antique Rep. Loren B. Legarda in June. — Revin Mikhael D. Ochave

More than just a form

 

The sensitivities of the new RPT Information Return

With the drive for more transparency on related party arrangements, tax authorities worldwide have been increasing their focus on transfer pricing (TP). In the Philippines, the Bureau of Internal Revenue (BIR) has also been taking strides to strengthen its rules regarding Related-Party Transactions (RPT).

To improve the TP risk assessment and audit of taxpayers, the BIR has issued Revenue Regulations (RR) No. 19-2020, requiring the submission of a three-page Information Return on Related Party Transactions or RPT Form (BIR Form No. 1709), to be attached, together with supporting documents, to the Annual Income Tax Return (AITR). This form will help the BIR monitor taxpayer compliance with the TP documentation requirement prescribed by the TP Regulations, which the BIR issued in 2013. More importantly, the BIR will use the data gathered from the forms to select which taxpayers to prioritize for TP audits given its limited resources.

RPT FORM FILING
The RPT Form requires a granular disclosure by Philippine taxpayers, corporations and individuals alike, of all RPTs, whether international or domestic. While the filing of the RPT form is also intended to implement Philippine Accounting Standards (PAS) 24 on Related-Party Disclosures, more details, especially on the taxation aspect of income paid or received from related parties, need to be supplied in the form and its attachments as compared to the disclosure for financial reporting purposes. Thus, taxpayers must prepare the form judiciously, and merely reproducing the related-party disclosures in their financial statements may not be sufficient to comply with the requirements under RR No. 19-2020.

There is no threshold, either in terms of amount or volume, on the RPTs that should be disclosed. As the term “related parties” under PAS 24 is a broad concept, taxpayers must also take extra care to determine their relationships with other entities to ensure that all transactions with those considered as “related parties” are properly reported, and that disclosures are consistent among the entities involved in the transactions. In ascertaining whether a person or entity is a related party, the substance of relationships between entities shall be considered and not merely the legal form.

INFORMATION DISCLOSURE
Bearing in mind that one of the objectives of the RPT Form is to ensure that taxpayers are reporting their true taxable income, questions are thus raised on the level of information that may be disclosed on related-party transactions. Of particular note is the disclosure on transfer under financial arrangements, such as equity contributions. As clarified by the BIR in its Revenue Memorandum Circular (RMC) No. 76-2020, dividends and redemption of shares between and among related parties, though not usually covered by a TP documentation, should likewise be disclosed in the RPT Form. However, investments in another entity do not affect the income or expense of either the investee or investor. Hence, there is no possibility of erosion of the tax base which the BIR intends to guard against by the submission of this RPT Form.

Companies are also required to disclose in detail transactions with each member of their key management personnel even if these pertain only to salaries received during the covered year. These officers are correspondingly required to submit the RPT Form in their individual capacities. An issue to take note of is the disclosure of sensitive information, such as the names and addresses of these officers. However, the BIR emphasized that the power of the Commissioner of Internal Revenue to obtain the necessary information to ascertain the correctness of any return, or in determining the liability of any person for any internal revenue tax, or in evaluating tax compliance serves as an exception to the Data Privacy Act (DPA).

In addition to the RPT Form, taxpayers also need to submit a certified true copy of the relevant contracts or proof of transactions, withholding tax returns and the corresponding proof of payment of taxes withheld and remitted to the BIR, proof of payment of foreign taxes, certified true copy of advance pricing agreement (if any), and any transfer pricing documentation.

CONTRACTS AND OTHER DOCUMENTS
Contracts are deemed the primary proof of the transactions with related parties. Other documents such as receipts and invoices are considered corroborating evidence only. Hence, all contracts executed by the parties to substantiate the RPTs in the covered taxable year have to be attached to the RPT Form. In case of voluminous contracts and documents, electronic copies may be submitted under certain conditions.

It is important to note that the RMC specifically mentions certain RPTs that should be covered by a formal written contract. Agreements on cost-sharing arrangements among members of a group of companies need to be submitted to prove that they are for legitimate expenses. This is in addition to documents (e.g. receipts, proof of payment) needed to substantiate the expenses. Moreover, contracts for the importation of goods or any equivalent genuine document must be submitted aside from other proof of transactions.

The TP documentation to be attached to the RPT Form should be the same documentation that the taxpayers relied upon to determine the transfer pricing prior to or at the time of undertaking the RPTs and must have been prepared contemporaneously — that is, not later than the filing due date of the tax return for the taxable year in which the transactions took place. The date of its preparation should also be indicated on the report so that the BIR can evaluate if the TP documentation was prepared contemporaneously. According to the BIR, requiring the submission of contemporaneous documentation ensures the integrity of the taxpayer’s position.

TRANSACTION DISCLOSURE
Again, since there is no threshold on the amount and volume of RPTs for purposes of the preparation of a TP documentation, a question is raised on whether all the transactions disclosed in the RPT Form should be covered by the TP documentation. As recognized in the RMC, there are RPTs that are not usually covered by a TP documentation such as dividends and redemption of shares. Transactions which do not have an impact on the revenue and taxable income of taxpayers, e.g. equity contributions, are usually not covered by TP documentation. It must be emphasized that the purpose of TP documentation is to demonstrate that the TP policies of a taxpayer are compliant with the arm’s-length principle, thereby ensuring that it is reporting its true taxable income.

Reference to the OECD TP Guidelines, which was largely adopted in the TP Regulations, may be made to determine the amount of transactions that must be included in the TP documentation. The OECD TP Guidelines suggests that a balance between the tax authority’s needs and taxpayers’ costs should be maintained in determining the scope and the extent of the information to be included in a TP documentation. Taxpayers should, thus, not be expected to go through such lengths that compliance costs for the preparation of documentation are disproportionate to the amount of tax revenue at risk or to the complexity of the transactions.

COMPLIANCE AND CONSISTENCY AMID COVID
With the COVID-19 pandemic, many companies will find it challenging to comply with this new RPT Form, faced as they are with the imposition of travel bans and lockdowns as well as the added pressures for workforce safety and well-being. Nonetheless, it would be imprudent to disregard this regulatory requirement. With the large amount of information that needs to be supplied, taxpayers must work closely with their related parties to ensure that transactions are disclosed in a consistent manner among the entities involved. Companies should also consider accelerating the digitization of their systems to more efficiently manage any information requested by the BIR.   

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

 

Joyce A. Francisco is a Tax Senior Director of SGV & Co.

The blind leading the blind

There is now no denying the fact behind the desperate statement of doctors and other medical frontliners: we are losing the war on the coronavirus. Despite the world’s longest recorded COVID-19 lockdown — which has prostrated the economy in the worst recession in the post-Marcos era — the Philippines still managed to become the primary hotspot for the pandemic in all of East and Southeast Asia, averaging 4,356 confirmed cases every week (as of Aug. 6). Indonesia is a far second, with an average 1,777 weekly cases. (And if you prefer stock- instead of flow-figures, there are thus far 105.8 confirmed cases per 100,000 population here — only 42.7 per 100,000 in Indonesia.*)

The administration, its political supporters, and many voices in the business sector have rationalized the situation by attributing the rising case-count to the easing of the lockdown, an inevitable cost that must be tolerated in order to “open the economy.” Hence, the various noises being made to gradually reconcile the public to the fact: “the need to live with the virus for a long time,” how we must “strike a balance between public health and the economy,” and, more recently, how we must learn to “dance with the virus.” But leave it to a senator who always manages to put things starkly, if tactlessly: “Kung ‘di mamatay sa COVID, mamamatay sa gutom ang mga tao.” (If they don’t die of COVID, people will die of hunger.)

Actually, until the medical frontliners’ plea and despite the rising case-count, the administration’s choice already seemed clear. Duterte’s feigned hemming-and-hawing notwithstanding, the impending decision really was to further loosen restrictions and “reopen” the economy regardless of the pandemic consequences, with Metro Manila and environs expecting to transition out of “general community quarantine.” The consequences of the rising COVID-incidence would then be left to LGUs and the private sector to deal with.

These plans were stymied, however, by the frontliners’ very public call for relief, which could not be ignored, especially not through insensitive exhortations for them just to work harder (“pagbutihin nila trabaho nila”). This disruption of the administration’s plans from left field was the likely reason Duterte took sharp offense at the frontliners and accused them instead of fomenting “revolution” and subverting the established order.

The subsequent decision to revert to a “modified” lockdown for Metro Manila thus appears to be no more than a grudging concession to mollify a noisy but morally unimpeachable medical sector and prevent a threatened public relations disaster.

Fourteen days is obviously not enough to shift gears, formulate, and execute an alternative approach.

All it is meant to do is to sweep the past under the rug. Before that happens, two points need to be made.

First, contrary to the creeping fallacy being circulated, public health need not (and should not) be traded against reviving the economy. Indeed, the two must ultimately move together. Any premature “opening up” before a sustainable approach to managing the pandemic is put in place is only bound to be self-limiting. Imagine a situation where most or all COVID-related measures and restrictions were lifted overnight and all firms and industries were given free rein to operate at or near full capacity.

The natural expectation must be that the infection rate would rise precipitously. (The US and India are almost models in this respect.) Questions of the health system’s capacity aside, sales and aggregate demand are likely to remain depressed nonetheless, since customers would likely continue to stay away for fear of catching what will have become a more rampant disease. Investment would fare no better, given the sluggish and uncertain consumption demand. And don’t even mention the foreign trade sector, given the global nature of the current recession. Closures and bankruptcies would happen anyway. It is a specious argument, therefore, to say that measures to safeguard public health are an obstacle to opening the economy; on the contrary, they are the precondition.

The recent retreat (grudging as it is) into a tighter quarantine for the NCR and Calabarzon already illustrates the economic consequence of failing to put a proper system in place. In this case, it was healthcare personnel and the tertiary care capacity that threatened to give out. But it might as well have been the health of some other part of the labor force (e.g., transport workers, food-processing) that was in peril, or some large community outbreak that had occurred. In any of these cases, another “timeout” would have to be called — which illustrates the point that unless an entire system of response to the pandemic is in place, the economy can “revive” only in fits and starts — like a patient always on the verge of flatlining.

This brings up the second point. Before it is swept under the rug, it is vital to acknowledge that the government’s response to the pandemic has thus far been a failure.

That much will be evident to anyone who compares the country’s performance to that of others. The Figure provided illustrates three common patterns among countries that combated the pandemic through lockdowns then ultimately relaxed them. South Korea’s is an example of a response that was prompt and effective (a similar pattern is seen for Vietnam, New Zealand, Taiwan, Thailand, and others), one that managed to keep case-rates low (except for a small bump) from the beginning of its lockdown to its finish and after. Germany’s pattern on the other hand (which resembles that of Italy, Spain, and others that were badly hit) first shows a precipitous rise in case-rates that was ultimately tamed through drastic measures and then kept low even after quarantine ended.

What makes the Philippine curve remarkable is that despite the absence of any “bump” and the fact that infections plateaued during the strict lockdown period (mid-March to end-May), average case-rates have risen continuously thereafter with still no peak in sight. This pattern strongly suggests that the steady case-rate was a false spring and due solely to restrictions on physical movement during the lockdown — the only thing police and military were adept at anyway.

But little else by way of systems seems to have been put in place to prepare for what would come once restraints on movement were relaxed. In particular, the capacities for testing, tracing, and treatment were not built up. The scale and frequency of testing never reached the government’s own targets. Contact-tracing was never comprehensive or systematic (with e.g. Quezon City Mayor Joy Belmonte even now complains that many in the Department of Health (DoH) list of COVID-positive persons lack addresses). And only belatedly — after the frontliners’ manifesto and loud calls for Health Secretary Francisco Duque to resign — did it dawn on the DoH to augment health personnel through massive new recruitment and redeployment. In short, there does not seem to have been a firm plan in place beyond the lockdown; so it should surprise no one that the case-rate has ballooned since. The government’s failure and helplessness in the face of the new situation is evident in President Duterte’s newfound line that citizens should just endure the situation until a vaccine arrives from China. All this contrasts with the way other countries have used their lockdown periods to beef up their tracking and treatment capacities — which explains why their case-rates have remained under control even after restrictions were relaxed and they are better prepared to confront a second wave.

The Philippine experience thus far calls into question the quality of the leadership of those put in charge of the national response to this pandemic — and ultimately the prudence of the appointing power. Missing above all is the assurance that any strong scientific input is guiding the direction of policy. The British have their SAGE (Scientific Advisory Group for Emergencies); the German government defers to the Robert Koch Institute; and even Trump must struggle with a Dr. Anthony Fauci; most other countries have at least a chief scientific adviser that explains the whys and hows of things to the public.

Here at home, by contrast, people cannot even access the most basic information to guide their behavior. Figures on the daily progress of cases are distorted by large changes in statistical definition and delayed and unreconciled results. Nor are these disaggregated by useful geographical-political areas to help local governments monitor the success of their efforts. Complex but more useful data are even harder to come by: What is the effective reproduction number (Rt) on a weekly basis? What is it per city or province? What is the estimate of prevalence per city or province including non- or asymptomatics? What is excess mortality per city or province? Some of these data could have been obtained by properly guiding and mobilizing the private sector (yes, including the much-maligned antibody tests), but the business sector’s voluntary efforts have been vilified instead.

Filipinos — a fortunate race — do not have to concern themselves with science and statistics. Instead they must merely ponder the profound wisdom in the pronouncements emanating from this or the other ex-general — including installing plastic barriers on motorcycles for pillion riders, applying tokhang methods to flush out infectious cases (using “police instincts” and neighborhood gossip), or requiring face-shields to ride public transport (which is banned under MECQ anyway). Alternatively, of course, they can simply join their favorite mayor in his devout effort of “praying to God for a guiding light so that [the Chinese] can make the vaccine.”

No one can be blamed at this point for remembering Rizal’s quote of Schiller at the beginning of the Noli, which strikes a chord to this day:

Aber, ich bitte dich, Freund, was kann denn dieser Misere

Großes begegnen, was kann Großes denn durch sie geschehn?

(But, my good friend, pray tell me, what can such people e’er meet with

That can be truly called great? What that is great can they do?)

* Figures as of Aug. 6, 2020 from https://ourworldindata.org/coronavirus/country/philippines?country=~PHL

 

Emmanuel S. De Dios is professor emeritus at the University of the Philippines School of Economics. He does not want to start a revolution.

Ameliorating the Social Amelioration Program

The current public health crisis brought about by the COVID-19 pandemic has disrupted all aspects of society, particularly income and employment. The unemployment rate rose to 17.7% in April, leaving 7.3 million Filipinos jobless. According to the World Bank, the two-month loss of income could increase the poverty rate by 3.3 percentage points in the Philippines.

Like many countries, the Philippines has implemented cash transfer programs to support the displaced and the vulnerable. The government was quick to enact a law to alleviate the public health crisis. Among the most salient features of the Bayanihan to Heal as One Act was the allocation of P199.975 billion to the Department of Social Welfare and Development (DSWD) to fund its Social Amelioration Program (SAP).

WHAT IS SAP?
The Social Amelioration Program grants a P5,000 to P8,000 monthly cash subsidy to low-income families for two months, depending on the area of residence. The subsidies provide marginalized sectors of society the means to afford basic needs during the pandemic.

Much like any new program, the implementation of SAP has not been smooth-sailing. Many LGUs have reported issues with coming up with the list of beneficiaries, and releasing the cash subsidy due to insufficient funds or inadequate distribution infrastructure. Some have also criticized the speed with which the subsidies are rolled out, the uncertainty with regard to the recipients of the subsidies, and the exact amount they are given.

SURVEY ON SAP
To evaluate the SAP, Action for Economic Reforms (AER) launched a survey, supported by the Asia Foundation, to ask respondents about their experience with the SAP subsidies. The survey ran from May 3 to 23, and aimed to know key details in the distribution of SAP — who were covered, how much was given, and how fast was it done. These questions can shed light on policy recommendations to improve the distribution and the administration of succeeding tranches. Advocating data-driven development, we believe that without data, the local government units (LGUs) may not know what they are doing right, and what they can do better to guide their decisions moving forward.

SURVEY METHODOLOGY
Social distancing has made face-to-face data collection challenging. Given the speed at which we need the data, elaborate phone surveys are infeasible. Acknowledging these challenges, AER launched an online survey on Facebook Messenger using an automated chatbot. While we understand the limits of online platforms, given our focus on the National Capital Region (NCR) and the relatively high Facebook usage of NCR residents (64%), we are still able to capture a significant sample at a lower-cost and faster rate than other survey modes.

For our sampling frame, we only consider Filipinos residing in the top 500 poorest barangays in NCR cities with a Facebook account. We based the list from the 2015 National Household Targeting Survey to identify these barangays. To enlist our respondents, we published a Facebook advertisement to invite them to answer our survey. Our final sample included 7,903 respondents. To validate our results, we randomly selected around 3% of respondents for a phone survey to ensure that responses are accurate, i.e., their self-reported data on Facebook and Messenger are consistent with their stated answers over the phone.

CAVEATS
Given our statistical methodology, our results will be representative of a specific subsample of the NCR population. Standard adjustments were made so that our results are representative of the Facebook users in the NCR. However, we caution any interpretations that aim to extrapolate to the entire NCR population, including non-Facebook users.

RECOMMENDATIONS
Based on the survey, we have arrived at the following recommendations for the succeeding tranche for SAP, as well as for future government subsidy programs.

Any targeting program is only as good as the data used to identify its beneficiaries. We echo the call of the DSWD for a national database system not just for the SAP but for social welfare programs moving forward. Through our survey, we noted various reports of households receiving multiple subsidies from the different programs of the DSWD, the Department of Labor and Employment (DoLE), and the Social Security System (SSS). Having a unified database that is updated regularly prevents this from happening and leads to more efficient use of resources.

To improve targeting, better coordination is necessary among barangay and LGUs. This enables both barangays and LGUs to respond more quickly should there be any changes in the list. The use of data-driven approaches — i.e., using the Community-Based Monitoring System (CBMS) or the National Household Targeting System (NHTS) data — can help LGUs identify barangays with more vulnerable households. By using clear indicators (i.e., residing in a gated subdivision), LGU officials will find it easier to redirect aid from one barangay to another. The data can map out areas not reached during the first tranche, and give insights into how to ensure their prioritization in the second tranche.

After coming up with the list, LGUs need to ensure that eligible or disadvantaged households are universally covered. Our survey revealed that during the first tranche, food distribution was faster and more widespread than cash distribution. If delays in cash distribution persist, LGUs may prioritize food or relief goods distribution to ensure that constituents do not go hungry. This is crucial given that a recent SWS survey showed 5.2 million Filipino families experienced involuntary hunger in the past three months, the highest since 2014.

Given the scarcity of resources, the mistargeting (i.e., when some households receive both food and money, while some households receive neither) of program benefits must also be minimized. Our survey also revealed that high-income individuals received food subsidies, which, although technically is not mistargeting, represents an inefficient use of resources.

To address issues of “palakasan,” or when those eligible were not reached or tagged as ineligible, transparency is critical to fighting corruption. Presenting both the inclusion and exclusion criteria and publishing lists of recipients in public offices and official LGU websites or social media pages and reason/s for receiving will promote transparency, and avoid suspicions of corruption and favoritism. These transparency measures will also allow the public to participate and report instances of double counting, mistargeting, and corruption. We welcome the DSWD’s efforts to publish the lists online and encourage them to continue to do so for the second tranche.

Ultimately, as the COVID-19 pandemic is first and foremost a public health issue, the distribution of cash transfers may also be an avenue to enjoin vulnerable populations to do their part to beat COVID-19. Health promotion programs can be added during the rollout of the cash transfer to improve the public’s safety and well-being.

Evidently, it takes a whole-of-society and whole-of-government approach to address the current issues brought about by COVID-19. Interestingly, the etymology of the words social amelioration gives us a clear vision to undertake this path: social from socialis meaning united, and amelioration from ameliorare meaning to improve. It is high time for us to take a united stand to improve our current state of affairs to reduce persisting inequities. In its core, is that not the spirit of bayanihan?

VC Apostol does policy research and analysis on health taxation and Universal Health Care. Laurence Go leads the Data-Driven Development Program of Action for Economic Reforms (AER). To request the full AER SAP Report, send an e-mail to research@aer.ph.

GDP: Down, down, down

Finance Secretary Carlos G. Dominguez III has always been known for saying it like it is. When he announced a 16.5% decline in the country’s second quarter GDP (gross domestic product) (in real terms, at 2018 prices) compared to last year — the news was shocking, but at least comfortably acceptable because it came from Mr. Dominguez. This is the worst contraction of the Philippine economy since 1981, during the debt crisis in the time of Ferdinand Marcos’ Martial Law. The country is now undeniably in a recession.

Bloomberg earlier estimated a less jarring 9.4% contraction of the Philippine economy for the second quarter, based on the forecasts of 21 reputable economists surveyed. Local economists earlier estimated that GDP at year end will have declined 2% to 3.4%, while now the Department of Finance (DoF) has determined shrinkage to be at 5.5% for the whole of 2020. For the first half of the year, the economy had already collapsed by 9%, the National Statistics Office (NSO) announced in a briefing last week.

“What went wrong?” economist Solita Monsod asked in her column in the Philippine Daily Inquirer. “The magnitude of this contraction was not at all expected by those monitoring us, as well as by our economic managers. In April this year (well into the pandemic), the IMF and the ADB projected that the Philippines would grow by 0.6% (IMF) and 2% (ADB). Of course, these projections are based on certain assumptions, but it is important to note that they both projected positive growth. Two months later, the World Bank’s June 2020 Global Economic Prospects placed our growth at -1.9%, nowhere near our first-semester contraction.”

Dr. Monsod could not resist making a jab at the Administration for spending “precious time and attention on things like the Anti-Terrorism Act of 2020 and the franchise of ABS-CBN” while it was “too little, too late” for the “social amelioration fund giving from P5,000 to P8,000 each to 18 million families, which has not even all been disbursed as of end July.” And the P10,000 to P16,000 over more than a three-month period bridging for the unemployed or employed but not working might not ever even be felt, as President Rodrigo Duterte had declared in his State of the Nation Address (SONA) at end July: “Wala na tayong pera” (We have no more money).

Presidential Spokesman Harry Roque was quick to explain that the 16.5% GDP decline was by force majeure thanks to the coronavirus lockdowns. But in the tug-of-heart between lock-down and relaxing of quarantines, economic plans and stimulus schemes must wait on the unpredictable tantrums of a virus that will not just yet leave. The number of COVID-19 cases has risen more than six-fold since restrictions were eased in June, making the Philippine outbreak the second-largest in Southeast Asia, Bloomberg notes.

Secretary Dominguez said in a public economic briefing that the slump would have been deeper at 11.5% (instead of established 9%) for the semester if the government did not boost spending, CNN Philippines reported. “Government spending was the only segment which substantially grew year on year. Household consumption — the backbone of the economy — emerged as the biggest dampener as lockdowns kept people at home and spent less,” the economic team acknowledged at last week’s public briefing.

“Record-high unemployment and a steep decline in money sent home by Filipinos have weighed on private consumption, which drives roughly two-thirds of GDP,” Bloomberg said in its dissection of the 16.5% GDP decline. “The economic cost of trying to contain the virus is leaving large scars to household and corporate balance sheets, which will weigh heavily on demand for many months to come,” analyst Alex Holmes of Capital Economics wrote. “A failure to contain the virus, continued restrictions to movement and inadequate policy support mean the Philippines is also likely to experience one of the region’s slowest recoveries.”

So far, the country’s second quarter slide is the worst when compared to neighboring Indonesia (-1.2%), Singapore (-6.5%), and Vietnam (2.1%), Dominguez admitted. Though he did not allude to it, the comparative size of the stimulus packages of ASEAN countries may not have a clear connection to economic recovery (or less decline), as many economic analysts (or some self-interested economic brokers) pitch for. The DoF had rejected the original proposed stimulus package of P1.3 trillion saying that the amount legislators were proposing would require new revenue sources, which are “very limited” because multilateral lenders and the bond market, for example, and are not readily available in this pandemic scenario. The economic team is anticipating the passage of the reduced P140 billion Bayanihan to Recover as One Act, saying it will help boost economic activity and provide help to the worst hit sectors, which in turn should (be enough to) usher in a rebound to growth come 2021.

We must appreciate the candor of the DoF as to our realities. We remember how candid and forthright Secretary Carlos Dominguez was in 2018, when he “warned lawmakers that foreign

investors would flee if they are not given a clearer picture of how the economy and its features would look like under a federal system of government” (Rappler, Aug. 15, 2020). Dominguez said the draft charter for federalism did not specify a clear mechanism of paying for national expenses and debt, and how to fund national agencies, personnel, and the military under federalism. Then-Socioeconomic Planning (NEDA) Secretary Ernesto Pernia likewise objected to the federalism draft for the unclear flow of revenues and expenses from central to federal regions and vice-versa, and thought it would “wreak havoc and disrupt the economy’s growth momentum.” At least seven major business groups in the country backed the economic managers’ stance on the matter, Rappler said.

At that time, Fr. Ranhilio Aquino, Consultative Committee member of the Con-com for charter change and Dean of the San Beda Graduate School of Law, said “(Duterte) should sack Dominguez and Pernia or command them to keep their traps shut. Freedom of expression does not apply to Cabinet officials in respect to policy” (Oscar Lagman in BusinessWorld, Aug. 20, 2018). Presidential Spokesman Harry Roque clarified that Dominguez was not against federalism but only commented on the draft charter. The legislative discussions on the shift to federalism soon died down, and Pernia stayed on before resigning in April this year, during which time the COVID-19 pandemic clearly single-handedly “wreaked havoc and disrupted the economy’s growth momentum.”

The NEDA under Pernia estimated that the COVID-19 spread’s overall economic impact across various sectors could be as much as P428.7 billion to P1.355 trillion in foregone revenues, equivalent to 2.1% to 6.6% of GDP; and as much as 116,000 to 1.8 million in employment reduction. The COVID-19 emergency was expected to reduce the Philippines’ real GDP growth to -0.6% to 4.3% in 2020 (GMA News Online, April 17, 2020). Pernia resigned “due partly to personal reasons and partly to differences in development philosophy with a few of my fellow Cabinet members,” in his own words (Ibid.).

Going back to the analysis of Ms. Monsod: it would be impossible, with the latest announcement of a 16.5% decline in the country’s second quarter GDP, to achieve a positive GDP growth at year-end unless miracles happen, and we have high positive growth rates in the last semester to bring the cumulative GDP year end growth to the new projected 5% 2020 growth.

But the COVID-19 pandemic is still fever-hot, not only in the Philippines but around the world. Our reality is still the quarantine, sometimes downgraded, sometimes upgraded. The vaccine, still waiting to be developed, has controlled planning parameters and stifled assumptions for economic forecasts.

Perhaps we should not even lose equanimity worrying about the hemorrhagic decline of 16.5% in GDP. Our government must selflessly, apolitically, plan and implement a defined program for alleviating the contagion of COVID-19. Then GDP will improve, as it did for other countries with more effective health plans for their people.

 

Amelia H. C. Ylagan is a Doctor of Business Administration from the University of the Philippines.

ahcylagan@yahoo.com

The way forward to recover and rebuild

With infection rates growing by a multiple of 2.2 times a month, it’s safe to say that our battle with the Wuhan virus will be long and painful. Its economic impact has so far been disastrous. With second quarter economic contraction plunging to an all time low of 16.5%, think-tanks agree that the economy will contract by at least 8% this year and joblessness will rise to 9 million.

While the IATF (Inter-Agency Task Force on Emerging Infectious Diseases) fumbles through its anti-pandemic response, our great consolation is that we have an economic team that is both competent and steadfast. This includes the Departments of Trade and Industry (DTI), Finance, NEDA (National Economic and Development Authority), and the Bangko Sentral. We look to them to get us out of this deep recession we are in.

Last week, DTI Secretary Ramon Lopez spoke before the joint European Chambers of Commerce and outlined the way forward to recover and rebuild.

The vision is to use this pandemic to strengthen everything that is weak in the economy. To make lemonade out of lemons, so to speak. This involves modernizing our industries, building production capacities, linking locally manufactured goods with global supply chains and producing more goods with higher value-added components. It also calls for our rapid digital transformation, the development of more innovative startups and green industries. By doing all these, the DTI hopes to manufacture more, export more, hire more and earn more when the crisis is over.

At the heart of the plan is to create and/or preserve jobs. Jobs stimulate consumer demand and in turn, entice corporations to produce more. This escalating chain reaction is what will restore the economy to its former vibrancy, said Secretary Lopez.

Four strategies are being pursued to create and/or preserve jobs. First, the government will do all it can to save micro, small and medium scale enterprises (MSMEs) from insolvency. Second, the government will accelerate its infrastructure program. Third, the government’s multi-billion stimulus fund will be cascaded to its intended beneficiaries faster so as to pump prime the economy. Fourth, all efforts will be focused on attracting foreign direct investments (FDIs). FDIs can bridge the unemployment gap and lessen the budget deficit. They also offer long term benefits such as technology transfer, recurring income through taxes and exports earnings.

On saving MSMEs, the DTI has so far disbursed P460 million in loans to 7,151 MSMEs (each receiving an average of P64,300) out of its CARES fund. We all know that this will hardly make a difference to save MSMEs as they require hundreds of billions in financial aid to stay alive.  This is why Bayanihan 2 must be passed. Bayanihan 2 will give more MSMEs the lifeline they need.

Another thing the government must do is relax quarantine restrictions and allow commerce to resume. MSMEs can hardly survive under GCQ conditions, let alone under ECQ or MECQ. Each day of quarantine shortens the life of the remaining MSMEs.

We understand that relaxing quarantine restrictions comes with health risks. However, the number of potential infections should be balanced with the number of bankruptcies, lost livelihoods and jobs. This is as much an economic war as it is a health war. Harsh quarantines kill businesses.

On infrastructure, not only must the government accelerate infrastructure projects already under construction, it must also expedite all pending unsolicited projects awaiting notices to proceed. This includes the Bulacan Airport, among others. Government must also revive public-private-partnerships. All cylinders must be fired-up as far as infrastructure development is concerned. Infrastructure building also includes strengthening our healthcare system and stockpiling essential goods such as personal protective equipment, ventilators and medical equipment.

Awaiting ratification is a new stimulus package that could range from P374.89 billion (the senate version) to P1.3 billion (the congress version), or some amount in between. The larger the approved stimulus fund, the quicker our recovery will be.

As far as investments are concerned, Board of Investments (BoI) Vice-Chairman Perry Rodolfo was proud to announce that the BoI secured P645 billion worth of new investments from January to June this year, a 112% increase from 2019. This was achieved despite the three-month lockdown.

While the level of investment commitments are noteworthy, what is disconcerting is that P626 billion, or 97%, originate from local sources. Just 3% is attributed to foreign investors. This exemplifies how uncompetitive the Philippines is in attracting FDIs.

As I have written in this corner before, the Corporate Recovery and Tax Incentives for Enterprises Act, or the CREATE Law, is the silver bullet that can solve many of Philippine’s weaknesses. It has four features that will make us more competitive when it comes to attracting FDIs.

First, CREATE will cut corporate income tax from 30% to 25% as soon as it is enacted. The one-time 5% reduction will be followed by an annual cut of 1% from 2023 to 2027, to settle at 20%. This will put the Philippines in step with the corporate income tax rates of our regional neighbors. For context, corporate income tax is 24% in Indonesia, 20% in Vietnam and Thailand, and 17% in Singapore.

Second, to prevent existing investors from leaving, CREATE allows them to enjoy the same incentives that are in place today for a period of four to nine years.

Third, CREATE allows investors access to the domestic market, even if they are located inside PEZA zones.

Fourth and most importantly, CREATE allows our investment promotions agencies the flexibility to tailor-fit incentives to the needs of the investors. This gives us a greater probability of bagging the investors we deem “desirable.” It is certainly better than the one-policy-fits-all approach that is in effect today.

In addition, the DTI is pushing for the enactment of the Retail Trade Act, a statute that allows more foreign competition in the domestic retail scene; the enactment of the Public Services Act (approved in congress on third reading), a statute that allows foreign participation in public services such as electricity transmission and water distribution; and the reduction of industries where foreign investors are precluded from participation.

The passage of these acts are pending in the legislature. If enacted, the DTI is confident that the Philippines will finally get its fair share of FDIs.

All of us from the various Chambers of Commerce were satisfied with what we heard. The DTI clearly has a sensible roadmap to recovery. Let’s hope the rest of the government, especially the legislature, supports it.

 

Andrew J. Masigan is an economist

Trump signs executive orders for coronavirus relief

BEDMINSTER, NEW JERSEY — President Donald Trump signed executive orders on Saturday partly restoring enhanced unemployment payments to the tens of millions of Americans who lost jobs in the coronavirus pandemic, as the United States marked a grim milestone of 5 million cases.

Negotiations broke down this week between the White House and top Democrats in Congress over how best to help Americans cope with the heavy human and economic toll of the crisis, which has killed more than 160,000 people across the country.

Mr. Trump said the orders would provide an extra $400 per week in unemployment payments, less than the $600 per week passed earlier in the crisis. Some of the measures were likely to face legal challenges, as the US Constitution gives Congress authority over federal spending.

“This is the money they need, this is the money they want, this gives them an incentive to go back to work,” the Republican president said of the lower payments. He said 25% of it would be paid by states, whose budgets have been hard-hit by the crisis.

Republicans have argued that higher payments were a disincentive for unemployed Americans to try to return to work, though economists, including Federal Reserve officials, disputed that assertion.

Mr. Trump’s move to take relief measures out of the hands of Congress drew immediate criticism from some Democrats.

“Donald Trump is trying to distract from his failure to extend the $600 federal boost for 30 million unemployed workers by issuing illegal executive orders,” said Senator Ron Wyden, the top Democrat on the Senate Finance Committee. “This scheme is a classic Donald Trump con: playacting at leadership while robbing people of the support they desperately need.”

The Democratic-majority House of Representatives passed a coronavirus support package in May which the Republican-led Senate ignored.

Democratic presidential candidate Joe Biden called the orders a “series of half-baked measures” and accused Mr. Trump of putting Social Security “at grave risk” by delaying the collection of payroll taxes that pay for the program.

Mr. Trump also said he was suspending collection of payroll taxes, which pay for Social Security and other federal programs, an idea that he has repeatedly raised but has been rejected by both parties in Congress. He said the suspension would apply to people making less than $100,000 per year.

His orders would also stop evictions from rental housing that has federal financial backing and extend zero percent interest on federally financed student loans.

Mr. Trump initially played down the disease’s threat and has drawn criticism for inconsistent messages on public health steps such as social distancing and masks.

He spoke to reporters on Saturday at his New Jersey golf club, in a room that featured a crowd of cheering supporters.

FAR APART
Nearly two weeks of talks between White House officials and congressional Democrats ended on Friday with the two sides still about $2 trillion apart.

House Speaker Nancy Pelosi had pushed to extend the enhanced unemployment payments, which expired at the end of July, at the previous rate of $600 as well as to provide more financial support for city and state governments battered by the crisis.

Ms. Pelosi and Senate Minority Leader Chuck Schumer on Friday offered to reduce the $3.4-trillion coronavirus aid package that the House passed in May by nearly a third if Republicans would agree to more than double their $1-trillion counteroffer.

White House negotiators Treasury Secretary Steven Mnuchin and Chief-of-Staff Mark Meadows rejected the offer.

The $1-trillion package that Senate Majority Leader Mitch McConnell unveiled late last month ran into immediate opposition from his own party, with as many as 20 of the Senate’s 53 Republicans expected to oppose it.

Mr. Trump did not rule out a return to negotiations with Congress.

“I’m not saying they’re not going to come back and negotiate,” he said on Saturday. “Hopefully, we can do something with them at a later date.”

Democrats have already warned that such executive orders are legally dubious and would likely be challenged in court, but a court fight could take months.

Mr. Trump has managed to sidestep Congress on spending before, declaring a national emergency on the US-Mexico border to shift billions of dollars from the defense budget to pay for a wall he promised during his 2016 election campaign.

Congress passed legislation to stop him, but there were too few votes in the Republican-controlled Senate to override his veto — a scenario that would likely play out again with less than 90 days to go before the Nov. 3 presidential election. — Reuters

NZ records 100 days without domestic virus case

New Zealand Prime Minister Jacinda Ardern was among those recognized in the annual Forbes list of the world’s 100 most powerful women. -- Image via Reuters

WELLINGTON — New Zealand marked 100 days without a domestic transmission of the coronavirus on Sunday, but warned against complacency as countries like Vietnam and Australia, which once had the virus under control, now battle a resurgence in infections.

New Zealand’s successful fight against COVID-19 has made the Pacific island-nation of 5 million one of the safest places in the world right now.

New Zealanders have returned to normal life, but authorities are concerned that people were now refusing testing, not using the government contact tracing apps, and even ignoring basic hygiene rules.

“Achieving 100 days without community transmission is a significant milestone, however, as we all know, we can’t afford to be complacent,” Director-General of Health Dr. Ashley Bloomfield said.

“We have seen overseas how quickly the virus can reemerge and spread in places where it was previously under control, and we need to be prepared to quickly stamp out any future cases in New Zealand,” he said.

New Zealand has 23 active cases in managed isolation facilities, and 1,219 COVID-19 cases in all so far.

Vietnam, which went for three months without detecting any domestic transmission, is now racing to control a new outbreak in Danang.

Neighboring Australia’s second-biggest city, Melbourne, has gone into a six-week lockdown due to a surge in cases. The second wave of cases in Melbourne has been largely a result of lapses in quarantining.

“For countries like Australia and New Zealand, the source of such outbreaks is likely to be from managed isolation and quarantine facilities because of the large numbers of people held there and the multiple shifts of staff involved in looking after them,” said Michael Baker, professor of Public Health at the University of Otago.

There have been cases of returning New Zealanders sneaking out of quarantine, and other security slip-ups.

New Zealand last week ramped up testing at quarantine facilities and clinics, and started work on technology to track people using Bluetooth technology.

Prime Minister Jacinda Ardern kicked off her reelection campaign on Saturday calling it a “Covid election.”

But a resurgence of cases due to “Covid fatigue” could spark a backlash against her, and give the opposition a chance to work its way back into the election contest. — Reuters

Johnson’s hot putter books 65 as he looks to secure second major title

SAN FRANCISCO — Dustin Johnson’s hot putter and improved accuracy off the tee gave him a one-stroke lead after the third round of the PGA Championship on Saturday, with the American looking set to secure his second major title on Sunday.

Johnson’s eight birdies were the most by him in a single round at a major and helped offset a bogey and double bogey on the front nine as he carded a five-under 65 and sit nine-under par 201 through 56 holes at TPC Harding Park.

Johnson is one clear of Scottie Scheffler and Cameron Champ with Collin Morikawa, Paul Casey and two-time defending champion Brooks Koepka all lurking a shot further adrift.

“I putted really well. That was key,” said Johnson, who leads the field in strokes gained with the short stick this week.

The former world number one and 2016 US Open champion is looking to avenge his loss at the 2010 PGA Championship, where he was leading entering the final hole but was hit with a controversial two-stroke penalty for grounding his club in a bunker and finished tied for fifth.

Johnson said landing the ball safely on the course’s narrow fairways will be key to hoisting the Wanamaker Trophy on Sunday.

“Tomorrow I definitely need to hit some more fairways, because it’s really tough playing this golf course from the rough,” said Johnson, who hit seven of 14 fairways on Saturday.

Johnson will be paired with Scheffler, who signed a busy scorecard that included eight birdies and three bogeys including one on the difficult par-four 18th, a hole that could prove critical on Sunday given the bunched leaderboard.

The 24-year-old Scheffler said he was trying to keep his wits about him as he looks to secure his first major title.

“There’s definitely some nerves but just got to try and handle them as best I can and go out and play, and I did a good job of that today.”

Hard-hitting Sacramento native Champ fired a 67 under foggy and cold San Francisco skies, conditions he said he is well used to playing in as the 25-year-old also looks to capture his maiden major.

“Obviously there is a comfortability,” he said.

“I’ve played a lot of golf down here growing up in junior events, state ams. And this has similar weather conditions as Monterey, which I’ve played a lot in, so I’m definitely used to that, kind of cold and damp.”

Four-time major champion Koepka, who had an uncharacteristic three bogey stretch late but birdied the last in his round of 69, said he would use his considerable experience on the sport’s biggest stages to his advantage even if there are no fans in attendance due to the COVID-19 pandemic.

“I feel very comfortable around the lead in the big events,” he said.

“Obviously we don’t have fans here, which makes it a little different when they’re hooting and hollering.

“It can be fun if they’re cheering for you, but if they’re against you it’s not so much fun. It’s going to feel completely different than any one we’ve ever played. I’m looking forward to it tomorrow.

“It should be a fun shootout.” — Reuters

United City Football Club taking further form

By Michael Angelo S. Murillo, Senior Reporter

A FORTNIGHT since officially taking its place in the Philippines Football League (PFL), United City Football Club is steadily taking form, busy building up its roster that will carry its banner in the four-year-old league.

Took over the spot left by three-time PFL champion Ceres-Negros FC which decided to leave the league because of the coronavirus pandemic, United City has seen it stay true to its push of keeping the core of Ceres to sustain competitiveness.

It first re-signed midfielder Stephan Schrock, who will serve as the team’s captain and assistant coach.

The team then went on to ink deals with former “Busmen,” namely, OJ Porteria, Dennis Villanueva, Spaniard Bienvenido Maranon, Sean Kane, Japanese Takashi Odawara, Tristan Robles, Arnie Pasinabo, Joshua Dutosme, Jun Badelic, Ron Bayan, Hikaru Minegishi, Angeo Marasigan, and Senagalese Robert Lopez Mendy.

Last Friday, the team announced that it also signed to a deal brothers Manny and Mike Ott, who United City sees as playing key roles as it tries to make its own mark in the PFL and other tournaments in the region.

“We are happy to announce [the signing of] Manny and Mike, [who] bring a tremendous amount of experience on the club and international level to the team and this will be instrumental in our pursuit to defend the PFL title and to progress from the AFC Cup Group stages in September in Vietnam,” said United City co-founder Eric Gottschalk.

Manny and Mike Ott were also part of the Ceres squad last year.

Mr. Gottschalk said they will still sign four more players to complete the team, which they will announce on a later date.

Former Ceres players still left unsigned by the team are goalkeeper Roland Muller, Super, Dylan Bruycker and Junior Munoz. Jeffrey Christiaens is now in Belgium while Joshua Grommen is in Australia. James Younghusband, meanwhile, has already retired.

United City said it is still negotiating with coach Risto Vidakovic for a possible return.

Apart from signing players, United City also recently unveiled its new crest, sourced from a contest it conducted.

PSC vows to release athletes’ allowances this week after delay

EXPERIENCED some delays in the processing of the release of the allowances of national athletes, the Philippine Sports Commission (PSC) assured at the weekend that the issues have been addressed and disbursement will take place this week.

As per the report of PSC Executive Director Atty. Guillermo B. Iroy, Jr., the allowances will be deposited to the Land Bank of the Philippines by Monday.

The government sports body was called out recently by Senator Bong Go, Senate Committee on Sports chairman, after the lawmaker got wind that allowances of athletes for the months of June and July were yet to be given.

Mr. Go urged the PSC to release the allowances at the soonest possible time so as to help the athletes during these trying times with the coronavirus disease 2019 (COVID-19) pandemic.

The PSC, for its part, admitted to the delay and apologized for it.

It, however, explained that the delay in the release of the allowances of the national team was brought about by the overhaul of its payroll administration system after the agency was rocked recently by a payroll padding scam by one of its employees.

“We shifted systems, in coordination with our depository bank. It was one of the ways we saw to tighten up our process in connection with the payrolling of employees and national team members,” said Mr. Iroy in a statement.

The PSC said it recognized the inconvenience the overhauling caused but underscored it was an action needed to be done “to ensure that no underhanded schemes are ever done in this service aspect again.”

“We issued an advisory to the national team to advise them of the delay and the cause of it.  We understand that with the crisis raging, the delay is very stressful but the corrections were also needed,” Marc Edward D. Velasco, PSC chief of staff and National Training Director, said.

The PSC also enjoined all national sports federations to ensure proper monitoring and reporting on the training and activities of the athletes under their supervision and to religiously submit as these are requirements in the processing of monthly allowances. — Michael Angelo S. Murillo

1...8,1448,1458,146...13,166Page 8,145 of 13,166
© 2024 BusinessWorld Publishing.
All rights reserved.
Read our privacy guidelines
Facebook Instagram Linkedin Twitter Youtube