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DA’s Dar calls corruption in pork MAV process unlikely but starts probe

THE Department of Agriculture (DA) has formed a committee to investigate alleged corruption in the process of certifying that pork imports are within the minimum access volume (MAV) quota, qualifying them to pay lower tariffs, though Agriculture Secretary William D. Dar said the possibility of corruption in issuing the document is “remote.”

In a statement Wednesday, Mr. Dar said the discretion of the certification issuers in ruling that imports fall within the MAV quota is limited.

“We have created a special committee to look into allegations made by a lawmaker that there is a syndicate in the DA engaged in a payoff scheme,” Mr. Dar said. The committee will be headed by the chief of DA’s legal service, Armando R. Crobalde, Jr. It will evaluate the preliminary findings of the MAV Secretariat led by Executive Director Jane C. Bacayo. The committee has a deadline of the end of March to submit its findings.

Senator Panfilo M. Lacson alleged during a Senate session on March 15 that expanding the MAV could generate illegal payoffs of about P6 billion from importers seeking to get their shipments in under the quota, paying 30% tariffs. An out of quota shipment pays 40%.

The DA is proposing to increase the MAV for pork to 404,210 metric tons (MT) and lower the tariff rates for in-quota shipments to 5%-10%; for out of quota imports the charges rise to 15%-20%.

The African Swine Fever (ASF) outbreak has greatly reduced hog numbers, creating a supply crisis which has threatened another inflation crisis, leading officials to seek ways to rapidly expand supply, including imports.

“We would like to emphasize that our objective in increasing the MAV and reducing tariff is to stabilize supply and price of pork,” Mr. Dar said.

Mr. Lacson had alleged that the people involved in the scheme collect P5 to P7 per kilogram from pork imports, and claimed that once volumes expand, they plan to collect P10 to P15 per kilogram.

Import certificates are issued to MAV licensees eligible to tap the yearly quota of 54,000 metric tons (MT).

Licensees unable to utilize 70% of their allocation are penalized via the recall of their unused volume for raffle to other qualified applicants.

“In addition to securing an MAV import certificate, licensees need to seek sanitary and phytosanitary import clearances from the Bureau of Animal Industry (BAI) to ensure that pork or other meat products are safe and disease free,” the DA said.

In a separate statement Wednesday, the Samahang Industriya ng Agrikultura (SINAG) claimed that the DA has not disputed its allegations on irregular volumes of pork being imported.

SINAG Chairman Rosendo O. So said: “In a series of hearings at the Senate, House of Representatives and the Tariff Commission, SINAG presented official records from the Bureau of Customs (BOC) from January 2020 to January 2021.”

“The DA never contested our claim as figures speak for themselves. And we are not wondering why after all this time, the DA did not check with importers or the suppliers of these importers on the true value of these imports,” he added.

Mr. Dar said at a virtual briefing Wednesday that the hog industry may take five years to recover with the implementation of biosecurity measures and antiviral products.

According to Mr. Dar, researchers at the Bureau of Animal Industry are currently testing and validating an ASF treatment dispensed by spray.

“If the antiviral products are proven effective to help eradicate the virus, this will be a game changer. If biosecurity measures are in place, including the antiviral compounds that can kill the virus upon ingestion at the initial stage, we can recover in three to five years,” Mr. Dar said.

On Wednesday, Senators adopted a resolution filed by Mr. Lacson that will create a Senate Committee of the Whole to hold an inquiry on the problems faced by the hog industry.

Mr. Lacson said in the resolution that the Senate committee will look into the impact of ASF on food security, the alleged payoffs associated with pork imports, and the DA’s proposals to increase MAV and reduce tariffs.

Separately, the Land Bank of the Philippines (LANDBANK) said it launched a new lending program worth P15 billion to assist hog raisers.

During the program launch Wednesday, LANDBANK signed a memorandum of agreement with the DA for the Special Window and Interim Support to Nurture Hog Enterprises or SWINE, which hopes to fund increased swine production.

Farmers can borrow to finance the procurement of inputs like semen or breeding animals; to set up feed milling operations; build hog raising facilities and acquire fixed assets; and access working capital.

LANDBANK President and Chief Executive Officer Cecilia C. Borromeo said: “We aim to respond to the recovery requirements of our hog industry and contribute to ensuring food security,” Ms. Borromeo said.

According to LANDBANK, qualified borrowers can tap a short-term line or a term loan for up to 80% of their total project cost or financing needs, with a fixed interest rate of 3% per annum for three years, subject to annual repricing afterwards.

Permanent working capital loans are payable up to five years. — Revin Mikhael D. Ochave

Will we finally be free to tax-free?

Every so often, corporations undertake business restructuring with varying business objectives in mind. It could be to optimize or streamline business operations, to expand to other industries, or to form strategic alliances with other corporations. In most cases, these would involve the transfer or exchange of significant property or shares, the taxes related to which become a material consideration to the parties involved.

To this end, Section 40(C)(2) of the Tax Code provides relief to taxpayers undertaking mergers, consolidations, or transfers of property to controlled corporations in exchange for shares. Specifically, the Tax Code states that no gains or losses may be recognized on such exchanges, or what is commonly referred to as tax-free exchanges (TFE).

It may be worth noting that the term “tax-free” is a misnomer. For income tax purposes, a TFE is not a tax exemption, but a mere deferral or suspension of tax. The rationale is that the transferee generally assumes the historical cost of the property received from the transferor. As such, upon the subsequent disposal of the property, the gain recognized by the second transferor (i.e., the transferee in the TFE) will be based on the said historical cost of the first transferor.

Other than income tax, however, the transfer of property via TFE is exempted by the Tax Code from value-added tax (VAT) and documentary stamp tax (DST). Hence, on this point, it is appropriate to call it tax-free.

It seems then that after an exchange is determined to be tax-free, the crux of the matter is ascertaining the appropriate cost basis of the properties transferred as part of the exchange. After all, the cost is a key factor in determining the amount of taxable gain later on.

Given these conditions, the Bureau of Internal Revenue (BIR) has issued guidelines over the years to monitor the basis of properties transferred in TFEs. These guidelines, which initially stemmed from the necessity to create a revenue safeguard, have inevitably resulted in requiring taxpayers to secure confirmatory rulings for TFEs. For transfers of land and shares especially, a ruling becomes administratively necessary to secure the Certificate Authorizing Registration (CAR) from the BIR. Since the CAR certifies payment of all the proper taxes, it is vital in transferring the legal title over such properties to the transferor.

Securing a confirmatory TFE ruling usually takes time. For some taxpayers, the timeline for securing a ruling has become a key factor in evaluating their restructuring options, particularly where third parties are involved and the transaction must be completed quickly.

In 2020, the Supreme Court finally clarified that securing a prior confirmatory ruling is not required to avail of the tax-free benefit in TFEs. In its decision, the Supreme Court ruled that a transaction is considered exempt as long as the requirements under the law are met, whether or not there is a prior ruling issued. BIR rulings merely operate to confirm whether the conditions under the law are met. The decision echoes, and in fact cites, a similar case in 2013 where the Court struck down the BIR’s requirement for a prior ruling to avail of benefits granted under tax treaties.

Despite the court ruling, a confirmatory ruling is still required by the tax authorities to issue a CAR.

There may be something to look forward to, however, in the upcoming tax reform bill. The Bicameral Conference Committee recently approved the reconciled version of the Corporate Recovery and Tax Incentives for Enterprises Act or CREATE Bill, which proposes to amend, among many others, the provision on TFEs. Aside from adding new types of tax-free exchanges, the CREATE Bill makes clear that a “prior BIR confirmation or tax ruling is not required for purposes of availing the tax exemption.”

Is this finally the clarification we need?

It is interesting to note the proposed wording of the provision. As mentioned above, strictly speaking, a TFE is only a tax exemption to the extent of VAT and DST on the transfer of property. For income tax purposes, a TFE merely defers or suspends the tax and is not really an exemption. Hence, if signed into law, it remains to be seen whether the no-ruling provision will be implemented to encompass income tax. On the other hand, an exclusion to this effect may effectively defeat the intention to address the current hurdle of securing a ruling.

Personally speaking, the above provision should apply to all aspects of the transaction, especially income taxes. After all, the proposed no-ruling provision is part of the Section in the Tax Code covering the income tax deferral provision. Plus, in a tax deferral, the crucial part is accurately establishing the cost basis of the properties transferred. I believe that can still be accomplished through means other than a ruling.

Outside of a ruling, the determination of the cost of the property transferred may be delegated to the officers processing the CAR (subject to a specific set of guidelines). This process may also be established through self-reporting by the parties involved, subject to a post-transaction review by a specialist group or by revenue officers during a tax investigation. In any case, the CAR only needs to indicate that the properties were transferred by way of TFE, hence the transfer is not subject to tax.

It is still not clear whether the current version of the CREATE Bill will fully pass into law. For now, we can only welcome this development as a step into a more competitive direction and hope for more 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.

 

Olivia Erika Susa is a manager at the Tax Services Department of Isla Lipana & Co., the Philippine member firm of the PwC network.

+63 (2) 8845-2728

olivia.erika.susa@pwc.com

Manila bans foreign travelers amid fresh spike in infections

THE PHILIPPINES has banned foreign travelers and returning Filipinos who are not migrant workers, as it faces a fresh spike in coronavirus infections, according to the Presidential Palace.

The National Task Force Against COVID-19 issued a memo on Tuesday ordering agencies to enforce the travel restrictions from Mar. 20 to Apr. 19, presidential spokesman Herminio L. Roque, Jr. said in a statement on Wednesday.

“This is in view of the rising COVID-19 (coronavirus disease 2019) cases and the entry of the coronavirus variants in the country,” he said.

Holders of certain visas, passengers on medical repatriation, distressed migrant workers and those traveling on emergency and humanitarian grounds would be exempted, Mr. Roque said.

Government agencies must limit inbound international passengers to 1,500 a day, he added.

Flag carrier Philippine Airlines (PAL) and budget carrier Cebu Pacific expect a surge in refund requests because of the travel ban.

Both airlines advised affected passengers to rebook their flights, request refunds or store the amount of their tickets in a travel fund.

In an advisory issued on Tuesday, the Civil Aeronautics Board said airlines that exceed the capacity would be penalized.

In a separate statement, Cebu Pacific said it was canceling flights between Manila and Narita and between Manila and Nagoya during the ban.

Philippines AirAsia said it had no international flights but has partnered with the government in bringing home Filipinos stranded overseas.

The Department of Health (DoH) reported 4,387 coronavirus infections on Wednesday, bringing the total to 635,698. The death toll rose by 18 to 12,866, while recoveries increased by 374 to 561,099, it said in a bulletin.

There were 61,733 active cases, 93% of which were mild, 3.8% did not show symptoms, 1.2% were critical, 1.3% were severe and 0.68% were moderate.

DoH said nine duplicates had been removed from the tally, while five recovered cases were reclassified as deaths. Six laboratories failed to submit data on Mar. 16.

About 8.8 million Filipinos have been tested for the coronavirus as of Mar. 15, according to DoH’s tracker website.

The coronavirus has sickened about 121.3 million and killed 2.7 million people worldwide, according to the Worldometers website, citing various sources including data from the World Health Organization.

About 97.8 million people have recovered, it said.

In a separate statement, DoH and the Food and Drug Administration said the reported death of a person who got vaccinated early this month had not been caused by the vaccine.

The person received a shot, subsequently tested positive for the virus and died, they said

“Vaccines are only one part of the solution in bringing the COVID-19 pandemic to an end,” they said, adding that people should still follow health protocols.

Meanwhile, Health Secretary Francisco T. Duque III said the government might have to tighten the lockdown if cases continue to surge.

“The localized lockdowns are starting to yield some positive outcome,” he told the ABS-CBN News Channel, adding that he wouldn’t recommend a stricter nationwide quarantine now.

Mr. Duque said the cities of Navotas, Malabon, and Pasay were aggressively implementing localized lockdowns, but noted that it takes about two weeks before infections could be slowed.

“If nothing changes and cases continue to rise, then the possibility of a more widespread lockdown is certainly strong,” he said.

Coronavirus infections may hit a daily record of 11,000 by end-March, the OCTA Research Group from the University of the Philippines said on Tuesday.

OCTA research fellow Fredegusto Guido P. David cited a spike in cases, with a virus reproduction rate of 2.03. This means a sick person may infect two more people.

The spike could be traced to increased mobility, failure to comply with minimum health standards and the detection of more contagious coronavirus variants in the country, he said. — Kyle Aristophere T. Atienza and Vann Marlo M. Villegas

Gov’t seeks to raise vaccination rate in H2 to 4 million weekly

THE GOVERNMENT seeks to inoculate more than a million Filipinos weekly against the coronavirus in the second half (H2) as it tries to ensure enough supply of vaccines, according to the presidential palace.

The country will take delivery of about four million doses of coronavirus vaccines in April, vaccine czar Carlito G. Galvez, Jr. told DZBB radio on Wednesday.

He said the country was also expecting about eight million vaccine doses in May so it could vaccinate at least two million Filipinos a week. In June, the country will increase its supply by one million so it can vaccinate three million Filipinos weekly, he added.

Mr. Galvez, who also serves as the deputy chief implementer of the country’s pandemic response, said the country would have enough vaccine supply by July, when as many as four million Filipinos will have been vaccinated weekly.

“Gradually, we will raise the target by one million a week, two million a week and three million a week,” he said in mixed English and Filipino.

More vaccines from AstraZeneca Plc are expected to arrive in May, and about 200,000 shots from Moderna, Inc., Mr. Galvez said.

The Philippines started vaccinating health workers on Mar. 1 using CoronaVac made by Sinovac Biotech Ltd. and donated by China. It is also injecting people with 525,600 doses of the vaccine made by British drug maker AstraZeneca that were obtained under a global initiative for equal access.

Mr. Galvez earlier said Manila would take delivery of at least 1.4 million more doses of Sinovac shots this month. Of the total, about 400,000 vials were fresh donations from Beijing, and the rest were paid for by the government.

About 900,000 more doses of AstraZeneca shots under the COVID-19 Vaccines Global Access facility will also arrive in late March or early April, he said.

Meanwhile, a survey conducted by ASEAN+3 Macroeconomic Research Office late last year showed that many Filipinos were inclined to get vaccinated if they could afford it. But 80% said they were concerned about vaccine effectivity.

“The vast majority of respondents (across ASEAN+3 region) would take the COVID-19 vaccine,” it said in a note.

“But, the speed of development and approval of the vaccines have made respondents somewhat apprehensive about their safety. Hence, many would rather wait for further information on the vaccines and their potential side effects,” it added. — Kyle Aristophere T. Atienza and Beatrice M. Laforga

COVID-19 vaccine views (and progress) at a glance

Retired justice to lead opposition coalition in elections next year

By Kyle Aristophere T. Atienza, Reporter

A RETIRED magistrate will lead a coalition of opposition candidates seeking to challenge President Rodrigo R. Duterte’s anointed candidates in the elections next year.

Retired Supreme Court Justice Antonio T. Carpio will head the 1Sambayan, which consists of sectoral groups that will form a slate of national candidates, the party said in an e-mailed statement on Wednesday.

“Carpio’s sterling record in public service, invaluable contributions to nation building and brave opposition to the abuses of the current administration make him a worthy advisor on efforts for government reform,” 1Sambayan said.

Mr. Carpio said he formed the coalition to secure victory for the opposition. He said both independent Grace S. Poe-Llamanzares and administration candidate Mar A. Roxas II lost to President Rodrigo R. Duterte in the 2016 presidential elections after the votes got divided.

“The lesson there is if you are not united, if you fill two or more candidates, the other side has a better chance of winning,” he said in a Zoom App Meetings interview. “Especially if the other side is the administration, that would be a tremendous advantage for them.”

Mr. Carpio said 1Sambayan would become a party of “democratic forces” and would oppose those “identified with authoritarianism, dictatorship, extrajudicial killings, plunder and violation of human rights.”

“Anyone identified with those characteristics will not be part of our side,” he added.

Mr. Carpio said the coalition is considering Vice President Maria Leonor G. Robredo, Manila Mayor Francisco M. Domagoso, Senators Maria Lourdes S. Binay-Angeles and Ms. Poe-Llamanzares as its candidates.

He added that the party could win national seats, noting that Mr. Duterte had won only by a plurality of votes.

The President continues to enjoy popular support, according to polls by the Social Weather Stations.

Mr. Carpio said the government’s alleged failure to handle the coronavirus pandemic would be a main stumbling block for the administration party.

“People look at the government as having failed,” he said. He also cited Mr. Duterte’s failure to assert the country’s rights in the South China Sea.

Nationwide round-up (03/17/21)

Senator calls for lower loan interest rate on modern public transport

A SENATOR asked transportation authorities to reduce the interest rate on loans for public vehicles procured under the modernization program to 4% from 6% to lessen the burden on operators and drivers. In a statement on Wednesday, Senator Grace Poe-Llamanzares urged the Land Transportation Franchising and Regulatory Board and the LandBank of the Philippines to cut the interest as the sector was hit hard by the pandemic. “If we want to really help our public transport sector transition to PUV (public utility vehicle) modernization, all support must be extended to our operators and drivers who have been among the hardest hit by the pandemic,” Ms. Llamanzares, chair of the Senate committee on public services, said in a statement. Danilo C. Yumul, chairman of the Confederation of Drivers and Operators in Central Luzon, said during the Senate committee hearing on Tuesday that drivers and operators cannot borrow money to buy modern units because of the interest rate and the loan term. He added that drivers could not afford the P40,000 monthly payment for a new vehicle even before the pandemic. Ms. Poe-Llamanzares said the interest rate reduction can serve as a subsidy to the drivers and operators. The Senate on Tuesday tackled Senate Bill No. 867 or the Just and Humane PUV Modernization Act, which proposes that government provide financial assistance of not less than 10% of the total price per unit and the interest rate on loan amortization should not exceed 4%. — Vann Marlo M. Villegas

Duterte to meet recipient villages of anti-communist funds in Eastern Visayas

PRESIDENT Rodrigo R. Duterte will meet with barangay leaders in Eastern Visayas on Mar. 18 as the development program aimed at ending communist rebellion is rolled out in the region, according to the Presidential Palace. National Security Adviser Hermogenes C. Esperon, Jr. said the President will hold a dialogue with the beneficiaries of the National Task Force to End Local Communist Armed Conflict’s controversial Barangay Development Program (BDP). “With the President personally witnessing the implementation of the BDP and other socio economic initiatives, he is ensuring that the improvement of the human conditions in Region 8 will be delivered with all possible haste,” Mr. Esperon, who co-chairs the task-force, said in a statement on Wednesday. The BDP’s allocation of about P16.4 billion in the 2021 national budget was questioned by Congress but eventually allowed for inclusion. The program incentivises barangays in 197 local governments that have supposedly cleared their areas of Maoist rebels. — Kyle Aristophere T. Atienza

Drilon says High Court recognizes limits of President’s power despite dismissal of petition on ICC withdrawal

SENATE Minority Leader Franklin M. Drilon said the Supreme Court recognizes the limitations of the President’s authority on foreign policy despite dismissing the petition questioning the country’s withdrawal form the International Criminal Court (ICC). “While the Supreme Court dismissed the petition questioning the validity of the Philippine government’s withdrawal from the Rome Statute for being moot and academic, the High Court acknowledged the limitations on the power of the President as chief architect of foreign policy,” Mr. Drilon, who was one of the case petitioners, said in a statement on Wednesday. “This is a clear recognition of the limitations of the power of the President with respect to foreign policy. Most striking is the acknowledgement that the power of the President to withdraw ‘unilaterally’ can be subject to limitations by the Senate,” he added. The Supreme Court on Tuesday dismissed the petition against the withdrawal from ICC for being moot. The decision penned by Associate Justice Mario Victor F. Leonen acknowledged that the President’s decision to withdraw unilaterally “can be limited by the conditions for concurrence by the Senate” or when a law allows negotiation of an international agreement, the court said in a statement. The Philippines officially had withdrawn from the ICC in Mar. 2019. — Vann Marlo M. Villegas

Solon tells PCSO to digitize lotteries to improve revenue

A LAWMAKER told the Philippine Charity Sweepstakes Office (PCSO) that it must digitize the operations of small town lotteries (STLs) to improve revenue after the agency reported losses last year. Albay 2nd District Rep. Jose Ma. S. Salceda, in a hearing of the House of Representatives committee on ways and means that he chairs, told PCSO officials, “Can you please prioritize digitizing the STLs?” Mr. Salceda also said the PCSO should improve its management of STLs, which continue to serve as fronts for the illegal numbers game known as jueteng. “It’s like you’re providing legal camouflage,” he said. Mr. Salceda said the PCSO can earn up to P256 billion in revenues if it adopts a digital platform that will be accessible to bettors nationwide. PCSO officials said the agency is currently studying the proposal as well as ways to conduct the Super Lotto draw online. The agency said revenues were lower in 2020 compared to previous years due to the closure of its franchises for half a year due to coronavirus-related restrictions. The PCSO reported an P18.6 billion income in 2020, a 58% drop from P44 billion in 2019. Lotto draws accounted for over P11 billion of the earnings while STLs contributed more than P5 billion. — Gillian M. Cortez

Regional Updates (03/17/21)

27 workers at DoJ main office test positive for coronavirus

THE DEPARTMENT of Justice (DoJ) recorded 27 coronavirus disease 2019 (COVID-19) cases as of Wednesday in its main office, which has been closed to the public since Mar. 12 for disinfection. “We have a new case today as of 9:30 a.m., so our total number of cases is 27,” DoJ Undersecretary Emmeline Aglipay-Villar said. Work is continuing with 50% of manpower on-site and the rest on a work-from-home arrangement. Ms. Villar said they “have been strictly observing all the safety protocols on social distancing, wearing face masks and face shields, and hand washing. We also make sure that we have enough supplies of face masks/shields and alcohol. We have alcohol dispensers in all common areas.” Of the total COVID-19 infected, eight were confirmed on Tuesday and “are active cases,” she said. — Bianca Angelica D. Añago

Cebu launches tourism packages

THE Bojo River cruise in Aloguinsan town. — @CEBUTOURISMOFFICE

THE CEBU tourism sector has launched five packages for domestic travelers, inclusive of air fare, accommodations and organized trips to the different attractions across the province. The Suroy Suroy Sugbo program, launched on Mar. 16, was initiated by the provincial government as part of the local economic recovery strategy. “Tourism is not just a leisure activity, it is an economic activity,” Governor Gwedolyn F. Garcia said at the launching event, noting how it creates employment and a market for small local businesses, among other revenue opportunities for the province’s 44 towns and six cities. Cebu province accounted for about half of the P50-billion tourism income in the Central Visayas Region in 2019. “The project which is partnered with three major airlines (Philippine Airlines, Cebu Pacific, and Air Asia), tour operators, resort owners, among others, is aimed at helping the tourism industry in Cebu to get arrivals during weekdays as they are already full during weekends,” the provincial government said in a statement. The four days/three nights tour options include trips going north to Daanbantayan; island adventures either in Bantayan or Malapascua; to the south with visits to agri-tourism sites, outdoor activities, and swimming with whalesharks in Oslob ; or a ‘staycation’ in a resort. For more information, visit the provincial tourism portal at www.discover.cebu.gov.ph.

DENR to address water hyacinths proliferation in Pasig River, Laguna de Bay

THE DEPARTMENT of Environment and Natural Resources (DENR) is forming a team with fisherfolk to control the spread of invasive water hyacinths in Pasig River and Laguna de Bay, which cause major obstruction to water flow and navigation. In a press release on Wednesday, DENR said Undersecretary for Solid Waste Management and Local Government Units Concerns Benny D. Antiporda has ordered members of the Manila Bay Anti-Pollution Task Force (APTF) to focus on removing water hyacinths in the two water ways while looking into employing fisherfolk in harvesting the aquatic plants. “We want to make a drastic change in the quality of water in Manila Bay,” Mr. Antiporda said in a statement, citing that one of the APTF’s goals is to ensure that there are no floating debris along Manila Bay and its tributaries. Pasig River, which passes through five cities in Metro Manila, connects Laguna de Bay and Manila Bay. In October, the DENR said it was looking at launching a livelihood project that will allow fisherfolk to exchange water hyacinth harvests for cash to provide them with an alternative livelihood amid the global health emergency. — Angelica Y. Yang

Responsible investing in different cultural contexts 3

(Third of four parts)

I have dedicated the weeks of March on my column to revisiting how sustainable finance is doing across different geographies. For those just joining us in this series, a quick summary: Responsible Investment (RI) is the umbrella term for the act of considering environmental, social, and governance issues in investing. It traces its roots to religious societies in the United States and Europe. It then evolved over time to encompass social issues such as boycotting financing apartheid and the Vietnam war, towards environmental protection and more recently, governance issues.

In the United States, the retail type of investing, known in the field as SRI (Socially Responsible Investing) is still very much ethics-driven with dedicated funds screening out so-called unsustainable companies, providing for a more dichotomized approach when putting one’s money. In Europe, the trend, which has been largely driven by institutional investors, particularly pension funds under government pressure, is much more pragmatic. Unwilling to completely divest or label entire sectors or firms in transition as “banned,” Europeans RI funds have advocated for increased transparency, best-in-class approaches, and stakeholder engagement. To wit, you can invest in an energy firm which is not 100% renewable, but that is actively attempting to improve its sustainability practices. In Latin America, we found that the practice is much more nascent because of the lack of institutional funds. The focus there has been on impact investing, or putting money in social enterprises, or giving donations using a percentage of fund proceeds to specific causes. This has been slowly shifting with the advent of new sustainability indices to become more accepted by institutional investors.

Now, what about the African continent?

Assets under management invested using a sustainability approach in the African continent remain at single digits as a percentage of total. But while RI remains a marginal practice, it has seen a surge in recent years. According to the latest data from the 2017 African Investing for Impact Barometer (AIFIB), there has been an increase of 23% in Southern Africa and 18% in East Africa compared to the previous year, totaling more than $400 billion or more than half the funds they examined in sub-Saharan Africa.

The largest economy in the continent is South Africa, also its biggest institutional investment market. And recall that apartheid played a huge role in the history of Responsible Investment. However, the apartheid regime was actually a double-edged sword to the development of RI: on the one hand, it spurred awareness for questioning where we all put our money, which extended towards the world, exposing powerful corporations and actors. But on the other hand, South Africa suffered in receiving foreign direct investment in the country. In the first couple of years after the democratic elections of 1994, South Africa received foreign capital averaging 1% of GDP. This was obviously detrimental to a country which faced a high number of social challenges such as the HIV/AIDS epidemic which has direct costs for companies (e.g., higher healthcare and training costs) and indirect costs (e.g., lower revenue due to absenteeism and lower productivity) as well as basic energy needs and access to water. Healthcare and education are also becoming increasingly important focus areas. It is therefore unsurprising that the themes surrounding socially responsible investment in this region are strongly of a developmental nature.

Similar to Latin America, impact investing is by far the most important RI strategy in South Africa, either on its own or in combination with positive screening, though several legislative initiatives since 2011 have pointed towards the inclusion of institutional investors.

Promising signs of prospects are visible in terms of two key factors: first, as the region develops its financial markets, RI is likely to follow suit because it caters to calls for a greater need of transparency.

According to the Business Indicator Index, Egypt, Tunisia, and Morocco are among the most corrupt countries in the world and RI organically helps address significant governance issues in the region’s companies, which are an important focus of investors. In fact, a lot of the focus of these funds are on investor engagement or the ability to influence company behavior. This has also led to the launching of corporate governance codes by the OECD in 2005 and the creation of sustainability indices.

Second, the practice of Responsible Investment can be tailored to be Shari’ah-compliant. The dominant religion of the population base in several countries in the continent is Islam. Shari’ah compliant investing adheres to Islamic finance principles which exclude involvement in “sinful” activities such as alcohol and tobacco, advocates “no exploitation” and equal risk-sharing wherein full disclosure and symmetric information is required from two transacting parties (i.e., similar to having good corporate governance), as well as “materiality,” wherein a financial transaction should have a positive impact on the community.

These are similar to employing negative and positive RI screens. Screening, which is the term used to describe investments related to religious and ethical investment practices, like Islamic Finance, for instance, is the third most significant investment strategy on the continent with over $192 billion in assets across the region according to AIFIB. n

The original book chapter on which this series is based is published in Italian: Laurel, D. & Piani, V. 2013 L’SRI nei diversi contesti culturali (Socially Responsible Investing in Different Cultural Contexts) in Creare Valore a Lungo Termine (Creating Long-term Value) eds. Del Maso, D. and Fiorentini, G. EGEA (Milan, Italy).

 

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.

Interrupting life, by choice

COVID-19 infections in the country are feared to hit a new daily record of about 8,000 cases by the end of March. If this happens, then by the end of this month, we will be worse off than we were a year ago, when the country was first put on community quarantine because of the pandemic. All our efforts and sacrifices, and economic suffering, throughout this time, will have been for naught.

Worse, our healthcare system barely coped when we hit 7,000 daily cases in August 2020. Healthcare workers had to call for a timeout, and the government responded by reimposing stricter quarantine measures for two weeks. But as we hit 8,000 or more, it becomes uncertain if our hospitals can still address all the needs of COVID and non-COVID patients.

Cases may even hit 20,000 daily by mid-April, a research fellow at the University of the Philippines-OCTA Research Group told a recent radio interview. Cases in Metro Manila, now the center of a new surge, can top 6,000 daily by end-March, and 14,000 by mid-April, he said. These projections are based on current reproduction rates.

We have not dealt with such numbers in the past, and our ability to do so remains questionable at best.

UP-OCTA is thus suggesting a two-week hard lockdown, similar to what happened in August 2020, to coincide with the observance of Holy Week, which starts on March 28.

UP-OCTA’s Professor Guido David of UP told a television interview that this would be a drastic “one-time, big-time” measure, but that it was necessary given the surge in COVID-19 cases particularly in Metro Manila. “We never saw this rate of increase in Metro Manila throughout the entire pandemic period,” he said.

His fellow UP-OCTA member, Professor Ranjit Rye of UP, noted that the situation was “dire,” adding, “It is going up, and we don’t see it going down with what we have now.”

He also noted that the country could not “fight this surge within the framework of a GCQ (general community quarantine). Some of the loosening of restrictions will have to be rolled back.”

There is no doubt in my mind that the current surge, as noted by OCTA, is variant-driven. And while I am opposed to reimposingenhanced community quarantine (ECQ), given its dire implications on lives and the economy, I don’t think we have a choice. But, to wait for Holy Week may be too late. March 22 to April 5 may be the more appropriate period for it. As Professor Rye noted, “We have to do something more than just compliance with minimum health standards.”

In my opinion, the 15-day ECQ will have to cover the Metro Manila area and nearby provinces like Cavite, Laguna, Rizal, and Bulacan. While local ECQs now in place can work, a more comprehensive and coordinated approach involving the greater region may be more effective. Flexibility in rules, however, should be considered in the production and transportation of food.

A year into community quarantine because of the COVID-19 pandemic and we are practically back where we started in March 2020. With a twist, of course. Prospects are now worse, with new daily peaks foreseen in the coming weeks. And I fear that what Metro Manila mayors have planned so far — banning minors from leaving their homes, new curfew hours, liquor bans, and localized ECQs — may not be enough.

My immediate family has chosen to again interrupt our lives until after Holy Week, as a way of dealing with the surge at the household level. We are lucky enough that we can actually go about our lives — work and school — from within the confines of our home. And while not many can do this, I strongly urge those who can to do the same. A personal choice to limit movement for two weeks — to self-quarantine — can go a long way in battling the surge.

The greater concern is for those who rely on their daily outings for their family’s sustenance. In the face of “no work-no pay,” keeping them in their homes for two weeks under a hard lockdown will be difficult. With national and local government resources already strained — and the private sector suffering from donor fatigue — little help can be expected for them this time around.

But unless a hard lockdown is put in place, to cover the greater region, it will be difficult to continue going after quarantine violators and to strictly enforce minimum health standards in all parts of the metropolis. Even increased police deployment will have little effect on people already suffering from quarantine fatigue and hard pressed to earn a living.

In lieu of a 15-day “Holy Week” ECQ for Metro Manila and nearby provinces, I will go for the suggestion of a coalition of healthcare professionals for private firms and local governments to further stagger working hours and to increase support for work-from-home arrangements. This is in light of findings that viral spread is occurring in congested workplaces and public transportation.

The Healthcare Professionals Alliance Against COVID-19 (HPAAC), a coalition of more than 160 medical societies, told a press briefing that businesses and local governments can still improve the situation in workplaces and communities. They suggested more bike lanes; more open spaces for business and leisure activities; and, discouraging dining in enclosed spaces.

They also noted the urgent need to avoid congestion inside workplaces and public utility vehicles. The group said a longer curfew — 10 p.m. to 5 a.m. — just limits the number of work and travel hours for workers, thus unnecessarily packing them in work areas and public transportation during work and commuting hours.

“Lockdown is still an option if we reach the point that the healthcare system is really overwhelmed beyond its capacity to effectively address the COVID-19 cases. But at this point, we feel that there is still something we can do to mitigate the surge,” HPAAC’s Dr. Aileen Espina told the press briefing in Filipino.

A workers’ group also noted the longer curfew was a burden to workers amid the obvious shortage in mass transportation. To an extent, I see the point in this. More public transportation options will help decongest the limited number of PUVs on the roads. At the same time, couple this with staggered working hours and work-from-home arrangements, then perhaps there will be a better dispersal of workers and less congestion in PUVs and offices during the work day.

More PUVs on the road will also help employers better manage resources as they forego more expensive private shuttles for their workers. Of course, it goes without saying that disinfection and distancing will have to be strictly enforced in all PUV modes.

Otherwise, more PUVs will just mean more ways for the virus to travel.

Managing the “surge” will be a tough balancing act for the government. Not even the most efficient vaccination program can beat COVID-19’s present reproduction rate. And, only time will tell if OCTA projections — 20,000 cases daily by mid-April — will happen.

Amid all these uncertainties, the only thing sure is that “surge” will take its toll on the economy.

 

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

matort@yahoo.com

Behind the 8-Ball

THE VALUE of time is diminished with a lack of foresight.

Test. Treat. Trace.

Underwhelming national testing capacity until mid-June 2020. Not enough rooms at the inn till mid-August.  Delayed tracing ramp-up till eight months after pandemic onset.

The most severe lockdown strategy in Asia and counting.

Inexplicable rejection of the initial Pfizer vaccine offer, with multilateral funding, which went to Singapore. Confused National Government instructions that diminished private sector initiative to negotiate for limited supplies.

Last to get vaccinated in Asia. (In the meantime the US has jabbed the equivalent of three-quarters of our population in three months.)

Finally — we have legislative proposals to get the proper anticipatory Infectious disease management system in place — creation of the Disease Prevention and Control Authority, the Medical Reserve Corps, the Magna Carta for barangay health workers. Catching up to the next pandemic, a global routine with a historically short-lived memory.

And now we have four months to logistically prepare for — hopefully — a deluge of vaccines in the second half of the year so we can inoculate maybe half our 70 million adult population — or stretching the case, all of it. Based on contracts out there, there is the initial 25 million from Sinovac dribbling in, 30 million Covavax from the world’s largest vaccine manufacturer, the Serum Institute of India, and Moderna orders of 13 million from the Philippine government and 7 million from the private sector.

Gutsy Indonesia launched in February with Sinovac, seeking to inoculate 181 million people in 15 months. They have an archipelago of 17,000 versus our 7,000 islands, a population 2.5 times ours.  Why not? Why wait till 2023 to finish the process?

In the meantime, with the infectious South African, UK, and Brazilian variants here and counting, we need PhilHealth to pay its outstanding bills and the strategic PPE reserve to be replenished for hospitals to have the financial resources to ramp up treatment capacity again. Unfortunately, we don’t see a PhilHealth recap on the horizon yet.

The World Bank’s 2018 logistics performance index ranked the Philippines as 60th globally.  This compares with Indonesia (46th), Malaysia (41st), Vietnam (39th), Thailand (32nd), Singapore (7th). Don’t forget to stock up as well on the needles and syringes necessary for the next vaccination step. Prices are rising, supply is short.

And remember, if you are worried about efficacy, and don’t trust the science enough when it comes to preventing anaphylaxis and death, nobody has said yet that you can’t have a third jab. Or trust that science will create modified vaccines for the next virus variant round. Ask Bill Gates.

Quo vadis, Pilipinas?

 

Jose Xavier B. Gonzales is the Chairman of The Medical City.

Scanning the media

NOT TOO LONG AGO, when traditional media still ruled (before the term “printosaurus” was coined), there was a service available to companies, celebrities, and politicians that tracked any mention of them, good or bad. Every morning, the “clippers” would scan the print media and literally cut out news items mentioning their “client.”

The objective of the exercise was to address controversies and get a reading of the public perceptions of the client, as well as the effectiveness of its PR machinery. The latter tracked media value of coverage in terms of the equivalent space or air time for paid ads.

With the dominance now of digital media with its fake news, trolls, influencers, and real-time comments, the clipper, now more aptly named “scanner,” has his or its (robots or algorithms can do the job) thumbs full.

Instead of bulky clippings in a folder, the more likely data scan comes in the form of colored pie charts or graphs for a quick visual rendition. Often it also tracks the competition with a different color. Reaction time too has been collapsed to minutes rather than days.

The same distortion from the “spotlight fallacy” applies to those who scan the news for any mention of themselves or their companies. This behavioral bias refers to misplaced concern that we are always under scrutiny, or “in the spotlight.” (Is everybody looking at my mismatched socks at the socially distanced party?)

There is the feeling (mostly unfounded) that there is an obsession with a subject, only because of the biased or skewed selection of news items or posts. The client going through the scans wonders why the media is obsessed with him. His selective perception, defined by the bundled posts, skews his own self-perception. What is unscanned is ignored unless brought up by others with a different set of scanners.

What about the opinions and posts of subjects that do not relate to the “interested party”? Is this simply ignored? Is a real perspective then lost when undue attention is consumed only by related news?

Of course, the subjects themselves don’t always need scanners as they are consumers of social media too. Friends in their chat groups can refer items they may have missed. It’s a very decentralized consumption of news.

Here’s the catch. Those in the business of attracting the attention of targeted subjects have a business model to follow. It is, after all, a business in the digital world to gain and increase “followers” as well as address personalities or companies sensitive about their reputation. Aren’t they willing to pay reputation-builders to enhance their brand? Conversely, will they be addressing unfavorable posts with some incentive to their being discontinued?

What about fake news directed at targets? “Attack journalism” is alive and well. The old basher’s axiom has a simple business model, known in the traditional tabloid media as AC/DC — Attack Collect/ Defend Collect. This is a sequential model, relating to a single agent.

The only saving grace for those relying on media scan to check their standing in the public perception is attention span — how long a news consumer can stay with the same topic. If traditional media (print, radio, and TV) measured public interest in one issue, like corporate failures or celebrity scandals, in terms of days (usually a week), does digital media attract a shorter attention span?

Internet surfing tracks attention span in terms of “engagement.” And this is measurable. The thumb flick to another subject or site of possibly greater interest is triggered within six seconds.

What gives news, good or bad for certain subjects, a longer engagement are reactions and clarifications. In the case of sexual harassment, the popping up of one more new victim after a week can revive the prurient attention of the consumer. But even these news legs are given a shorter running track in social media. There are just too many topics coming up every six seconds.

Unfortunately, in these times of influencers, trolls, and dedicated wrecking crews, it is not enough for companies and individuals to be generous in their contribution to social upliftment. So much corporate generosity has been expended in these pandemic times to import vaccines, protect employees, and set up testing facilities for adopted communities.

There is always a chink in anyone’s reputational armor, never too small to be exploited. Those casting stones don’t bother to check if they are without sin themselves. The integrity of an accuser is not even an issue. It’s how loud or widespread the attack is. 

 

Tony Samson is Chairman and CEO, TOUCH xda

ar.samson@yahoo.com

Phoenix and Blackwater to give late picks a shot at roster spots

By Michael Angelo S. Murillo, Senior Reporter

THE Phoenix Super LPG Fuel Masters and Blackwater Bossing are out to shore up their roster for the coming Philippine Basketball Association (PBA) season and looking at every option they have, including tapping the late picks they have in the recent rookie draft.

Among the busier teams in the draft proceedings last weekend, both the Fuel Masters and Bossing were pleased with the selections they had, and now in the process of evaluating where these players fit in.

Phoenix picked Letran’s Larry Muyang seventh in the opening round then Fil-foreigner Nick Demusis (18th) and Aljun Melecio (19th) in the second round.

It then got Reymar Caduyac (third round), Max Henstchel (fourth round), and Jerie Pingoy (fifth round) after.

For Fuel Masters coach Topex Robinson, all the players they got from the draft will be evaluated and given the chance to get a crack at a roster spot.

“Everyone deserves a chance. Now that I’m a coach, it’s my opportunity to give chance to others,” the Phoenix coach, the 44th pick in the 2001 rookie draft, was quoted as saying by pba.ph.

Added focus was given to Mr. Pingoy, who was emotional after hearing his name called in the fifth round of the draft.

Mr. Pingoy’s basketball journey has been a roller-coaster one, including transferring schools in college, which did not allow him to showcase what he could as a player after being a high-profile juniors recruit.

“I can’t guarantee anything to (Jerie) Pingoy because everything will depend on the choices that he will make,” the coach said.

The same applies to the others, Mr. Robinson reiterated.

BOSSING
Meanwhile, Blackwater is also having the same approach as they address its needs.

The renamed Bossing team did not have a pick in the first round but had two in the second, which they used to get Rey Mark Acuno (14th) and Joshua Torralba (15th).

Blackwater selected Andre Paras, son of PBA legend Benjie, in the third round, Jun Manzo (fourth), Kim Bayquin (fifth), and Jeson Delfinado (sixth).

Mr. Paras, Bossing coach Nash Racela said, is an interesting prospect.

“We’re hoping to get a get big man in the third round and suddenly, he became available for us so we got him,” Mr. Racela shared of the 6’4’ Paras on the official PBA website.

“We actually invited Acuno and Paras to work out with us and we saw what they could do,” said the Blackwater coach as they try to fortify their new-look roster.

The PBA is now targeting to begin its new season on April 18 pending approval from the government over health and safety concerns in relation to the pandemic.

The Ynares Center in Antipolo City is being eyed as a potential venue for the season.

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