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DA to press for release of P2 billion for quarantine inspection facilities

AGRICULTURE Secretary William D. Dar said that the Department of Agriculture (DA) will be requesting in January the release of P2-billion in funds budgeted to set up border quarantine facilities in selected ports of entry.

“Yung budget, Cabinet has approved. Yung plano ready na. Sinubmit na namin sa DBM (Department of Budget and Management), so by January magre-request na kami ng release ng budget worth P2 billion, P400 million kada facility (The Cabinet has approved the budget. The plan is ready. We submitted it to the DBM, so by January we will request the release of the P2-billion budget, P400 million for each facility),” he said at a news conference held in Quezon City.

These facilities will be located at the ports of Manila, Batangas, Bataan, Cebu, and Davao, and will perform tests on all imported agricultural products, as regulated by the Bureau of Animal Industry (BAI), National Meat Inspection Service (NMIS), Bureau of Plant Industry (BPI), and the Bureau of Fisheries and Aquatic Resources (BFAR).

The secondary purpose of the quarantine facilities is to deter smuggling.

“It’s an integrated facility… it’s a multi-commodity facility where our quarantine people can do their proper work,” he said.

Two cargo containers were flagged at the Port of Manila in October which turned out to contain pork products, among others, from China, an African Swine Fever (ASF)-infected country. These were “misdeclared” as tomato paste and vermicelli.

“We do not have the facilities to store in an area para mabulatlat lahat. Ang problema naka-paloob yung mga karne as per mga nasabat na mga smuggled items. Nasa loob, nakatago (We do not have the facilities to store items where they can be fully inspected. The problem is that smuggled meat is hidden inside shipments of other goods),” he said. — Vincent Mariel P. Galang

PDEx maintains P350-billion bond listing target for 2020

THE Philippine Dealing & Exchange Corp. (PDEx) said it maintained its 2020 bond listing target at P350 billion while digitizing the documentation process for bond issues.

PDEx President and Chief Operating Officer Antonino A. Nakpil, asked about the exchange’s target for next year, told BusinessWorld on the sidelines of the listing ceremony for BPI Family Bank’s maiden bond issue last week: “The same level, at least…. P350 billion again for next year.”

In his speech at the ceremony, Mr. Nakpil said that bond listings in the year to date have hit P363.3 billion, up 41.7% from the P256.4 billion for all of 2018.

“For banks really there’s an economic push for them. With regard to the reserve requirements (for bonds)… the regulation of the Bangko Sentral (ng Pilipinas) is very conducive,” he told BusinessWorld.

The bank’s president Maria Cristina L. Go also told BusinessWorld that the central bank’s decision to decrease the reserve requirement for bonds to 3% has also been factored into the bank’s maiden bond issue.

“We’ve been planning to really go to the capital markets maybe as early as the middle of the year. We got approval from the board to issue bonds, because there was a lowering of the reserve requirements for bonds to 3%. So in October, we got approval,” she told BusinessWorld on the sidelines of the listing ceremony.

The bond tenor is 2.5 years with a 4.3% coupon payable quarterly.

Aside from BPI Family, Asia United Bank also listed its maiden bond issue in November that raised a total of P7 billion, after the initial plan to raise P3 billion was oversubscribed.

In October the BSP decided to slash the reserve requirement for bonds issued by banks and quasi banks (QBs) by 300 basis points from its then level of 6%. The central bank said that the move was expected to reduce bond issuers’ intermediation cost, savings which could then be passed on to holders of such securities.

Mr. Nakpil said the digitization process is under study.

“We’re also exploring means to digitalize issuer transactions with PDEx across the areas of listing, trading and disclosure activities,” he said in his speech.

He noted that major developments this year on the registry front include “fully electronic applications and submissions from the selling agent to the registry” for bank bond issues.

“We look forward to establishing fully paperless transactions as the norm in the primary market activity,” he said. — Luz Wendy T. Noble

SC rejects bid to nullify reclaimed land sale to MBDC

THE SUPREME COURT (SC) has dismissed a petition seeking to nullify the sale of land to Manila Bay Development Corp. (MBDC) in 1988 for P472 million.

The petition for prohibition and mandamus was filed last year by SAGIP Party-list Rep. Rodante D. Marcoleta, covering land in Parañaque City sold by the Philippine Reclamation Authority (PRA) to MBDC.

The 410,467 square-meter site located along Roxas Boulevard, Seaside End is otherwise known as Central Business Park II. Over time, the land was divided into 15 titles: eight belonging to MBDC, three to government-owned corporation Light Railway Transit Authority (LRTA) and four now with PRA.

Mr. Marcoleta wanted the government to recover the properties under MBDC and LRTA, claiming the land sold is “inalienable land of public domain.”

In an eight-page Notice of Resolution dated Dec. 10 released recently, the court said Mr. Marcoleta has no standing to seek the nullification of the land sale.

“Assuming that the sale of the subject land is indeed void for the reasons mentioned by petitioner, the appropriate suit to bring is for the reversion of such land back to the mass of public domain,” the notice read.

“Such suit, however, can only be filed by the State — the original owner of such land — through the Office of the Solicitor General,” it said.

The high court also said that the subject land is “not an inalienable land of the public domain outside the commerce of man.”

“The subject land, it must be pointed out, is land completely reclaimed pursuant to the MCRRP (Manila-Cavite Coastal Road and Reclamation Project) and which has been titled in the name of PRA by special patents issued by then President Corazon C. Aquino under the aegis of PD No. 1085,” according to the resolution.

The court also rejected the petitioner’s claim that the sale transaction between PRA and MBDC is void without a valid contract, in the absence of a technical description of the land sold.

The court ruled that the absence of technical description in the Deed of Sale does not mean that the transaction does not refer to an object certain. It also said that the parties use adequate descriptions such as designating the land “Central Business Park II.”

It ruled it cannot outright cancel the and titles held by MBDC and LRTA.

“Even assuming the fact that the sale of the subject land to the MBDC may be regarded as prima facie unconstitutional, the latter must still be afforded an opportunity to present evidence in defense of its title in an appropriate proceeding,” the court said.

“It must be stressed that MBDC has held title over the subject land, uninterruptedly and without incident, for over three decades until the present action,” it added. — Vann Marlo M. Villegas

On purpose, passion and possibilities

Whenever the calendar year winds down, many among us find it an opportune moment to reflect and reevaluate the last 12 months. We recall the challenges we faced, revisit the dramatic changes in the business landscape, and ponder how we, as individuals and organizations, have grown and evolved. We have seen how companies have shifted their focus to global trends and technologies, how people are taking on new jobs that didn’t even exist a few years ago, and how the challenges of sustainable development have become the top priority for organizations.

At the start of 2019, I wrote about how the SGV team recommitted itself to the firm’s collective purpose to nurture leaders and enable businesses for a better Philippines. I described how purpose motivates people, becoming the primary driver of strategy and transformative development in every aspect of business. Purpose can empower individuals and teams by creating a deep sense of meaning that enhances personal commitment and energizes them with the power of positive action. Purpose is like having an internal compass, one that guides a person’s every action by never compromising values. At the same time, people who believe in and are proud to be part of an organization go the extra mile and tend to be at their creative best.

Becoming a purpose-driven organization is one thing, however. Sustaining that purpose for the long term is another. How, then, can organizations ensure that its people and culture will remain steadfast in its chosen purpose?

ALIGN YOUR PEOPLE TO YOUR PURPOSE
For a purpose to work, it is vital for the organization’s people, culture, work practices and leadership behavior to be aligned with it. Think of your purpose as your road map — those travelling on the road will need to adjust their course if they wish to remain on track. The truth of your purpose needs to permeate every aspect of your business. Purpose has to be a living covenant.

When SGV launched its purpose, we asked our people if they were willing to commit to the purpose and journey together to live it out. Each member wrote his or her commitment and placed it on a visual map as a symbolic reference. They were also encouraged to integrate our purpose with their own personal career journey, and internalize how such a purpose could energize and validate their progress, from initial recruitment to their continuing professional growth to their involvement in our CSR programs. Eventually, we see our people carrying our purpose with them even if they continue their journeys outside SGV as alumni.

Speaking of recruitment, purpose-driven organizations also need to consider adjusting their metrics for hiring people. Most companies hire for talent, skill or potential. Purpose-driven companies also hire for values, taking into consideration whether a candidate’s values align with those of the organization.

STEER YOUR PURPOSE
Simply declaring a purpose is not enough. Organizations need to have leaders who will set the pace for positive change by transforming the organization’s culture and ways of working to become more purpose-led. Purpose should not be the sole responsibility of one leader in the organization, it needs to be supported by the collective will and wisdom of various stakeholders. In SGV, a steering committee (aptly named the Purpose Council) meets regularly to identify areas for improvement and design programs to continually ensure that our practices reflect our purpose.

COMMUNICATE AND DEMONSTRATE PURPOSE-DRIVEN CONDUCT
As with any transformative program, constant communication is key. An organization’s leaders need to actively and constantly communicate the company’s vision and encourage people to embrace the meaning behind the purpose on a personal level. Leaders not only have to “walk the talk” when it comes to purposeful behavior, but they also need to regularly keep the channels of dialogue open. We continue to sustain our purpose through regular, inspirational internal communications from leaders and partners to further strengthen our people’s collective resolve.

HELP YOUR PEOPLE FIND THE PURPOSE ‘SWEET SPOT’
Leadership advisor Peter Fisk references an interesting duality between passion and purpose, which he attributes to Ha Nguyen of Omidyar Networks. Passion, he says, is about finding yourself. It’s about doing what you love and possibly building your life and career around it. Purpose is about losing yourself in something bigger than you. It’s about wanting to make a difference, to leave a lasting and meaningful legacy. Finding one’s passion may not always have purpose and finding one’s purpose may not necessarily fit one’s passion. However, for those individuals who can both do what they love while serving the greater good, that is where true fulfilment lies.

I wish to take this opportunity to share with our readers how fortunate I had been — that in my 38 years of working with SGV — I had personally found deep fulfilment in the unique intersection between my passions and our purpose. As I turn over SGV’s leadership to Wilson P. Tan, the next SGV Country Managing Partner, I am excited about the limitless possibilities of a fresh, new decade with full confidence that SGV’s Purpose will thrive and endure for generations of SGV professionals yet to come.

A Merry Christmas and a purposeful 2020 to all!

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

 

J. Carlitos G. Cruz is the Chairman and outgoing Country Managing Partner of SGV & Co.

GMA Network fined almost P1 million for actor Garcia’s death

THE Labor department fined broadcast company GMA Network, Inc. P890,000 for violating work safety standards during the taping of a show where a veteran actor fell and eventually died.

The network was fined P810,000 for failing to report the late actor Eddie Garcia’s accident on time and P80,000 for failing to hire a first-aid personnel and safety officer at the time of the filming, according to the agency’s Dec. 2 order that was made public on Sunday.

GMA was made jointly liable with Alpha Premier Transport Services, Gapo Special Effects Services, Inc., GMA-7 Employees Multi Purpose Coop., Renteqaire Enterprises, CMB Film Services Inc. and Shoot Digital Video Co.

In a statement released on Monday, GMA said it had appealed the ruling to Labor Secretary Silvestre H. Bello III seeking its reversal. “GMA will proceed with the necessary steps as soon as the DoLE resolves its appeal,” it said.

GMA failed to report the actor’s accident within 24 hours as required by law, according to the order. The network also did not have any available first-aid personnel and safety officer during the taping.

A closed circuit TV video showed Mr. Garcia being carried by people, without a stretcher, after he tripped on a cable wire and hit his head on the pavement during a shoot for his TV shot on June 8. He did not get any first-aid treatment, the Labor department said.

He was rushed to a hospital in Tondo, Manila and was transferred to the intensive care unit of a Makati hospital after he remained unconscious.

It was initially announced that the 90-year-old actor suffered a heart attack but his doctor ruled this out. He was later found to have suffered a neck and cervical fracture due to the fall.

In September, GMA Network said in a statement that its set location was not covered by the requirements of a “workplace” described in the Occupational Safety and Health (OSH) Law.

A workplace is considered a location where employees’ services are regularly rendered, as opposed to shooting locations that are temporary, the network said.

The Labor order, however, noted that GMA was “duty-bound to observe and implement occupational safety and health standards in all its workplaces” including all of its shooting locations. — Gillian M. Cortez

Motorcycle operator warns of job losses after cap on bikers

A MOTORCYCLE taxi operator on Sunday warned of job losses after the land transport regulator capped its service bikers to 10,000 from 27,000.

Angkas bikers, commuters and transport advocates came together in Quezon City to protest the government decision.

The Senate may investigate the policy, Senator Maria Imelda Josefa “Imee” R. Marcos, who took part in yesterday’s protest, said in an interview.

“There is no more reason why we should not legitimize Angkas and other ride-hailing bikers,” she said.

In a statement at the weekend, Angkas said it was forced by the Land Transportation Franchising and Regulatory Board (LTFRB) to trim its pool of bikers to 10,000 from 27,000.

The government’s technical working group had extended its pilot run of motorcycle taxi services for six more months, but set an equal cap among three providers: Angkas, JoyRide and Move It.

The three must split the new limit of 39,000 bikers among them, with each being allocated 10,000 bikers for Metro Manila and 3,000 bikers each for Cebu City.

Angkas was the sole service provider during the initial six-month trial run, in which 27,000 of its bikers participated.

“That’s a compromise to the quality of service you can expect, and a direct blow to over 17,000 Filipino families,” Angkas said, referring to bikers that will be excluded from the extended pilot run.

The company will appeal the LTFRB decision, said George I. Royeca, regulatory and public affairs head at Angkas.

He cited “irregularities” in the LTFRB ruling, and both Houses of Congress should investigate this, he said.

“We were kept in the dark,” Mr. Royeca said. “We don’t know what is the rationale behind many of the provisions,” he said in an interview. — Denise A. Valdez and Arjay L. Balinbin

House OK’s six of 15 priority bills before holiday break

THE HOUSE of Representatives approved six out of 15 priority bills that President Rodrigo R. Duterte had outlined in his 2019 state of the nation address before Congress goes on a Christmas break.

These are the measures that will postpone the May 2020 village and youth elections, create a Department of Overseas Filipinos, simplify taxation for passive income earners, lower corporate income tax, standardize government salaries and set up a Department of Disaster Resilience.

Still unapproved are bills that will reinstate the death penalty for henious crimes, create a magna carta for villages, trim the government bureaucracy, establish a Water department and modernize fire protection.

Also pending are measures that will rationalize land use, allot coconut levy funds to farmers, boost national defense and require students to undergo military training.

Both chambers of Congress also ratified the P4.1-trillion national budget for 2020, which House Majority Leader and Leyte Rep. Ferdinand Martin G. Romualdez said was “one of the highlights” of both chambers.

“We were able to steer the approval of the 2020 national budget in record time through creative initiatives never before experienced in the House of Representatives,” he said.

Mr. Romualdez also cited the swift passage of tax reform measures that seek to promote the country as a “viable investment destination.”

The House of Representatives also passed on third and final reading a bill lowering the retirement age of government workers to 56 from 60 years. — Genshen L. Espedido

Davao City Health Office gets DoH funding support for own building, health centers

THE DAVAO City Health Office (CHO) will be having its own building with 75% of the construction cost to be covered by the Department of Health (DoH). The city council gave authority last week to Mayor Sara Duterte-Carpio to sign a memorandum of agreement with the national agency for several key projects, including the P60-million CHO building. CHO is currently renting space at a building across the city hall. The other projects include purchase of 16 ambulances, each costing about P2.5 million, and the repair of three health centers with a total budget of P3 million. — Carmelito Q. Francisco

Pototan: Town of rice and lights

EVERY CHRISTMAS season for over two decades now, the town of Pototan, considered as the rice granary of Panay island, puts on a grand lights display that has also earned it the title as the region’s Christmas capital. Mayor Rafael Enrique P. Lazaro narrates that the tradition was actually started back in the 1960s by then Mayor Manuel “Quedo” Parcon. “During that time, he installed colored bulbs all over the town to spread the joyous spirit among the residents of Pototan,” Mr. Lazaro said in a phone interview. But an energy crisis during the Martial Law years under Marcos in the 1970s forced the local government to give up the annual adornment. It was revived in the 1980s and in 1997, the tradition was institutionalized through the establishment of the festival called Iwag, a multi-layered Hiligaynon word that means “to light.” “For the festival to be sustained and institutionalized, the local government and the private sector worked together and came up with Iwag Festival. Since 1997 up to now, the festival has been going on for 22 years already,” Mr. Lazaro said. Aside from the lights display, the two-week festival, on this year from Dec. 15 to Jan. 2, features nightly shows, a food fair, and a carnival. “The festival is really one of our major economic activities because it provides livelihood to the vendors, tricycle drivers and the residents of Pototan. Through the bazaars and agri-fairs, we can also promote our products,” he said. Pototan, located about 30 kilometers north of Iloilo City, is classified as a first-class municipality with agriculture as its main industry. About 65% of its over 9,700-hectare land area is used as rice farms. — Emme Rose S. Santiagudo

Tropical storm Ursula intensifies as it nears Visayas, Mindanao

TROPICAL STORM Phanfone, which will have the local name Ursula when it enters the Philippine area possibly on Monday morning, has intensified with maximum sustained winds of 65 kilometers per hour (km/h) and gustiness of up to 80 km/h, weather agency PAGASA reported on Sunday. Meanwhile, the low pressure area in Mindanao has dissipated as of Sunday morning. Ursula is seen to make landfall between the Eastern Visayas and Caraga areas on Tuesday, Christmas eve. It is expected to traverse the Visayas islands and affect the central to northern parts of Mindanao as well as southern Luzon, including Metro Manila during the week. The tropical storm’s center was located 1,365 km east of Mindanao as of 10 a.m. Sunday.

Water woes

Second of two parts

This continues the discussion started on Dec. 16 on aspects of the Concession Agreements (CA), which have been tagged as “onerous” and “grossly disadvantageous” by the administration.

2. On the supposed illegal extension of the contract to 2037

The extension of the original contract is allowed under the CA and by law. This had been the subject of analysis and review in government for over a year in 2008/09: at the Metropolitan Waterworks and Sewerage System (MWSS) all the way to the Board; by the Department of Finance under Secretary Gary Teves, assisted by Undersecretary Jeremiah Paul and Director Soledad Cruz; by the Department of Justice under Secretary Raul Gonzales and Government Corporate Counsel Al Agra. It was also presented to the full cabinet and went through public consultations before final approval by President Gloria Macapagal-Arroyo.

The rationale for the extension is compelling:

a.) New waste water requirements set by the Clean Water Act and later by Supreme Court mandamus requiring 100% or full sewerage coverage for the concessions, and thus more investments for these;

b.) Tariff rate impacts had to be mitigated. By extending the contract through 2037, there is a longer period of recovery of these long life investments, and thus lower annual tariff adjustments.

3. On the recoverability of the corporate income taxes from tariffs:

Much ink and paper have been spent on this subject in the course of the arbitrations.

Let me strip it down to the basics.

a.) All firms in any business, be it burgers or water service, look at after-tax returns when they decide to invest.

b.) Considering this, the framers of the Concession Agreement allowed the investors to explicitly recover business taxes, as well as capital maintenance and investment expenditures efficiently and prudently incurred, and payments corresponding to debt service on the MWSS loans and concessionaire loans as part of its expenditures.

And for these to earn a rate of return after tax that is comparable to those of operators of long-term infrastructure concession arrangements in other countries having a credit standing similar to that of the Philippines. This rate of return, called “Appropriate Discount Rate” or ADR under the concession agreement, is a weighted average of the cost of borrowing and the return to equity, is REVIEWED AND RESET EVERY FIVE YEARS (emphasis mine) and arrived at using internationally accepted methodologies.

c.) If now the MWSS/ government changes its mind, as it did after 16 years of the concession agreement, or as a result of actions of courts past or prospective, and would not allow for corporate income taxes to be recovered via tariffs, then government is obligated to restore it in some other way to be faithful to (b). This was the verdict of the last arbitration panel that heard the Manila Water case.

Item (b) was how it was presented to the bidders in 1996, how it was implemented over the years until 2013, and how it was represented to the bidders again in 2007 when the west zone concession was rebid.

This was thus the basis upon which they gave their low water tariff bids. As the CEO of MWSS during the Ramos administration explained recently in his testimony at a hearing chaired by Senator Grace Poe: “income tax as part of the expenditures that the Concessionaires may recover from MWSS led to bids at lower water rates.” In the case of Manila Water, the bid in 1996 was around P2.32 per cubic meter vs the then prevailing MWSS rate of P8.78 per cubic meter.

Indeed, until the last administration (Aquino 2) came in, it was very clear to those appointed to the MWSS and the Regulatory Office that the ADR was an after-tax rate of return. It was also very clear to regulators and government authorities before the Aquino 2 administration that during the rate-rebasing process, there are only two ways to give the concessionaires an agreed upon after-tax rate of return. One is to use what is stipulated in the concession agreement, i.e., an after-tax rate of return and include the corporate income tax in recoverable expenditures. The other is to use a before-tax (and therefore higher) rate of return and exclude corporate income taxes from the set of recoverable expenditures.

The second methodology was not given as an option in the concession agreement but is equivalent to the first, i.e., it can be shown numerically that the two methodologies will result in the same tariff. Hence, if government now wants to remove corporate income taxes from allowable recoverable expenditures, the simple solution is to adopt the second methodology from hereon. This is similar to how other regulatory regimes do it.

4. On termination

This leads me to a final point, the consequences of a unilateral termination of the contract. Not being a lawyer, and based only on my recall of PPP (Public-Private Partnership) contracts in general, MAGA, or material adverse government action, obliges government to indemnify the private parties for actions it takes that harm, prejudice, or impair the rights and reduce the benefits of investors, i.e. shareholders and creditors. In this respect, the Performance Undertaking of the Republic is key — it guarantees performance of MWSS in accordance with the CA. The CA is truly the only real asset of the two concessionaires and upon which creditors rely; their loans do not enjoy concessionaires’ parent company guarantees.

Thus, if Government disregards its obligations under the CA, banks need to protect deposits by suspending disbursements of loans to the concessionaires. This will inevitably disrupt construction of projects meant to address looming water shortages.

Down the road, it will compound the burden on the tax paying public of future snowballing arbitration awards. And much worse, it will devalue the worth of government’s contractual commitments.

This cannot but prejudice government’s Build, Build, Build program at a time when it has been gaining momentum. Besides infrastructure PPP, all other local and foreign investments that depend on the stability of government’s commitments will be hurt. Already we have seen values of shares drop sharply in the stock market, not just of concessionaires, but all firms that are highly exposed to political and regulatory risks, thus dampening investment appetite.

This is most ill timed. Now that opportunities are being opened up by the regional dispersion of foreign direct investments (FDI) due to the US-China trade wars, and in light of notable achievements of the Duterte administration in nurturing a more investment-friendly environment to create more jobs and improve our people’s lives. These wins include the robust macroeconomic conditions, 30 places rank improvement in the IFC World Bank ease of doing business index, wide ranging reforms in the tax system, the passage of the Bangsa Moro Act, the Rice Tariffication Act, the Ease of Doing Business Act, and many more. We might as well also say goodbye to the aspired for A credit rating by 2022 of Finance Secretary Carlos Dominguez III and Central Bank Governor Benjamin Diokno.

Beyond these, I shudder to think about the future of the water system in Manila should the government continue on this termination course. Heaven deliver us from a repeat of the pre-1997 water service quality courtesy of MWSS. Their continuing decades-long failure to develop any new raw water source, even to start on a new one, hardly inspires renewed confidence. (Those of us old enough can already hear echoes of the plaintive cries of the ’90s — “Tubig!”)

Let me conclude with a quote from a letter of President Fidel Ramos to President Rodrigo Duterte counselling prudence, as reported in the newspapers:

“To achieve all this, the private sector mobilized funding from both foreign and local sources depending on the word of the Philippine government that the essential conditions of adherence to the sanctity of contracts and rule of law must be observed, These are the pillars that hold together any agreement, be it between governments and/or the government and the private sector. Our word must be our bond.”

 

Romeo L. Bernardo was finance undersecretary during the Cory Aquino and Fidel Ramos administrations. He serves as a director in several listed company boards, including BPI and Globe Telecom, sister companies of Manila Water.

romeo.lopez.bernardo@gmail.com

Christmas 2019

Christmas is about love and peace. And hope.

Pulse Asia has a nationwide survey about the holiday season. For the past two years, the survey outcome has shown that Filipinos are overwhelmingly filled with hope. In December 2018, 91% of Filipinos said they were hopeful for the new year. In the survey conducted in December 2019, 93% of Filipinos responded that they face 2020 with hope. What is striking this year is that among the poorest of the poor (Class E), the number of those who have expressed hope increased significantly by 15 percentage points — from 76% in 2018 to 91% in 2019.

A less impressive but still encouraging outcome is that 48% of Filipinos said that this Christmas will be more prosperous for their family, while 11% of Filipinos said that they will be poorer, compared to last year.

An older survey from Social Weather Stations (SWS) — for the third quarter of 2019 — had a similar outcome. Those whose lives improved for the year made up 36% of adult Filipinos, but 25% said their lives worsened. Related to this, 46% of Filipinos expected their lives to improve in the next 12 months, while five percent expected their quality of life to worsen.

The Pulse Asia and SWS surveys yield similar results although one may note that perception during the Christmas season is brighter.

The self-rating or perception is consistent with the latest poverty estimates derived from the 2018 Family Income and Expenditure Survey (FIES). The FIES shows a significant drop in the number of poor. The number of poor people as a percentage of the total population fell from 23.3% in 2015 to 16.6% in 2018. The sharp decline is equivalent to 6.7 percentage points, which happened in a short period of three years.

This was different from previous episodes of growth, a pattern of growth that was accompanied by a slow decrease in poverty incidence or worse, a rise in poverty incidence. The sustained growth since 2012 (marked by a growth rate of 6% and above) has made an impact on poverty. But it is not growth per se, but the quality of growth — featuring an increasing number of wage workers in the formal economy — that explains rising incomes and spending and hence faster poverty reduction.

From the FIES, one can also obtain the income factors that explain poverty reduction. It turns out that the domestic remittances of workers employed in urban areas to their families in rural areas principally account for reducing poverty. Government cash transfers and overseas remittances also alleviate poverty, but not as big as the impact of domestic remittances.

This suggests that further strengthening industry, specifically manufacturing, is the key to faster poverty reduction. What seems ironic though is that rural economic activities even worsen poverty. Agriculture has been stagnant for so long.

But there is hope for agriculture. It may seem counter-intuitive that the recent rice tariffication policy will help agriculture, particularly our rice farmers. To be sure, the consumers (which include many farmers who are net consumers of rice) are benefitting from the lower rice prices. On the other hand, the rice farmers have lost incomes in the face of the entry of imported rice, which is more efficiently produced. The challenge thus is how to achieve much higher productivity.

The previous regime of quantitative restrictions only made everyone complacent. However, the commitment to compensate farmers for losses and to pour additional resources to improve rice productivity in the Philippines will translate into benefits. The tariffication program compels the government and the rice producers to enable bigger reforms that will redound to the farmers.

The economy now has momentum. Successive reforms, particularly the comprehensive tax reform that has given government much space to address binding constraints like infrastructure and human development, will sustain the performance.

Still, we face serious problems along the way. Rule of law is undermined as shown by the President’s arbitrariness and disrespect for contract enforcement. (The threat to disregard the international arbitration award that Manila Water obtained and to scrap the agreements with the private water concessionaries is most chilling for investors.) This has an adverse consequence on poverty reduction since investor confidence is a necessary condition for quality growth.

Economic performance ultimately has to serve the poor. The Christmas season makes this message all the more relevant and pronounced.

Christmas is about hope, especially hope for our poor. That Jesus, son of God, was born in wretched conditions — being homeless and settling in a cold manger — is symbolic of his being one with the poor.

Let’s realize the hope of the people for a much better future. Ahon Laylayan, the call of Vice-President Leni Robredo, captures the call of the times.

This is the message of Christmas, exemplified in the life of Jesus — He who gave hope; he who became one with the masses, he whose incarnation symbolized salvation from spiritual and temporal poverty.

 

Filomeno S. Sta. Ana III coordinates the Action for Economic Reforms.

www.aer.ph

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