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Philippine external debt ratio lowest among ASEAN peers

THE Philippines’ external debt relative to gross national income (GNI) is the lowest among its peer economies in the Association of Southeast Asian Nations, known as the ASEAN-5, according to the Department of Finance (DoF).

Citing data from the World Bank, the DoF in an economic bulletin said the gross foreign debt stock was 20.11% of GNI in 2019, from 19.98% in 2018.

Thailand’s ratio was 34.07% in 2019, followed by Indonesia with 36.85% and Malaysia with 64.59%. Data for Vietnam was not available but the DoF said Vietnam’s external debt was at 31.06% of GNI in 2018.

In a text message Sunday, Finance Undersecretary Gil S. Beltran, the department’s chief economist, said the ratio measures the debt burden carried by each country, reflecting its ability to pay back creditors and how much room they have to take on more debt.

“In the face of a slowing global economy and dampening of investment activities resulting from the COVID-19 pandemic, countries scramble for funds to fuel economic recovery. This is where countries’ overall debt scenario is crucial,” he said in the bulletin.

“While uncertainties abound, debt metrics are among the important indicators being watched by both domestic and international investors, along with credit rating agencies,” he added.

As a percentage of exports of goods and services and primary income, the foreign debt ratio fell to 54.4% in the first quarter from 54.8% a year earlier.

After the 1997 Asian financial crisis, the equivalent ratio was 106.1% in 2000.

“The relatively low external debt-to-GNI ratios attests to the government’s policy of sustaining its prudent borrowing activities,” according to the bulletin.

The central bank estimates that outstanding foreign debt rose 7.4% quarter on quarter to $87.45 billion at the end of June after the government increased its borrowing to fund pandemic containment measures. The debt was also up 4.6% from the start of the year.

“While the realities brought about by the health crisis have significantly changed the global economic and financial landscape, the government is steadfast in pursuing various reforms to raise much needed  revenue to stimulate the economy and at the same time enhance  the fiscal space,” the DoF said.

The government plans to borrow P3 trillion this year from domestic and foreign sources to plug the funding gap, which is expected to hit 9.6% of gross domestic product. It plans to raise 74% of the total from domestic lenders to minimize exposure to foreign exchange volatility. — Beatrice M. Laforga

TESDA, electronics industry developing certification standards

ELECTRONICS EXPORTERS are working with the Technical Education and Skills Development Authority (TESDA) to develop training standards and certification in the sector.

“It was recommended for TESDA… to explore the idea of establishing a public-private enterprise-based model for skills standard development and assessment,” TESDA Deputy Director General for Partnerships and Linkages Aniceto Bertiz III said in an online meeting Friday.

The partnership between Semiconductor and Electronics Industries in the Philippines Foundation, Inc. (SEIPI)  and TESDA includes the development of national competency standards and assessments, putting together a trainer and assessor pool, laying the groundwork for a certification system, and promoting worker entrepreneurship in the semiconductor and electronics industry.

Mr. Bertiz said that forming a national certification body would professionalize and standardize skills evaluation.

“Training regulations shall then be implemented under the enterprise-based program with SEIPI, identified partner company. Hence, target learners are the ones who can be immediately hired by SEIPI partner companies and organizations,” he said.

“However, TESDA needs the assistance of SEIPI to implement standards being developed for the particular sector. At the moment there are competency standards, training regulations, and assessment tools that are already developed for this sector which are not being implemented.” — Jenina P. Ibañez

Nuclear power possible by 2027, Energy dep’t says

NUCLEAR ENERGY could be helping power the grid by 2027 at the earliest, according to the Department of Energy (DoE).

“Gumawa po ng study ang DoE, in the year 2030, pwede na ipasok ang nuclear power in the energy mix (The DoE prepared a study which found that nuclear power can enter the energy mix in 2030),” Energy Assistant Secretary Gerardo D. Erguiza, Jr. said, referring to the findings under the Philippine Energy Plan.

However, under an optimistic scenario, nuclear power could be launched “as early as 2027,” he said.

At a virtual industry gathering Saturday, Energy Secretary Alfonso G. Cusi declared that the “time is ripe” for the Philippines to pursue nuclear power.

“The DoE considers nuclear energy as a long-term energy option and part of its strategy to address energy security through the diversification of energy sources,” he said in a message read by Mr. Erquiza.

President Rodrigo R. Duterte in an executive order issued in July ordered an inter-agency body led by the DoE to determine the viability of nuclear power and review current policy.

Mr. Cusi in August told reporters that he expects the government to adopt a national position on nuclear energy by the end of 2020.

The fastest way to reintroduce nuclear power is by reviving the mothballed 621-megawatt Bataan Nuclear Power Plant (BNPP), which the president also ordered to be reviewed, according to Carlo A. Arcilla, director of the Philippine Nuclear Research Institute of the Department of Science and Technology.

“Pag binuksan ang BNPP, $1 billion lang ang cost. Two-three years na operation, mababawi na ang cost of importation dahil sa coal savings (If the BNPP becomes operational, it will cost $1 billion. That will pay back after two or three years from the savings on importing coal),” Mr. Arcilla said at the same event.

He noted that around $6 billion is needed to build new baseload nuclear facilities.

No new nuclear plants are expected to come online over the next decade due to the high capital costs and safety considerations, analysts said.

“We maintain our forecast that no nuclear capacity will come online in the country over the coming decade, and will only seek to revise it if we see concrete project developments going forward,” Fitch Solutions Country Risk and Industry Research said in a recent commentary.

Meanwhile, Mr. Erquiza said it was important to lay down the legislative and regulatory frameworks to attract investors. At present, six measures on nuclear power are pending in various House committees, while an old Senate bill has yet to be refiled.

Alpas Pinas, a group of nuclear energy advocates, expressed the hope that Senator Ralph G. Recto, who joined the conference, will help refile the measure.

“To ensure that when planning out our energy needs, nuclear should be included as soon as possible. It takes a decade to build a plant, maybe even longer, and we have to start immediately,” Mr. Recto said.

The Philippines is close to fulfilling the 19 requirements prescribed by the International Atomic Energy Agency for countries seeking to develop nuclear energy, Mr. Cusi has said. — Adam J. Ang

New natural gas depots needed as Malampaya terminal gets depleted

THE PHILIPPINES needs immediate alternatives for the loss of Malampaya natural gas to avert power outages in the next few years, a legislator said.

Senator Sherwin T. Gatchalian said in a statement Saturday that the energy sector is in a “race against time.”

“We’re racing against time. If we fail to act now, we could be experiencing anew debilitating rotational brownouts by 2024 once our supply from the Malampaya gas field is depleted,” he said.

Mr. Gatchalian said LNG terminals “should be in place” before the supply of Malampaya deepwater gas runs out.

The Department of Energy (DoE), which has also expressed its intent to allow the entry of natural gas imports, has received four applications for LNG terminal projects. The proponents are the Lucio Tan group alongside Blackstone Group affiliate Gen X Energy; First Gen Corp. and Tokyo Gas Co. Ltd.; US-based Excelerate Energy; and Energy World Gas Operations Philippines, Inc.

The Government is seeking to make the Philippines an LNG hub in Southeast Asia and is pursuing public-private partnerships to explore and develop indigenous natural gas.

In early September, the DoE promoted its investment guide to potential LNG investors at a webinar hosted by the United States Agency for International Development.

Mr. Gatchalian, who heads the Senate energy committee, filed a measure outlining a national policy and framework for the development and regulation of the midstream natural gas industry. Senate Bill No. 1819 governs the transportation, transmission, storage, and marketing of LNG.

“The proposed Midstream Natural Gas Industry Development Act will encourage private capital and foster an open and fair competitive market while at the same time ensure safe, reliable and environmentally responsible operation of LNG terminals,” Mr. Gatchalian said.

Year to date, the Philippines has produced 73,388 million standard cubic feet (mmscf) of natural gas, with consumption at 69,856 mmscf, according to the DoE.

The Malampaya project under Service Contract 38 is run by a consortium led by Shell Philippines Exploration B.V., which holds a 45% interest there. Dennis A. Uy-controlled UC Malampaya Philippines Pte Ltd. owns another 45%, while the Philippine National Oil Co.-Exploration Corp. (PNOC-EC) holds 10%.

Last year, the gas field accounted for the generation of 3,200 megawatts of power, or 21.1% of the total. — Adam J. Ang

Simplifying share valuation

The COVID-19 pandemic may have unwittingly triggered acquisition activity as private equity investors demonstrate an increased appetite for Philippine companies. Despite the expected economic slowdown, investors continue to look for opportunities, with many entities needing sufficient capital to sustain their businesses.

Whether it be due to corporate restructuring or a simple divestment, the sale or transfer of shares of stock in a domestic corporation remains a routine commercial transaction.

Under the Tax Code, the sale, barter, exchange or transfer of shares in a domestic corporation, not traded on the stock exchange, is subject to capital gains tax and documentary stamp tax. Donor’s tax may also be imposed if the consideration for the transfer of the shares is below fair market value, though amendments to the Tax Code by the TRAIN Law emphasizes that the sale, transfer, or exchange of property made in the ordinary course of business will be considered as made for an adequate and full consideration.

As such, the Department of Finance (DoF), on the recommendation of the Bureau of Internal Revenue (BIR), recently issued Revenue Regulations (RR) No. 20-2020 effective Sept. 3, which simplified the process of determining the fair market value (FMV) of shares of stock for sale, exchange, or transfer.

RR No. 20-2020
Under RR No. 20-2020, the FMV of common shares is prima facie equivalent to the book value based on the latest audited financial statement (AFS) prior to the sale, but not earlier than the immediately preceding taxable year. For preferred shares, the FMV is set at the liquidation value equivalent to the redemption price as of the balance sheet nearest the transaction date, including any cumulative and preferred dividends in arrears.

If the investee corporation has both common and preferred shares, the book value of the common shares will be derived by deducting the liquidation value of the preferred shares from the equity and dividing the result by the number of the issued and outstanding common shares. Thus, RR No. 20-2020 underscores the difference in the valuation for common and preferred shares, given the nature and rights of each class of shares.

This clarity on the valuation of preferred shares is a welcome development since, for the longest time, previous rules did not provide details in determining the FMV of preferred shares.

NET BOOK VALUE ADJUSTMENT
Prior to the effectivity of RR No. 20-2020, FMV was determined following the provisions of RR No. 6-2013. The 2013 regulations prescribed that to determine the FMV of shares of stock, the book value of the shares, based on the investee corporation’s (corporation selling shares) latest AFS, must be adjusted to take into account the actual FMV of the real properties owned, if any, by the investee corporation.

This net book value (NBV) adjustment requires, among others, the actual valuation of the real property by an accredited appraiser and the tax declaration of the real property as issued by the City or Provincial Assessor. The highest FMV of the real property (among the appraisal report, the tax declaration, or the BIR’s zonal value) will be used to adjust the book value of the shares for FMV purposes. Consequently, the independent appraisal report and the tax declaration must be submitted to the BIR during the processing of the Certificate Authorizing Registration (CAR) covering the transfer of the shares of stock. Without the CAR, the transfer of the shares from the buyer to the seller cannot be recorded in the investee corporation’s books.

Such requirements have complicated the processes of transferring shares, depriving the government of revenue from the taxes on such transactions. The preparation of an appraisal report may take some time, depending on the properties of the investee corporations to be assessed, and entails additional costs since the appraisal report must be prepared by an independent appraiser.

Since RR No. 20-2020 removed the net adjusted value requirement under RR No. 6-2013, all that is needed is the latest AFS in order to determine the FMV of the shares.

STREAMLINING TAX PROCEDURES FOR COMPLIANCE
RR No. 20-2020 also appears to be consistent with the government’s objectives to streamline tax procedures. It can be recalled that RR No. 12-2018 (or the consolidated regulations to Donor’s and Estate Taxes incorporating the TRAIN Law amendments), expressly exempted the valuation of shares of stock of a decedent for Estate Tax purposes from the provisions of RR No. 6-2013 in requiring the valuation report. Both RRs give credence to the government’s intent to streamline procedures.

We can expect the simplified requirements under RR No. 20-2020 to lead to an increase in tax compliance. Without the need for a costly and complicated appraisal report, more parties may be encouraged to transfer shares. Establishing the FMV will also be easier and will minimize disputes among parties since the latest AFS should be able to provide the FMV that will serve as the base consideration.

RR No. 20-2020 can also be expected to expedite the process of securing the CAR since the independent appraisal report and the tax declaration are no longer necessary, taxpayers will need to submit fewer documents to process and secure the CAR.

Implicit in RR No. 20-2020 is the need for the investee corporation to maintain its AFS, which must also be submitted to the BIR and the Securities and Exchange Commission. Since the RR now requires that book value be based on the latest AFS not earlier than the immediately preceding taxable year, it is now imperative for corporations to always have the AFS of the immediately preceding taxable year prepared.

POTENTIAL IMPACT ON OTHER REGULATIONS
However, RR No. 20-2020 may also have an impact on other regulations that refer to RR No. 6-2013. For instance, Revenue Memorandum Order (RMO) No. 17-2016 requires that shares to be transferred from an absorbed corporation to the surviving corporation in a merger should also be valued following the guidelines under RR No. 6-2013. Now that RR No. 6-2013 has been superseded by RR No. 20-2020, it remains to be seen how the BIR will interpret the requirement in RMO No. 17-2016 on the adjustment of the FMV of shares to be transferred in a merger, as well as whether it will also adopt RR No. 20-2020 for such valuation purposes.

RR No. 20-2020 is a welcome respite for taxpayers. With greater facility of transactions comes a potential increase in compliance. In turn, improved compliance can lead to an increase in the Government’s tax revenues, which could go a long way to support Government efforts in these challenging times.

This article is for general information only and is not a substitute for professional advice where the facts and circumstances warrant. The views reflected in this article are the views of the authors and do not necessarily reflect the views of SGV, the global EY organization or its member firms.

 

Partner Jonald Vergara and Senior Manager Betheena Dizon are from the Tax Service Line of SGV & Co.

Manila to negotiate P12-M claim vs China ship

THE PHILIPPINES will discuss with China the payment for 22 Filipino fishermen who were abandoned at sea after their ship collided with a Chinese trawler in June last year, according to the Department of Foreign Affairs (DFA).

The agency said it had received the report from the Justice department proposing P12 million in damage claims, Foreign Affairs Assistant Secretary Eduardo Martin R. Menez said in a mobile phone message on Saturday night.

“The matter will now be subject to diplomatic engagement between the two governments, while advancing the claims and interests of the affected Gem-Ver fishermen,” he said.

The Chinese fishing boat, registered in Guangdong, took responsibility for the accident that it claimed was unintentional, two months after it happened at Reed Bank in the South China Sea, based on a letter sent to DFA. The owner said the Philippines should file a claim for damages related to the incident.

The Chinese Embassy on June 14 denied that a Chinese ship had sunk a Filipino boat in a “hit-and-run” incident. It said the Chinese ship was “besieged by seven or eight Filipino fishing boats,” preventing it from rescuing the Filipino fishermen.

It later sent its sympathies to the 22 distressed fishermen who were abandoned at sea for hours and were later saved by a Vietnamese fishing vessel.

The apology came more than two months after the mishap and on the day Mr. Duterte left for an official visit to China last year.

Eight days after the sinking, President Rodrigo R. Duterte dismissed the June 9 incident as a “little maritime accident” and rebuffed the pleas of Philippine fishermen demanding a firmer stance to protect their rights in the disputed waterway.

“I’m sorry, but that’s how it is,” Duterte said at that time.

The P12-million claim covers the repair of the fishing boat as well as income and wages for six months, Justice Secretary Menardo I. Guevarra said last week.

“We’re expecting they will forward this to the Chinese government side,” the Justice chief told CNN Philippines. “We’re just waiting for the reaction of the Chinese government.”

China claims sovereignty over more than 80% of the South China Sea, one of the world’s busiest trade routes. Beijing has occupied and built artificial islands on the disputed reefs complete with runways and military installations, alarming the US and its allies.

A United Nations tribunal in 2016 upheld the Philippines’ sea claims, rejecting China’s historical claim based on a so-called nine-dash line map.

Meanwhile, retired Supreme Court Justice Antonio Carpio said lawmakers could violate the Constitution if they open telecommunications to foreign control.

An attempt by Congress to redefine public utilities might be illegal because the Supreme Court is the “final interpreter of words and phrases in the Constitution,” he told an online forum on Friday.

“But if Congress will pass a law interpreting and redefining these terms and phrases you are taking away the power of the Supreme Court,” he added.

Some sectors including lawmakers have raised concerns about third telecommunication player DITO Telecommunity Corp.’s partnership with China Telecom (ChinaTel) and its planned construction of cell sites inside military camps.

Mr. Carpio said the Chinese government is mandating all Chinese companies, as citizens, to disclose any information required by its intelligence service.

“It is a problem that the Philippines is allowing ChinaTel to install telecom equipment in military camps and the fact that we have a conflict with China,” he said.

DITO earlier said it would not use its devices and infrastructure to obtain classified information from the Philippine military. — Charmaine A. Tadalan

Duterte son threatens coup against speaker

PRESIDENTIAL son and Deputy Speaker Paolo Duterte has threatened to stage a coup against Speaker Alan Peter Cayetano after lawmakers complained of inequitable shares for their districts in the P4.5-trillion national budget for next year.

Mr. Duterte on Sunday said he had sent a message to a group of lawmakers on Viber that he would ask the Mindanao bloc of congressmen on Monday to declare the positions of speaker and deputy speakers vacant.

The Davao City representative said his threat was an “expression of my personal dismay” upon hearing the concerns of his fellow congressmen.

“I leave this issue to the members of Congress as I believe that it is within their rights as elected officials to come up with a favorable solution to an issue that could badly impact the development of their districts and their people,” he said in a statement.

Mr. Duterte said several legislators had reached out to him and “expressed their disappointment and consternation” over the 2021 national budget.

“Most of these concerns shrouded doubts over the process and mistrust of the lawmakers ruling the House, those who are acting as if they are bigger than their colleagues,” he said. “Respectfully, I told them that I did not want to get involved.”

Mr. Duterte said the budget row should be addressed soon “before everything goes out of hand, before it could bludgeon the credibility of the institutions and inflict damage beyond repair.”

This is not the first time Mr. Duterte threatened a coup against Cayetano. He had targeted the speakership last year, but later withdrew his bid and backed Isidro Ungab, another representative from Davao City. — Kyle Aristophere T. Atienza

COVID-19 deaths nearing 5,000 as cases hit 286,743

THE DEPARTMENT of Health (DoH) reported 3,311 coronavirus infections on Sunday, bringing the total to 286,743.

The death toll rose to 4,984 after 55 more patients died, while recoveries climbed by 20,021 to 229,865, it said in a bulletin.

There were 51,894 active cases, 86.6% of which were mild, 8.7% did not show symptoms, 1.4% were severe, and 3.3% were critical, the agency said.

Of the new cases, 1,435 came from Metro Manila, 261 from Negros Occidental, 231 from Laguna, 204 from Rizal and 174 from Cavite, DoH said.

Metro Manila reported the highest number of new deaths with 29, followed by Central Visayas with six, Western Visayas with five, the Calabarzon region with four, and the Bicol region and Bangsamoro Autonomous Region in Muslim Mindanao (BARMM) with three each.

The Ilocos region reported two deaths, while Central Luzon, Eastern Visayas, and Caraga region had one each.

More than 3.1 million individuals have been tested for the coronavirus, the agency said. — Vann Marlo M. Villegas

Minority senators weigh in on EU lawmakers’ call

By Charmaine A. Tadalan, Reporter
and Kyle Aristophere T. Atienza

A call by European lawmakers for the Philippines to release a senator critical of the government shows her detention is baseless and politically motivated, according to opposition senators.

“We stand with the European Parliament in urging the government to free Senator Leila M. de Lima,” the Senate minority bloc said in a statement on Sunday. They also urged President Rodrigo R. Duterte to stop extrajudicial killings and human rights abuses.

The EU parliament adopted a resolution on Sept. 17 calling on the Philippines to comply with the recommendations of the United Nations High Commissioner for Human Rights, citing “widespread and systemic” killings linked to Mr. Duterte’s deadly war on drugs.

Six hundred twenty-six European lawmakers approved the resolution. Seven disagreed and 52 abstained.

“The resolution should also remind the current administration that the international community  will not turn a blind eye and do nothing toward the government’s attacks against the fundamental freedoms of Filipinos,” the senators said.

They said the country’s human rights situation had worsened since Mr. Duterte came to power four years ago.

Minority Leader Franklin M. Drilon and Senators Risa N. Hontiveros-Baraquel and Francis N. Pangilinan signed Sunday’s statement.

The European Parliament resolution also raised concerns about threats to press freedom after Philippine congressmen rejected the franchise of ABS-CBN Corp. which is critical of the Mr. Duterte. They also cited the conviction of Maria A. Ressa, chief executive officer of news website Rappler, which has also criticized the government.

The parliament also called on the European Commission to revoke tax perks enjoyed by Philippine products in the region due to the worsening human rights situation.

The European Parliament resolution is considered to be a form of “economic blackmail,” said Marlon M. Villarin, a political science professor from the University of Santo Tomas.

“The Duterte Administration will remain strong in its conviction, believing that this EU resolution is more violative of Filipino human rights,” he said in a mobile phone message. He said revoking the tax perks would punish Filipinos just because the government chose to exercise sovereignty.

The resolution was untimely because the world is fighting a global coronavirus pandemic, Mr. Villarin said. The government would probably find a common ground with the EU, he added.

Meanwhile, Albay Rep. Edcel C. Lagman said the EU lawmakers’ call for an independent probe of the drug killings was justified.

“The Commission on Human Rights has no prosecutory powers, while the Department of Justice iis a virtual adjunct of the presidency even as the courts have failed to resolve pending human rights cases, except for a very few,” he said in a statement on Sunday.

“It is self-serving to bar an independent United Nations investigation, through the UN Human Rights Council, on the country’s worsening state of human rights on the pretext of sovereign immunity when the Philippines is a state party to many human rights conventions obligating signatories to promote and protect human rights,” he added.

Regional Updates (09/20/20)

Samal bridge landing site alignment final, says DPWH

THE ALIGNMENT of the Davao-Samal bridge is final, a Department of Public Works and Highways (DPWH) official said amid the continued appeal for a redesign by the property owner of the Samal landing site. “We cannot change anymore the alignment after the long study. The alignment that was identified in the study is final,” DPWH Undersecretary Emil K. Sadain said in a text message over the weekend. He emphasized that the feasibility study of the bridge that will connect Samal Island to mainland Mindanao through Davao City was done thoroughly, with all the technical, economic, social, environmental and other engineering aspects assessed. “There is no shortcut here. Having the alignment in the Samal island side inside Paradise Resort is not intentional but based on long prudent and factual study,” he said. The Rodriguez family, owner of the resort and the surrounding property affected by the project, has been appealing to DPWH and Ove Arup and Partners Hong Kong Ltd. for a realignment, citing the need to protect the marine environment at the Paradise Reef. Lawyer Julito R. Sarmiento, chief executive officer and founder of Climate Change Adaptation Resettlement Earth (CARE) Commune, said in a virtual press conference on Thursday that the Rodriguez family might be forced to file a Writ of Kalikasan to stop the project. Mr. Sadain, however, said such legal action will not hinder the longstanding bridge project. The writ is a judicial remedy relating to environmental protection and the people’s constitutional right to a healthy ecology. Samal Mayor Al David T. Uy previously said the Writ of Kalikasan cannot be applied in this case as the affected properties are classified under a commercial zone. Mr. Sadain assured that the preservation and protection of the marine environment is part of the priority considerations in the construction of the bridge. The P23.04 billion bridge, which will span 2.8 kilometers, will be funded through official development assistance. The final bridge landing sites will be in R. Castillo Street, Agdao on the Davao City side and in Barangay Caliclic in Samal. — Maya M. Padillo

Bomb plot in Jolo pier foiled

A SNIFFER dog sat beside a suspicious item found by a Philippine Coast Guard-Explosive Ordnance Disposal team at the Jolo pier at around 6 p.m. on September 19. The abandoned item did turn out to be a bomb, with two electric blasting caps, a rifle grenade, spark plug, and concrete nails. “I commend our troops and our partners for this accomplishment. You saved the lives of the innocent people and foiled this terroristic activity of our heartless enemies,” Brig. Gen. William N. Gonzales, Joint Task Force Sulu commander, said in a statement on Sunday. The Coast Guard team immediately relayed the situation to the military’s 35th Infantry Battalion and local police, who cordoned off the area where the item was found, in between the offices of the harbor master and maritime police. A twin suicide bombing in Jolo on Aug. 24 killed 14 and wounded over 70 others.

Nationwide round-up

2 survivors of capsized ship back home, to get gov’t aid

TWO FILIPINO SURVIVORS of a cargo ship that sank off Japan arrived in the Philippines on Saturday and will be getting cash aid from government as well help in finding new employment, according to the Labor department.

“We are also looking at possible job opportunities for them in other shipping companies in case they want to get back at work as soon as possible,” Labor Secretary Silvestre H. Bello III said in a statement on Sunday.

Chief officer Eduardo Sareno and deck crew Jay-nel Rosales were rescued by the Japanese Coast Guard after their vessel, M/V Livestock 1, capsized during a typhoone earlier this month.

Another Filipino crew member, Joel Canete Linao, whose remains were recovered by the Japanese Coast Guard, was flown in Friday.

His family will also receive assistance and benefits from the government. The vessel’s 43-man crew included of 39 Filipinos. — Gillian M. Cortez

What would happen to UHC law if PhilHealth is abolished, asks agency chief

PHILIPPINE HEALTH Insurance Corp. (Philhealth) President Dante A. Gierran said abolishing the agency would be “counterproductive,” especially with the Universal Health Care Act just at the start of implementation.

“It’s not good. It’s counterproductive to the Filipino people. You know, the President has just approved the Universal Health Care Act. Now, what will become of that law if the President abolishes the institution?” he said in an interview with CNN Philippines on Sunday.

The law, which automatically makes all Filipinos members of the state insurer, was legislated last year and its implementation started this year.

According to Senate President Vicente C. Sotto III,  President Rodrigo R. Duterte last week said he wants privatize or abolish PhilHealth, which has been marred with allegations of various irregularities and corruption.   

Both chambers or Congress launched inquiries on the agency and Mr. Duterte also created a task force to investigate alleged anomalies.

The task force’s initial report was submitted last week, recommending the filing of administrative and criminal cases against PhilHealth’s top officials, including its former president, Ricardo C. Morales.

Mr. Gierran, who was appointed to lead PhilHealth on August 31, said the agency’s administration under his watch should be given a chance to clean up the system. — Gillian M. Cortez

Reds knocks on VP’s door for peace talks in ‘post-Duterte scenario’

THE POLITICAL arm of the Communist Party of the Philippines (CPP) aims to reopen peace negotiations with the government in a ‘post-Duterte scenario’ and plans to start laying the groundwork now through talks with Vice President Maria Leonor G. Robredo, who chairs the opposition party.

In a statement posted on CPP’s official website, National Democratifc Front of the Philippines (NDFP) Interim Negotiating Panel Chairperson Julie De Lima said they should “engage the constitutional successor to press for the resumption of the peace negotiation.”

“The NDFP, including its panel, should hold discussions with opposition parties, in particular, the Liberal Party LP,” she said.

In a separate interview, Bagong Alyansa Makabayan Secretary General Renato M. Reyes, Jr. told BusinessWorld that all options for peace should be explored even if Mr. Duterte’s administration already ended the peace talks.

“All options for peace should be explored, including options beyond the current administration. The people demand substantial reforms which are addressed through the peace negotiations,” he said.

Ms. Robredo has yet to respond to the proposal. — Kyle Aristophere T. Atienza

Towards a fairer and more investment-inducing CREATE

THE government’s CREATE (Corporate Recovery and Tax Incentives for Enterprises Act) recovery program, now a pending bill in Congress, proposes to reduce the corporate income tax (CIT) from 30% to 25% or a loss of an aggregate P625 billion in fiscal revenue in five years. This amount of pre-condoned CIT will only grow into the trillions in the future as the economy recovers and grows. This bonanza for business is granted to private registered corporations in the hope that they will then turn and invest the tax savings in jobs and income-creating projects to hasten the recovery. Unfortunately, as economic experience in past economic crises tells us, during an economic free fall, risk-averse business will place much of this bonanza in riskless government treasuries and central bank deposits, thus, defeating the avowed purpose. This profligate generosity to the rich in currently constituted CREATE contrasts with the resistance of the Department of Finance (DoF) to a true debt condonation for agrarian reform beneficiaries (ARBs) which has a large scale-up potential for productivity and investment in the farm sector (the condonation in Bayanihan II is only band aid). This unfairness is a moral stinker!

If we must have CREATE, we have to at least make it fairer and more investment-inducing by: a.) widening the bonanza net to include the condonation of the principal of ARB debt which amounts to P58 billion; and b.) make the bonanza for the top 1,500 corporations conditional on some socially beneficial, market sustainable, and quickly implementable investment to move the economy to a more efficient, more Mother Earth-friendly, and more resilient next normal. My friend and fellow op ed writer Filomeno “Men” Sta. Ana also suggested some form of investment conditionality (BusinessWorld Online, July 5, 2020).

The aim of b.) above is to increase the overall supply of power which has so long bedeviled our power quality and improve its resilience, while reducing our dependence on imported fossil fuel and our carbon footprint to boot. We should deploy CREATE to incentivize the adoption of rooftop solar photovoltaic (PV) generation by large private corporations. At present there are hectares upon hectares of idle rooftops already owned by large businesses. Besides keeping solar radiation and heat out of our work areas, these rooftops could be repurposed to host solar PV installations. They can become urban solar farms engendering a new revenue stream! All the evidence to date point to the market increasingly favoring solar PV power generation over fossil-based generation, even over other renewables. The cost of solar PV-generated power has achieved — and even surpassed — parity with fossil-fueled power generation in many solar radiation-rich jurisdictions, especially for large consumers who mind the levelized cost of electricity. The attraction of solar PV generation in 2020 no longer rests on good corporate citizenship alone but even more seriously on an attractive bottom-line proposition.

Being located on rooftops, rooftop solar PV installations have unique cost advantages: they will avoid the opportunity cost of alternative use of farm areas associated with large-scale land-based solar and wind farms; they avoid costly transmission losses and associated fees; they avoid miscellaneous charges such as the universal charge; they avoid NIMBY issues and many costly environmental regulatory and permitting hurdles. They are modular — you can build up capacity as needed. Being distributed and, especially when paired with local storage, means resilience and power can flow even when the grid is down. The rooftop solar PV market in the Philippines is now very competitive with many solar installers. An added bonus, we locally produce solar panel modules in Laguna, Philippines. Solar PV investment is as close to being shovel-ready as one can imagine. Construction can start tomorrow and workers are hired. The chief hurdle to rooftop solar PV installations is no longer economics but a mindset comfortable with the social ecology of the 19th century fossil-driven centralized power technology and suspicious of the new.

How can CREATE help to usher in a new power revolution? Append a one-line eligibility requirement for the 25% CIT: a corporation in the top 1,500 will pay 30% CIT until it has installed a rooftop solar PV generation capacity the equivalent to at least x% (say, 20%) of its daytime power use backed up by a corresponding battery or other environment-friendly power storage (say, liquid metal storage already available in the market in lieu of back-up gas or oil fired generators). For those firms without substantial idle rooftops, equivalent modalities to satisfy the socially beneficial and market-sustainable investment requirements may be found. They may, for example, rent idle rooftops from other firms who have them in excess or even from households and schools. Such rooftop solar PV rent contracts now exist in the country. For example, Solar Philippines rents the rooftop of SM North parking building and supplies power to its host. Or they can put up independent energy storage companies serving the grid, or an independent rooftop rental company. Grid-scale energy storage have the feature of avoided cost: Negros Island during the day has now surplus power from abundant solar and biofuel (bagasse-based) generation but the limited inter-island submarine cable capacity means this can’t be exported; thus, these precious capacities are instead curtailed and wasted. Having grid-scale energy storage will avoid the cost of curtailment and avoid using coal-fired power at night. Having met the CIT reduction condition, these firms now qualify to pay the lower 25% CIT.

This will open up a new investment avenue for large and new businesses and provide a new growth spark for the recovering Philippine economy. The 5% tax differential will serve as a contingent tax on idle rooftops, which tax liability disappears as soon as the condition of solar PV installation and storage is met.

Private businesses will not invest to raise production in an economy of shrunken demand. But they can, and should, invest today to reduce the cost of producing output in preparation for the competitive marathon in full recovery. While this can be done in other ways, installing rooftop solar PV generation and storage ensures an investment that is socially beneficial, market-guided and of short gestation. The private sector has for decades complained but left to the government to resolve the poor quality and high cost of power in the country. Now is the time to step up and be part of the solution. What could be more comforting for private corporations in this age of stakeholder responsibility than marrying the love for Mother Earth and the bottom-line in rooftop solar PV farms? With, we hope, a little nudge from CREATE!

 

Raul V. Fabella is an Honorary Professor of the Asian Institute of Management (AIM), a member of the National Academy of Science and Technology (NAST) and a retired professor of the University of the Philippines. He gets his dopamine fix from hitting tennis balls with wife Teena and bicycling.

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