Facebook Instagram Linkedin Twitter Youtube
Home Blog Page 8816

Life insurers expect double-digit growth on digital push in 2020

THE LIFE insurance industry is projecting double-digit growth this year amid moves to reach untapped markets via digitization and a push for greater financial literacy.

Philippine Life Insurance Association (PLIA) President Benedict C. Sison said the industry will focus on addressing the lack of financial literacy on the market in order to reach the underserved.

“Second would be digitalization (which) will allow us to reach untapped client segments. It’s underpenetrated, so sometimes you have to use digital to reach untapped client segments,” Mr. Sison told reporters on the sidelines of a PLIA event Thursday.

“I couldn’t give an exact number but I think double-digit growth for 2020 (for the life insurance sector),” Mr. Sison added.

According to the Insurance Commission (IC), the overall indurance industry’s premium income was P224.97 billion in the nine months to September, up 2.76% year-on-year. The life insurance sector accounted for P172.05 billion of net premiums, while the nonlife sector accounted for P44.02 billion.

With greater financial literacy and wider reach through technology, Mr. Sison said the industry stands to raise its penetration rate, which is currently below 2%.

“We’re such an underpenetrated market. So there’s really huge opportunity. We’re really very positive about this,” he said, “We hope to be able to increase the penetration rate.”

IC estimates that the industry accounts for about 1.69% of the economy.

Premiums per capita rose 1.16% year-on-year to P2,077.30.

Insurance Commissioner Dennis B. Funa has said the regulator is expecting “steady” growth for the industry this year. — Beatrice M. Laforga

Transfer pricing and tax avoidance: What does the CITIRA bill say?

Government investment promotion agencies offer tax incentives to attract investors. Many companies, especially those in priority and emerging sectors, benefit from such incentives in the course of doing business. In some cases, companies engage in related-party transactions, such as transactions between a parent company and a subsidiary, or between affiliates. However, according to a Department of Finance (DoF) and Bureau of Internal Revenue (BIR) analysis, such practices may give rise to abusive transfer pricing schemes, deemed to cost the Government billions in lost revenue each year.

Specifically, the DoF identifies transfer pricing abuses to include the corporate practice of shifting profits from a high-tax country to tax havens, as well shifting profits from a corporate taxpayer to its related party located in special economic zones. Because of such practices, the DoF is pushing for the legislative approval of the Comprehensive Tax Reform Program (CTRP), which will prevent income from being shifted among related parties through the inappropriate pricing of related party transactions.

Under Section 50 of the Tax Code (the Philippine Transfer Pricing provision), the Commissioner of Internal Revenue has the authority to review controlled transactions among associated enterprises and distribute, apportion or allocate their income and deductions to reflect the true taxable income of such enterprises.

In the 17th Congress, a bill was introduced which included a proposal to amend Section 50 of the Tax Code under the current administration’s Tax Reform for Attracting Better and High-Quality Opportunities (formerly known as the TRABAHO Bill or the then CTRP Package 2). The TRABAHO Bill was approved on third reading by the House of Representatives but was not passed by the Senate in the 17th Congress.

The TRABAHO Bill has since been renamed the Corporate Income Tax and Incentives Rationalization Act (the CITIRA Bill or the now CTRP Package 2). The CITIRA Bill has been re-filed in the 18th Congress to pursue, among others, the amendment of Section 50. As of this writing, the CITIRA Bill has been approved on third reading by the House of Representatives and has been endorsed to the Senate for its consideration and approval.

FINE LINE BETWEEN TAX AVOIDANCE AND EVASION
The proposed amendment to the current transfer pricing provision emphasizes the prevention of tax avoidance. The proposed amendment defines tax avoidance for purposes of transfer pricing.

Corporate taxpayers often weigh their options when planning to implement their business transactions. In doing so, they may resort to tax avoidance strategies to reduce the amount of tax payable. Tax avoidance per se is not illegal. On the other hand, the intentional and deliberate non-payment of taxes, in an attempt to reduce or eliminate a taxpayer’s liability, is called tax evasion, which is illegal.

An Organization for Economic Cooperation and Development (OECD) Economics Department working paper by Johansson, Skeie and Sorbe reported that all G20 and OECD member countries have implemented transfer pricing rules to prevent related-party taxpayers from manipulating the price of their transactions for tax purposes. Some of these member-countries have anti-avoidance rules against international tax planning by multinational enterprises. The general anti-avoidance rules prohibit an aggressive approach to tax avoidance, with a common thread of adherence to the principle of substance over form. Tax benefits may not be availed of when a related-party transaction lacks economic substance or has no reasonable commercial purpose.

The anti-avoidance rules of the G20 and OECD member countries are generally designed to achieve the following goals: identification of such a scheme or arrangement; quantification of the actual tax benefit or advantage gained from the scheme; and performance of a test to assess if the company gains a clear tax advantage through the scheme. It should be noted, however, that there are differences in the rules for various countries.

STRENGTHENING THE TRANSFER PRICING PROVISION
The CITIRA Bill proposes that the time is ripe for the Philippines to adopt similar anti-avoidance rules to counteract the potential abuse of tax incentives by corporate taxpayers. From a current Philippine tax perspective, the BIR may impose an adjustment to transfer prices affecting the recognition of income or expenses of taxpayers based on its industry-specific arm’s length standards. This imposition may result in deficiency taxes and even possible interest and penalties to be assessed against the taxpayer.

With the proposed transfer pricing amendment to Section 50 of the Tax Code, the CITIRA Bill will vest the Commissioner of Internal Revenue with dual roles: first, to distribute, apportion, allocate, and impute income and deductions; and second, to disregard and counteract tax avoidance arrangements necessary to clearly reflect the income of a corporate taxpayer. The CITIRA Bill also aims to empower the Commissioner to consider the transaction or arrangement as void for income tax purposes.

Under the proposed amendment, tax avoidance will become more clearly defined to include actions that directly or indirectly alter either the incidence of any income tax, or relieve, avoid, postpone, or reduce any liability to pay current or future income tax. Companies with transfer pricing arrangements should note that tax avoidance is presumed to exist in situations where the transaction or arrangement can be proven to be motivated by obtaining a tax benefit or advantage with no commercial reality or economic benefit.

CONSIDERING TRANSFER PRICING RISKS
If and when the proposed amendment to Section 50 of the Tax Code passes into law, we can expect the BIR to take an aggressive approach to transfer pricing. Philippine companies with related-party transactions will have to increase vigilance to potential transfer pricing issues that may have a significant impact on reporting its taxable income. Given the current administration’s drive for tax reform, the passage of the CITIRA Bill into law will further intensify the need for taxpayers to include transfer pricing as a significant part of their tax planning and risk management strategies.

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.

 

Ana Katrina C. Celis-De Jesus is a Tax Senior Director of SGV & Co.

Eala boosts stock with strong 2020 Australian Open outing

By Michael Angelo S. Murillo
Senior Reporter

FILIPINO teen tennis sensation Alexandra Eala boosted her stock in the juniors circuit after a productive and successful outing in the 2020 Australian Open, capped by winning the girls doubles title with Indonesian partner Priska Nugroho on Friday.

In the latest ranking of the International Tennis Federation (ITF), Eala, 14, climbed to number eight in the girls’ rankings, her highest to date.

Eala and Nugroho defeated the European tandem of Matilda Mutavdzic of Britain and Ziva Falkner of Slovenia, 6-1 6-2, in Melbourne.

It was a culmination of an impressive roll for the doubles tandem where they more than proved that they belonged in the tournament, overcoming each hurdle placed in front of them in convincing fashion.

Eala also made a strong push in the singles competition, reaching the third round before losing to Hong Yi Cody Wong of Hong Kong, 6-1 6-3.

Entering 2020, Eala, a product of the Rafa Nadal Academy, was on a steady ascent.

She finished the 2018 season ranked 248th in the world, before jumping to a then-career best 13th spot last October.

Eala then pressed further to the top 10 after winning the title in the Orange Bowl doubles tournament in Florida last December to come within a spot of breaking the elite Top 10 best players of the world.

Prior to the 2020 Australian Open, she cracked the top 10 at number nine to earn a spot in the main draw of the tournament.

With the win, Eala, a Globe Telecom ambassador, made history, becoming the first Filipina to win a grand slam title be it in juniors or seniors play.

It also sustained her push in top-tier competitions after debuting in a grand slam at the US Open last year.

Eala joined Francis Casey Alcantara as the Filipinos to win at the Australian Open.

Alcantara partnered with Hsieh Chen-peng of Chinese Taipei in 2009 to win the boys doubles title.

Eala thanked tennis partner Nugroho after for being a solid tandem in the tournament even as she vowed to continue working as her career moves on.

Kenin calls nervous mom: ‘Hello, I won, you can relax now’

MELBOURNE — Sofia Kenin shed a few tears and needed to find a way to keep her emotions in check during an epic final against Garbine Muguruza, but soon after lifting her first Grand Slam title the American had to rush to calm someone else down — her mother.

Kenin counter-punched her way back from a set down against Muguruza to win her first major at the Australian Open with a 4-6 6-2 6-2 win on Saturday.

The 21-year-old was almost reduced to tears in the third set and even threw her racquet away in frustration at some of her shots.

“I felt that in the third set, I felt like I was getting closer to the title, something that I really want,” she said after toasting her win with a glass of champagne.

“I knew I needed to somehow try and relax, just try to calm down.”

Eventually she found a way to do that, as twice Grand Slam champion Muguruza wilted in the latter stages.

But Kenin still had one more worry: her mother, who gets so nervous she finds it hard to watch her daughter play.

“I called her right after the match just to tell her that everything’s fine, I won, she can just relax now,” she said, before bursting into laughter.

“She’s been really stressed at home, very superstitious. She’s just really happy. I told her I’m not going to be able to talk to you for hours, but at least you know that I won. I’m coming home, you can give me the biggest hug of your life.

“My mom cannot watch me. I can see she’s still nervous. She doesn’t like watching. It’s fine.”

Kenin, who had to dig herself out of trouble on numerous occasions during the match, said she considered the fifth game of the last set to be the turning point, when she painted the sidelines with three scorching winners and produced an ace to hold her serve for 3-2 from 0-40 down.

“I can remember that game very well, yes. That’s the game I feel like changed things,” she said, adding that next on her agenda was a trip to the Cartier store in Melbourne to buy herself a ring and nail bracelet.

“I had to play some best tennis. I did. After that, I was on fire. I was ready to take the beautiful trophy.”

Kenin will become the world number seven when the WTA rankings are released on Monday which will move her past idol Serena Williams as America’s top player.

“It hasn’t sunk in yet. Everything is just still a blur for me. I just can’t believe what happened,” said the Moscow-born Kenin, whose parents are Russian immigrants. “It’s just great. I feel like I’m doing some great things for American tennis. It’s such an honour.

“I’ve watched Serena. I’ve been following her, all the slams she’s been winning. It’s a special feeling just to be ahead of her. I’m just super excited. I can’t wait to compete, be on the same team with her in Fed Cup.”

COMEBACK KID
Sofia Kenin showed grit and combativeness on the way to her maiden Grand Slam title on Saturday, as the 21-year-old American fought her way back from a set down to beat Spain’s Garbine Muguruza in the Australian Open final.

Kenin may not have the strength or build of her Spanish opponent, but what she lacked in power she made up for in willpower as she took down double Grand Slam winner Muguruza 4-6 6-2 6-2.

Born in Moscow to Russian immigrant parents, the 14th seed became the youngest American since Serena Williams in 2002 to win a major, with Muguruza double faulting on Kenin’s second match point to end an engrossing contest of over two hours.

“I just want to say my dream has officially come true. If you have a dream, go for it, because it can come true,” Kenin said after lifting the Daphne Akhurst Memorial Cup.

“I feel like mental toughness has been a huge part. I’ve worked on that over the course of the years. It’s just paying off.”

On a wet and cold evening, Kenin and Muguruza produced a fitting and intense final under the closed roofs of a packed Rod Laver Arena.

Muguruza had arrived in Melbourne suffering from a virus that forced her to quit the Hobart International, but the Spaniard was soon back to playing to her strength which helped her reach the top of the women’s rankings in 2017.

Some of the inconsistency that led to her slipping to 36th in the rankings last year resurfaced against Kenin, however, as the Spaniard blew hot and cold with her serve, getting 57% of first serves in while mixing nine aces with eight double faults.

The 26-year-old former Wimbledon and French Open winner, who was playing her fourth Grand Slam final, hit four winners more than her opponent but that came at the price of almost double the number of unforced errors.

Kenin, who had never advanced beyond the fourth round at a Grand Slam before this match, was definitely not short on confidence, however.

The American tied world number one Ash Barty for hard-court wins (38) in 2019 when she won three singles titles to reach a career-high world ranking of 12th.

She defeated Muguruza in their only previous career meeting, in Beijing last year, and came to Saturday’s contest with a game plan, mixing deft drop shots with deep forehand groundstrokes to catch the Spaniard by surprise initially.

But Muguruza soon found her range and converted her third breakpoint in the third game to nose ahead in the opening set.

Kenin hung on, and then gave herself a dose of confidence by saving four breakpoints to hold the seventh game.

She was rewarded for her tenacity in the next game and got the break back, but the Spaniard came out firing on all cylinders to break Kenin again and took the opening set when her opponent missed the sideline with a forehand.

Kenin took the court in the second set with renewed vigour, and the power behind her shots visibly went up a notch. She levelled the match with two breaks of Muguruza’s serve.

The intensity rose considerably in the deciding set, with Muguruza slapping her thigh to egg herself on while Kenin was almost reduced to tears of frustration at some of her shots and threw her racquet away a few times.

Down 0-40 in the fifth game and with her back to the wall, Kenin produced arguably her best tennis of the match. She painted the sidelines with three scorching winners and fired in an ace to hold serve for 3-2. She saved 10 out of the 12 breakpoints she faced.

The Spaniard’s serving woes returned to haunt her as Kenin sealed the match with a second break, with the nervous Muguruza serving three double faults in the final game.

“I think I had to play better today because she came up with a great level,” Muguruza said. “I think at the important moments I didn’t find my shots.” — Reuters

Playing it smart pays off for ‘The Passion’ Pacio in ONE Championship strawweight title retention

By Michael Angelo S. Murillo
Senior Reporter

ONE Championship world strawweight champion Joshua “The Passion” Pacio of the Philippines made it a successful title defense by beating Brazilian Alex “Little Rock” Silva at “ONE: Fire & Fury” by split decision on Friday at the Mall of Asia Arena.

It was a victory that the Team Lakay bet credited to sticking to their game plan and playing it smart against a highly capable opponent and former champion like Mr. Silva.

Defending his title for the second time after reclaiming it last year, Mr. Pacio, 24, successfully fended off a determined challenge from his Brazilian opponent.

Mr. Silva, 37, spent most of the contest hunting Mr. Pacio for the takedown, at times successfully pulling the Filipino down to the ground where he held the advantage.

But showing patience and control, Mr. Pacio would hold his own with solid submission defense, and often was able to get back up to his feet.

In the standup, Pacio was also crisp, peppering Silva with pinpoint accurate combinations.

His performance all in all proved to be just enough to earn the decision on the scorecards.

Following his victory, Mr. Pacio, who improved to a 17-3 record, shared that he was aware of the need not to allow Mr. Silva have the leverage he needed to go for the win.

It was a tack that turned out well on his way to the victory.

“I think he was waiting for me to make a mistake. I was mindful of that because a BJJ (Brazilian jiu-jitsu) black belt like Alex would jump at every mistake you make. So I played it safe and smart. Not rushing things and when he caught me in a hold I did not panic, especially when got me on an arm triangle,” Mr. Pacio said.

Filipino mixed martial arts fighter Eduard Folayang lost by split decision to Dutch Peter Buist in their lightweight clash. — ALVIN S. GO

The Filipino champion went on to say that he was happy with the result but admitted he could have done more and had a convincing victory.

“I need to work more. I didn’t get the finish I was expecting. I will continue to work on my ground game and follow-up striking,” he said.

FOLAYANG FALLS
Meanwhile in the co-main event, Mr. Pacio’s Team Lakay senior Eduard “Landslide” Folayang failed to make it back-to-back wins in ONE, losing to Dutch Peter “The Archangel” Buist by split decision.

A short-notice replacement opponent, Mr. Buist’s length proved problematic early for Mr. Folayang as the latter found it difficult to gauge his opponent’s range.

The second round was huge for Mr. Buist as he found his mark and hurt the Filipino, including a solid head kick as the frame drew to a close.

In the end, two of three judges saw the bout in favor of Mr. Buist (15-4) who took home the split decision for his efforts.

Post-fight, Mr. Folayang (22-8) said he was disappointed with the result as it derailed his push to become a lightweight champion for a third time.

But he took solace in holding on to a split decision result and not losing much ground.

In other results, flyweight Danny Kingad, atomweight Gina Iniong and strawweight Lito Adiwang, all of Team Lakay, were victors while atomweight Jomary Torres saw her match ruled a no-contest after she was hit on the groin twice by opponent Jenny Hwang of Chinese Taipei and could not continue.

ONE: Fire & Fury was the first event of ONE Championship in the country for 2020.

Mighty Sports rules Dubai international cage tourney

MIGHTY Sports Philippines completed a dominant showing in the 2020 Dubai International Basketball Tournament, defeating defending champion Al Riyadi of Lebanon, 92-81, in the finals on Sunday morning at the Shabab al Ahli Sports Club.

The win saw Mighty Sports making history as the first team not from the Middle East to top the competition in its 31-year history.

Former National Basketball Association campaigner and Philippine Basketball Association import Renaldo Balkman led the Philippine club in the title game, finishing with a team-high 25 points to go along with nine boards.

Gilas Pilipinas natural player and ex-NBA-er Andray Blatche also did his part with all-around numbers of 21 points, 10 boards, four assists, and two steals.

The contest was tightly fought all the way to the break where the Charles Tiu-coached squad held just a four-point lead, 46-42.

In the third quarter, Mighty Sports made its pullaway with contributions coming from different directions.

The team outscored Al Riyadi, 28-15 in the frame to hold a 74-57 advantage heading into the fourth quarter.

Al Riyadi tried to make up for lost ground in the payoff quarter but with little success as Mighty Sports just did not relent on its attack on its way booking the historic victory.

Filipino-American Mikey Williams and imports McKenzie Moore and Jelan Kendrick tallied double digits for Mighty Sports with 13, 11 and 10 points, respectively.

Thirdy Ravena finished with six markers.

For Al Riyadi it was Michael Efevberha who showed the way with 26 points and five rebounds, followed by Dwayne Jackson with 20 points.

In last year’s edition of the tournament, Mighty Sports made it to the final four but lost and was relegated to the bronze medal game where it won.

Other members of the champion team were Jamie Malonzo, Beau Belga, Joseph Yeo, Juan and Javi Gomez De Liano, Dave Ildefonso, Isaac Go, Gab Banal, Joaqui Manuel and Jarrell Lim.

Joining Mr. Tiu in the coaching staff were William Voigt, Dean Castaño, TY Tang, and Paolo Layug.

Mighty Sports’ Dubai campaign was backed by Creative Pacific, Go for Gold, Oriental Group, Discovery Primea, and Gatorade. — Michael Angelo S. Murillo

In grief

LeBron James had the shot. He was wide open, having executed a deft crossover dribble that had defender Trevor Ariza literally skidding on the hardwood. The purple-and-gold faithful at Staples Center let out a collective gasp, anticipating a basket that would keep the rally going and firmly shift momentum on their side. They needed a hero, needed a fitting end to a game prefaced by a moving tribute to the passing of one of their own. And he was ready, and willing — and as he launched from beyond the arc, he very clearly wanted to be able as well. He backpedaled, believing his aim to be true, only to be greeted by a brick and a long bounce to the sideline.

Just like that, the moment was gone, and the Lakers failed to cap an emotional night with a victory in Kobe Bryant’s honor. Admittedly, they were too consumed by the tragedy to concentrate on the match in the first place. Their talent was evident, but so was their relative lack of focus; they gave up whatever advantages they had in size with careless possessions. They dominated the boards, but came up with turnover after turnover to stunt progress. And while they did try, they wound up trying too hard. James was especially intent on giving a such good accounting of himself that he ultimately, well, didn’t.

Perhaps it was unfair of the Lakers to put too much pressure on themselves to deliver. Wounds were fresh, and bound to stay fresh for a while. James’ miss was telling, but it occurred with a minute and change left in the contest, and plenty more examples of misfires and missteps littered the set-to. Yet, who could blame them for their inability to compartmentalize while buried under an avalanche of grief? It was just a game. Bryant was life, and the loss of his life would need time to digest. Plenty more setbacks may well be in the offing, and they cannot be taken to task in the face of the impact the Laker great had, and continues to have, on them.

James has the right mindset, though. All the Lakers do. Bryant’s demise brought about sorrow, but if what his life stood for is to remain meaningful, it should also be cause for celebration. By his example, they shouldn’t be afraid to reach crossroads, make decisions, and accept the results — for as long as they show nothing but their best en route. By his example, they will hopefully understand that success is a journey, not a destination. And in leaving nothing in the tank at every instance, they honor him and ensure that his memory endures.

 

Anthony L. Cuaycong has been writing Courtside since BusinessWorld introduced a Sports section in 1994. He is a consultant on strategic planning, operations and Human Resources management, corporate communications, and business development.

First coronavirus death outside China reported in Philippines

By Gillian M. Cortez, Reporter
Charmaine A. Tadalan, Reporter
and Genshen L. Espedido

A 44-YEAR-OLD Chinese man who died of severe pneumonia in the Philippines had tested positive for the new coronavirus strain, the first coronavirus-related death outside China, the Department of Health said on Sunday.

The patient was from Wuhan in Hubei province, where the virus was first detected, Health Secretary Francisco T. Duque III said at a briefing.

The Philippine Civil Aeronautics Board said it was temporarily banning non-Filipino travelers arriving from mainland China, Hong Kong and Macau, hours before the death was announced.

The World Health Organization (WHO) has declared a global health emergency as the new deadly coronavirus strain that came from China spread to more than 20 countries, including the Philippines.

WHO cited the potential for the virus to spread to countries with weaker health systems, and which are ill-prepared to deal with it.

There are more than 14,000 confirmed cases worldwide, and about 300 people in China have died, according to Chinese and World Health Organization data.

The vast majority of the cases are in China, while about 100 cases have been confirmed in at least 23 other countries.

The man traveled to the Philippines from Wuhan via Hong Kong, with a 38-year-old Chinese woman who also tested positive last week, Mr. Duque said.

Both were admitted at the San Lazaro Hospital in Manila on Jan. 25. Before he died, the man experienced fever, cough and sore throat.

The Chinese woman was in stable condition but was still in quarantine and being monitored, Mr. Duque said.

The agency said 36 people had been investigated for the novel coronavirus strain. Twenty-four patients had tested negative, while 10 were discharged but still being monitored, it said.

Also yesterday, Manila International Airport Authority General Manager Eddie V. Monreal said a commercial plane from Hong Kong had landed in Manila on Sunday morning.

Filipinos were allowed to enter the capital provided they undergo self-quarantine for two weeks, but the plane was sent back with the foreign passengers.

TRAVEL BAN
Meanwhile, the presidential palace said President Rodrigo R. Duterte would impose a temporary travel ban on foreigners who come directly from China, Macau and Hong Kong. It won’t apply to Filipinos, presidential spokesman Salvador S. Panelo said in a statement.

The ban is “geared for the safety of our countrymen and will last until the danger of the dreaded disease has ceased,” he added.

Filipinos coming from these places must undergo a two-week quarantine. Travel of Filipinos from the Philippines to China, Macau and Hong Kong will also be restricted.

Immigration Commissioner Jaime H. Morente said the agency was “ready to implement further policy changes relating to foreign travel.”

He said they have a team of immigration officers who have undergone medical and safety training who will process the repatriation of Filipinos from Hubei province.

The Tourism department was coordinating with the travel sector to ensure the ban was fully enforced. The agency issued at the weekend guidelines for the hotel industry in handling guests amid the coronavirus outbreak.

Meanwhile, senators called on agencies to beef up quarantine measures.

“We need to step up our quarantine measures and safeguard our people,” Senator Juan Miguel F. Zubiri said in a statement. He said the travel ban should last until the outbreak becomes under control.

“As a goodwill gesture, we can offer to extend the visa of Chinese visitors who were already here before the crisis and who don’t want to go home to avoid catching the disease,” he said.

Mr. Duterte would lead a meeting with an inter-agency task force to discuss the health guidelines to be followed, Senator Christopher Lawrence T. Go, his former aide, said in a separate statement.

Senator Francis N. Pangilinan asked the government to track all suspected patients and ensure they were quarantined.

Senate President Vicente C. Sotto III, meanwhile, proposed to create an inter-agency body that will update the public about the status and impact of the coronavirus outbreak.

The body will consist of representatives from the Health, Tourism, Trade and Finance departments.

House Speaker Alan Peter S. Cayetano urged the Health department to coordinate with local governments and congressional representatives to help provide “timely and easy to understand information” on the virus.

“We have social media to help inform us, but the information that we are sometimes getting are confusing because they are unverified and do not come from official channels,” he said. — with Arjay L. Balinbin

Gov’t detects first African swine fever outbreak in south

BLOOD samples taken from pigs in a southern province in the Philippines, the world’s 10th-largest pork consumer, tested positive for the African swine fever virus, the Department of Agriculture said on Sunday.

It was the first reported case of African swine fever infections in Davao Occidental province and elsewhere in Mindanao, the southern island of the Southeast Asian nation.

Agriculture Secretary William Dar has ordered regional department officials to restrict animal movement in that part of the archipelago, the department said in a statement.

The Philippines, also the world’s seventh-biggest pork importer, reported its first African swine fever outbreak in September 2019, in some backyard farms near the country’s capital, Manila.

The disease quickly spread to other parts of the main island of Luzon, including Manila, prompting some central and southern provinces to ban pork and pork-based products from disease-hit areas.

Mr. Dar has said pork smuggled from China, where millions of pigs were culled because of the disease, could be behind the outbreak in the Philippines.

Although the blood samples from pigs in Davao Occidental had already tested positive for African swine fever, the agency’s Bureau of Animal Industry will conduct further tests for confirmation.

The initial tests covered blood samples from more than a dozen villages in the province, it said.

The provincial government has imposed a “complete but temporary lock down,” prohibiting the transport of pigs and pork products from and into Davao Occidental, it said.

“Backyard pig farmers in the area practice group rearing of hogs, from different owners, most of them without proper housing provisions or biosecurity practices,” the Agriculture department said.

Pigs are also not regularly vaccinated and dewormed and rarely get vitamin supplements in the province. Household butchering is common, especially with animals exhibiting weakness or disease, it said.

About a thousand pigs in Davao Occidental have been culled amid the outbreak, according to local media reports, citing information from the provincial government.

Philippine agricultural output grew at an annual pace of 0.4% in the last quarter, slower than the 2.9% gain in third quarter, as hogs production contracted.

Though not harmful to humans, the disease is deadly to pigs, with no vaccine available. — Reuters

Cabinet group seeks VFA review

A CABINET group has recommended a review instead of the immediate termination of an agreement with the US on the deployment of troops and equipment for war games.

The Cabinet cluster on security, justice and peace endorsed a further review of the visiting forces agreement (VFA), Justice Secretary Menardo I. Guevarra told reporters in a group message.

President Rodrigo R. Duterte earlier ordered the Justice department to study a plan to end the VFA after the US government canceled a Senate ally’s visa.

The Cabinet cluster will submit a report this week, but other agencies may opt to submit their own impact assessment separately, he said.

“The DoJ report will consolidate the assessment made by other concerned executive agencies,” Mr. Guevarra said. “We have no direct information about the comments of the Senate, but coincidentally, the suggestion of some senators to review the VFA happened to be one of the options considered by the cabinet cluster.”

“A firmer picture will come out after the top-level meeting with the Presidential Commission on Visiting Forces tomorrow,” he added.

The Makabayan bloc, a coalition of 12 party lists at the House of Representatives, last week filed a resolution for the termination of “onerous” military agreements between the US and the Philippines, including the VFA, the Enhanced Defense Cooperation Agreement and Mutual Defense Treaty. — Vann Marlo M. Villegas

Thanks to China, it’s the Year of the Black Swan

By Daniel Moss

HITCHING YOUR wagon to China’s star just isn’t what it used to be.

Once, proximity to the mainland and relying on its economy were surefire ways to boost growth. During China’s rapid development in the 1990s and 2000s, it became the world’s biggest goods exporter and factory floor. Smaller neighbors that wove themselves into China’s supply chain benefited as a result. Those were the heady days of trade and market liberalization.

But twice in the past year, East Asia has learned the hazards of this model: first with the Washington-Beijing trade tussle and now with the coronavirus. The consequences could be material. A 1% drop in China’s gross domestic product would shave 0.3% off growth in Hong Kong, South Korea, Thailand, and Malaysia, and 0.2% from Japan, Vietnam, Singapore, the Philippines, Indonesia, and Australia, Bloomberg Economics’ Tom Orlik wrote recently, citing a 2016 study by the International Monetary Fund.

While a sharp dip in Chinese activity will be most acutely felt in Asia, the ramifications are global. Asia accounts for two-thirds of the world’s growth; China alone makes up about 40%.

In its recent Asia-Pacific regional outlook, the IMF said, “Asia’s strong trade and financial integration is a manifestation of the region’s economic success, but can also be a source of vulnerability.” The lender lowered its forecast for growth in the region. The World Bank made a similar observation earlier in 2019.

When Wuhan was still just a point on a map, the trade war and China’s broad-based slowdown were already taking a toll. Singapore, a barometer for business sentiment, recorded the slackest growth in a decade in 2019. In Thailand, the central bank projected last year’s expansion to be the weakest since 2014.

In many instances, fiscal and monetary policy — deployed in 2019 to combat these challenges — have more heavy-lifting to do. Officials across the region are also likely calculating the cost of commercial ties to China and their dependence on this big neighbor.

“If this matter continues, just like previous outbreaks, it would certainly impact the national economy,” said Azmin Ali, Malaysia’s economic affairs minister. He’s right to be worried: China buys about a fifth of Malaysia’s exports, more than any other country, and is the third-biggest source of foreign tourists. When I took my family to Legoland Malaysia the other weekend, it was hard not to think about the economic impact of a reversal in mainland Chinese visitors (after worrying about all the Lego pieces my children put in their mouths). Eliminating those hotel reservations, restaurant bills, and rental car charges will add up.

It’s little surprise that tourism-based economies in the region haven’t diversified. The inexorable rise in Chinese visitors tracked the growth of its middle class. But there was little by way of a backup plan.

It’s naive to think that regional leaders, especially in Southeast Asia, will simply ignore their biggest trading partner. But remember that China wasn’t always the main game, and it won’t remain so forever. Back in the 1980s and early 1990s, Japan was the center of gravity, especially after the Plaza Accord provoked a wave of investment in factories across the region. If India can recover from its banking crisis and floundering growth, it could again become the world’s fastest-growing major economy. The Organization for Economic Cooperation and Development projects that India’s share of global output will rise through mid-century, by which point China’s will have long peaked.

The world’s second-biggest economy will eventually recover its footing and account for a bigger slice of the global pie. Yet it no longer looks infallible, and it’s no longer a one-way bet. As Asian leaders wait for China to recover, it wouldn’t hurt to take advantage of rock-bottom bond yields to borrow — not just to buttress activity over a few months, but also to invest in infrastructure and education. Much depends on whether they are big enough to seize the opportunity in this crisis.

 

BLOOMBERG OPINION

Taal: probing the judgment of scientists and the power of bureaucrats

My wife is Batangueño; some of her relatives are evacuees. So I have a personal interest in the human drama around the Taal volcano eruptions.

Let me paint the scenario as it played out:

Threatened by eruptions which began Jan. 12, many residents evacuate on their own. Others stay longer, to save their livelihoods. The Philippine Institute of Volcanology and Seismology (Philvolcs) warns against imminent, more powerful eruptions, declares a 14-kilometer danger zone, and recommends its complete evacuation. Invoking their police powers, local government units (LGUs) forcibly evacuate people and stop residents from returning to salvage whatever they could of their livelihoods. Other officials allow a four-hour window. More than a week after the first eruption, a stern order comes from the Department of the Interior and Local Government (DILG) about Tagaytay businesses: stay closed or your business permits will be revoked. National officials also talk about permanent relocation. On Jan. 26, Philvolcs downgraded the Taal alert level from 4 to 3. Many evacuees return to their homes to pick up the pieces and resume their lives.

Areas around Taal have been under threat of eruption for centuries. Batangueños, more than anyone else, feel the threat in their guts. This conscious decision to live near a volcano is a badge of courage. That they have flourished is a tribute to their resilience. This right to decide what and how much risk to take should be respected. In the current context, this is how it could be done:

Philvolcs’ knowledge and judgment guide government decisions. Philvolcs knows the mechanisms of volcanic behavior. It knows how specific volcanoes the world over have behaved in the past. It knows the details of Taal’s previously recorded eruptions. Its instruments tell it how magma is flowing underneath the Taal geological formation. But it does not know how soon a deadly eruption will actually occur. It knows the various threats (base surge, toxic gases, ashfall, pyroclastic flows, lava flow, tsunami, landslides, etc.), but it does not know which of these will occur and to what extent. It has judgments, based on its knowledge.

The problem is the uncertainty in its judgments. The solution is to put numbers to this uncertainty: How imminent? How powerful? How risky? Initially, Philvolcs gave no number to the probability of a deadly eruption. A few days after the eruptions subsided, its spokesperson said, “we need to look at the probabilities again.” This means it did have probability estimates, but it kept it to itself. On Jan. 23, Philvolcs finally announced its estimate: 30%.

This 30% presumably refers to the probability of an eruption within “hours or days” that can kill people within the 14-km danger zone. To be far more useful, Philvolcs should word its risk estimates roughly as follows: “As of (say) 6 a.m. today, we estimate the probability within the next (say) 10 days of a Taal eruption that can kill people within (say) 14 km is (say) 30%. Inside the danger zone, the risk of getting caught in a deadly eruption is around (say) 0.15% for every hour inside.”

The very useful last sentence above assumes a period of 10 days and that the probability is evenly distributed over those 240 hours. Philvolcs can use its updated probability parameters whenever it issues its daily bulletins.

The 0.15% is calculated as follows: The chances of a deadly eruption not occurring within 10 days is 70%; the chances of one not occurring on a particular one-hour period among the 240 hours/10 days is 99.85% (for the math-literate: 0.9985 raised to 240 is 0.70); the chances of one occurring on that particular hour is 0.15% — roughly one in 673. These are by no means precise, but they are the best we have. Even in wars, staying in a battle zone for an hour is far less risky than staying there for a month. Senator Bato calls such a risk “one-time, big-time.”

Consider a one-time retrieval of animals to bring them to a safe zone. If this takes four hours, the probability of getting caught by a deadly eruption quadruples: 0.6% or 1 in 167. Residents and LGU officials who wanted to retrieve their animals must have instinctively felt that the risk was worth taking. Had higher officials allowed it, and provided the means to do it quickly, many animals could have been retrieved and part of the people’s livelihoods salvaged.

A lot of homes could be saved if ash is swept from roofs regularly to prevent collapse. Assume a two-hour cleaning operation every five days. This also totals four hours of risk exposure, like the one-time animal retrieval operation. Residents who thought the risk was worth taking should have been supported by LGUs by providing transport, face masks, ladders and brooms, and risk-reduction personnel could stand by just outside the danger zone in case a quick exit was necessary.

Doing both operations doubles the risk further to 1.2%. But not for individuals, if a different set of people did the second operation. For instance, it was wrong to assign the same police personnel in the danger zone throughout the eruptions. Rotation would have reduced the risks for individuals.

It was painful to watch coverage of residents pleading to bureaucrats and police to let them clean their roofs and save their animals. With the benefit of hindsight, we now know for a fact that no deadly eruption occurred during those particular hours. Given the prior odds of 99.85% against a deadly eruption, that was entirely expected. The roofs would have been cleaned, and the animals retrieved. Nobody would have died.

On forced evacuations: the following argument can hopefully convince LGUs why they should let households make the final decision.

Economists use the term moral hazard for this problem. Evacuees bring extra money and resources to LGUs; the more evacuees, the more aid LGUs receive. This was highlighted by the state of emergency declared in Cavite, so the neighboring province can also use its emergency funds and receive aid for evacuees.

When LGUs force residents to evacuate against their will, then receive millions in aid as a result, a moral hazard arises. The hazard is that genuine concern may at some point become a callous way of getting more aid. No such hazard arises in voluntary evacuations.

The DILG order to the Tagaytay mayor that businesses should stay closed was clearly overreacting. For businesses within the danger zone, the order was superfluous. The lock-down policy already applied to all. For struggling businesses outside the danger zone, the order would have been a death sentence. Tagaytay City is the crown jewel of Southern Tagalog tourism. Big land developers — President Duterte sometimes derisively calls them the Rich — are moving in. A string of bankruptcies would have created new opportunities for the Rich to muscle in.

President Duterte won partly for his promise to end the rule of “imperial Manila.” He should realize that the DILG order for Tagaytay businesses to stay closed smacks of this Imperial Manila Syndrome.

For centuries, Batangueños did not give up their livelihoods for fear of a volcano. Now and in the future, they will not surrender to it without a fight. If the government ties their hands with lock-downs and closure orders, they will surely become dependent evacuees requiring huge infusions of aid and vulnerable victims of Manila-based land speculators.

 

Roberto Verzola has an academic background in economics and engineering. He runs a non-profit organization promoting renewable energy, and he is a senior fellow of Action for Economic Reforms.

1...8,8158,8168,817...13,121Page 8,816 of 13,121
© 2024 BusinessWorld Publishing.
All rights reserved.
Read our privacy guidelines
Facebook Instagram Linkedin Twitter Youtube