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Bank of Japan’s need for major move still unclear amid review

BANK OF JAPAN Governor Haruhiko Kuroda’s call in September for a review of how its mission to stimulate price growth could be threatened by the global slowdown spurred speculation that October would be the month for policy action.

With that meeting now a little over a week away, the ebbs and flows of the global economy and their impact on domestic data leaves him in an awkward predicament: Having stoked speculation of impending action, the need to ramp up stimulus still isn’t clear-cut.

Sure, the outlook for the global economy remains gloomy with the International Monetary Fund calling for more stimulus and forecasting the slowest growth this year since the financial crisis. Japan’s exports continue to fall, inflation keeps slowing and a sales tax hike is expected to shrink the economy this quarter.

But there’s been good news too: a truce in the trade war between the U.S. and China is the biggest development, while nascent signs of recovery in the tech sector also offer hope that some of the biggest risks for the world economy could be softening. Despite setbacks in parliament for Boris Johnson’s deal with the European Union, a no-deal Brexit also looks less likely.

The BOJ’s Tankan business survey at the beginning of October showed that the mood among Japan’s largest manufacturers is holding up better than expected, while the service sector remains buoyant.

Markets are also looking more sanguine, with Japanese stocks hovering around highs for the year, the yen away from a policy makers’ danger zone and yields on 10-year government debt within a loose trading band around zero.

“Kuroda can’t stay in his fighting pose for too long,” said Masamichi Adachi, chief economist at UBS Securities Japan and a former BOJ official, referring to the governor’s readiness to take action and the looming decision on Oct. 31. “Given the lack of really bad economic data and some signs of relief in financial markets, it’s a close call.”

BETTER ANGLE
Earlier expectations for more BOJ stimulus in October dovetailed with a global wave of interest rate cuts from Australia to South Korea that followed moves by the Federal Reserve and the European Central Bank. Kuroda also fanned expectations that the BOJ might lower rates by saying he was getting closer to adding stimulus and talking up the power of negative rates.

As recently as Oct. 11, overnight swaps indicated a 100% probability of a rate cut at the BOJ’s October meeting. Now those swaps are showing the bank is less likely to lower its short-term rate from -0.1%, pricing the likelihood of a cut at 56% on Wednesday.

The swaps data is volatile, but it suggests market perceptions have changed since the U.S. and China pulled back from the brink, despite Kuroda’s continued comments on the possibility of lowering rates.

Strip out falling energy costs and Japan’s prices are still edging up

What makes the BOJ reluctant to ease is the overwhelming scale of its easing program and its building side effects. If the economy looks like it can stave off a recession, the bank may prefer to hold off any major use of ammunition.

Japan already has a couple of decades of experience in the quantitative easing and other forms of unconventional monetary policy that central bankers in New Zealand, Australia and South Korea are only just starting to talk about.

GUIDANCE OPTION
If Kuroda holds off on lowering the negative rate despite calling for the review, one escape route would be to adjust the bank’s guidance on policy, perhaps linking the continuance of extremely low rates to risks to price momentum rather than the effects of the sales tax, as is currently the case.

That’s a possible outcome that meshes with the view of Kazuo Momma, former executive director in charge of monetary policy. He said he doesn’t expect any major policy change at the end of meeting on Oct. 30-31. What’s likely is an extension of forward guidance, the least costly tool to demonstrate the bank’s easing stance, he said.

Speculation about October stimulus earlier in the year centered on the possibility of the central bank acting in tandem with the government to support the economy through the sales tax. That’s the kind of action that would be welcomed by the IMF.

Those strong expectations of joint action cooled as Japan’s economy continued to expand and signs that the sales tax hit to the economy will likely be smaller than on previous occasions.

While the possibility of the government and BOJ acting together can’t be ruled out, Prime Minister Shinzo Abe’s administration now looks more likely to link any extra spending to disaster relief from Typhoon Hagibis. Compiling an extra budget to pay for major damage to bridges, building and roads could take about a month, making it difficult for the government to coordinate with the BOJ at the end of October. — Bloomberg

How PSEi member stocks performed — October 23, 2019

Here’s a quick glance at how PSEi stocks fared on Wednesday, October 23, 2019.

 

Comparative daily minimum wages of select Asian economies

Comparative daily minimum wages of select Asian economies

PCC may deploy powers against rice middlemen

By Jenina P. Ibañez

THE Philippine Competition Commission (PCC) said it is preparing to investigate whether middlemen are widening the price gap between what traders pay to obtain inventory from farmers and what consumers pay at retail.

The PCC said it may deploy its competition-regulating powers pending the findings of a technical working group (TWG) it formed with the Department of Agriculture (DA) to determine whether the gap between farmgate and retail prices reflects uncompetitive behavior.

PCC Chairman Arsenio M. Balisacan told reporters: “The intention of that TWG is to have a better understanding of the situation of the market. Hopefully with that understanding, we can have a clearer, firmer, more focused investigation if it comes to that, if a conclusion is there is such a problem and an investigation is warranted,” he said.

The PCC on Oct. 1 signed a memorandum of agreement with the DA for mutual assistance in agriculture competition issue. The farmgate price of palay, the unmilled form in which domestic farmers sell their crop, has softened since the enactment of the Rice Tariffication Law in March, while retail prices have not declined to a similar extent.

PCC Commissioner Johannes Benjamin R. Bernabe said that as tariffication puts pressure on farmgate prices to decrease, abusive market dominance or cartelistic behavior by middlemen could exacerbate the farmgate-retail price gap.

“There are middlemen — traders, millers, wholesalers — who are engaged in the distribution, facilitation of distribution of rice to the end-user. If there is concentration, if there are players who are in a dominant position in certain markets for this middle-faced transaction, then is it worsening the gap between farmgate prices and retail prices?” he said.

The PCC has been monitoring the various stages of rice production, focusing on traders, wholesalers, and dealers, and is also looking at the possible involvement of retailers.

“There are certain relevant geographic markets that seem to indicate that it is worth pursuing whether there is some anti-competitive behavior going on (among retailers). But primarily, the ones who have leverage in this value chain appear to be the middlemen,” Mr. Bernabe said.

He said that the commission is still avoiding attributing guilt or liability to any group. Beyond monitoring, he said the PCC is looking to be more actively engaged in analyzing the issue.

PCC can investigate anti-competitive behavior by requesting information from and surveying any industry by region or subregion.

If PCC issues a finding of cartelistic behavior or abuse of dominance, the Philippine Competition Act prescribes corresponding sanctions.

“If it turns out there are cartels — (the charges are) administrative and criminal. If it’s criminal, that comes with admin fines or could (lead to) imprisonment,” Mr. Balisacan said.

Any local government involvement in cartels is not covered by the Philippine Competition Act.

Mr. Bernabe said that any such official’s involvement discovered by the commission will be referred to the Office of the Ombudsman or the Department of the Interior and Local Government.

The Philippine Statistics Authority reported that the average farmgate price of palay fell 1.4% to P15.96 per kilogram (/kg) in the third week of September.

The retail price of well-milled rice and regular-milled rice both fell 0.3% to P42.11/kg and P37.66/kg, respectively.

Palay farmgate price falls further in early Oct.

THE average farmgate price of palay, or unmilled rice, declined further in the first week of October, falling 1.6% week-on-week to P15.56 per kilogram (kg), the Philippine Statistics Authority (PSA) said.

The PSA said in its weekly price update that the average wholesale price of well-milled rice fell 0.3% week-on-week to P38.02 per kg. At retail, prices fell 0.2% to P41.94.

The average wholesale price of regular-milled rice fell 0.5% week-on-week to P33.86 per kg. The retail price declined 0.3% to P37.53.

The price of the staple grain has been on a downward trend since the implementation of the Rice Tariffication Law, which removed restrictions on rice imports. In exchange, imports of grain from Southeast Asia are charged a 35% tariff.

The influx of imports has softened the market for palay, the form in which domestic farmers sell their harvest to traders, triggering a government effort to prop up palay prices using public funds. Private traders in some provinces are reportedly offering farmers single-digit prices per kilo of palay, well below the National Food Authority’s support price of P19.

Week-on-week, the farmgate price of yellow corn grain declined 1.6% to P12.34 per kg. The average wholesale price fell 1.0% to P18.29, and the retail price fell 0.1% to P24.26.

The average farmgate price of white corn grain fell 1.7% to P13.51 per kg. The average wholesale price dropped 1.0% to P16.80. The average retail price fell 0.5% to P26.53. — Vincent Mariel P. Galang

MWSS orders water firms to maximize treated-water output

By Victor V. Saulon
Sub-Editor

METRO MANILA’s water regulator said it told the capital’s two water concessionaires to maximize the output of their water treatment plants in Muntinlupa and Rizal to mitigate the impact of the water service interruptions which started today.

The Metropolitan Waterworks and Sewerage System (MWSS) said it told Maynilad Water Services, Inc. and Manila Water Co. to ramp up the output from their respective water treatment plants in Putatan, Muntinlupa and Cardona, Rizal.

The Cardona and Putatan plants draw water from Laguna de Bay to add to the main supply drawn from Angat Dam in Bulacan. Raw water from Laguna de Bay needs to be specially treated to be suitable for consumption.

In a text message, MWSS Chief Regulator Patrick Lester N. Ty said both companies have also been required to undertake other measures to mitigate the impact of the water interruptions, which the companies said were to slow the rate of depletion from Angat.

“They should strictly adhere to the schedule of water interruptions as announced,” he said.

He said the concessionaires must also provide stand-by water tankers or static tanks; and explore cross-border supply if needed. He said they are also to activate stand-by deep wells and make sure there are water allocations to all consumers within 24 hours to allow them to store water.

“Rationing will start tomorrow (Thursday),” Randolph T. Estrellado, Maynilad chief operating officer, said in a text message, confirming published schedules.

“We expect to continue rationing until releases from Angat are increased to the normal level of 48 cms (cubic meters per second),” he said, adding that for the two concessionaires the level is 46 cms, plus 2 cms for the Bulacan bulk water system.

“The reduced releases have been in place since July in an effort to build up supply in Angat which needs to be filled up before the dry summer months,” he said.

“Ongoing and upcoming mitigating measures are the increased production of our second Putatan plant from 100 mld (million liters per day) to 150 mld, activation of around 50 mld of deep wells, 20 mld of mobile treatment plants, and around 100 mld from continuing reduction of NRW (non-revenue water),” he added.

Mr. Estrellado said that although Angat dam’s releases have been constant at 40 cms, the company has benefited from additional flows from Ipo Dam, also in Bulacan, during the rainy season.

“Unfortunately, the recent dry spell has seen both Angat and Ipo dam levels go down and we can no longer get additional flows from Ipo,” he said.

Meanwhile, Manila Water said it would begin implementing rotational water service interruption on the evening of Oct. 24, 2019, as it had been warning since last week while the water level at Angat dam continues to decline.

“This is necessary because we want to ensure that the still-limited raw water supply will last even beyond the summer of 2020 since Angat Dam may not reach its ideal 212-meter level by the end of 2019,” it said in a statement.

“As such, we enjoin our customers to use water wisely and responsibly. Please store water when available, and just at enough amount to serve your needs during hours of service interruption,” it added.

DPWH says board to study SLEx toll suspension

PUBLIC WORKS Secretary Mark A. Villar said the Toll Regulatory Board (TRB) will study requests to suspend the collection of tolls at the South Luzon Expressway (SLEx).

Mr. Villar, who is also a member of the TRB, told reporters Tuesday that the board will take up the matter.

Wala pang notice kung kailan. Of course, siguro pag-aaralan muna (There is still no word when it will discuss the matter. I expect the issue to undergo study first),” he said.

Senator Sherwin T. Gatchalian on Oct. 7 urged the TRB to suspend or reduce the tolls collected by SLEx, which has been severely congested due to construction activity.

Para mabigyan naman ng kaunting relief ang mga kababayan natin, I do recommend na i-slash or suspend muna ang toll rates (To provide relief to road users, I recommend a reduction or suspension in the collection of tolls),” he told reporters.

He added: “The TRB can also call for a hearing. In fact, dapat ang TRB ay mino-monitor itong situation dahil ang lahat ng construction ay dumadaan sa kanila eh. They should call for a hearing and then analyze kung dapat bigyan ng relief ang ating motorists. (The TRB should be monitoring the situation because it evaluates all construction proposals. They should call for a hearing and analyze whether motorists should be given relief)”

Skyway Operations and Maintenance Corp. (SOMCO), which is managed by San Miguel Corp. (SMC), is currently undertaking preliminary works on its extension project for the Skyway system, affecting SLEx.

Mr. Villar said the ongoing construction is better undertaken sooner than later, saying: “Mas mabuti nang gawin na natin ‘yan ngayon… Kasi nagkakaroon ng build-up sa area na ‘yan. Kung hindi natin gagawin ngayon, baka in a few years mahirap na (It’s better to do it now, because the area is becoming built-up. If we don’t do it now, it might be more difficult to do in a few years).”

SMC President and Chief Operating Officer Ramon S. Ang has taken responsibility for the road congestion along the SLEx and promised that the problem will be resolved by Dec. 1.

SOMCO said on Oct. 1 that it will expedite the major preliminary work on its extension project. — Arjay L. Balinbin

ALU-TUCP calls for testing of talcum powder after US recall

A MAJOR union said it wants the Food and Drug Administration (FDA) to test talcum powder sold by Johnson’s Baby Philippines, citing possible asbestos risk to consumers and manufacturing workers after the US parent company, Johnson & Johnson, voluntarily recalled its “Baby Powder” product last week.

The recall followed the discovery of low levels of asbestos in one manufacturing batch. The US FDA said it found chrysotile asbestos fibers in a US batch of the talcum powder.

In a statement Wednesday, the Associated Labor Unions-Trade Union Congress of the Philippines (ALU-TUCP) said the Philippine FDA should inspect Baby Powder sold in the Philippines.

Asked to comment, the Philippine FDA said it believes the manufacturing batch that was ordered recalled in the US has not reached the Philippines.

ALU-TUCP National Executive Vice President Gerard Seno said Wednesday: “We are calling upon the FDA to proactively take steps to mitigate the undue anxiety felt by consumers caused by this serious discovery of asbestos contamination in a baby product commonly used by so many Filipinos across our growing population. We are urging them to conduct product evaluation test to assure the quality and safety of the product poses to the health of consumers.”

“Workers involved in the manufacture of asbestos-containing materials, construction workers, electricians, plumbers, pipe fitters, carpenters, power plant workers, boilermakers, shipyard workers, firefighters, and teachers are the type of workers who are highly risk to exposure to cancer-causing asbestos in the country,” he also said.

Last week, a TUCP-affiliated party-list legislator, Representative Raymond C. Mendoza, filed House Bill No. 2636 or the proposed Ban Asbestos Act of 2019, which calls for a ban on the asbestos manufacturing and imports, and the material’s use in the construction trades.

The use of chrysotile or white asbestos is regulated by the Department of Environment and Natural Resources’ (DENR) Chemical Control Order 02 series of 2000. Blue and brown asbestos are the only asbestos types banned in the Philippines.

In a mobile message to BusinessWorld Wednesday, FDA Officer-in-Charge Rolando Enrique D. Domingo said: “At this time we have information that the batches involved were not sold in the Philippines. We are now verifying this.”

According to the Johnson’s Baby website, all types of its Baby Powder are asbestos-free, saying that the company uses talc across its product line except for one that uses cornstarch. It said talc is non-carcinogenic.

“Our confidence in using talc is based on a long history of safe use and more than 30 years of research by independent researchers, scientific review boards and global regulatory authorities,” Johnson’s Baby said in its website.

Asked to comment on the ALU-TUCP statement, Johnson’s Baby said in an e-mail that its products are routinely FDA-tested, with the latest taking place last month, which showed no trace of asbestos in products sold in the Philippines.

“We have a rigorous testing standard in place to ensure our cosmetic talc is safe and years of testing, including the FDA’s own testing on prior occasions — and as recently as last month — found no asbestos,” the company said. — Gillian M. Cortez

ADB to support sustainable tourism project for Palawan’s Coron, El Nido

THE Asian Development Bank (ADB) said it is planning to support a tourism development project with the Department of Tourism (DoT) for the Palawan resort towns of El Nido and Coron, to prepare these destinations to handle greater visitor numbers over the next decade.

In a statement Wednesday, the ADB said it sees the need for investment in the two “fast-growing destinations” in sustainable urban facilities and marine environment protection due to projections of “higher numbers of tourists visiting the islands over the next decade”.

The DoT-led project is set to launch by the fourth quarter of 2020.

ADB will offer solutions and financing for “vital urban infrastructure and services” including solid waste management, drainage, sanitation and clean drinking water, as well as build local capacity to “protect and conserve healthy oceans and rehabilitate key biodiversity-based tourism sites.”

“This project is critically important for ADB because we share with the Philippine government the goal of seeing local economies thrive on an environmentally sustainable path. Tourism, when managed properly, can be a catalyst for inclusive development that can lift residents of El Nido and Coron out of poverty,” ADB Country Director for the Philippines Kelly Bird said.

ADB will also consider other forms of funding for local businesses and community-based groups to improve the services they offer and maintain tourism benefits for the communities.

“Palawan is known as the country’s ‘last ecological frontier’ and we want to ensure its rich marine ecosystem, particularly in El Nido and Coron, will be protected amid the rapid growth in tourist demand,” Tourism Secretary Bernadette Romulo-Puyat said.

Representatives from ADB and DoT went to El Nido and Coron in Palawan earlier this month to gather preliminary leads for project design, holding consultations with stakeholders.

The project will be carried out via the DoT’s Transforming Communities Towards Resilient, Inclusive, and Sustainable Tourism Program. — Beatrice M. Laforga

House committee approves rice procurement instead of subsidies for 4Ps beneficiaries

THE House Committee on Agriculture and Food approved on Wednesday a still-unnumbered substitute joint resolution calling for rice procurement to be funded by the 2019 rice subsidy budget for poor families.

The budget funds will be used to directly procure rice from farmers, who have been realizing declining prices for their produce since the implementation of the Rice Tariffication Law in March. The proposals call for cash subsidies distributed by the social welfare department to be converted to rice, to be directly distributed by the department to its beneficiaries.

The substitute resolution consolidates House Joint Resolutions 16 and 322 filed by Representatives Luis Raymund F. Villafuerte, Jr., Ferdinand Martin G. Romualdez and Yedda Marie K. Romualdez, which both authorize the use of the rice subsidy meant for beneficiaries of the conditional cash transfer (CCT) program to procure rice from farmers.

The committee’s chairperson, Quezon 1st district Rep. Wilfrido M. Enverga said the measure will be discussed at the plenary level once legislative sessions resume on Nov. 4.

Once certified by President Rodrigo R. Duterte, Mr. Enverga said that it could be approved on second and third reading on the same day.

“Assuming that there is a certification, once we return, we will ask the committee on rules and the Speaker kung pwedeng mai-prioritize natin ito (if it can be given priority), for sponsorship (on) second reading. Being certified, sa araw narin na ‘yun, pwede nang idiretsyo for third reading (it can be go for third reading on the same day),” Mr. Enverga in chance remarks to reporters.

Presidential Legislative Liaison Office Secretary Adelino B. Sitoy said that the executive department can immediately certify the measure once approved by the House.

“If this is approved by the House and forwarded to the Senate, we can work on the immediate certification,” Mr. Sitoy told the committee.

The 2019 General Appropriations Act provides a total allocation of P33.9 billion for rice subsidies, with the largest portion going to beneficiaries of the Department of Social Welfare and Development’s (DSWD) Pantawid Pamilyang Pilipino Program (4Ps). Currently, a balance of P6.97 billion remains undisbursed under the department’s rice subsidy program.

Beneficiaries of 4Ps receive a monthly rice subsidy of P600, equivalent to 20 kg of rice.

DSWD National Program Manager for 4Ps Gemma B. Gabuya said that the agency is drafting a memorandum circular along with the Department of Agriculture and the National Food Authority in preparation for possible direct rice distribution

“Currently, we are drafting a joint memo circular in terms of the mechanics in the distribution of the rice to the 4Ps beneficiaries. We are just awaiting the approval of this resolution, so that we can transfer the funds as initially discussed to NFA to be able to buy palay,” Ms. Gabuya said. — Vince Angelo C. Ferreras

How RPA aids in E2E Business Process Management

A powerful tool, a game-changing technology. Robotics Process Automation (RPA) has been a buzz word for years now. By definition, it’s a software robot that does what a user tells it to do – autonomously performing activities the same way a human user would on a machine. It is frequently used for manual, predictable and repetitive tasks to allow a more productive use of the process owner’s time. Its adoption has allowed companies to gain significant improvements in their operational metrics such as increased speed, quality, and functionality.

Robots execute work by mimicking the way a human process owner would perform the task. They are programmed according to a streamlined and rules-based business process logic, which is why, prior to implementation, it is important that business rules are well-defined.

If business processes are poorly managed and undocumented, it will result in gaps and inefficiencies which will serve as roadblocks from the onset of a company’s RPA journey.

The reality is that many processes are broken. This burdens process owners since they have to do manual, unequal and often redundant workarounds to accomplish the same purpose or amount of work. It also leads to inefficiencies in tasks that are carried out, and the lack of ability to provide the required output in a consistent fashion. Truth be told, whenever these challenges present themselves, the usual road that many organizations take is to add new resources to the process like man hours — an approach that directly impacts the balance sheet, and indirectly, kills employee morale and productivity.

One of the many factors contributing to broken processes is the level of process complexity and volume of unstructured data which process owners have to work with. This includes the large number of interactions among process steps, and the variety and inconsistency of inputs handed off from one process step to another. Working with voluminous data and complex processes is also made even more challenging by the absence of a detailed and updated process documentation that also leads to confusion and ambiguity on how a process is supposed to be done.

Far from the popular concept, an RPA Center of Excellence (CoE), which centralizes governance and best practices for RPA implementation, does more than just developing, deploying and monitoring robots; it actually operates on an end-to-end business process model. It constructs a streamlined and harmonized process where robots and humans can work together – effectively aligning people, process and technology. Continuous process improvement is among its core philosophies and is seated at the center of every automation initiative for optimum value.

As a standard, deep process analysis and process standardization are rolled out by the RPA CoE before the actual robot development. Process standardization essentially is the establishment of rules that dictate how people should complete a sequence of tasks. To do this, business rules are sometimes re-defined and data are re-structured so that they can be tested in different scenarios. An effective process standardization means that there is one precise approach to complete a task defined in terms of a clear and measurable end result — a unified way of doing a procedure, reducing process variations that normally lead to inconsistency in the output.

Embedding RPA in the operations challenges business units to re-evaluate, document and update their processes because a detailed process design is a prerequisite of robot development. In practice, this is done by an RPA Business Analyst who also tracks process performance, identifies major gaps and provides solutions. Upon deployment, a comprehensive documentation of the re-engineered process is introduced showing how robots can work side by side with their human counterparts. Process documentation is an established way to sustain the value created in every process step over time.

An RPA CoE simplifies processes. Having a robot in production do transactional procedures eliminates some layers of an end-to-end process. Often, multiple process checks and other steps are rooted out in some parts of the map. This reduces non-value adding activities that may cause potential errors. Using less time and fewer manual interventions, the goal of process simplification is to make work easier to understand and reduce process bottlenecks. This allows human workers to make more efficient use of their time and focus more on value adding activities.

RPA is parallel to process excellence. The collaboration of developers and process technicians give life to an RPA CoE’s mission of building smart robots and optimizing processes. As powerful as it is, RPA alone is not a solution to enhance productivity. It will fall out of alignment if implemented without good business process management. Subsequently, this will cause inefficiency, contrary to its promise. The best cases for RPA implementation are processes that are mature and stable. When RPA is merged with effective business practices, immediate positive impacts are realized which include the company’s overall employee experience and increased economic value.

Clearly, to realize the full potential and value of RPA, companies will need to re-evaluate and re-think their process optimization initiatives and focus more on streamlining processes — the first step all businesses must take in order to keep up with the fast paced evolution towards digital transformation.

The author is a Manager at the Digital Transformation Solutions — Robotics Process Automation of Isla Lipana & Co., the Philippine member firm of the PwC network. Readers may call +63 (2) 8845 2728 or e-mail the author at jay.armand.b.ogayon@.pwc.com for questions or feedback.

The views or opinions expressed in this article are solely those of the author and do not necessarily represent those of Isla Lipana & Co. The content is for general information purposes only, and should not be used as a substitute for specific advice.

Brexit has the British fleeing to Europe

By Leonid Bershidsky

FIVE YEARS ago, I emigrated to Germany from Russia, because it had abandoned any pretense of wanting to be a European country. Now, I’m watching in amazement as Britons — people we Russians have long considered the epitome of Europeanness — are doing the same, in droves, for the same reason.

It’s well known that tens of thousands of UK citizens have obtained second passports from Ireland as insurance against a post-Brexit loss of the European freedom of movement. But that’s only part of the story. Far more British citizens are applying for passports in other European countries than had been doing so before the Brexit referendum; they’re also moving to these countries in numbers not seen in a decade.

The number of Britons acquiring the German nationality, for example, has jumped from hundreds to thousands a year. There are so many of them they no longer get a traditional ceremony when they receive their German passports.

In 2014, five times as many Russians as Britons became naturalized Germans. The situation has reversed today: In 2018, 6,640 UK nationals obtained German passports, compared with 1,930 Russians. According to the Organization for Economic Cooperation and Development’s international migration database, after Brexit passed, the naturalizations of Britons also went up sharply in France, Belgium, the Netherlands and Sweden, although the absolute numbers are smaller there than in Germany.

While Britons getting second passports from Ireland mostly aren’t going anywhere, there’s a substantial jump in UK emigration to the rest of the European Union.

While Britons migrated to the continent in similar numbers in the mid-2000s, about half of those emigres were moving to Spain, which marketed itself aggressively to retirees (and enjoyed a housing boom as a consequence). Today, the geography of the UK emigration is much more diverse. And, as with naturalizations, continental Europe is receiving significantly more UK nationals than Russians.

Data from the OECD are only available through 2017. But Daniel Auer of the Berlin Social Science Center, who is working on a study of recent UK emigration with co-author Daniel Tetlow, projects that the number of UK citizens moving to other EU countries increased to more than 75,500 in 2018, and will go up to almost 84,000 this year. That would be an absolute record.

The numbers are bigger than those reported by the UK Office of National Statistics for the outward migration of UK citizens — according to the ONS, net out-migration in the 12 months ending in March 2019 reached 52,000. But Auer considers OECD data and his extrapolations from national statistics in Germany, Spain and Ireland more accurate than British data, which is based in large part on passenger surveys.

It’s true that Britons face a lot less bureaucracy than Russians when they want to move to EU member states. And, unlike Russians, they are allowed dual citizenship in Germany while the UK is still an EU member. But I still can’t help my incredulity as I look at the numbers.

Russia is a corrupt country run by an authoritarian ruler who invades neighboring states, and it’s much poorer than the UK. It fits the profile of a country of emigration much better than Britain does. According to Gallup data from the end of last year, 34 million people worldwide would want to move to the UK and only 8 million to Russia. And yet the UK appears to be beating my country of birth at driving people away.

The fact that the UK is still an attractive destination for immigrants makes it likely that post-Brexit Britain will be able to attract enough talent to replace those who leave. The foreigners still come: According to the OECD, the number coming to study — mostly from non-EU countries — has increased even as fewer people have been arriving to take jobs. But the UK government needs to pay more attention to how many citizens are leaving the country and declaring their allegiance to other European states. It needs more accurate statistics, obtainable from destination countries, and policies designed to persuade its people to stay or to come back if they’ve left.

The growing emigration of UK nationals is a measure of policy failure — just as it has been for the Vladimir Putin regime in Russia since the 2014 Crimea annexation. The UK, like Russia, is losing people who disagree with insular policies. Brexiters may consider that good riddance — just like the Kremlin does. But I’m deeply convinced that countries need such people. They’re the ones who connect nations in this increasingly small world, and with fewer of them, countries can quickly lose their edge.

 

BLOOMBERG OPINION