Home Blog Page 8970

Show tackles Ramadan cooking while under quarantine

In time for Ramadan celebrations and adjusted for measures to mitigate the spread of COVID-19, the Asian Food Network (AFN) is hosting live cooking sessions to help Muslims celebrate the month-long religious festival starting April 21.

“This year, with people spending more time indoors, [AFN] is bringing inspiration directly into audiences’ homes through live cooking sessions,” the network said in the statement.

Ramadan runs from April 23 to May 23 this year.

The live cooking shows will be hosted by Malaysian chef Ili Sulaiman, the host of network’s Home Cooked: Malaysia and Family Feast with Ili. She has also come out with her own cookbook, For the Love of Food and is said to have been cooking since she was seven years old.

Ms. Sulaiman will be cooking four dishes and is encouraging viewers to cook along with her as the ingredients list will be posted on asianfoodnetwork.com prior to the show, which starts at 7 p.m. on the network’s Facebook page.

The sessions are scheduled on April 21, April 28, May 5, and May 12 at 7 p.m. on the Asian Food Network Facebook page. Those who miss the Facebook Live session can still view the full show on the AFN website at 11 p.m. on the same day.

Which developing markets are attractive to retailers?

Which developing markets are attractive to retailers?

How PSEi member stocks performed — April 20, 2020

Here’s a quick glance at how PSEi stocks fared on Monday, April 20, 2020.


DBM releases final batch of funding for DoLE worker aid

THE Department of Budget and Management (DBM) released P2.5 billion to replenish the Department of Labor and Employment’s (DoLE) cash aid program for displaced workers but said the remaining request for P5 billion worth of additional funding, which could support 1 million more people out of work, is unlikely to be approved.

Budget Secretary Wendel E. Avisado told BusinessWorld that the P2.5 billion will be the “last” replenishment for the labor department’s cash aid programs since applicants and beneficiaries will be transferred to the newly-launched wage subsidy program of the Department of Finance (DoF).

“Last na po ‘yung P2.5 billion per instruction of President Rodrigo R. Duterte kasi all the rest will be provided na with financial support under the DoF program for all workers under the MSMEs (The P2.5 billion is the final tranche per instruction of President Rodrigo R. Duterte because all the rest will be provided financial support under the DoF program for all workers of small firms,” Mr. Avisado said by mobile phone Monday.

Mr. Avisado said the DBM has no other pending requests from DoLE.

Labor Officer-in-Charge Assistant Secretary Dominique R. Tutay said the recently-approved P2.5 billion, which will be sourced from the agency’s realigned budget, will support 300,000 more workers under the COVID-19 Adjustment Measures Program (CAMP) with additional P1.5 billion funding while the remaining P1 billion will be used for another aid program known as TUPAD, or Tulong Panghanapbuhay sa Ating Disadvantaged/Displaced Workers.

“The P2.5 billion will be spent as follows: P1.5 billion for CAMP to benefit about 300,000 more workers [and] P1 billion will be for TUPAD. If P5 billion is approved and released, it will benefit 1 million more workers,” Ms. Tutay said in a mobile phone message on Monday.

CAMP provides P5,000 in cash aid for workers displaced due to the Luzon-wide lockdown. The program had an initial P1.6 billion worth of funding.

Meanwhile, TUPAD aims to provide temporary emergency employment for workers in the informal sector. It had an original budget of P1.5 billion.

Initially, Ms. Tutay said DoLE requested P7.8 billion in additional funding for its programs, P2.8 billion from budget realignments and an additional P5 billion to support its programs.

Applications for relief have totaled 1.6 million, and DoLE stopped accepting applications for CAMP starting April 15. Displaced workers were estimated at 1.7 million as of Sunday.

As of April 18, DoLE said it disbursed P1.32 billion to 264,154 workers, leaving the program with a balance of P300 million.

Mr. Avisado said DBM also released to DoLE P100 million worth of financial assistance for displaced private sector employees on March 18 as well as P15 million for the emergency repatriation program of Overseas Workers Welfare Administration.

DoF’s P51-billion wage subsidy program for employees of small businesses aims to provide P5,000-P8,000 worth of cash aid to some 3.4 million displaced workers, depending on the prevailing minimum wage rate. The program is set to be distributed in two tranches, the first on May 1-15 and the second tranche on May 16-31.

CAMP beneficiaries who have received P5,000 will only be eligible for a one-month wage subsidy. — Beatrice M. Laforga

Irrigation plan to be coordinated with expanded rice planting

THE Department of Agriculture (DA) said it is working with the National Irrigation Administration (NIA) to maximize irrigated land for the next rice planting season to ensure a larger harvest.

“We are pleased that the Inter-Agency Task Force for the Management of Emerging Infectious Diseases (IATF-EID) approved our recommendation that the government pursue the optimum level of rice production with the support of the NIA, as well as the prepositioning of needed farm inputs like quality seed and fertilizer for early planting,” Agriculture Secretary William D. Dar said.

According to the Philippine Statistics Authority (PSA), irrigated rice farms result produce yields of 4.43 metric tons (MT) of palay, or milled rice, per hectare, against rain-fed land which yields 3.13 MT per hectare.

“The release of irrigation water should be in sync with land preparation and planting activities, as we aim to boost palay production by 2020 to 22.12 million metric tons (MMT), equivalent to 13.51 MMT of rice, or 93% self-sufficiency,” Mr. Dar said, as against the 2019 self-sufficiency level of 87%, Mr. Dar said.

The coordination between the DA and NIA was authorized by IATF Resolution No. 24, which called for the timely and ample water availability during the main rice planting season.

“Many of our farmers rely on national irrigation systems, managed by NIA. Thus, it plays a vital role in ensuring the timely release of water sufficient to supply each locality, especially those at the tail end of irrigation canals,” Mr. Dar said.

Meanwhile, the DA said that it is willing to partner with the Department of Trade and Industry (DTI) on marketing programs aimed to increase food supply and availability during the coronavirus disease 2019 (COVID-19) outbreak.

Trade Secretary Ramon M. Lopez proposed that the DTI’s Diskwento Caravan partner with the DA’s Kadiwa ni Ani at Kita to ensure the increased availability of basic commodities during the enhanced community quarantine.

“As in previous years, the DTI has been a strong ally and partner. Hence, we more than welcome the suggestion of Secretary Lopez that we include discounted manufactured goods in the marketing of agri-fishery products in all Kadiwa outlets and platforms,” Mr. Dar said.

The DTI’s Diskwento Caravan aims to supply basic goods priced the same or lower than the suggested retail price, while the DA’s Kadiwa marketing program links local government units (LGUs) to farmer-producers for easier delivery and distribution of food supply.

“Our close coordination with the DA, retailers, manufacturers and LGUs is essential in ensuring supply of basic necessities and are priced according to, or lower than the prevailing prices set in the price freeze list,” Trade Undersecretary Ruth B. Castelo said.

Mr. Dar said that the Kadiwa and Diskwento Caravan partnership could function as a mini-grocery store with more affordable goods.

“DTI will coordinate with the DA to join the scheduled Kadiwa activities,” Mr. Lopez said.

The proposed partnership between the two departments was introduced during a meeting of the Food and Water Security Task Group on Friday. — Revin Mikhael D. Ochave

Energy, Finance dep’ts release implementing rules for Murang Kuryente Act

THE Department of Energy (DoE) and the Department of Finance (DoF) released the implementing rules and regulations (IRR) governing Republic Act No. 11371 or the Murang Kuryente Act. which relieves consumers of the universal charge for stranded contract costs (SCC) and stranded debt incurred by the National Power Corp. (NPC).

In August, President Rodrigo R. Duterte signed the law, which allocates P208 billion of the net proceeds of the government’s share from the Malampaya Natural Gas Project to cover these costs, including the anticipated shortfalls or deficits incurred from paying these obligations.

Both charges, which are collected by the government-led Power Sector Assets & Liabilities Management (PSALM) Corp., form part of the universal charge paid for by consumers in their monthly power bills.

Stranded contract costs are “the excess of the contracted cost of electricity under eligible IPP (independent power producer) contracts over the actual selling price of the contracted energy output of such contracts,” according to the IRR.

Stranded debt, on the other hand, consists of those unpaid NPC financial obligations which have not been liquidated by the proceeds from the sales and privatization of its assets.

The Malampaya gas-to-power project under the DoE-awarded Service Contract 38 is being developed by Udenna-controlled UC Malampaya Philippines Pte. Ltd., which has a 45% stake in the project, Shell Philippines Exploration B.V., which also has a 45% stake, and state-owned Philippine National Oil Co. Exploration Corp. (PNOC-EC), which owns the remaining 10%.

The IRR states that no new universal charges for both stranded contract costs and stranded debt are to be collected upon its effectivity.

Should there be an excess in the fund allocation after paying these costs, the law provides that the remainder must be used to finance energy resource development and exploitation programs of the Energy Development Board.

The IRR also requires such fund allocation to be included in the General Appropriations Act.

In February, PSALM announced its decision to stop collecting P0.0543 per kilowatt-hour (kWh) universal charge for SCC starting that month. This translates to a reduction of P5.43 for every 100 kWh of electricity consumption. — Adam J. Ang

NPC seeks ‘minimal’ data collection for COVID-19 tracker apps

THE National Privacy Commission (NPC) said digital tools designed to help health authorities contain the coronavirus disease 2019 (COVID-19) pandemic should avoid over-collecting personal data.

“COVID-19 related apps can only achieve the desired level of uptake if it is clear about its legitimate purpose, is transparent on how it uses personal data and proportional in its collection. The App must not over-collect personal information from users and collect only what is necessary for the purpose” Privacy Commissioner Raymund E. Liboro said in a statement on Monday.

The Department of Health has launched a COVID-19 tracker app that collects data from hospitals and laboratory facilities to provide information on testing and health facilities.

The tracker includes data on the capacity of laboratory testing facilities and the availability of protective equipment, beds, and ventilators. The public can also track the number of confirmed cases per area, broken down by age and sex.

The Philippine Red Cross launched an app that uses mobile wireless and location data capabilities to inform users if they could have had contact with a patient that has tested positive for COVID-19, while StaySafe.ph is a health reporting system designed to help improve contact tracing.

Mr. Liboro said that personal information controllers (PICs) must ensure that the app is built on a legitimate purpose, which in this case is limited to the aim of defeating the pandemic.

PICs are individuals who can process personal data or instruct another to do so.

“The app’s design, functionalities, personal data collection and extent of processing must never deviate from this purpose,” Mr. Liboro said, adding that personal data processing must stop as soon as the purpose is achieved.

He said that the collected personal data must be discarded securely to prevent further use and minimize privacy risks.

NPC said that PICs must only collect the minimum data necessary to achieve the objective, and do so using the least intrusive method. The commission also said that PICs must inform users how the app will collect, use, store, share, and dispose of their personal data through a privacy notice.

Mr. Liboro added that PICs must implement security measures as data processing online is vulnerable to cyber threats and inform users of their data subject rights.

The government requires individuals who have tested positive for COVID-19 to declare personal information to the health department. Cabinet Secretary Karlo Alexei B. Nograles, spokesperson of the Inter-Agency Task Force for Emerging Infectious Diseases (IATF-EID), said this would enhance contact tracing efforts. — Jenina P. Ibañez

EU-ASEAN council bats for more secure cross-border data transfers

THE EU-ASEAN Business Council (EU-ABC) said that Southeast Asia must improve secure cross-border data transfers to achieve a projected $300-billion Internet economy in five years.

The council in a report said the importance of data security and protection has been highlighted in the wake of the coronavirus disease 2019 (COVID-19) pandemic.

“As countries in the region are in varying levels of physical lockdowns due to COVID-19, millions more citizens are taking to digital tools such as online learning, video conferencing and telemedicine. This places ever greater importance on data security and privacy protection,” EU-ABC Chairman Donald Kanak said in a statement.

The report, Data Governance in ASEAN: From Rhetoric to Reality, listed the Philippines among Southeast Asian countries that are modernizing their data protection frameworks, noting that the country did not make it to the top 50 in a survey of 100 economies studying their ability to benefit from digitization.

The council, however, does not support data localization, or the requirement that data must be processed and stored within a country to meet local privacy laws prior to being transferred to another country.

“Instead, the council encourages the government to permit data transfers in the regular course of business, with exceptions where necessary for privacy or security purposes.”

The council said that ASEAN member states must allow secure data transfers across borders by using leading technologies and harmonized rules.

“Develop a coherent, transparent and consistent data classification framework which can promote interoperability across sectors. This will facilitate data to flow easily, efficiently and securely within and across multiple sectors.”

The group said that companies must be ordered to adhere to international standards, which it said will help small and medium-sized enterprises build trust with different stakeholders within the region.

They said rules must be compatible with the European Union’s General Data Protection Regulation (GDPR), adding that ASEAN businesses have to apply these regulations when offering goods and services to people living in the European Union.

“There is an urgency for businesses in Southeast Asia to incorporate GDPR to their day-to-day operations or risking losing out in a $17-trillion economy,” according to the report.

EU-ABC said that harmonized cross-border flows will not only promote intra-ASEAN trade but also trade and investment with key dialogue partners, including the European Union.

“The Council encourages governments to design legal frameworks that facilitate data transfers in the regular course of business, while ensuring that such transfers take place with appropriate privacy and data security safeguards.” — Jenina P. Ibañez

Is there taxable liquidation in an upstream merger?

At a time when all hope seems lost, witnessing people coming together to help each other in the battle against COVID-19 may be what’s needed to have one’s faith in humanity restored. Frontliners, from health care workers and emergency response teams to grocery workers and food delivery riders, are being lauded as heroes, and rightfully so. Whether it is our lives or dinners that are on the line, these frontliners work hand in hand and with the rest of the world, despite the risk to their personal safety every time. The Bayanihan spirit we have been seeing these past few weeks is a show of solidarity that is definitely one for the ages.

As tempting as it is to dig deeper into how frontliners have integrated themselves into our daily lives, this article will tackle a different kind of union: one that existed long before this pandemic challenged business leaders to think on their feet. To the business-savvy, these unions are known as mergers or consolidations.

In the Philippines, companies resort to mergers and consolidations because of the demands of their business strategy. Corporations combine into a single unit to pool their resources for greater efficiency. In fact, mergers and consolidations are an option that businesses might consider after the enhanced community quarantine (ECQ) ends.

Our laws actually recognize and provide incentives for such transactions. For instance, our current tax laws exempt corporations that enter into a tax-free merger from income tax and other forms of taxes. Under this scheme, a corporation that absorbs another corporation through a merger and exchanges its shares for the property of the latter is exempt from income tax, value-added tax (VAT), and other forms of tax.

However, in Bureau of Internal Revenue (BIR) Ruling No. 508-2012, the BIR held that an upstream merger where no shares were issued to the absorbed corporation in exchange for its assets is a taxable donation and does not qualify as a tax-free exchange under Section 40 (C) (2) of the Tax Code, as amended. In the same manner, the intended merger has the effect of dissolving and liquidating the subsidiary without paying the corresponding taxes.

Upon the review of the Secretary of Finance in Department of Finance (DoF) Opinion No. 012-2018, the DoF emphasized that tax exemptions are to be construed in strictissimi juris (strictly) against the taxpayer and liberally in favor of the taxing authority. Without complying with the requirement to issue shares in exchange for the property of the absorbed corporation, the upstream merger failed to qualify as a tax-free exchange. The DoF clarified, however, that the upstream merger is not a donation made by a subsidiary to its parent company, as there is no intent to donate on the part of the subsidiary. Finally, the DoF held that, since the upstream merger is not a tax-free merger, proper taxes on dissolution and liquidation must be imposed.

But what is a merger, and what does the process involve? The Supreme Court (SC) has defined a merger as “a union between two or more corporations, whereby one or more existing corporation is absorbed by another.” The parties to a merger, or constituent corporations, are dissolved, leaving only the surviving corporation. For this transaction to be tax-exempt, jurisprudence requires the following conditions: (1) there must be a legal merger or consolidation, or transfer of all or substantially all of the properties of a corporation for the stock of another corporation; and (2) such business restructuring or reorganization must be for a bona fide business purpose.

In an upstream merger, the parties are the parent company (the surviving corporation) and its wholly-owned subsidiary (the absorbed corporation). Since the surviving corporation is the sole stockholder of the subsidiary, the merger does not result in the issuance of shares, as issuing shares to the stockholders of the absorbed corporation would result in the issuance of treasury shares.

As a result of the merger, all of the absorbed subsidiary’s assets and liabilities are transferred to the surviving corporation by operation of law. The DoF has stated that, since the upstream merger failed to qualify as tax-free, the dissolution of the absorbed corporation brought about by the merger amounts to taxable dissolution and liquidation. Hence, it is subject to pertinent taxes under the Tax Code. However, in a long line of cases decided not only by the Court of Tax Appeals, but also by the SC, the consistent doctrinal pronouncement is that there is no winding up of the affairs or liquidation of the assets of the dissolving corporation in a merger, because the surviving corporation automatically acquires all its rights, privileges, and powers, as well as its liabilities, by operation of law.

In a merger, the surviving corporation can achieve a continuous life of the juridical personalities and business enterprises of the dissolving corporation. As ruled by the SC in several cases, there is no legal break in such juridical personalities and business enterprises, as they end up combined in the surviving or consolidated corporation. Since there is no legal break in the juridical personality of the absorbed corporation, then there is no liquidation to speak of. While there is a dissolution of the absorbed corporation by operation of law, there is no winding up of its affairs or liquidation of its assets, since the surviving corporation would continue the combined business. Liquidation contemplates the death of a corporation, one that amounts to the winding up of the affairs of a corporation. Such is not present in a merger.

The future of our people and our economy has been greatly affected as the COVID-19 pandemic continues to claim lives and opportunities. We have been reading news about mass layoffs by several corporations around the world due to community lockdowns and the onset of a global recession. Many businesses have been paralyzed, with several companies implementing a no-work-no-pay scheme to counter the effects of the pandemic.

At this point, the private sector has been thinking of ways to ease the serious consequences of the ECQ. In order to continue business operations, an option would be to enter into mergers. With the efficiencies and scale achieved through mergers, businesses may be able to prevent serious losses and laying off workers. The government should consider supporting this kind of union, especially among corporations bearing the brunt of the economic impact resulting from the global pandemic. For this to work, however, the government must review its existing policies, particularly those concerning upstream mergers, in order to provide a stable future.

Let’s Talk Tax is a weekly newspaper column of P&A Grant Thornton that aims to keep the public informed of various developments in taxation. This article is not intended to be a substitute for competent professional advice.

 

Dabuimar Burgos is a tax associate of Tax Advisory & Compliance division of P&A Grant Thornton, the Philippine member firm of Grant Thornton International Ltd.

pagrantthornton@ph.gt.com

PSE index ends lower as virus clouds sentiment

By Denise A. Valdez, Reporter

THE MAIN INDEX closed lower yesterday as uncertainties over the coronavirus disease 2019 (COVID-19) pandemic continued to cloud investor sentiment globally.

The Philippine Stock Exchange (PSEi) shed 56.32 points or 0.97% to 5,733.65 on Monday. The broader all shares index likewise gave up 18.53 points or 0.53% to 3,473.90.

“Local shares started lower as investors remained vigilant on news of a possible treatment for COVID-19 and after the Trump administration announced guidelines for reopening the economy,” Regina Capital Development Corp. Head of Sales Luis A. Limlingan said in a mobile message.

Different countries across the world are trying possible treatments or antiviral medicine for COVID-19, and last week, United States-based Gilead Sciences, Inc. was reported to have found favorable results from its trials.

This resulted in hopes that the end of the pandemic is coming soon, on top of the United States government’s release of guidelines for a three-phased reopening of its economy.

Philstocks Financial, Inc. Research Associate Piper Chaucer E. Tan said the lack of foreign money in the Philippine market shows the instability of the PSEI’s climb as observed in the past four weeks.

“The market performance ending on red territory is within our expectation that the 5,800 resistance will be tested by investors… We expect also that the recent market rally may not be sustainable if you would take a look at its foreign fund flow,” he said.

Net foreign selling stood at P628.75 million yesterday, marking the 24th straight day that foreigners have pulled their money out of the local bourse.

“It is crucial for the market to have the presence of foreign funds in order to maintain and sustain the market rally,” Mr. Tan said. “With the threats of the number of coronavirus infections in Southeast Asia…, (there are) mounting worries among experts that the region could turn into a hotspot for the fast-spreading disease.”

The industrials index lost 121.15 points or 1.60% to 7,445.67 yesterday. Financials shed 13.16 points or 1.06% to 1,222.56; property trimmed 31.52 points or 1.06% to 2,932.17; and holding firms shaved off 45.66 points or 0.79% to 5,686.06.

But some indices still closed with gains: mining and oil by 92.88 points or 1.98% to 4,781.10; and services by 4.39 points or 0.33% to 1,299.23.

Value turnover dropped to P4.76 billion yesterday from P7.29 billion in the previous session. Volume also slid to 703.70 million from 733.29 million on Monday.

Advancers outnumbered decliners, 109 against 83. Some 44 names ended unchanged.

“We expect more volatility in the upcoming weeks as to uncertainty of the enhanced community quarantine, whether it will be extended again or (will be partially lifted) to restart the economy,” Mr. Tan said.

Peso climbs as oil prices continue to drop

THE peso climbed against the greenback on Monday on the back of a continued drop in global oil prices due to falling demand caused by the coronavirus disease 2019 (COVID-19) as well as a decrease in Treasury purchases by the US Federal Reserve.

The local unit finished trading at P50.79 per dollar on Monday, appreciating by 11 centavos from its P50.90 close on Friday.

The peso opened the session at P50.90 per dollar. Its weakest showing was at P50, while its strongest was at P50.75 against the greenback.

Dollars traded decreased to $320.56 million on Monday from the $491.6 million seen last Friday.

A trader attributed the peso’s strength to recent moves from the US Federal Reserve which improved investor optimism.

“The peso appreciated after the US Federal Reserve announced a $15-billion reduction in daily bond purchases from the market and from optimism amid prospects of reopening the US economy,” the trader said in an email.

The New York Fed said it aims to purchase $75 billion in Treasuries starting this week. This will bring the daily purchase amount down to an average of $15 billion per day from the $30 billion per day seen last week.

Meanwhile, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said the peso tracked the latest drop in global oil prices.

“The peso closed stronger, among its strongest in two years, after the sharp decline in global oil prices that could fundamentally lead to lower inflation,” Mr. Ricafort said in a text message.

Reuters reported that crude oil futures dropped in electronic trading on Sunday, succumbing to its lowest level since November 2001 on the back of falling demand due to the COVID-19 pandemic.

The trader expects the peso to trade within the P50.70 to P50.90 levels this Tuesday while Mr. Ricafort gave a forecast range of P50.60 to P50.90.

The peso was among the most stable currencies in Asia amid heightened volatility due to the pandemic, according to the Department of Finance (DoF).

In an economic bulletin, the DoF said the peso ranked third among the three currencies that maintained their value against the greenback in the region as of April 15, after appreciating by 0.04% versus the US dollar in its year-to-date value.

This was just behind Japanese yen’s 2.05% appreciation and Hong Kong dollar’s 1.28% appreciation, while all other countries recorded depreciation.

The 12 Asian currencies studied, based on Bloomberg’s data, include Chinese yuan renminbi, Japanese yen, Indian rupee, Philippine peso, Singapore dollar, South Korean won, Thailand baht, Vietnamese dong, Malaysian ringgit, Indonesian rupiah, Hong Kong dollar and Taiwan dollar.

“Despite the rising risks in the global economy, heightened by the spread of COVID-19, the collapse of global stock markets, the crash in Latin American currencies and the downgrading of credit ratings of many economies, the Philippine peso remained firm, almost unmoving from year-end 2019 level,” the DoF’s statement read.

The DoF said the peso-dollar exchange rate had also shown stability with a coefficient of variation of 0.26%, the smallest among the 12 regional currencies and lower than the 1.94% regional average.

“The main reasons for the peso’s growing strength and stability are the country’s strong BoP position and rising GIR. Strong foreign exchange inflows from exports of services, remittances, income from investments abroad, direct foreign investments and foreign borrowing all contributed to the strong BoP position. These in turn boosted the confidence in the Philippine peso,” it said.

“Strong macroeconomic fundamentals support the country’s financial position. The BoP surplus in 2019 was the highest in recent history. Manageable budget deficits and prompt adjustment of monetary settings in response to current developments help maintain investor confidence,” it added. – L.W.T. Noble and B.M. Laforga with Reuters

Politics and Crisis: A discussion seriesCOVID-19 Lessons in East Asia: The good, the bad, and what’s just right

By The Ateneo de Manila Department of Political Science

Part 5 of an eight-part series

AMID the global disruptions caused by the pandemic on all economies, attention is drawn to how countries in East Asia respond to the crisis. Which of their responses account for relative success or failure? The regional effects of the COVID-19 pandemic suggest that wealth and level of development do not guarantee effective governance. An openness to innovation and feedback (plus the ability to creatively and inclusively implement working recommendations), however, seems to do better.

As the region moves gradually towards eventual stability, it is instructive to examine the role that East Asian socio economic and political governance will influence the emerging post-pandemic international order. They serve as effective cases not only on pandemic management, but also on the changing nature of the needs of contemporary Asia-Pacific citizens, and how governments should adjust to them — not the other way around.

BEIJING AS ‘PATIENT ZERO’
Significant criticism must rest squarely on the non-transparent, obfuscating governance and international relations China under the Communist Party (CCP) has engaged in. Despite warnings and initial cases sounded within Wuhan, China as early as December 2019, local authorities and the CCP insisted in downplaying the purported risks of the disease. The most damaging would be its continued refrain that virus transmission is not possible between humans — despite mounting evidence to the contrary. The World Health Organization (WHO) was also party in disseminating this inaccurate information throughout January 2020.

Perhaps it was inevitable that China’s aloofness from engaging in genuine multilateral cooperation led to this debacle. Even at this very moment, Beijing directs Chinese responses to the pandemic to portray itself as a “savior” and “emerging global leader” — not the main party responsible. Unequal treaties and trade influence with its partners (within and outside Asia Pacific) continues to mute criticism and attempts at accountability. Continued Chinese activity within contested territories (such as Taiwan, Senkaku/Diaoyu Islands and the West Philippine Sea) do not help matters.

SOUTH KOREA LEARNS FROM THE PAST
South Korea’s extraordinary response in battling COVID-19 may appear characteristically intrusive to some, but the pre-emptive, transparent, and immediate measures it has adopted to curb the spread of the virus deserve the attention of policymakers and leaders worldwide. As a democracy, it shied away from putting its cities under lockdown — but was decisive enough and acted swiftly upon determining its first confirmed cases. Bold efforts were directed towards immediately addressing two variables critical in slowing the virus: quarantining and high-volume testing campaigns.

In mid-January, as soon as the ugly reality surrounding the virus became known to the government, agencies with knowledge and experience in infectious and pandemic diseases were mobilized to roll out rigorous quarantine mechanisms and nationwide testing. South Korea’s robust research and biotech industries raced to produce testing kits for testing centers. Beyond conventional testing centers, drive-through testing stations were set up around the country, allowing faster determination if one needs treatment. Such innovative and expansive strategies means more people are tested per million, without compromising speed nor overwhelming other conventional centres. As of April 10, South Korea had conducted 503,051 tests (Worldometer) against a population of more than 51 million people. The numbers do not effectively translate to a categorical win, but are effective in isolating infected individuals and tracing their contacts for quarantine.

Established quarantine guidelines inform the public of the stakes involved with violations. They run risks of getting slapped with a ₩3,000,000 ($2,500) fine if their designated two-week self-quarantine period is breached. Harsher penalties include deportation for foreigners and jail time for citizens (Reuters).

South Korea’s zero tolerance for anyone violating protocol is tempered by the support of a local monitoring team who checks on individuals and delivers government-subsidized supplies.

South Korea leverages on the hard lessons it learned from the Middle East Respiratory Syndrome (MERS) in 2015 and the SARS epidemic in 2003 to effectively implement quarantine and testing measures against COVID-19. At the same time, its model stands out due to a bold display of political will, carried out in swift and decisive actions. Protocols are also well-established, leaving no gray areas of interpretation.

JAPAN’S TENTATIVENESS BREEDS ANXIETY
When the Diamond Princess cruise ship returned to Yokohama port on Feb. 3 (days after its quarantine clearance was invalidated in Hong Kong), no one anticipated a month-long wait before the last crew members of the 3,711-passenger ship would eventually disembark. Keeping the passengers on board was heavily criticized as inhumane and medically unsound. Healthy passengers were made to remain in the infected vessel, causing an infection spike within two weeks, from ten people to more than 700. The cruise ship became an incubation place for the virus, exacerbated by the lack of hygiene protocols and poor isolation mechanisms. Dr. Norio Ohmagari of the National Center for Global Health and Medicine later called the decision “imperfect” (CNN, 2020).

On March 24, Japan did the inevitable and officially postponed the 2020 Tokyo Olympics to next year. Soon after, the number of COVID-19 cases rose drastically, prompting Prime Minister Shinzo Abe to put Tokyo, Osaka, and five other “virus hotspot” prefectures in a state of emergency from April 7. Ten days later, it was expanded to cover the entire nation. While it is not a total lockdown, the state of emergency has put a sense of urgency in the government’s last minute efforts. Furthermore, last April 9, the Japanese government announced a proposed stimulus package ($993-billion worth) that would allow for each Japanese citizen to receive a ¥100,000 ($1,300) cash handout (Kyodo News, 2020). Of major interest is an earmarked $2.2 billion proportion, slated to supporting Japanese multinational companies to relocate out of China.

Marooning the Diamond Princess and the painfully slow decision to postpone the Olympics were not lost on the public’s eye. In a nationwide survey (Kyodo News, 2020) released on April 13, 80.4% of the respondents felt the declaration came too late. This is compounded by the poor comparison to South Korea in terms of COVID-19 testing. From February till late March, Japan only tested about 50,000 people, compared to South Korea’s 250,000 by mid-March. Selective and slow testing aggravated peoples’ quiet discontent to the perceived tone-deaf response by the Abe administration.

TAIWAN REAPS ‘EARLY BIRD’ REWARDS
Taiwan’s winning fight against COVID-19 is remarkable. It recorded its first infections in January and almost three months later, its 393 confirmed COVID cases are recorded as the lowest per million people. As of April 16, it has six deaths and no new record of confirmed cases. Taiwan’s foresight when it decided to prepare early for a possible human-to-human infection is merited, in contrast to other governments which were either still in a state of denial or dilly-dallying.

As early as January, Taiwan already introduced exhaustive measures that would allow them to block the spread of the virus. After filing a report with the World Health Organization (WHO) and not receiving any response in return, Taiwan went ahead with screening for infections, contact tracing, and enforcing strict quarantine. Borders were closed, particularly from mainland Chinese tourists.

Taiwan’s defensive preparation against the virus is strongly hinged on its negative experience during the SARS outbreak in 2003 (which resulted in 181 deaths [Chen, 2005]). This gave Taiwan leverage as it deals with newer cases of epidemics with more political will, transparency, and decisiveness.

Emergency units such as the Central Epidemic Command Center (CECC) — put in place to address past epidemics — help provide the government direction on how to proceed swiftly. The CECC also adopted action plans recommended by The Journal of the American Medical Association (2020), such as border control, travel restrictions, resource allocation, and communication.

Digital governance also played a critical role in the Taiwanese government’s response to the virus, something rarely highlighted in the approaches of other governments. Using big data and available technology, popular applications allowed the government to make useful apps that track local mask supplies and create databases that identify vulnerable groups for monitoring.

THE ROAD TO ECONOMIC RECOVERY (?)
The World Bank’s Regional and Economic Update for East Asia and the Pacific this month has projected that “the growth outlook for the region in 2020 has been sharply downgraded.” With trade and access to goods inconsistently maintained or protected throughout the region’s nations, we can expect significant downturns in peoples’ financial stability, quality of life and productivity. It is reasonable to assume that their ability to recover from such will be dependent on the kind of social and economic protection structure governments have instituted for the past decades.

Two concerns face Asia Pacific nations in moving forward from this crisis. First, they need to assess the ability of their societies to bounce back and rebuild economies from lost productivity. Second, they have to decide whether such “bounce backs” rely on restoring old economic ties or inventing new ones. With the reality of globalization, nation-states cannot execute their plans in a vacuum. Geopolitical tensions within the region will continue to color economic policy-making.

China’s status as Asia’s main global industrial hub still relies on multinationals setting up shop there, despite cultivating competition-ready brands. The movement of Japanese (as well as other countries’) investments away from China heralds a rebalancing of regional economic activity. Potential new destinations for such capital flight would be Vietnam, Thailand, Cambodia, Indonesia, and Bangladesh — whose economies are at a suitable level of industrialization and upgraded infrastructure. Such redistribution of investments can help in the development catch-up of the aforementioned target economies along more sustainable and accountable directions.

The implications of such capital flight, however, tend to bring up alarm bells for those following human development trends of the past century. Luring capital almost always involves governments of the destination countries lowering quality assurances, health and safety standards, and labor rights — guaranteeing inequitable population development.

Addressing this is only possible by upholding international standards (plus the existence of political institutions and groups willing to lobby for such standards). While this opens opportunities for trans- and multinational cooperation to address regional economic catch-ups, this does require a level of reassessment and re-engagement between Asia-Pacific regional bodies and their neighbors.

TOASTING DEMOCRATIC SOLUTIONS
Social protection via political struggle, however, carries its own dilemmas. Naomi Klein’s 2007 book The Shock Doctrine forcefully exposed, a.) how governments used crises in order to implement policies that would otherwise meet opposition; and, b.) the practice of “disaster capitalism”: exploiting disastrous situations in order to unjustly profit the private sector. These practices are making a comeback in the region.

Human Rights Watch (HRW) sounded the alarm, together with global media, on how many governments took the COVID-19 crisis as an opportunity to centralize powers and use it to silence all institutions guaranteeing transparency, accountability, and democracy. The biggest offender, not surprisingly, is China. It remains intransigent, non-transparent and bare-facedly dishonest in its handling of the crisis — while also seeking to expand its territorial and economic influence further.

The Asia-Pacific region of course has home-grown authoritarian regimes following the Chinese model. Thailand and Cambodia have cracked down on critics/dissidents against government responses to the crisis. The Philippines, for that matter, already ranked in Deep Knowledge Group’s data research as the 9th riskiest country in the world to be in and the least-safe in the Asia-Pacific region. Yet its government under Rodrigo Duterte continues to focus on ineffectual draconian posturing — and calls for the sacking of Health Secretary Francisco Duque III are still met with resistance.

In contrast, the countries figuring among the safer ones (South Korea, Taiwan, and Hong Kong) demonstrate democratic credentials by maintaining transparency and rapid response structures between government and people. The centrality of adopting mass testing policies, innovating on new governance technologies, as well as maintaining a cooperative (instead of wholly draconian) stance with its vulnerable peoples guarantees better coordination, obedience, and achievement of objectives.

The delegitimation of authoritarian/centralized governments (purportedly elected by public mandate to “solve” perceived crises) is a real possibility and opportunity. Yet this needs to be tempered with the reality of increasingly polarized political and civil societies, kept apart by “moral discourse” and prejudicial divides. The pernicious presence of disinformation structures, being deployed by governments to bolster falsified legitimacies and silence dissent also remains intractable.

Most of these recommended actions may indeed be modified by emerging realities, especially as the global curve for COVID-19 cases has yet to significantly flatten. Nonetheless, the reward of electoral victory for good governance has already been shown to be palpable — such as the Democratic Party of Korea’s landslide win in the National Assembly last April 15. The perceived efficacy of democratic governance in crisis management can galvanize pro-democracy forces in authoritarian/flawed democratic countries to mount opposition in upcoming election cycles. It can also motivate the reassessment of long-standing cultural and social assumptions of the compatibility of democratic values and institutions with Asian societies — one that is long overdue.

 

Previous columns in this series can be accessed here:

https://www.bworldonline.com/politics-and-crisis-a-discussion-series-framing-the-crisis-conversation/

https://www.bworldonline.com/politics-and-crisis-a-discussion-series-governing-the-pandemic/

https://www.bworldonline.com/politics-and-crisis-a-discussion-series-power-from-below-social-policy-for-the-people-by-the-people/

https://www.bworldonline.com/politics-and-crisis-a-discussion-series-re-imagining-asean-in-a-time-of-crisis/