SONA 2019: what was said and not said

July 24, 2019 | 6:53 pm

SEOUL-INCHEON AIRPORT — An impressive new terminal greeted me here and it will definitely make many Filipinos wish that we have a similar airport soon. This is huge, spacious, and modern, with Wi-Fi that is fast and free. I am here waiting for my connecting flight to the US.

President Rodrigo Duterte’s State of the Nation Address (SONA) last Monday did not mention the new airports that are being proposed and developed around Metro Manila. That SONA was notable because of many things that he said and did not say. Foremost of what he said are the following:

• That corruption in government is pervasive, is everywhere. He is grossly disappointed with corruption and asked, “When will corruption end?” Special mention was made of PhilHealth (Philippine Health Insurance Corporation), the Customs bureau, the Bureau of Internal Revenue, Social Security System, Land Transportation Office, PAG-IBIG, Land Registration Authority.

• That he wants to create three new departments: Departments of Disaster Resilience, Water Resources, and Overseas Filipinos.

• That he wants more Malasakit Centers, higher salaries for teachers and nurses, a new National Academy of Sports for High School students. Which means he wants to expand welfare spending on top of existing agencies.

• That local governments should hasten the issuance of business permits to a maximum of three days, reclaim public roads, and enforce the Bangsamoro Organic Law (BOL).

• That the West Philippine Sea (WPS) is ours but we should not provoke China, otherwise there will be a confrontation and our Marines will die. Meanwhile, most or many Cabinet members are ex-military men.

• He pointed out that the Build, Build, Build programs are gaining ground, and the entry of the third telco player that will provide fast and reliable telecom service.

The creation of three new departments — how much would this cost taxpayers?

They could cost somewhere near the budget of the agencies in the Table on this page. Huge departments with budgets of at least P100 billion a year like the departments of Education, Social Welfare and Development, Health, Public Works and Highways, Interior and Local Government, and National Defence are not included here.

Where to get the money for these new departments, agencies, and subsidies?

One is from new tax reform measures like the TRABAHO (Tax Reform for Attracting Better and Higher-quality Opportunities) bill. Second, from remittances by government-owned and controlled corporations (GOCCs). The President noted that GOCCs, infamous for high salaries, are shaping up and, as of July 2019, have remitted over P61 billion.

The TRABAHO bill is among the “dampeners” of more investments, local and foreign. The proposed removal of certain incentives like the 5% gross income earned (GIE) as substitute for corporate income tax (CIT) and local taxes, to be replaced by lowering the CIT from 30% to 20% after 10 years, or reducing to 25% immediately, is not favorable to many investors and job creators.

WHAT’S NOT SAID.
There are things that should not be said or issued and indeed were not said by the President — good. Like new drug price controls, or further demonizing tax coal and fossil fuels “to save the planet,” or creating five or more new Departments and not just three, etc.

There was a good tweet by Senator Panfilo Lacson hours after the speech:

“SONA 2019: I like most the part when the president said, ‘I have come face to face with the enemy. The enemy is us. We are our own tormentors… for every transaction, commission; for every action, extortion.’ Then the camera panned out on the audience right in front of him.”

Overall, SONA 2019 has issued more alarm bells to businesses and taxpayers. Corruption remains high, as admitted by the President, and yet they will further expand the size and burden of government, taxpayers will pay for the extra financial baggage, waste, and evaporated money. The saving grace is that businesses can expect easier business permits from LGUs, and things could have been worse if some ugly and unsaid things were instead announced.

Bienvenido S. Oplas, Jr. is the president of Minimal Government Thinkers.

minimalgovernment@gmail.com

Good intentions and unexpected results

July 24, 2019 | 6:51 pm

By Tony Samson

GOOD intentions, especially when backed up by political will, can have unexpected results, not all of them beneficial to those they intend to benefit. The “Law of Unintended Consequences” in economics states that a policy intended to promote the common good can have the opposite effect when implemented.

A favorite example for unintended consequences deals with British India. With the proliferation of deadly cobras in the rural areas, the government decided to stamp out the pestilence once and for all by announcing a bounty system, exchanging cobra skins for cash.

This good intention of offering a cash reward to eradicate a blight did not go as planned. The bounty system became an easy way for the snake hunters to make money. Instead of hunting down the cobras, why not raise them instead? When the government discovered that the snakes had become a cash crop, they discontinued the bounty system, forcing the erstwhile raisers to abandon their snake farms and letting loose the now worthless livestock. The effort to curb the snake population with cash rewards had the unintended effect of even increasing its numbers.

Populist measures meant to favor the poor end up unintentionally harming them. Legislated price controls for such necessities as rice end up in artificial shortages, the rise of a black market, hoarding, and all sorts of disruptions that upend the economic law of supply and demand. What unintended effects will the recent rice tarrification to increase the supply of rice bring about? Will imports replace rice production and heighten the risk of food security?

Legislated wage increases and the addition of workers’ benefits like a 14^th month pay are intended to improve the lot of the working class. But the higher labor costs are sure to bring up the prices of goods. Also, as the cost per employee rises, headcount reductions or hiring freezes become more common, bringing unemployment rates even higher, eventually harming the working class.

Lowering the price of tuition for a school may not really increase enrollment. It may instead signal the erosion of the quality of education being offered.

Is it possible to anticipate the impact of a prospective policy using a real-life modeling approach?

Astronauts use simulation techniques to mimic zero gravity that results in floating and more restrained movement. This artificial experience allows the trainee to adjust to weightlessness and feel its effects on his body as well as his ability to cope with it.

In the corporate setting, this real-life modeling takes the form of a pilot project. Sometimes, companies upgrade the software for their customer delivery system, and in the first few days, there’s chaos from disrupted services such as lost ATM balances for banks and billings to e-commerce users. Rolling out a software upgrade in stages can anticipate problems and fix the bugs.

Sudden wealth too can also bring unintended social consequences, like the discovery of new relatives and the expansion of their needs to include tuition requests and vacations at the beach. This is why the names of big lotto winners are not disclosed. This, in turn, raises the unintended suspicion that there are in fact no real winners.

Norman Mailer in his book on astronauts, A Fire on the Moon (1970), muses that dreams are a form of simulation. They allow us to imagine possibilities we don’t routinely think about. When we dream of the deaths of still living loved ones, we feel the pain of the loss as we sleep, even leaving real tears on the pillow. Thus is the unexpected event somehow prepared for, even if the real pain when it comes will still be a shock.

The economic law of unintended consequences is more of an observation rather than a prescriptive tool. It cautions even the careful policy maker to appreciate that there may be factors he did not include in his laboratory model. The behavioral side of policy implementation can be quirky.

Is the bully better behaved when unchallenged and greeted with obsequious courtesy? Is he likely to reciprocate grace and kindness, or does passivity only embolden him to be even more abusive? Good intentions do not always invite good behavior.

It is good to remember the proverb: “the road to hell is paved with good intentions” …and well-meaning policies.

Tony Samson is Chairman and CEO, TOUCH xda.

ar.samson@yahoo.com

Boris Johnson needs to get serious for the UK

July 24, 2019 | 6:50 pm

By Bloomberg Editorial Board

AND that’s that. With 92,153 votes from Conservative Party members, Boris Johnson — the mononymous former mayor, foreign secretary and Brexit impresario — has become the new Tory leader and hence the UK’s prime minister.

It will no doubt be an eventful ride. As Mr. Johnson takes office, his party is fracturing and his majority is shrinking. A crisis is simmering in the Strait of Hormuz, where Iran has seized a British tanker. Public services are flagging, the economy is stalling, and the pound is sliding. In just 99 days, the country is set to depart the European Union — potentially precipitating its biggest crisis since the war.

Is Mr. Johnson the man for these challenges?

His public record gives reason for pause. As mayor of London, he revealed an aptitude for showmanship but not one for prudence. His stint as foreign secretary was punctuated by reckless speech and mortifying gaffes. Even his allies in government concede that he’s often heedless, unreliable, detail-averse, and unmindful of the truth — hardly a promising combination for the intricate negotiations that lie ahead.

Much of Mr. Johnson’s stated agenda, meanwhile, manages to be both vague and irresponsible. A centerpiece of his campaign was a package of regressive and unnecessary tax cuts that could cost nearly $25 billion a year. These were paired with extravagant commitments to boost spending on schools, social care, police, broadband expansion, “great projects” and more. Where the money will come from is anyone’s guess.

Inevitably, though, it is Brexit that will define Mr. Johnson’s term in office. And here his plans are alarming. He hopes to convince the EU (against its will) to completely renegotiate the deal the two sides have hashed out, yet he hasn’t specified what he thinks should take its place. He proposes to replace the deal’s “backstop” — intended to avoid a hard border with Ireland — with technological arrangements that few experts think are feasible. And he has vowed to withhold Britain’s $48 billion divorce settlement unless the EU meets his terms.

If this strategy fails, as seems likely, Mr. Johnson has vowed to leave on Oct. 31 without a deal, “do or die.” This is in all probability a bluff: Such a chaotic exit would grievously wound Britain’s economy, clobber its public finances, split Mr. Johnson’s own party and likely lead to electoral disaster. Cabinet ministers have been preemptively quitting in protest.

If he is indeed bluffing, though, Mr. Johnson has played a weak hand badly. By asserting that the odds of a no-deal exit were “a million to one,” he has discouraged businesses from making the kinds of preparations — such as stockpiling inputs or revamping supply chains — that would convince the EU to take the threat seriously. By proposing to divert funds from the government’s no-deal reserve to pay for his tax cuts, he has implied that he himself doesn’t take the possibility all that seriously.

There is not much that he does seem to take seriously, in fact, which is perhaps the most worrisome thing about the months to come. Nearly any decision Mr. Johnson makes on Brexit is likely to have momentous consequences — for his party, for the economy, even for the union itself. If he senses the gravity of the moment, he’s given few signs of it.

BLOOMBERG

National Nutrition Month 2019: State of the nation’s nutrition

July 24, 2019 | 9:00 am

Nutrition is an indispensable aspect of one’s health. It is an important indicator of a nation’s development, especially that globally, malnutrition is a big problem that needs to be solved.

The Food and Nutrition Research Institute (FNRI) of the Department of Science and Technology (DoST) is mandated to assess the nutritional status of the country through the National Nutrition Survey (NNS), which is conducted every five years. The latest survey, the 8^th NNS, was conducted in 2013.

In 2018, an Expanded National Nutrition Survey (ENNS) updated the recent data from FNRI’s previous surveys. Just before the National Nutrition Month this July, the results of the ENNS were presented during the 2019 National Nutrition Summit at Dusit Thani Manila last June 25.

Compiled and published on FNRI’s Web site, results were classified into infants and young children (0-23 months), preschool children (2-5 years old), school children (6-10 years), adolescents (10-19 years), women of reproductive age (15-49 years), adults (20-59 years), and elderly (60 and above).

Among infants and young children, stunting, or impaired height for age, remains highly prevalent, especially among 12-23 months old who recorded 36.6% prevalence.

Anemia, or the condition of having less than the normal number of red blood cells, also have high prevalence, specifically among six to 11-month-old infants. Compared to infants aged 12-23 months (35.4%), infants aged 6-11 months got 48.2%.

In a span of seven years, “exclusive breast-feeding among 0-5 months old significantly improved.” From 48.8% in 2015, the number was raised to 54.9%. However, “the rate of breast-feeding exclusively until 5.9 months duration remains low.”

“Young children meeting the minimum acceptable diet is very low, particularly among infants 6-11 months,” FNRI added. From a rate of 18.6% in 2015, the rate of young children meeting minimum acceptable diet went down to 13.4% in 2018.

Among preschool children, the research stated that stunting “remains to be of high magnitude.” It decreased from 33.4% to 30.3%.

Overweight is becoming a problem as the child grows older. Prevalence of 2.9% was recorded among 2-year-olds. Five percent was recorded among 3-year-olds, 4.8% among 4-year-olds, and 9.2% among 5-year-olds.

“A decreasing trend in anemia prevalence was observed with a slight increase from 2013 to 2018,” FNRI added.

Among school children, the prevalence of stunting and underweight decreased from figures in 2015. Stunting went down from 31.1% to 24.5%. Underweight decreased from 31.2% to 25%. However, FNRI still regards them as public health problems “of high severity”.

Overweight among this group is “a growing problem.” From 8.4% in 2015, it was raised to 11.7% in 2018.

An increase in anemia prevalence was also seen, “affecting most of the six years old with moderate severity.” Prevalence of 23.5% was recorded for 6-year-olds, while lower than 20% was recorded for succeeding ages within this group.

Among adolescents, stunting recorded a significant decrease from 31.9% to 26.3%. Wasting, or low weight for height, slightly decreased from 12.5% to 11.3%. Overweight and obese adolescents, meanwhile, grew from 9.2% to 11.6%.

“Anemia remains a problem of mild public health significance especially among females, 13-19 years old,” FNRI added.

In addition, FNRI found 10 to 12-year-olds having pockets of Iodine Deficiency Disorder (IDD), or lack of iodine.

Notably, most adolescents were deemed insufficient in physical activity particularly among 10 to 17-year-old females. Current smokers decreased from 5.5% to 4%.

Among non-pregnant and lactating women as well as lactating mothers of reproductive age, chronic energy deficiency (CED), defined as “intake of energy less than the requirement, for a period of several months or years,” has decreased significantly.

Significant decreases in IDD were also tallied. From 21.7% in 2013, IDD prevalence decreased to 11.3% for non-pregnant and lactating women in 2018. The same is also found among lactating women, from 33.1% to 21.2%.

Overweight, obesity, and anemia are growing problems among this subgroup, albeit anemia has decreased.

The number of nutritionally-at-risk pregnant women have decreased, although not significantly. From 27.% in 2015, it decreased to 20.1%.

Anemia “remains a problem of moderate public health significance” among pregnant women, since prevalence increased from 24.6% in 2013 to 26.1% in 2018.

Among adults, CED significantly declined from 9% in 2015 to 6.9% in 2018. However, overweight prevalence increased from 24.7% to 28.8% and obesity increased from 7.2% to 9.6%.

Anemia is of “mild public health significance,” with a prevalence of 8.3%.

“Elevated blood pressure significantly declined, while high fasting blood sugar increased,” FNRI added.

While there was a decline in smoking, there are more than half of current drinkers engaged in binge drinking. It was also noted that physical inactivity did not change, with 40.6% prevalence.

Among the elderly, the prevalence of CED significantly declined, from 17.2% in 2015 to 13.4% in 2018. Overweight increased from 21.3% to 24.7%. Anemia is “of ‘moderate’ public health significance, with 20.2% prevalence.

“Elevated blood pressure significantly declined but high fasting blood sugar increased,” FNRI added.

While there was also a decline in smoking among elders, four in every 10 are engaged in binge drinking. Half of them are found to be physically inactive.

As reflected in this survey, while problems in nutrition are being addressed, more needs to be done in improving the nutritional state of Filipinos. FNRI suggests that creative or innovative strategies must be formed to further address these problems, from stunting among children to physical inactivity among adults. — Adrian Paul B. Conoza

Scorecard bares mixed dev’t gains

July 24, 2019 | 12:34 am

A GOVERNMENT SCORECARD that tracks the Philippines’ progress in meeting economic development targets showed the government making strides in curbing anti-competitive practices and promoting ecological integrity, but performing poorly in agriculture, governance and culture.

According to the Statistical Indicators on Philippine Development (StatDev) 2018, 138 out of the 307 indicators show “high likelihood” of hitting targets by 2022, when President Rodrigo R. Duterte ends his six-year term.

The report, released on Tuesday by the Philippine Statistics Authority (PSA), also showed 42 indicators had “medium likelihood” while 127 showed “low likelihood” of meeting targets.

“A great majority (59%) of the indicators covered in StatDev 2018 posted either high or medium likelihood of achieving the target early at the first two years of the medium term,” the report read.

StatDev monitors the progress of meeting economic and social development goals set under the Philippine Development Plan (PDP) 2017-2022.

Among the 14 PDP sectors, 11 “had at least half of their respective indicators exhibiting high or medium likelihood of achieving the target in 2022,” the PSA said.

Having a “high likelihood” means a target is likely to be achieved by 2022 while “medium likelihood” means a target may or not be achieved.

“Low likelihood” means that a target is “not likely” to be met.

“It is great to see some of the progress we’ve made so far in terms of achieving the PDP 2017-2022 but… there are some sectors that appear to be lagging in terms of timelines,” said ING Bank N.V. Manila senior economist Nicholas Antonio T. Mapa.

The StatDev report noted, in particular, the progress made in the competitiveness and environment sectors.

Under competitiveness, the report noted the proportion of studies on competition law and economics of major academic and research institutions completed at 7.9% in 2018, which was “almost twice greater” than the four percent target in 2022. It also mentioned the country’s high rankings in the Global Competitiveness Index in 2018, particularly in the index pillars of business dynamism (Top 28%) and product market efficiency (Top 43%) that had already attained their respective targets.

In the environment sector, the PSA cited passing marks in terms of total area of planted mangroves, saying that the 1,916 hectares of newly planted mangroves in 2018 alone nearly reached the 2022 target of 1,974 additional hectares.

“Also, the number of issued Certificates of Ancestral Domain Title from 2017 to 2018 have gone beyond the target of 26 for the whole six-year medium term. Likewise, the coverage of protected areas in relation to marine areas had exceeded its target in 2022,” the PSA added.

On the other hand, the report cited low likelihood of meeting targets in agriculture, governance, and culture and values.

“The yield of 11 out of 12 major commodities posted low likelihood of achieving the 2022 target. More so, the number of fisherfolk provided with production support as of 2018 was still far from the end-of-plan target of 1.4 million,” the report noted of agriculture, forestry and fisheries.

The targets set under cultures and values would also not likely be met: “Despite having development plans with culture components for all 17 regions, the number of documentations conducted on indigenous knowledge systems and practices; and the percentage of provinces, cities and municipalities with Indigenous Peoples Mandatory Representation, both in 2018, showed low likelihood of achieving the target in 2022,” the PSA said.

For governance, the PSA noted the decrease in the percentage of provinces, cities and municipalities with the required nongovernment organization representation in the Local Development Council.

“Also, only three of four national government agencies were fully compliant with the Transparency Seal as of 2018,” PSA added.

Among silver linings in governance was a high Open Budget Index score, which denotes budget transparency. The latest figure was in 2017 when the Philippines had a transparency score of 67, which is on track in meeting the target score of 71 by 2022.

Despite the government’s aggressive push for infrastructure spending, goals set in the infrastructure category are mixed.

“[T]he infrastructure drive of the government looks to help bridge the gap between target and completion, and we’ve seen early gains so far such as headway in power, low-cost housing and transport infrastructure,” ING Bank’s Mr. Mapa said.

“Gaps, however, have surfaced in areas that may be linked to soft infrastructure (associated with higher value added creation) and on the other side of the spectrum: in basic services.”

In terms of physical infrastructure, the PSA said the end-of-plan target power requirements in Luzon, the Visayas and Mindanao had been achieved in 2018.

The number of round-trip international flights for Ninoy Aquino International Airport, Mactan-Cebu International Airport, and Clark International Airport would also likely be met.

“However, for social infrastructure, classroom-to-pupil ratio in primary schools in School Year 2017-2018 had low likelihood of achieving the target in 2022. Also, for infrastructure on information and communications technology, the proportion of public schools with computer packages posted low likelihood.”

Positives in the area of the macroeconomy include the annual value of microfinance services delivery, which was “more than twice greater than the target of P10 billion and above,” and the value of export goods wherein the 2018 value of $67.5 billion had already surpassed the end-of-plan target of $61-62.2 billion.

On the flip side, the export of services for 2018 amounted to just $37.5 billion, below the $61-68.6 billion target.

OUTLOOK
“From the performance across the sectors, we’ve seen several themes emerge which may trace their roots to the fact that we may be short of achieving critical mass through our reform agenda,” ING Bank’s Mr. Mapa said.

Moving forward, the economist hopes to see the government “chase these goals with more zeal” in the remaining three years of the Duterte administration.

“In order to truly uplift the economy and chase [AmBisyon Natin 2040], we’ll need to see the government deliver across the full range of the spectrum — strengthening basic services, but at the same time, chase a higher growth path by championing higher value creation with investments in science and technology,” Mr. Mapa said. — Marissa Mae M. Ramos

Summary of statistical indicators on Philippine development

July 24, 2019 | 12:34 am

BSP: Inflation could slow to below 2% this quarter

July 24, 2019 | 12:33 am

sari-sari store

INFLATION could settle below the official full-year target this quarter as food and oil prices ease, BSP Governor Benjamin E. Diokno told reporters on Tuesday, citing “base effects” due to multi-year-high rates last year.

“Third quarter na tayo, so baka below two pa nga ‘yan because of the base effects (We’re in the third quarter, so it might settle below two percent because of the base effects),” Mr. Diokno said at sidelines of a forum, also citing a “significant” drop in oil prices as well as the cost of rice.

The central bank reported that inflation settled at the midpoint of its 2-4% target band in the second quarter at three percent, coming from the 3.8% recorded in January-March, helped by improved domestic food supply conditions.

BSP Deputy Governor Francisco G. Dakila, Jr. had said in a briefing last Friday that “rice prices declined with the ongoing harvest season and the continued arrival of imports.”

President Rodrigo R. Duterte signed on Feb. 14 the law that liberalized rice importation by removing the National Food Authority’s import function and replaced quantitative restrictions on the staple with tariffs: five percent for rice from within the Association of Southeast Asian Nations (ASEAN); 40% for imports within the 350,000 metric-ton minimum access volume (MAV), regardless of country; and 180% for above-MAV imports from non-ASEAN countries.

“Unless magkaroon ng (there is) severe El Niño, I don’t think magi-increase ‘yung (there will be an increase in the) price of food,” Mr. Diokno said yesterday.

Central bank officials on Friday said it expects inflation to “decelerate close to the low end of the target range” this quarter before settling close to the midpoint of the target over the medium term.

Dennis D. Lapid, BSP Monetary Policy Sub-Sector officer-in-charge, downplayed the effects of the “mild” dry spell on food supply, saying the disturbance will not pose a “huge” risk. “It (El Niño) might be a little better now because we’ve liberalized the trade regime for rice. So you’ll now see response from the private sector if there will be a shortage in domestic supply,” Mr. Lapid had said on Friday.

In its June 20 monetary policy meeting, the central bank revised its inflation forecast for this year to 2.7% from the 2.9% penciled in May and to three percent from 3.1% for 2020, on expectations of lower global oil prices and the peso’s appreciation.

Also on Tuesday, Mr. Diokno said the BSP awaits second-quarter gross domestic product (GDP) growth data to be reported in the morning of Aug. 8, hours before monetary authorities conduct their fifth policy review for this year. “We are going to look at the second-quarter GDP and look at the sources of growth… such as strong investment growth,” he said. “Consumption is a given but we want it to be investment led.”

The central bank chief has estimated that the economy grew by “at least six percent” in the second quarter on the back of improved government spending after President Rodrigo R. Duterte signed into law the P3.662-trillion 2019 national budget and household consumption fueled by slowing inflation. If realized, this estimate will be faster than the 5.6% growth posted in January-March that was the economy’s worst quarterly performance in four years.

The government said the economy will need to expand by an average of 6.1% over the next three quarters to reach the floor of the full-year growth target of 6-7%.

The Development Budget Coordination Committee has maintained its gross domestic growth target at 6-7% for this year, 6.5-7.5% in 2020 and 7-8% in 2021 and 2022. — Karl Angelo N. Vidal

ASEAN+3 think tank cuts economic growth forecasts

July 24, 2019 | 12:32 am

By Reicelene Joy N. Ignacio, Reporter

THE ASEAN+3 Macroeconomic Research Office (AMRO) has revised downward its Philippine economic growth forecast for 2020 to 6.5% from its previous outlook of 6.6% in May, according to the July Monthly Update of the ASEAN+3 Regional Economic Outlook released on Tuesday that showed the 2019 projection retained at the 6.3% pencilled in June but down from 6.4% in May.

“AMRO has revised Philippines’ GDP (gross domestic product) growth forecast slightly downward to 6.3% for 2019 and 6.5% for 2020 due to a gloomier global growth prospect and a sharp slowdown in Q1 2019 of the Philippines economy,” AMRO Chief Economist Hoe Ee Khor said in an e-mail.

“The country’s GDP growth rate dropped to 5.6% in Q1 2019, the lowest since Q1 2015, due partly to the delay of budget approval which constrained government spending, in addition to the weakening external demand,” Mr. Khor added.

“Looking ahead, economic growth is expected to recover significantly, as the government started to ramp up spending and ease monetary policy.”

For the whole ASEAN+3 region — which groups the 10 Association of Southeast Asian Nations (ASEAN) members plus China, Japan and Korea — AMRO cut its economic growth projection to 4.9% for this year and 2020, from May projections of 5.1% and five percent, respectively, due to “continuing weakness in manufacturing and export outturns.”

Asked what AMRO expects of the Philippines in the second half of President Rodrigo R. Duterte’s six-year term, Mr. Khor replied, “The Philippines’ economic growth is expected to recover going forward.”

“The spillovers from US-China trade conflicts on the Philippines economy may not be significant. However, a further escalation of the trade conflicts could lead to a sharper global slowdown which could drag down the Philippines’ economic growth,” he said.

“In this context, the policy emphasis should be oriented more towards supporting growth, while avoid undermining macro-stability. The government should keep up the reform agenda to continue enhancing the growth potential.”

AMRO — initially formed as a company in April 2011 and transformed into an international organization in February 2016 — conducts macroeconomic surveillance and supports implementation of the Chiang Mai Initiative Multilateralization currency swap arrangement which the 10 ASEAN members, as well as China, Japan and South Korea adopted to help avert any financial crunch.

Duterte says in ‘catch 22’ as clock ticks on security of tenure measure now awaiting his signature

July 24, 2019 | 12:31 am

PRESIDENT Rodrigo R. Duterte remains in a quandary over a measure now awaiting his signature that imposes tighter controls on labor contracting, with a few days left before it lapses into law on Saturday sans any Executive action.

“Pinag-aralan namin mismo (We have been studying it)… I have to confer with a lot of people affected. You know… this is a two to tango… it would affect employers and of course it would also greatly favor the workers,” Mr. Duterte told reporters at the House of Representatives on Monday night after delivering his fourth State of the Nation Address (SONA) midway into his six-year term.

“It’s a catch-22 for me… I can veto it… I can sign it or allow it to lapse into law.”

Labor Secretary Silvestre H. Bello III told reporters on Tuesday that he was not surprised that Mr. Duterte left the measure out of his SONA.

“Even before that, I was told by the president… that it’s under study… The intention of the president is to provide workers their constitutionally guaranteed right to security of tenure… ang gusto ng presidente ay iplantsa ng mabuti (what the president wants is to iron out any kinks in the measure ) so no one will question the validity of the law and its purpose,” he said.

Sought for comment, University of the Philippines professor Rene E. Ofreneo in a mobile phone message on Tuesday said Mr. Duterte has been performing a “balancing act” on this issue, with “industry associations opposed” while labor “unions see SOT (security of tenure) bill still weak.”

The proposed law, “An Act Strengthening Workers’ Right To Security of Tenure”, bans the practice of hiring workers for five-months stints in order to circumvent the requirement that they be automatically granted regular status on the sixth month of employment. It also provides that workers performing jobs directly related to the principal business of or are under the direct control and supervision of a contracting party “shall be deemed regular employees of the contractee… retroactive to the date they were first deployed to said contractee…”

There are four types of employment status allowed under the measure: probationary, regular, project and seasonal. Project-based and seasonal workers “have the rights of regular employees for the duration of the project (e.g. construction) or season (e.g. agriculture or where there are periods of increased demand or inherent industry fluctuations)… termination of which has been determined and made known to the employee at the time of engagement.”

Mr. Duterte vowed to do away with labor contracting during the campaign for the 2016 presidential elections, but has since tempered that promise, acknowledging that this employment practice is allowed by law with certain restrictions.

In a July 16 joint press statement, 13 local and foreign business chambers asked “the president to veto the security of tenure bill” since it “is redundant as there are previously approved laws that already protect workers from ‘endo’ (end of contract scheme), it impinges on management prerogative anchored on the constitution… it excludes contract workers hired by government agencies” and “could have a negative impact to the Philippine economy and to the workers whom the bill aims to protect.”

But in its reaction to the SONA, the Trade Union Congress of the Philippines — the country’s biggest labor group — said in a press statement on Tuesday that “the proposed Security of Tenure law, while it does not end all forms of contractualization, is a good start to address the abuses of labor-only contracting and will lessen our social and economic inequality.”

“The President should not be shaken by scaremongering of the economic managers, employers and the foreign chambers.” — with Gillian M. Cortez

Meralco plans more microgrids

July 24, 2019 | 12:06 am

By Victor V. Saulon, Sub-Editor

MANILA Electric Co. (Meralco) is looking outside its franchise area to build microgrids similar to its hybrid system on Cagbalete Island, company officials said.

“We also plan to bring this outside our franchise area so we can also help the DoE (Department of Energy) and government in providing electrification to other parts of the country using the same solution,” Ray C. Espinosa, Meralco president and chief executive officer, told reporters on Tuesday.

Meralco Chairman Manuel V. Pangilinan confirmed the power distribution utility’s plan to replicate the system in other areas.

“There are several islands we’re looking at still,” he said about introducing more microgrid systems, or small-scale power grids that operate independently from the mainland’s interconnected power transmission and distribution network.

On Tuesday, Meralco launched the power microgrid in Cagbalete, a fishing island village and an expanding tourism spot in Quezon province, after completing a hybrid generating plant that features 60 kilowatt-peak (kWp) solar photovoltaic system, 150-kWh battery energy storage, and two units of 30 kW diesel generators.

Initially, the microgrid will provide 24/7 power to around 200 households in Cagbalete, a 1,795-hectare waterlocked island with two barangays.

Mr. Espinosa said within the year, the remaining 600 families as well as the establishments and resorts on the island would be energized.

Yesterday’s launch was held at Grand Hyatt at the Bonifacio Global City, with a simultaneous ceremony in Cagbalete. Meralco previously launched a hybrid generating power plant in Verde Island in Batangas province.

Mr. Espinosa said Meralco’s plan is not just to provide a system using innovative and integrated hybrid solution but also to ensure stable power to the grid.

Energy Regulatory Commission (ERC) Chairperson and Chief Executive Officer Agnes VST Devanadera said Meralco was making itself “more relevant” by venturing into microgrid systems that are high in cost but low on investment recovery.

“There is a growing sensitivity to respond to the growing needs,” she said during the event. She expects the cost of power in Cagbalete to go down from its existing P55 per kWh.

The launch comes a day after President Rodrigo R. Duterte said in his State of the Nation Address on Monday that the country should lessen its dependence on coal as a power source to more renewable energy (RE).

Mr. Pangilinan said the call was a “happy coincidence” as the microgrid was “partly CSR (corporate social responsibility.” One Meralco Foundation is a partner in the project by bearing a portion of the cost that residents to shell out to get connected to the power distribution system.

“Power is an enabler. What the people need there is clean water. At the moment there it’s deep well. We need to put up a water treatment plant to clean the water,” he said.

“Number two, I noticed fisherfolks, the main industry is fishing. We need to put up a cold storage plant,” he said. “And of course tourism facilities — the huts, a place where people can stay overnight or several nights.”

On the sidelines of the event, Mr. Pangilinan told reporters that he expects Meralco first-half income to be better than last year’s.

He declined to say by how much, but said: “It’s helped by the volume.” He was referring to the sales in kilowatt-hours.

He does not expect a double-digit growth in the first half, but noted it is “better than historic average.”

Meralco will report its financial performance in the first semester on Monday. In the first half last year, its consolidated core net income rose 7% to P10.9 billion, while reported consolidated net income increased by 14% to P12 billion. Revenues reached P150.5 billion, up 7%, while volume of energy sold was at 21,665 gigawatt-hours, also higher by 7%.

Villar firm to unveil new AllBuilders store format

July 24, 2019 | 12:05 am

VILLAR-LED All Home Corp. plans to roll out a new store format catering to the construction and housing market this year, as well as an e-commerce platform in a bid to reach a wider customer base.

In a preliminary prospectus on its website, the home improvement supplies retailer said it will unveil six AllBuilders stores in the second half of 2019. This is part of the 19 new stores it scheduled to open for the period.

“The AllBuilders store format, with a focus on contractors and builders, offers a more extensive selection of hardware, tiles and sanitary wares, and construction materials,” the company said.

The company plans to build the AllBuilders stores in areas outside Mega Manila, with the first six to be located in Vibal Dasmariñas, Cavite; Gapan, Nueva Ecija; San Ildefonso, Bulacan; Koronadal and General Santos City in South Cotabato; and Tagum in Davao del Norte.

All the stores will cover 4,410 square meters (sq.m.) in net leasable space, except for the Cavite branch which will have 7,530 sq.m. The stores cost about P42-72 million each, excluding the initial inventory.

All Home expects the growth of construction activities in the region to boost the performance of this new format, banking on bulk orders and high transaction values of contractors and builders.

The company currently has three store formats, namely large mall-based, large free-standing, and small specialty store. It has 18 large mall-based stores, which accounted for 78.5% of revenues during the first quarter of 2019.

It operates three large free-standing stores, contributing 12.4% of revenues, and three specialty stores that generated 2.1% of revenues in the same period.

Aside from its brick and mortar stores, All Home is also looking to introduce an e-commerce platform where customers can view their product offerings.

“We believe that establishing our own online sales channel will offer greater convenience to our customers, allowing them to view and purchase products, which would, in turn, complement our physical store network where our customers can see and touch our products and interact with our onsite staff,” the company said.

All Home has recently filed an application with the Securities and Exchange Commission to raise P20.7 billion in an initial public offering. If approved, the company’s shares are set to be listed at the Philippine Stock Exchange on Oct. 1 under the ticker “HOME.”

The company plans to use proceeds of the share sale for its expansion, which includes the construction of 38 new stores by 2020. It currently has 25 stores with a net selling space of 196,327 sq.m. By the end of its expansion in 2020, it will have an additional 256,615 sq.m. in net selling space. — Arra B. Francia

One-stop shop eyed for accreditation of external auditors

July 24, 2019 | 12:04 am

THE Securities and Exchange Commission (SEC) plans to establish one-stop shops for the accreditation of external auditors in the financial sector by next month.

The corporate regulator posted on its website last Friday draft guidelines on the Adoption of Centralized (One-Stop-Shop) Framework for Accreditation/ Selection of External Auditors. The proposed rules will cover institutions regulated and supervised by the SEC, Bangko Sentral ng Pilipinas (BSP), and Insurance Commission (IC).

Under the draft guidelines, the commission will handle the acceptance, processing, and approval of applications for the accreditation of external auditors of institutions supervised by the aforementioned regulators.

While the SEC will handle the applications, it will work together with the BSP and IC for the respective institutions they handle.

“The proposed one-stop-shop framework for the accreditation of external auditors will not only streamline the application process on the part of independent auditors and audit firms but also improve the ease of doing business in the country, in general,” SEC Chairperson Emilio B. Aquino said in a statement.

The guidelines will classify external auditors into three categories based on the institutions they are allowed to audit.

Those under Category A will include universal or commercial banks, foreign banks, trust departments and trust corporations for the BSP. Category A for the SEC may audit issuers of registered securities, issues with a class of securities listed for trading in an exchange, and public companies.

As for the IC, auditors under Category A may handle insurance companies, reinsurance companies, and mutual benefit associations.

Category B and C will cover smaller institutions such as thrift banks, rural and cooperative banks, pawnshops, investment houses, brokers and dealers of securities, lending companies, pre-need companies, health maintenance organization (HMO) companies, and HMO brokers, among others.

Institutions must appoint an external auditor belonging to the same category or from categories higher than what is designated for them.

The SEC may ask for different requirements depending on the external auditor’s category, in addition to the concerned financial sector’s specific requirements.

The proposed guidelines also state that an individual external auditor or partner of an audit firm must be accredited and licensed by the Board of Accountancy (BOA) during the time of application. They must also have at least five years of experience in external audit as an in-charge, manager, lead partner, engagement quality control reviewer or its equivalent.

For an audit firm, the company must likewise be accredited by the BOA, while the name of the partners involved in the firm must be attached to the certificate of accreditation issued by the BOA or the Professional Regulation Commission.

The accreditation will be valid for five years, or for a shorter period as prescribed by the financial sector regulators. External auditors whose current accreditation will expire by end-December will be given a one-year extension so that they may engage in the audit of 2019 financial statements.

The commission is requesting all interested parties to submit their comments, recommendations, suggestions, and inputs by Aug. 5. — Arra B. Francia

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