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PHL GDP could contract by 8-9% — FMIC

GROSS domestic product (GDP) in 2020 is likely to contract 8-9% due to the pandemic, positioning the economy for a rebound off a low base in 2021 with fundamentals largely intact, according to participants at a First Metro Investment Corp. (FMIC) briefing.

“The third quarter is still going to be negative and fourth quarter will be a much smaller negative depending on how firms and people respond to opening up the economy,” University of Asia and the Pacific (UA&P) Professor Victor A. Abola said at the FMIC’s virtual mid-year Economic and Capital Markets Briefing Wednesday.

FMIC’s original 2020 growth outlook was 6.2% issued in January. The 8-9% contraction forecast positions FMIC as far more pessimistic than the official government projection of -5.5%.

The investment banking unit of the Metrobank Group also expects cash remittances to shrink by 8% to 9% this year, much worse than the 5% contraction projected by the central bank.

Panelists at the briefing said the Philippines is in a stronger position compared to previous crises, with sufficient buffers to withstand the pandemic.

“The speed of recovery will depend on our quick and strategic moves to overcome the bottlenecks in supply chains, revising our business models, and the response to the digitization challenge,” Mr. Abola said.

Meanwhile, Bernardo M. Villegas, also of the UA&P, said the pandemic has shown what the country needs to pay more attention to, including food security and the development of critical technical skills.

Mr. Villegas said industries that will likely gain traction in a recovering economy are food and agri-business, health and wellness, and fields related to digitization and education. He said travel and tourism, retail, and restaurants will likely take a longer time to return to growth.

“Even when the vaccine is found, Filipinos will still be very hesitant to dine out to go to the mall,” he said.

Mr. Villegas also said the pandemic has clarified to investors the need to look outside Metro Manila. — Luz Wendy T. Noble

Mindanao spot market launch faces delays

THE low rates of registration by the Mindanao energy industry may further delay the launch of the electricity spot market in the region, according to the Independent Electricity Market Operator of the Philippines (IEMOP).

The independent operator of the Wholesale Electricity Spot Market (WESM) said it is on track to proceed with the operation of the Mindanao market on Dec. 26 despite low levels of participation so far.

“‘Pag ‘di pa nakumpleto ang registration by December, that’s an indication na baka ma-move pa further ‘yung commercial date ng Mindanao. But so far, nag-i-stick pa tayo sa December because ‘yun talaga ang government target (If registrations aren’t complete by December, the commercial launch in Mindanao could be moved back. But so far we are sticking to the government target)“ IEMOP Chief Operation Officer Robinson P. Descanzo said at a virtual briefing.

So far, participation in the trial run of the Mindanao market consisted of 12 grid-connected generation firms, three private distribution utilities, and four of the 28 embedded generators.

Three of 28 electric cooperatives and two of 13 directly-connected customers have also registered, while the rest have yet to complete their initial prudential requirements.

IEMOP noted some issues discouraging the power industry from joining the spot market.

Power utilities managing embedded generators are wary of the central dispatching set-up, which is needed to coordinate generation schedules.

“Ang bawat DU (distribution utlilities) kasi may kanya-kanya silang motor units na sila mismo nagma-manage ng operations ng mga embedded generators, so nasanay sila sa concept na ganun (DUs are used to managing their own operations),” Mr. Descanzo said.

They are also worried about incurring additional charges if their partner generators trade on the market.

“There are concerns na sinasabi ng DUs na even ang cost recovery ng generator na ‘yan binabayaran ko na. So, ‘pag naglaro siya (embedded generators) sa market, makakabenta siya sa labas, partly ako naman ang nag-subsidize (The concern is that they will partly be subsidizing power sold to external customers)“ Mr. Descanzo said.

The utilities also fear additional costs once the privately-owned National Grid Corp. of the Philippines (NGCP) assumes the role as the market’s sole metering service provider.

“According to them, may cost silang binabayaran na ‘di nila mare-recover… ang sinasabi nila baka magkaroon pa ng additional cost/charges ang NGCP sa kanila,” (There might be costs that they cannot recover in the process. They might incur additional charges from the NGCP),” he said.

He also noted that utilities are reluctant to relinquish their control over metering activities involving their partner generators.

IEMOP said the issues can be resolved through the on-going fine-tuning activities for the market and regulatory processes.

“Overall, makikita mo may benefit ka (you can see you will benefit) from the market; these little things, fine-tuning lang kailangan d’yan (is only needed),” he said.

Separately, he said WESM in Mindanao can proceed even if the Mindanao-Visayas Interconnection Project (MVIP) is not yet complete as the region has “excess” generation capacity.

“We can integrate Mindanao in the WESM even without the interconnection. The current situation there is mayroon tayong (we have) excess generation… ‘Di naman isyu na show-stopper ang delay ng interconnection (The delay of the project is not a deal breaker),” Mr. Descanzo said.

The Department of Energy has ordered the NGCP to fast-track its various interconnection projects, which were delayed by the pandemic and right-of-way issues.

The P52-billion MVIP, in particular, was said to be delayed for another year from its target launch in 2020.

Along with the new market, an ungraded WESM design, which will introduce a five-minute trading interval, is also being tested out to participants in the Luzon and Visayas markets. It is also expected to be launched by year’s end. — Adam J. Ang

Farm, fisheries ‘clustering’ to be required for some DA aid

THE government will help the agriculture sector achieve sufficient scale to better access financing and equipment under a program known as Farm and Fisheries Clustering and Consolidation (F2C2).

Agriculture Secretary William D. Dar issued an administrative order launching F2C2, calling it a measure to ensure food security during the pandemic.   

Consolidated farms and fishing communities are expected to be easier to reach by government programs offering credit, training in modern production methods, machinery, and packaging support, among others.

“The F2C2 program is needed to enable the agriculture and fishery sector attain economies of scale, and thus achieve cost-efficient production, harvest, processing and marketing operations subsequently increasing farmers’ and fishers’ incomes,” Mr. Dar said.

Mr. Dar ordered his regional directors to establish at least two pilot F2C2 projects. Agriculture Undersecretaries Ariel T. Cayanan and Rodolfo V. Vicerra were tasked to lead the program’s advisory committee for its pilot implementation.

Mr. Dar said consolidating fragmented small farm holdings will be a challenge.

According to the Philippine Statistics Authority (PSA), the average farm size in the Philippines was 0.9 hectare in 2012 compared to three hectares per family in the 1980’s.

“Eight years ago, when the PSA survey was conducted, it showed the country then had 5.56 million farms, totaling 7.2 million hectares, of which 57% were one hectare or less, 32% were one to three hectares, 9% were three to seven hectares, and 2% seven hectares and more,” the Department of Agriculture (DA) said.

The DA added that fisherfolk remain dependent on small fishing vessels that are only capable of plying municipal waters.

The DA set eligibility criteria for F2C2 aid at 100 hectares for rice, fruit trees, perennials, and fiber crops; 75 hectares for corn and other grains; and 50 hectares for vegetables and other high-value crops.

Livestock producers must possess a feed mill within the production area while growers of ruminants should have a centrally-managed grazing land and feed production systems.

Raisers of free-range chicken and other livestock must also have well-delineated community growing territories.

Eligible fisherfolk must have community-based production zones or processing facilities or leases for a community fishpond.

“Cluster production areas must either be contiguous or in close proximity within a village. For areas that are not contiguous, these should be located within a municipality or congressional district,” the DA said. — Revin Mikhael D. Ochave

PHL not investing enough in ‘green’ stimulus – ING

THE Philippine stimulus package to bring the economy back from the coronavirus crisis has neglected to target “green” and sustainable projects that could help ensure a stronge recovery, ING Bank said.

ING Bank N.V. Philippines, quoting its report, “Asia’s Lamentable Green Response to COVID-19,” said “green” spending in the Philippines’ stimulus package was zero, putting it in the same boat as Indonesia, Thailand and Taiwan.

ING said the Philippine stimulus package is equivalent to 5.2% of gross domestic product (GDP), with monetary measures accounting for 3.1% of GDP and fiscal measures at 2.1%.

Among the countries studied, New Zealand’s “green” investment as a proportion of its stimulus package was 13%, followed by Singapore (10.8%), India (5.2%), Malaysia (4.4%), South Korea (3.2%) and China (1.7%).

“Research suggests that in many if not most cases, green stimuli can deliver a stronger boost to the economy than other policies and generate a greater number of jobs,” it said.

ING said it remains unclear why countries in the region “have not taken a greener route to COVID-19 stimulus.”

“That the near absence of any green policies in Asia’s COVID-19 stimulus packages is a missed opportunity is one thing; it is doubly disappointing given how important Asia-Pacific is for global greenhouse gas emissions. This was an opportunity not just to catch up with other regions, but to restore trajectories towards Paris Agreement objectives,” it said.

In the Philippines, ING estimated that the government has rolled out a stimulus package worth P604 billion so far, with P409.6 billion in actual spending that largely went to fund cash aid programs, wage subsidies and healthcare expenditures, “with no emphasis on the environment or sustainability.”

It said other stimulus bills pending in Congress will also likely focus on income replacement, with still no priority given to green projects.

“With COVID-19 spreading across the Philippines and the economy in recession, it may be understandable that the majority of funds have been allocated to income subsidies, healthcare and support to SMEs (small and medium-sized enterprises),” it added.

It said the government can tie some of the proposed wage subsidies and low-interest rate loans to sustainable and environment-friendly requirements.

On infrastructure, which is thought to be an effective stimulus program due to its multiplier effects, it said the government can “identify and prioritize infrastructure projects depending on their green criteria.”

ING said the Philippines was showing “partial gains” in sustainability before the pandemic hit, with government agencies active in promoting and creating policies covering green financing.

However, the Philippines remains “heavily reliant on oil and coal for power generation which account for 81% of total electricity use, while hydroeletric and other renewable sources constitute just 11.7%.”

“The COVID-19 pandemic has offered governments around the world an opportunity for a total rethink on how their economies will operate in the decades to come. COVID-19 might be a near-term crisis, but global warming remains the longer-term threat. Few governments in Asia appear to have grasped this chance, with most choosing easier, but arguably less effective traditional stimulus approaches,” it said. — Beatrice M. Laforga

Energy efficiency industry claims eligibility for 6-year tax holiday

THE energy efficiency industry said energy-saving projects should qualify for a six-year income tax holiday based on its interpretation of the Omnibus Investments Code.

According to the Philippine Energy Efficiency Alliance (PE2), if energy efficiency and conservation (EEC) projects are treated as locally-sourced power, proponents are eligible for the tax holiday.

“PE2 seeks a six-year income tax holiday, which is legally feasible under EO (Executive Order) 226, if all EE (energy-efficient) projects are treated as a first fuel — an indigenous resource — for pioneer status,” Alexander Ablaza, the group’s president, told BusinessWorld via text Wednesday.

In a separate statement, the industry said the tax break “is crucial in ensuring that ESCO (energy service companies) and third-party investments in EEC equipment assets installed in non-owned and non-leased premises draw commercial-grade returns.”

Executive Order No. 226, or the Omnibus Investments Code, provides for a six-year tax break for pioneering projects or those which use a design, formula, scheme, method, process, or system of production that is new and untried in the Philippines.

Mr. Ablaza said energy efficient projects that are non-pioneer should be given the same incentive. “There was precedent — before the RE (renewable energy) law was passed in 2008, BoI (the Board of Investments) granted all RE projects pioneer status, whether the technology was pioneering or not,” he said.

The Department of Energy (DoE) is currently developing guidelines for entities seeking fiscal incentives for their energy-saving projects.

Based on the implementing rules for Republic Act No. 11285, or the EEC Act, such incentives are given to projects endorsed by the DoE and registered with the investments board.

Green projects which produce at least 15% in energy savings can qualify for specific incentives, according to the DoE draft.

Renewable energy, including EEC projects, is listed as a priority investment sector in the BoI’s investment plan.

Meanwhile, PE2 welcomed the DoE’s commitment to prioritize energy-efficient projects for an incentive endorsement.

In a recent webinar hosted by the European Chamber of Commerce of the Philippines, the DoE said it prefers to endorse such projects from certified and registered ESCOs.

Providing them with tax breaks allows the government to “remain focused on the delivery of energy savings rather than the mere replacement or modernization of equipment assets,” PE2 said. — Adam J. Ang

Can BPOs sustain a work from home model?

Two years ago, I wrote about telecommuting, now commonly known as “work from home, (WFH)” focusing on its benefits to employees due to the worsening traffic situation in Metro Manila. At that time, I felt that this was a more viable option compared to building new roads, which is more costly and takes long to complete. Also, WFH allows work-life balance by removing some work stressors. Now trapped in this pandemic, I would never have thought that WFH acceptance would come sooner than expected.

Admittedly, there are a few challenges in implementing WFH, such as weak internet connectivity and time management issues. However, these concerns can be realistically resolved.

FLEXIBLE WORK ARRANGEMENTS IN BPOS
Under the community quarantine rules, industries with employees confined at home were allowed to utilize alternative work arrangements. These industries include Business Process Outsourcing (BPO) companies, which were required to adopt WFH arrangements for their employees during the lockdown. Some of the challenges encountered by BPOs in shifting to WFH were transporting company assets (like desktops), setting up internet/WIFI devices in their employees’ homes, as well as tightening their data security protocols for all their remote workstations.

Given the measures adopted by BPOs, does work performed outside an economic zone under a WFH scheme violate tax incentive rules?

To put things in context, BPO entities which are export-service companies are predominantly registered with the Philippine Economic Zone Authority (PEZA). They enjoy tax incentives such as Income Tax Holidays and a 5% gross income tax (in lieu of all national and local taxes). Under the PEZA Law, these tax incentives can only be availed of if the revenue-generating activity is performed within the ecozone. Thus, if the PEZA law were to be strictly construed, the WFH activities of BPOs should be disqualified from tax incentives for having been performed outside the ecozone.

PEZA RULES ON QUARANTINED ENTERPRISES
Acting swiftly, PEZA issued Memorandum Circular (MC) No. 11-2020 in March, in response to a request from PEZA enterprises to allow flexible work arrangements for their employees during the quarantine. The circular was issued preemptively to ensure the health and safety of employees and the continued delivery of services to BPO clients.    

The MC effectively allowed BPOs to immediately implement alternative work arrangements to deal with the state of emergency without the need to secure a Letter of Authority (LoA) from PEZA prior to implementation. Thus, in the interim, employees were allowed to WFH, subject to the BPO’s submission of the required information to PEZA (e.g. the number of employees under the WFH arrangement, the list of assets that will be brought out of the Ecozone, etc.).  Based on the documents submitted by the company, PEZA will then issue an LoA.

While the MC was a provisional measure initially valid until July 31, PEZA released MC No. 40-2020 extending the validity until Aug. 31.  Under the new MC, PEZA also allows BPOs to engage in WFH operations to the extent of 90% of their total revenue until Dec. 31. Given the temporary nature of the MC, WFH arrangements would seem to apply only while the MC is still effective. Therefore, it is uncertain if BPOs can continue to enjoy tax incentives while adopting a WFH scheme after 2020.

Nonetheless, even before the pandemic, PEZA permitted some BPOs to adopt a WFH arrangement within a limited capacity.  PEZA also imposed some preconditions (among others) before BPOs could implement a WFH scheme, such as:

• The arrangement should be limited to employees providing the core BPO services (e.g. software development, call center activities);

• Revenues from WFH operations should not exceed 30% of annual revenue (which is way lower than the 90% threshold under the new MC);

• Separate books of account for such operations should be maintained; and

• There should be monitoring of the movement of IT machinery and equipment that will be used by WFH employees.

WEIGHING IN ON THE WFH SCHEME
It is not surprising that some BPOs are keen on implementing the WFH scheme given the benefits it can offer, both tangible and intangible. For instance, the remote workplace will help reduce operating expenses in the form of office leases and utility costs. Tardiness, absences, and low productivity can also be curbed, as external factors such as inclement weather, travel time to work, etc., are avoided. Further, the safety of employees on the graveyard shift is ensured, as they no longer have to travel during the wee hours of the day.

While it is true that WFH may have its downsides, overall, its benefits far outweigh the disadvantages. Time will tell if PEZA relaxes the rules and allows tax incentives for WFH schemes permanently. For now, there seems to be no reason not to consider WFH for the long haul as long as quality service is being delivered while employee wellbeing is safeguarded.

While the pandemic has disrupted routines and practices, it has also challenged people to adapt, innovate, and move forward. Though unsettling at first, change is good if embraced with the right mindset and attitude. Perhaps it’s high time to discard the traditional office work paradigm and consider WFH arrangements as the new workplace model post-quarantine. Let’s keep our fingers crossed.

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.

 

Joel Roy C. Navarro is a director at the Tax Services Department of Isla Lipana & Co., a Philippine member firm of the PwC network.

+63 (2) 845-2728

joel.roy.navarro@pwc.com

Growth, mobility and vaccines

For countries and economies that have GDP data for second quarter (Q2) 2020 so far, the Philippines has had the deepest contraction of -16.5% in Asia. The same virus that affected all countries in the continent has produced very different results in economic performance — Why?

The answer is not the pandemic itself, but in the response and degree of restrictions and lockdowns imposed by country governments.

Google produces the “COVID-19 Community Mobility Reports.” Download the Excel, you will get big data, more than one million rows of data for many countries and states. The reports cover six areas measuring percent changes in mobility of people from the baseline day, the median value from the five‑week period Jan. 3 – Feb. 6, 2020. These areas are Retail and Recreation (R&R), Grocery and pharmacy, Parks, Transit stations (TS), Workplaces, and Residential. In the table below, I chose only two for brevity purposes: R&R which covers restaurants, malls, libraries, museums, movie theaters; and TS that covers public transportation like buses, trains and taxis.

For Q2 2020 covering the period April 1 to June 30, I chose the midpoint date of May 15 as reference in Google mobility changes. Then I added the latest data for Aug. 7, the degree of restrictions of which will be reflected in Q3 2020 GDP data a few months from now. I also added the latest data for COVID-19 deaths per million population (DPMP).

From the Google data, it seems that the Philippine government has imposed the most draconian, most dictatorial lockdown policies in the whole world, which largely explains for the steep GDP contraction. Despite our DPMP being among the lowest in the world, only 1/5 of the world average of 95 DPMP (see the table).


Now we suffer from endless, indefinite, no timetable lockdowns and mobility restrictions, until credible and safe vaccines become available.

There are at least two important issues when it comes to COVID-19 vaccines here. One is the seemingly gung-ho preference of President Rodrigo Duterte for vaccines from China, known globally for producing risky counterfeits of successful products and brands; or a vaccine from Russia. And, two, a need for a vaccine insurance system to encourage early entry in the Philippines of COVID-19 vaccines from globally reputable, research-based biotech and pharma companies.

Unlike medicines which are given to sick people, vaccines are given to healthy people to prevent future sickness from particular diseases. Vaccines under development normally take many years to be declared safe and effective. The COVID-19 vaccines are rushed and thus, there is the potential for vaccine-related side effects or adverse events in the future.

In the Dengvaxia case, both the innovator company and the previous administration were demonized and it has become a precedent, a big lesson why other innovator companies will be hesitant if not scared to bring COVID-19 vaccines to the Philippines.

One solution is to create a COVID-19 vaccine insurance fund that will serve as an indemnity fund for people who might suffer from any adverse events in the future. The fund will not come from taxes but from a certain percentage, say 1% to 2%, of the total procurement cost of the Department of Health (DoH) from various vaccine producers and suppliers, and the DoH will hold and keep the fund. In case some people someday claim and prove that they suffered adverse reactions from a vaccine, there is already a fixed amount set aside by the DoH. The amount may or may not be enough, but the patients will get compensation. No more filing of cases in court and things will be simplified.

Market-based vaccine and health insurance, not taxes and politics-based insurance. We need more of this, especially with the ongoing PhilHealth scandals involving billions of pesos of taxpayer money.

 

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

minimalgovernment@gmail.com

Markets are fixated on the wrong bogeyman

By Daniel Moss

WITH GOLD above $2,000 and central banks flooding the world with cash, the prospect of surging inflation is again starting to exert a grip on the minds of investors. Concern is premature: Deflation remains the bigger threat.

There’s little sign of a meaningful spurt in consumer prices, even after five months of unparalleled easing in fiscal and monetary policy to combat the pandemic. Not that you’d know it from some market commentary. Believers in a looming inflation spiral cite gold’s almost daily records and a slide in the dollar. Inflation expectations as measured by the US 10-year breakeven rate have risen by more than a percentage point to 1.6% from a 12-year low in March. The Federal Reserve has contributed to the zeitgeist with its insistence that it isn’t even thinking about raising interest rates, amid signs the economic recovery will be unimpressive enough to warrant further stimulus.

It may all prove another false dawn. Bumps in consumer prices across Asia last month don’t disrupt the essential story of the past decade: Inflation just isn’t firing and remains significantly below the modest targets of around 2% typically set by central banks. The crushing of economic growth by COVID-19 has exacerbated this phenomenon, notwithstanding vigorous stimulus from budgets, steep cuts in borrowing costs and the re-emergence of quantitative easing. The collapse in global demand is more powerful than a runaway printing press.

If there is a runaway train approaching, it’s impossible to discern in the figures yet. Consumer prices in Tokyo, usually a leading indicator of Japan’s national numbers, rose 0.4% in July, the government said Aug. 4. That’s up from 0.2% the past two months and above the 0.1% advance forecast by economists. Separate numbers showed Japan’s monetary base rose almost 10% from a year earlier. Neither changes the overall picture that inflation will be hard pressed to reach even half the Bank of Japan’s 2% target within three years.

The same day in South Korea, the national statistics office said inflation picked up to 0.3% last month. That’s better than June’s zero and May’s negative readings, and consistent with signs the economy is brightening. But it’s well below the Bank of Korea’s 2% goal. Inflation believers might have found a fillip in Chinese data released Monday that showed consumer prices climbed 2.7% from a year earlier. Massive flooding that forced food prices up is the culprit, though, rather than virus-induced choke points. A peek at the core index, which excludes such volatile measures, shows China’s inflation is the lowest in a decade.

If Indonesia doesn’t give inflation hawks pause, it’s hard to imagine what might. The republic committed the ultimate heresy in the eyes of hard-money types when the central bank agreed to monetize government debt. In normal times, this would have investors running for the exits, given monetization is supposed to rob authorities of inflation-fighting zeal. But these aren’t normal times. Indonesian inflation was the lowest in two decades in July. Far from plunging, the country’s bonds were Asia’s top performers last month and third among 47 global markets.

The odds that US inflation will exceed 2.5%, assumed to be the Fed’s tolerance threshold, aren’t trivial, say economists at Cornerstone Macro LLC in Washington. Yet deflation remains far more likely. Only once in the 46 years that Cornerstone tracked was deflation a greater specter than it is today, and that was for a brief interlude during the global financial crisis.

So what if inflation does genuinely spike, as opposed to merely picking itself back up off the floor? The cost of allowing prices to overshoot is nothing compared to the misery that will be inflicted if this wrenching slump is allowed to linger.

That means the onus is on those who argue that inflation is the danger to prove their case. In 2010, in the aftermath of the Great Recession, a group of economists, academics and money managers sent an open letter to then Fed Chairman Ben Bernanke warning that the central bank’s quantitative easing program risked inflation and currency debasement. It didn’t happen. Having cried wolf too loudly then, such voices should be treated with caution this time around.

Ultra-accommodative monetary policy and a bias toward slow draining of fiscal waters is warranted. If and when the inflation bogeyman finally arrives, it may seem like a good problem to have.

BLOOMBERG OPINION

Russia doesn’t really know whether its COVID vaccine works

By Max Nisen

RUSSIA is prematurely declaring victory in the race for a vaccine against COVID-19 (coronavirus disease 2019), with potentially dangerous consequences for the Russian population.

President Vladimir Putin says his government has approved a vaccine and will start inoculating teachers and medical workers this month, before embarking on a mass vaccination effort in the fall. Yet the shot is not backed by evidence from a complete Phase 3 trial, the gold standard for confirming safety and efficacy. Deciding to move ahead without this proof stands to hamper rather than help Russia’s COVID-19 response.

“It works effectively enough, forms a stable immunity and, I repeat, it has gone through all necessary tests,” Putin said at a cabinet meeting Tuesday. What little we know about Russia’s vaccine effort suggests he has limited ground for these claims; the vaccine has reportedly completed only early-stage trials, and data hasn’t been made available for independent scientific review. According to Russia’s Association of Clinical Trials Organizations, fewer than 100 people had received the vaccine as of early August.

The human immune system is enormously complicated and varies significantly from person to person, based on age and many other factors. As a result, people experience a range of reactions to a vaccine. Some shots may work well in certain parts of a population yet be harmful or ineffective in others. Safety signals aren’t always obvious or immediately apparent in trials; in rare cases, a vaccine can cause someone’s immune system to overreact, leading to a severe form of the illness the drug is meant to prevent.

Beyond missing these essential nuances, Russia is taking an enormous chance on whether the vaccine works safely. A significant amount of data from thousands of people in a real-world setting is needed to prove that a shot is protective or broadly tolerable.

Perhaps Russian scientists have great animal models or lab data from early participants. They haven’t been forthcoming with details. But such data would not appreciably improve the picture. Scientists have had less than a year of experience with the novel coronavirus itself and even less with immunity to COVID-19.

Putin noted Tuesday that one of his daughters took the vaccine and then registered high antibody levels. At this point in the scientific process, however, secondary measures such as antibody levels do not confirm that a vaccine is effective.

It’s not hard to see why Putin’s government might be willing to gamble on an inadequately tested vaccine. If it works, the country could get back to normal more rapidly. And a win in the vaccine race could burnish Putin’s reputation at home and abroad. But the potential to lose this bet is enormous, and the cost may come in lives.

If the vaccine turns out to offer minimal, transient, or variable protection, then it may give the Russian people a false sense of security. They may interpret getting a shot as a license to behave as if the virus has gone away, allowing the germ to spread more widely than it otherwise would. If that happens, or if people suffer significant side effects, it will undermine confidence in the government and in vaccination generally. Like the rest of the world, Russia will remain in COVID uncertainty for a long time.

BLOOMBERG OPINION

Not even herd immunity can fully protect us

By Tyler Cowen

THE QUESTION of herd immunity — specifically, whether some cities and regions are acquiring it sooner than expected and thus have higher than expected protection against COVID-19 (coronavirus disease 2019) — has been attracting more attention lately. Even if this hypothesis is true, however, it still leaves the world with some truly significant challenges and mandates a continuing vigorous fight against the pandemic.

The evidence for herd immunity can be seen in Sweden, for example, where the case and death rate have plummeted, even though the Swedes still don’t wear masks or engage in extreme social distancing. In London, the bars, movie theaters, and many other venues are open, yet the health situation appears to be stable, again with a low death rate. Of course both Sweden and southeast England were hit hard by the coronavirus early on, so if they acquired herd immunity, it may be because they had a larger percentage of the population get infected and develop some form of protection.

Some researchers are suggesting that regions acquire at least partial herd immunity at 20% exposure, whereas earlier estimates had suggested up to 70% exposure would be needed. If true, this could be very good news for the hardest hit areas.

But there are caveats. First, many herd immunity hypotheses invoke the idea of “superspreaders” — that a relatively small number of people account for a disproportionate amount of the contagion. Perhaps it is the bartenders, church choir singers, and bus drivers who spread the virus to so many others early on in the pandemic. Now that those groups have been exposed to a high degree and have acquired immunity, it might be much harder to distribute the virus.

That logic makes some sense except for one issue: namely, that the identities of potential superspreaders can change over time. For instance, perhaps choir singers were superspreaders earlier in the winter, but with most choral singing shut down, maybe TSA security guards are the new superspreaders. After all, air travel has been rising steadily. Or the onset of winter and colder weather might make waiters a new set of superspreaders, as more people dine inside.

In other words, herd immunity might be a temporary state of affairs. The very economic and social changes brought by the virus may induce a rotation of potential superspreaders, thereby undoing some of the acquired protection.

A related issue is that the regions with herd immunity are vulnerable to “invasion” from less protected parts of the country. Maybe hard-hit New York City does have partial herd immunity, but to the extent the city appears safe for months on end, outsiders are going to start to visit and live there, again undoing some of the current level of protection. Meanwhile, New Yorkers themselves will take more chances and be exposed to higher doses of the virus. Their current levels of immunity, while useful, will not make them invulnerable against all possible forms and degrees of exposure.

Once again, there is no guarantee of permanence when it comes to herd immunity.

Another problem is global in nature and could prove very severe indeed. One possible motivation for the herd immunity hypothesis is that a significant chunk of the population already had been exposed to related coronaviruses, thereby giving it partial immunity to COVID-19. In essence, that “reservoir” of protected individuals has helped to slow or stop the spread of the virus sooner than might have been expected.

There is a catch, however. If true, that hypothesis means that the virus spreads all the more rapidly among groups with little or no protection. (Technically, if R = 2.5, but say 50% of the core population has protection, there is an R of something like 5 for the unprotected population, to get the aggregate R to 2.5.) So if some parts of the world enjoy less protection from cross-immunities, COVID-19 is likely to ravage them all the more — and very rapidly at that.

Again, this is all in the realm of the hypothetical. But that scenario might help explain the severe COVID-19 toll in much of Latin America, and possibly in India and South Africa. Herd immunity, as a general concept, could mean a more dangerous virus for some areas and population subgroups.

Continued monitoring of Sweden, southeast England, and New York City will probably reveal whether the herd immunity hypothesis is true. But no matter how that evidence turns out, this is no time to let down our guard.

BLOOMBERG OPINION

Can we skip to Christmas?

 

 

PERHAPS just as a promo gimmick, one fast food outlet put out Christmas décor for the store last month, in July. It’s not certain whether this unexpected and playful approach increased the take-outs and dine-in sales levels. But it was worth a try, if only to lift the spirit with a wink.

Maybe spreading holiday cheer this early can be a worthwhile (even if fanciful) plan to lift the gloom and accelerate economic recovery after the second, but surely not the last, quarter of negative growth. Doesn’t Christmas shopping boost consumption for dining and consumer goods like jackets and hats? Should the malls start playing holiday music?

The calendar date of Dec. 25 does not anyway determine when Christmas is celebrated. It merely serves as a reference point for the inevitable countdown that stores and media use to build up excitement for the season and perk up consumption.

Can we now already skip to Christmas?

We still remember a time when Christmas started on the first day of the novena of dawn masses before Christmas, on Dec. 16, and unofficially ended on Jan. 6 for the feast of the Three Kings. Maybe because malls found the nine days constricting in terms of stoking depraved and wanton shopping, it was decided to move Christmas earlier and earlier by the simple expedient of putting up star lanterns, reindeers, and lights and piping in Ray Conniff and Mabuhay singers’ carols, even at the car park.

We already held the record for having the longest Christmas in the 1950s reckoned then from Dec. 16, the previously agreed upon start of Christmas, to Jan. 6 of Three Kings, which has since become a moveable feast celebrated on a Sunday and called by its more liturgically correct but unromantic tag of Epiphany.

With the erosion of this once clear dividing line in the calendar, keepers of records like Guinness or Ripley needed to look for another date in November, like after All Saint’s Day. Absent some common agreement on precise dates, guardians of world records may have just lost interest in the longest Christmas altogether.

Is an earlier celebration of Christmas, even before the already aggressive marking with the “ber” months, an economic recovery program worth looking at? Consumption after all is the driver of our GDP, accounting for 70% of this number. With the delay of the government spending on infrastructure (Build, Build, Build) now replaced, or complemented, by an equally alliterative mantra (Plant, Plant, Plant), can increased holiday spending offset high unemployment and the repatriation of the OFWs?

There is a need to rescue the word “positive” from its current implication of a death sentence. Testing positive, after all, consigns one to becoming a statistic in the contagion rate which is tracked daily. What happened to the non-medical meaning of “positive”? The association with hope, optimism, and, yes, the Christmas spirit needs to be restored.

In an experiment on emotional intelligence among children enticed with marshmallows (two right now or four after three hours), it is established that the virtue of deferred gratification for a greater goal is considered an ingredient for success. Has our all too ready and premature celebration of Christmas become a case of wanting our dessert before the obligatory tofu with bean sprouts? Is it too early to recycle last year’s haul of fruitcakes?

Must economic considerations of an earlier Christmas and its positive effect on sales take precedence over the distortion of the Gregorian calendar? Has the “countdown” to Christmas caused the season to lose its original meaning and become merely a promotion of consumerism?

True, there is an element of self-delusion in moving the calendar around, at least in spirit, to already jump-start economic confidence and recovery. Moving the countdown to Christmas a month earlier from the traditional hundred days can lift the spirit.

Anyway, how can you argue with the Christmas message of peace and goodwill to men being embraced much earlier than usual? Still, we haven’t heard such a call for unity and fellow feeling in a long while. Can this new-new normal for the Christmas spirit flip the now all-too-familiar “hoy, hoy, hoy” back to the more cheerful “ho, ho, ho”?

Still, even for Christmas, we don’t always get the gift that we want. It’s the spirit that counts. And it really needs a boost.

 

Tony Samson is Chairman and CEO, TOUCH xda

ar.samson@yahoo.com

Biden picks Kamala Harris as his running mate

JOE BIDEN chose Senator Kamala Harris as his running mate, Tuesday, betting that her ties to the African-American community and self-branding as a “progressive prosecutor” will help propel him to the White House.

Ms. Harris, 55, who ran against Mr. Biden in the Democratic presidential primaries, becomes the first Black woman and first Asian-American on a major party presidential ticket. Known as an aggressive campaigner, the junior senator from California has won statewide elections in the most populous US state three times. She built her early career as district attorney of San Francisco and later California attorney general.

“I have the great honor to announce that I’ve picked @KamalaHarris — a fearless fighter for the little guy, and one of the country’s finest public servants — as my running mate,” Mr. Biden tweeted.

Ms. Harris tweeted her own response, pledging to help Biden defeat President Donald Trump.

“@JoeBiden can unify the American people because he’s spent his life fighting for us. And as president, he’ll build an America that lives up to our ideals. I’m honored to join him as our party’s nominee for Vice President, and do what it takes to make him our Commander-in-Chief,” she said.

The Democratic nominee announced the selection six days ahead of the party’s convention, which begins Aug. 17.

The two candidates will appear together in a virtual fund-raiser on Wednesday and at events in Delaware in the coming week. Ms. Harris will face Vice-President Mike Pence in a Oct. 7 debate scheduled to be at the University of Utah.

Mr. Biden made his decision based on his own eight years as Barack Obama’s vice-president. He often said he hoped to choose a running mate with whom he’d be compatible and shares values, even if she came from a very different background than his.

Ms. Harris knew Mr. Biden’s son Beau when he was attorney general of Delaware and Ms. Harris held the same job in California. Mr. Biden was also impressed by her work on the Senate Judiciary Committee, the campaign said.

With her history in law enforcement, Ms. Harris could help Mr. Biden revamp the US criminal justice system, which has been under intense scrutiny since nationwide protests after the May 25 death of George Floyd in Minneapolis police custody. Her tough stance for police reform in recent months, including co-authoring a Senate bill to ban police chokeholds and other steps, has helped mute criticism from advocates of her own record as a prosecutor.

Ms. Harris has drawn criticism over her aggressive prosecution of men of color, some of whom were later exonerated, for serious crimes. Ms. Harris responded to that criticism by describing herself as a progressive prosecutor who worked to thread the needle between law-and-order toughness and a protective instinct for those who needed it.

Rashad Robinson, executive director of Color of Change, a political action committee, said Ms. Harris was a “stellar Black candidate” even if they haven’t always agreed on issues.

But Mr. Robinson said Ms. Harris needs to directly confront her past as a prosecutor and talk about how her views have evolved.

“These are questions that she has to answer head on, she actually has to talk about her evolution and talk about the way the world was in terms of her progressive prosecution back when she was a prosecutor, talk about the challenges that she’s had and talk about where she’s moved,” Mr. Robinson said in a phone call with reporters.

Mr. Biden committed to choosing a woman even before he’d won the nomination, making a surprise announcement during the final debate of the primary in mid-March. Ms. Harris endorsed Mr. Biden on March 8, throwing her support behind his candidacy after sharply criticizing him in the Democratic primaries.

Representative Jim Clyburn, whose support gave Mr. Biden the momentum he needed to win South Carolina and eventually the nomination, welcomed the historic choice.

“What we’re seeing today is one more chapter in this country living out its true creed that all men and women are created equal,” he said.

Mr. Obama said Mr. Biden had “nailed this decision.”

“Now Joe has an ideal partner to help him tackle the very real challenges America faces right now and in the years ahead,” Mr. Obama said in a statement.

Ms. Harris and Mr. Biden had a heated exchange during the primary, when she confronted him over his opposition in the 1970s to a federal mandate for busing to integrate schools, which put him on the same side as segregationist senators. Mr. Biden has said he supported desegregating schools, but not the federal mandate.

After the debate, it became clear she and Mr. Biden agreed on modern desegregation policies.

Mr. Trump said he was “a little surprised” that Mr. Biden selected Ms. Harris as his running mate, saying she had been “nasty” to the former vice-president in primary debates, using a term he usually reserves for women. He criticized her for her aggressive questioning of Supreme Court Justice Brett Kavanaugh over sexual misconduct allegations during his Senate confirmation hearings.

“I thought she was the meanest, the most horrible, the most disrespectful of anybody in the US Senate,” Mr. Trump said. — Bloomberg

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