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Journalist, non-profit groups among latest to file petition vs anti-terrorism law

THE CENTER for International Law, Inc., together with a group of law professors, journalists, and a non-profit organization, filed the 27th petition before the Supreme Court questioning the validity of the Anti-Terrorism Act. The petitioners include Foundation for Media Alternatives, Inc., Democracy.net.ph, Inc, VERA Files, Inc., and  law professors from the Lyceum of the Philippines, among others. Similar to the earlier filings, they argued that the law, which took effect last July 18, contained provisions that infringe on fundamental rights in the Constitution such as the right to freedom of speech, the right of the people to peaceably assemble and petition the government for redress of grievances, and the right to freedom of association. They also pointed out that acts that can be penalized under the law are “incomprehensible and overbroad,” it said, noting that “mere thought and inception of an idea in a person” fall under the definition of terrorism in the law. “Never has intent alone been a level of culpability punishable by penal statutes because our laws have always required overt illegal acts to be the standard when it comes to punishment,” the lawsuit read. Petitioners said they they do not dispute that terrorism must be stopped, “but to direct government and citizens alike to a clearer and firmer conviction about the very purposes of government and the State, at a time when freedoms are denied in the name of national security.” — Vann Marlo M. Villegas

DFA reports 5 more injured Filipinos in Beirut blast

FIVE MORE overseas Filipinos in Beirut were reported to have been injured in the Aug. 4 explosion, the Department of Foreign Affairs (DFA) confirmed on Monday. “We are still thankful that the injuries sustained by our kababayans are not life-threatening,” Foreign Affairs Assistant Secretary Sarah Lou Y. Arriola said in a statement. This brings the total number of injured persons to 47 as of Aug. 10. In its previous report, the DFA said there were two other Filipinos missing, while four have died. The explosion occurred at a port warehouse that stored 2,750 tons of ammonium nitrate, a substance used for fertilizers and explosives, according to reports. The department is set to bring home the remains of the four victims on Aug. 16. The repatriation flight will also transport some 400 overseas workers in Lebanon. Ms. Arriola said the repatriation expense will be shouldered by the government. The Department of Labor and Employment announced Sunday that P5 billion more has been allotted to fund  repatriation efforts off the government. About 32,000 Filipinos are in Lebanon, down from 33,000 in December after some of them came home amid the global coronavirus pandemic. —  Charmaine A. Tadalan

Evidence of ‘gradual’ recovery emerges in June — Finance dep’t

BUSINESS leaders have reported the start of a “gradual” recovery in their sales starting June, Finance Secretary Carlos G. Dominguez III said.

“We have also learned from the industry leaders that business activities in various sectors of the economy have started to pick up following the economic standstill during the lockdown. In general, most firms reported that they have begun to see a gradual sales recovery in June, coinciding with the partial reopening of the economy,” Mr. Dominguez said in a statement Monday.

Mr. Dominguez, who has resisted pressure to spend massively at the outset of the crisis in order to keep some funds in reserve in case the pandemic is prolonged, warned that the government must perform a “difficult balancing act,” in terms of saving lives while minimizing economic damage.

He said evidence of the recovery is also showing up in the import volume and value-added tax data filed by the Bureau of Customs (BoC) and the Bureau of Internal Revenue (BIR) in July.

The BIR surpassed its collection goal last month by 2.08%, generating P127 billion, while the BoC exceeded its target by 5% after generating P50 billion in duties and taxes.

Lockdown restrictions in the capital, along with the rest of the country, were eased starting June.

However, Metro Manila and nearby cities were returned to a stricter form of lockdown — known as modified enhanced community quarantine — for the first two weeks of August due to the continued rise in coronavirus cases.

He said reimposing lockdown measures will have an adverse impact over the short term but will ultimately benefit the country if it succeeds in slowing down the spread of the virus.

“The Duterte administration will not rest until we have prevailed over this extraordinary challenge.  We will redouble our efforts to protect our economic gains over the past three years, prepare our economy for a strong recovery, strengthen our resilience, and solidify our return to the path of inclusive growth,” Mr. Dominguez added.

Mr. Dominguez is hoping for a “steady, yet moderate” economic recovery in the third quarter.

The economy contracted by 16.5% in the second quarter at the height of the lockdown, taking the first-half average to -9%.

Gross domestic product (GDP) should not decline by more than 2.2% in the second half to keep the full-year average within the government’s target of a 5.5% contraction.

Economic managers have set a GDP forecast range of -4.5 to -6.6% this year, against an earlier estimate of -2 to -3.4%. — Beatrice M. Laforga

Subic Freeport Expressway project 50% complete

NLEX CORP. said Monday that its P1.6-billion Subic Freeport Expressway (SFEx) capacity expansion project, which is expected to ease travel to and from the freeport zone, is now 50% complete.

Construction activities “are in various stages of development and seen to be completed by the end of the year,” NLEX Corp. said in a statement.

The project involves the construction of “two additional expressway lanes, two new spans at the Jadjad and Argonaut bridges, and a new tunnel adjacent to the existing one, transforming the road into a four-lane expressway,” it added.

NLEX Corp. expects the transport of goods in and out of the Subic Freeport to be faster and simpler once it completes the project.

Subic is home to the Subic Bay Freeport Zone, serving as a major port for Central and North Luzon.

“By increasing the road capacity of SFEx, which traverses the provinces of Bataan and Zambales, transport of goods in and out of the Subic Freeport will be faster and easier. This would also mean that the expressway can accommodate more motorists at a given time,” NLEX Corp. President and General Manager J. Luigi L. Bautista was quoted as saying.

The company said it has partnered with the Subic Bay Metropolitan Authority to include in the project scope “the raising of elevation of the Maritan Highway-Rizal and Highway-Tipo Road Junction and enhancing its drainage system to improve flood management in the area.”

The SFEx expansion is also expected to make Subic a more viable tourist and investment destination because of improved connectivity.

NLEX Corp. is a unit of Metro Pacific Tollways Corp. Its parent Metro Pacific Investments Corp. is one of three key Philippine units of Hong Kong’s First Pacific Co. Ltd., the others being Philex Mining Corp. and PLDT, Inc.

Hastings Holdings, Inc., a unit of PLDT Beneficial Trust Fund subsidiary MediaQuest Holdings, Inc., has a majority stake in BusinessWorld through the Philippine Star Group, which it controls. — Arjay L. Balinbin

Mindanao rail phase 1 construction moved to 2021

THE start of the construction of the China-funded Mindanao railway phase 1 has been moved to the first quarter of 2021, with the government yet to decide on a contractor.

The Transportation department is targeting the start of construction for the Mindanao Railway Project-Tagum-Davao-Digos (MRP-TDD) by the first quarter of 2021, the National Economic and Development Authority (NEDA) Region XI said in a recent statement.

The Transportation department said in December that the groundbreaking for the project would be in the first quarter of 2020, but it did not happen.

Transportation Assistant Secretary for Project Implementation-Mindanao Cluster Eymard D. Eje told BusinessWorld by phone Monday that the department had received from the Chinese embassy the shortlist of bidders for the project monitoring consultancy package of the rail works.

Mr. Eje said the department is still waiting for the shortlist of bidders for the design-and-build package.

The list of bidders for the build-and-design contract was expected in June.

The P82.9-billion railway’s first phase, covering the 100.2-kilometer Tagum-Davao-Digos segment, will be financed through an official development assistance package from the Chinese government.

In its statement, NEDA Region XI said there was a special meeting on July 21 where Project Manager Clipton J. Solamo “reported that the validation of affected parcels in Digos City, Davao City, Panabo City, Carmen, and Tagum City is at 100%, while the Municipality of Sta. Cruz was at 69%.”

“Atty. Solamo further reported that the tagging of structures would be at 100% before the end of July 2020.”

It also said the Transportation and the Public Works and Highways departments were undertaking a study “to resolve the alignment interfaces between the MRP-TDD and the ongoing Davao City Bypass Construction project, which will commence construction in the third quarter of 2020.”

Also discussed at the meeting was “the updated timeline for the implementation of the MRP-TDD in view of the postponed field operations due to the COVID-19 quarantine,” NEDA Region XI said. — Arjay L. Balinbin

Downgrades issued by HSBC Research, Nomura after dismal GDP data

TWO major institutions downgraded their full-year growth forecasts for the Philippines in 2020 in the wake of the 16.5% contraction in second-quarter gross domestic product (GDP), with HSBC Research pricing in what would be a record contraction for the year of 9.6%.

In a report issued Monday, HSBC Economist Noelan Arbis said the institution slashed its GDP forecast for the Philippines from -3.9% previously, projecting that the “recovery ahead will be shallow” with COVID-19 (coronavirus disease 2019) cases still rising and new lockdowns ordered.

“The continued rise in COVID-19 cases domestically remains a serious concern, and in our view, has dashed any hopes for a meaningful recovery in the second half of 2020. Moreover, the absence of a big-ticket stimulus is likely to put a damper on the recovery in the year ahead,” Mr. Arbis said.

He said private consumption, a growth driver for the domestic economy, is unlikely to “bounce back meaningfully” in the third quarter since economic centers, including Metro Manila, have reverted to stricter forms of lockdown.

“Another factor weighing on our outlook is a potential decline in the government’s ability to spend on infrastructure in the quarters ahead… As COVID-19 lingers, the government’s fiscal ammunition is likely to be diverted toward more needed expenditures (i.e. health and social safety nets) and away from infrastructure,” he added.

Nomura Global Markets Research on Monday also trimmed its 2020 GDP forecast to -6.6% from -4.8% as the escalating COVID-19 outbreak points to “a shaky economic recovery.”

“The surge in unemployment and falling remittances will continue to likely weigh heavily on consumption. With still rising COVID-19 cases, the outbreak is still posing a threat to the recovery,” Nomura Global said.

The economy declined by 16.5% in the second quarter following the revised 0.7% contraction in the first quarter. The two consecutive contractions puts the Philippines in a recession, the first since 1991.

Mr. Arbis also lowered his 2021 GDP forecast to 5.7% from 7% previously, while Nomura Global expects 8.1% growth next year.

HSBC Research and Nomura Global both flagged the size of the stimulus package currently pending in Congress.

“The absence of a big-ticket stimulus program from the government has also reduced our expectations for a meaningful recovery in the near-term,” HSBC Research’s Mr. Arbis said, noting that the modest size of the package could weigh on growth prospects both this year and next year.

Nomura Global also warned of a “fiscal cliff” threatening further the economy for the rest of the year, as the government prioritizes longer-term reforms and sets limits to additional spending. It estimated fiscal expenditure growth slowing to 0.2%-5.4% year on year in the second half, against the 26.6% growth in the first half.

“Without a new program that either expands the 2020 budget or supplements it to allow new spending, we expect fiscal spending growth to slow materially in H2 vs H1 at a time when fiscal support measures are critically needed in the war against COVID-19,” it said.

It said the proposed corporate income tax cut to 25% this year from 30% under Corporate Recovery and Tax Incentives for Enterprises (CREATE) bill “is unlikely to be an effective stimulus measure” since the benefit of a lower tax rate will remain “minimal” and may not spur spending as the profitability of businesses will be hit hard this year.

“In contrast, we think ARISE would be more appropriate if the goal is to support a more sustainable recovery and prevent the damage due to the pandemic from becoming permanent,” it added.

Several rescue bills are currently being discussed by Congress, ranging from P140 billion under the Bayanihan to Recover as One Act (Bayanihan II), which has been endorsed by the economic team; to the P1.3-trillion Accelerated Recovery and Investments Stimulus for the Economy (ARISE) bill, which economic managers said is “unfundable.”

“We think such conservatism runs the risk of undermining the economic recovery, given that the Philippines continues to see a worsening of the local outbreak despite the lockdown in mid-March,” Nomura Global said.

Economic managers expect the economy to contract 4.5%-6.6% this year, with the midpoint of the range at about -5.5%, before bouncing back to 6.5%-7.5% growth next year. — Beatrice M. Laforga

Income declines affected 6 in 10 workers during pandemic — study

SIX in 10 workers experienced income declines during the pandemic, according to a study conducted by the Philippine Business Coalition for Women Empowerment (PBCWE) and the Australian government.

The survey of 600 workers, 50% male and 50% female, was conducted  with Australian Aid and Investing in Women. Its results were issued Monday, the PBCWE said.

Survey participants were between 18 to 60 years old who were employed in large-scale private sector businesses. The survey was conducted between May 7 and 17. All participants were still employed during the lockdown.

“Among those surveyed, 63% of employees reported their jobs had been affected, with 21% reporting their job was suspended until further notice, 17% had reduced hours and less pay, and 13% forced to take unpaid leave,” it said.

The report also highlighted the mental well-being of the employees, with three out of four respondents saying financial strain caused by the virus negatively affected their mental well-being.

Four out of 10 participants also said there was a negative impact on their physical well-being because of the virus pandemic. They cited factors such as at-risk personal safety; inability to exercise; and  exhaustion due to domestic work.

Almost 70% of respondents said they were equally or more productive during the lockdown compared to before the crisis. Those who reported they were less productive cited inadequate facilities and anxiety about the crisis. — Gillian M. Cortez

Animal disease study targets development of vaccine for livestock, fish

PAMPANGA STATE Agricultural University (PSAU) will conduct a study of diseases affecting livestock and fisheries to aid the development of potential vaccines, the Department of Agriculture (DA) said.

The DA signed the Memorandum of Agreement on Aug. 8 with PSAU for the P6.4-million project that aims to provide data on animal viruses that can be used by drug manufacturing industries to create custom design vaccines that target the viral strains affecting an area.

The project will study viruses which cause African Swine Fever, Newcastle Disease, which affects poultry; avian influenza; tilapia lake virus; and white spot syndrome, which affects shrimp.

“The launch of this project is both timely and relevant, as it marks a new milestone in our efforts to boost our capacity to accurately detect and effectively manage emerging animal diseases, including that of transboundary diseases, here in Central Luzon and nearby regions,” Agriculture Secretary William D. Dar said.

Funding for the DA-PSAU program, known as “DNA Analysis for Accurate Diagnosis of Emerging Deadly Viruses among Agri-fisheries of Central Luzon,” will come from the DA’s Bureau of Agricultural Research (BAR).

Mr. Dar directed BAR and PSAU to inventory the capacity of diagnostic research facilities nationwide.

“Supporting this project can help us in a big way in the future. Let us tap the best of molecular science and all biotechnology tools available,” Mr. Dar said. — Revin Mikhael D. Ochave

The saga of transfer pricing continues

Last month, I wrote an article about the saga of transfer pricing in the Philippines. The tale begins in 1939 when the Commonwealth Act 466 or the “National Internal Revenue Code was passed. This is the source of the Commissioner of Internal Revenue’s (CIR) authority to review, allocate and distribute the income and deductions of related-party transactions (RPT), both cross-border and domestic, including intra-firm transactions between related parties, to determine the appropriate revenue and taxable income.

Since the birth of this authority, the Bureau of Internal Revenue (BIR) has issued several guidelines to put this authority in effect. While there were no official transfer pricing regulations in place then, the CIR exercised this authority from the actual accounts of tax cases in which the BIR assessed taxpayers whose transactions with related parties allegedly did not conform to transfer-pricing requirements.

To catch up with other countries with more established transfer pricing regulations, the BIR formulated the following notable administrative issuances in the past seven years:

(1) Revenue Regulations (RR) No. 2-2013 (The Transfer Pricing Guidelines) — requires taxpayers to maintain contemporaneous transfer pricing documentation or TDP;

(2) Revenue Audit Memorandum Order (RAMO) 1-2019 — provides standardized audit procedures and techniques in auditing taxpayers with a related party and/or intra-firm transactions to ensure that the audit is of good quality;

(3) RR No. 19-2020 — requires taxpayers to submit their Information Return on Related Party Transactions (BIR Form No. 1709) or RPT Form and its supporting documents, including the TPD, as an attachment to their Annual Income Tax Returns (AITR); and

(4) Revenue Memorandum Circular (RMC) No. 76-2020 — clarifies certain issues and provides answers to frequently asked questions on the filing of RPT Form and its attachments.

The latest development in transfer pricing is the issuance of RMC No. 76-2020 two weeks ago.

According to the RMC, the BIR’s rationale for requiring the submission of the RPT Form and TPD is to improve and strengthen its transfer pricing risk assessment and audit. The BIR will analyze the information gathered from these submissions when selecting taxpayers to be subjected to a tax investigation and in determining whether or not to conduct a thorough review/audit of a particular entity or transaction.

The BIR implied that not all RPTs can be examined because, given its limited resources, it will only focus its audit and commit its resources to the most important transfer pricing issues.

The RMC emphasized that all Philippine taxpayers with RPTs regardless of amount and volume of transactions must file the RPT Form and its attachments every year as an attachment to their AITR. However, eFPS filers have 15 days from the statutory due date or actual date of electronic filing of the AITR within which to submit the RPT Form and attachments. Taxpayers’ failure to comply will lead to a penalty of P1,000 up to P25,000, which is subject to further penalties.

eFPS filer or not, the manner of filing of RPT Form and attachments will be manual, to the Large Taxpayer Division or Revenue District Office where the taxpayer is registered.

The first to submit the RPT Form and its attachments are supposedly taxpayers with the fiscal year ended March 30 and filing due date on July 30, but the BIR extended the deadline until Sept. 30. Because of this extension, non-eFPS taxpayers with the fiscal year ended April 30 will instead become the first filers when they file their AITR on or before Aug. 15. On the other hand, eFPS filers’ filing due date of the RPT Form and attachments is on Aug. 30.

AITRs for the 2019 calendar year and for the fiscal year ending before March 31, on the other hand, are not covered by the mandatory submissions.

While the BIR prefers local TPD, TPD prepared by the parent company or the group (master file) covering the transactions with the Philippine related company is also acceptable. This TPD must be updated yearly in case there are significant changes in the business model, factors or conditions considered in drafting the TPD, and the nature of the RPTs. If there is none, the old TPD shall suffice.

In terms of covered RPTs, the RMC stated that the enumeration of RPTs in RR No. 19-2020 is not exclusive. The intention of the RR is to include within the term RPT all transactions between related parties that result in the transfer of resources, services or obligations, irrespective of their arrangement (with cost-recovery or cost-sharing or recharging) and regardless of whether a price is charged. Even dividends and redemption of shares between and among related parties, though not usually covered by a TPD, should likewise be disclosed in the RPT Form.

RR No. 19-2020 requires full disclosure of all RPTs in the RPT Form. Taxpayers cannot rely on the related party disclosures in their audited financial statements because of some lack of tax-related information. Some of this information are the names of each related party and its Taxpayer Identification Number, amount of tax paid in a foreign country, amount of tax withheld on income payment to foreign related parties, and declaration of whether or not the taxpayer availed of benefits under tax treaties.

Additionally, the BIR claims that some cost-sharing arrangements are abusive RPTs, therefore a formal written agreement or contract to prove the legitimacy of the transaction must be maintained in addition to other documents to substantiate the transaction.

These new filing requirements are not simple tasks, because all contracts are required to be attached to the RPT Form regardless of volume. In a normal sale or purchase of goods to or from a related party, for example, the contract or any equivalent genuine documents, sales invoices, delivery receipts and proof of payment of the consideration must be submitted. Just imagine the piles of documents the taxpayer must collate just to complete the submission.

Another challenge facing taxpayers is their accounting system’s ability to capture all the required information and if it can generate reports that suit the disclosure requirements of the RPT Form. Another system investment added onto the taxpayer’s plate. Moreover, the accounting system is not the only concern, but also who is responsible for gathering the information: Will it be the accounting or tax personnel?

Just like other tales, viewers will start asking questions as the storyline progresses. If the tale of transfer pricing in the Philippines were a TV drama, the present situation would put us in the early episodes — because the plot has just unfolded. Taxpayers are invited to wait excitedly for the release of other episodes.    

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.

 

Nikkolai F. Canceran is a partner from the Tax Advisory & Compliance division of P&A Grant Thornton, the Philippine member firm of Grant Thornton International Ltd.

pagrantthornton@ph.gt.com

The COVID reality check for business owners

Is it time to change my business model?

I have seen many Facebook support groups for restaurant owners, business owners in general, and just about every SME that has founded a business the past decades or maybe even just a few months before COVID started, and all of us, myself included, have wondered how long ECQ and MECQ, and finally GCQ, will last.

I applaud those bold enough to open for services, like beauty salons, barber shops, and wellness centers, without fear that one infected client may cause the ultimate downfall of a business. It’s the only proof or test if our business will still survive the coming months. We just will find out sooner than later.

We were about to open a café in Cavite, right by our farm. All the equipment has been set in place, and tables and chairs delivered. Soon the maintenance guys would come to install the rest of the machines and we would be on our way to opening day. Or so we thought.

We know of friends who just opened their restaurants a year ago or just a few months ago and they now have to face accelerated depreciation of equipment and maybe even closure. A café across our store just advertised their equipment for sale. Another friend is selling two refrigerated vans at a discount.

So, we come to pinch ourselves to make sure that this is NOT just a bad dream. It is real and we have to face the music. It is real and we have to make tough decisions. To face the business squarely and check what our slim chances are of still making it. Of facing our suppliers and creditors to give us six months to a year to maybe liquidate or hopefully bounce back and be able to settle our bills.

Judging from the resilience I have been observing, here are some pivots and shifts which are proving to be useful and fairly successful.

COVID TREND No. 1 — Families cocooning at home

1. A bag designer has repurposed her fashion bags as home accent pieces.

2. A textile retailer repurposing fabrics for throw pillows instead of for clothes or bags.

3. An art gallery owner is selling art for people who are investing whilst staying home to enjoy the art pieces.

COVID TREND No. 2 — Families eating meals at home

1. Food suppliers selling pre-baked or pre-cooked food for reheating at home.

2. Food chains selling frozen versions of their top sellers.

3. Do It Yourself (DIY) kits of ramen and other dishes that don’t travel well.

4. Home delivery of groceries has become the norm.

COVID TREND No. 3 — Families having more time to learn something at home

1. Children can take language lessons.

2. Parents can take music lessons with their kids.

3. Art lessons and crafts are learned from YouTube and other internet sources.

What are these trends telling us?

Our business must morph or transform into a new model of itself. We just cannot insist on the same old model for our business. Every business is changing into a COVID VERSION of its mission and vision. An adaptable version is much needed.

Even banks have to do fintech or they die.

Even advertising agencies have to break up and serve smaller clients.

Even consulting companies now have to provide services fit for MSMEs.

Travel and tour companies have to regroup.

Events companies must now use virtual places.

So, every business must transform or die. It used to be “differentiate or die.” Now, it’s transform, innovate and use all the creative juices we have to change our business model.

And if we still insist on doing the usual, and keep harping on Pre-COVID and Post-COVID (if there is such a thing), we will keep stopping ourselves from thinking out of the box.

Think positive. Yes, think: What if every one of your clients tested positive?

Think positive. What if one of your staff suddenly is tested positive?

I am an optimist but also a realist. COVID-19 is here to stay and we have to roll with the punches. Either we change now or it will change us.

THINK POSITIVE. There is another business model waiting to be discovered and it’s for you.

This article reflects the personal opinion of the author and does not reflect the official stand of the Management Association of the Philippines or the MAP.

 

Chit U. Juan is a member of the MAP Inclusive Growth Committee and the President of the Philippine Coffee Board Inc.

pujuan29@gmail.com

map@map.org.ph

http://map.org.ph

Terrorism, revisited

The battle against the COVID-19 pandemic has taken most of the time, resources, and energy of the government, and much has been written about the exasperation of citizens with the seeming lack of cohesion and unified action of authorities to mitigate the effects of the health emergency. In a move that is seen more as a panic reaction rather than as part of a strategic plan, the government has deployed the military and police to the frontlines, literally, to carry out its major strategy to address the health crisis: for people to practice social or physical distancing.

Utilizing the security forces, especially the military, in an erstwhile civilian concern poses several issues that I have, time and again, argued in this column. Foremost of which is that it securitizes a problem, in this case a health issue, and utilizes military-style solutions to a civilian concern. Note that military-solutions are, most often, not appropriate to civilian issues since the training and doctrine of the military are very different from that of civilians. The military is trained to defend national sovereignty and hence, their ways are focused on “mission accomplishment” rather than “process compliance” which is, on the other hand, the focus of civilian units. (‘Process compliance’ is the major reason why the Civil Service Commission and Commission on Audit have instituted numerous requirements and procedures for government employees. I am not claiming that the military bypasses the government processes; my beef is the fact that in most cases, they have a different set of requirements precisely because their focus and mission are different.)

The second issue, and the heart of this article, is the fact that using the military to handle civilian problems divert its attention from what it is supposed to focus on, that is, addressing national security issues that threaten or undermine the authority of the democratically elected government. Terrorism currently tops this list.

Terrorism is not a new issue. But there is renewed interest in it due to the recent passage of the Anti-Terrorism Law (ATL). Many have criticized the law, alleging that some provisions violate the constitution. As of this writing, a number of petitions by human rights and civil society organizations (CSOs) have been submitted to the Supreme Court. In contrast to the posturing of CSOs, the military and police institutions favor the ATL’s passage. This is not surprising since these institutions have long been lobbying for a law that would either amend or replace the 2007 Human Security Act (HSA), the country’s supposed anti-terrorism law.

The current Philippine reality with regard the issue of terrorism can be summarized in five points: 1.) The Human Security Act (2007) is inoperable and inadequate (and was hardly used since its passage); 2.) There is no comprehensive national strategy and plan dealing with terrorist groups (very few were involved in the formulation of the 2019 National Action Plan, undermining its claim to be “comprehensive and national”); 3.) The policy directives of national government and local government units (LGUs) regarding terrorist groups are conflicting; 4.) the border control in the Sulu sea is extremely weak, making it an attractive back-door channel for foreign terrorists to enter the country; and, 5.) The nature of terrorist groups have evolved — they employ both armed/ military action as well as political-ideological work to “win the hearts and minds” of their target public.

In the absence of an effective legal platform, clear guidelines, and a comprehensive security plan, short-term programming of interventions are done and ad-hoc arrangements are adopted by LGUs to address the security problem. The military and police handle the armed/military actions of terror groups, but there’s no clarity on which civilian units are supposed to manage the political-ideological battle space. Security institutions, in a way, are forced to also fill in this gap. This situation makes a military solution normalized since civilian units have unclear directives and mandates vis-a-vis dealing with terrorist organizations.

This is the context on why an effective Anti-Terrorism Law is necessary. While I concede that there are provisions in the current ATL that are dangerous and can be abused, as highlighted by critics, it should be noted, however, that the ATL likewise provides the security institutions a stronger legal platform to address terror organizations. A few of these highlights include: a.) it expands the coverage of the penal provision to include acts of terrorism outside of the Philippine territory; b.) it strengthens the legal framework for international cooperation against terrorist groups; c.) it strengthens the Anti-Money Laundering Act relative to terrorist financing; d.) It provides clarity on who is ultimately in charge of terrorism problems (i.e., the Anti-Terrorism Council or ATC); and, e.) it adopts the “whole of government/whole of nation” approach as the national government’s framework versus terrorism, thereby giving a clearer mandate to government civilian agencies to be involved in addressing issues being used by terror groups to recruit.

However, a legal platform like the ATL is only one of the many interventions needed to address the problem. Coinciding with it should be an improvement of good governance practices in areas that remain to be recruitment hotspots; as well as an improvement in the border control and management especially in the Sulu Sea.

But the biggest challenge in the country’s fight against terrorism is the necessity and urgency to improve the capacity, professionalism, and credibility of our security and justice institutions. The strong opposition to the ATL stems not just from its questionable provisions, but also due to the credibility problem of the frontline agencies tasked to implement it. Until the public is assured that the security and justice institutions are committed to democratic governance and the rule of law, opposition to the ATL and similar interventions will continue to mount.

In the end, the dilemma remains — we need a strong legal platform to address the ways of terrorist groups and individuals, but we also need equally strong safeguard provisions to ensure that these legal measures will not be used against legitimate dissent and opposition to the government.

 

Jennifer Santiago Oreta is the Director of the Ateneo Initiative on South East Asian Studies, and an Assistant Professor of the Department of Political Science of the Ateneo de Manila University. She is also the Executive Director of the civil society organization Human Security Advocates.

In 2020, commerce was forced to change — but consumer expectations will drive further transformation

By Safdar Khan

For most of us, the COVID-19 pandemic and its repercussions have been unprecedented — at least by this order of magnitude. A broad array of impacts has been felt at the most individual level, all the way through to the levels of the international community and the global economy. Anecdotally, it certainly feels like there’s been a change in how we’ve been conducting commerce in response to the pandemic — and the figures certainly back this up.

The latest set of Mastercard Impact Studies has revealed how extraordinary events influence consumers and business professionals, with major markets in Southeast Asia seeing drastic jumps in participation in digital commerce. For example, in the June edition of the study, nearly half of the respondents in Malaysia, Singapore, and Thailand had increased their use of online shopping services over the course of a single month. During the same period, 40% or more of the respondents in Malaysia, the Philippines, Singapore, and Thailand said they had increased their usage of home delivery services. The research also found that roughly 60% to 70% of the respondents had decreased their usage of physical cash, while many had increased their use of contactless payments through their cards and their smartphones — in part, it would seem, to reduce their amount of physical interactions with others. There is no doubt that the way we do business has inexorably changed, and that change will continue past the era of lockdowns and social distancing.

It’s been fortunate for the sake of a continuing sense of normalcy that we’ve had the technology to keep many aspects of our lives going. There is some irony to the fact that a crisis that drove us out of our offices, away from social gatherings, and into our homes, has in some ways actually resulted in greater connectivity than ever before and also forced many to quicken their pace of technology adoption. With shopping and payment habits now irrevocably changed, the question on everyone’s minds now is whether the world is coming up on a kind of “static” new normal, or facing a period of ongoing commercial evolution? I believe we’re looking at the latter.

For many consumers in Southeast Asian, the pandemic necessitated them having their first experiences with e-commerce, which if you think about it, is quite a big jump to make. Where once many people had to go out, perhaps get into a car or on a scooter, drive to a supermarket or mall, get cash out of their wallet, and carry everything home, they’ve transitioned into a new way of doing things — tapping a few times on their smartphone, perhaps authenticating their payment with a fingerprint scanner, and having items delivered to their door later that day. Interestingly enough, e-commerce spend growth is increasing rapidly, even among older consumers who traditionally favored traditional stores and markets.

We call this moving towards a more “frictionless” economy, and this new seamlessness is the platform on which many businesses are going to be competing and surviving moving forward. When someone has to count out cash, hand it to a cashier, and wait for change — this is an example of friction. When a customer simply pulls out their card or smart device and holds it over a POS terminal to make a contactless payment, this is an example of a more frictionless transaction. As consumers come to expect increased seamlessness in their day-to-day lives, the reduction of this friction is going to be one of the key levels on which businesses compete.

At Mastercard, we’re actively developing and implementing multi-rail infrastructure with businesses and governments that allow payments to happen in real time across any number of platforms and using any number of devices. At the moment, payments tend to involve items like physical credit and debit cards, smartphones, and smart watches — but the Internet of Things (IoT) is rapidly expanding the number of possible rails, which will in turn, reduce the amount of friction in the economy and our everyday lives, irrespective of whether we’re at home or at work.

By now, the example of the IoT-enabled refrigerator that restocks itself automatically is kind of cliché, but it is a good example of where things are headed — though it’s by no means the final destination. Multi-rail payment infrastructure will allow for totally frictionless experiences, while also enabling the possibility of “digital conversations” between merchants and consumers, where for instance, a shopper’s smartwatch might track certain behaviors and offer them discounts or rewards based on that. Of course, payments will undergird all of these experiences, but it will cease to be a significant part of the process of going shopping, commuting, traveling, and dining.

In much the same way that we don’t think about turning on a tap in our house and getting water, or flicking a switch and turning on a lightbulb, the future of commerce will be one where there is a payments infrastructure in place that allows us to meet our needs at any time, with little to no effort. At Mastercard, we’re not just thinking about what can be done at this moment to improve payments — we’re in the business of working out what the future of commerce may look like as a part of day-to-day life, and how access to innovative technology can help everyone thrive, in both good times and challenging ones.

 

Safdar Khan is Mastercard’s Division President of Southeast Asia Emerging Markets.

Revitalizing these four areas will help developing Asia cope with the new normal

By Shixin Chen

TO DATE, more than 700,000 people around the world have died from the coronavirus disease 2019 (COVID-19). The pandemic has brought despair to countless families and caused unprecedented economic damage. The response has been significant: governments halted global travel, imposed nationwide lockdowns, quarantined large swaths of the population, and scaled up medical care services. Governments have also funded the development and production of testing technology, in addition to the ongoing search for a vaccine.

Yet, it is widely accepted that even when a vaccine is ready and effective, the virus is likely to persist given challenges associated with universal vaccination. The highly contagious nature of the virus means that where there are resurgences in cases, areas that have reopened will need to reimpose restrictions. This is the pattern that we are seeing playing out in several countries including Kazakhstan, the People’s Republic of China, and, most recently the Philippines, where more than 27 million people in Manila and surrounding provinces returned to modified lockdown in early August.

So, we must learn to live with the virus. In this uncertain “new normal,” the prospects for rapid economic recovery are limited. A return to business-as-usual looks unlikely, too, and may not fully restore the economy. Focusing on high-impact segments of the economy is therefore an efficient approach to reaching a new normal.

Revitalizing four key areas can help developing Asia cope with the new normal and find a path to economic recovery.

First, revitalize the health sector. Due to the lack of long overdue investment, there is a significant gap not only in hospital infrastructure, but also at the primary care level including human resources necessary to staff effective health systems. In response to the pandemic, developing Asia has made record investments in strengthening the health sector. For example, the Indian government in April sanctioned approximately $1.9 billion to address the immediate gaps in strengthening the COVID-19 response by scaling up delivery of services. This was followed by the recent announcement of a major program to comprehensively strengthen the public health system. Bangladesh, Nepal, Pakistan, Uzbekistan, and Kazakhstan have adopted similar approaches in their pandemic response plans. There is also a sizable gap in health-related sectors such as pharmaceuticals and health insurance. Current levels of investment are insufficient to achieve Universal Health Coverage (UHC), however, countries have committed to achieving UHC by 2030. ​The health sector has huge growth potential.

  

Second, revitalize the social protection sector which remains fragile and underfunded in developing Asia. In response to COVID-19, great efforts have been made to ensure that affected populations are covered by social safety nets. For example, in the Philippines the government introduced an emergency subsidy program to provide monthly cash payments to 18 million low-income families for two months. In India the government announced a scheme to provide free food to 800 million people until November 2020, as well as direct cash transfers and free cooking gas to women, the old, and socially disadvantaged groups. The Pakistani government has allocated $1.2 billion for emergency cash transfer payments to 16.9 million poor households including daily wage workers. Yet, social protection schemes require long-term efforts to develop, including establishing disaggregated databases, registration and monitoring systems, and strong budget support. The development of the social security sector will help promote economic inclusion and sustainable growth.

Third, revitalize digital technology. The pandemic is transforming people’s behavior and social norms. Working from home has completely changed people’s mindset. Web-based collaboration and sharing platforms have been widely recognized for their effectiveness in facilitating remote collaboration and co-working, while webinars are successfully replacing physical seminars. More importantly, digital technology has been widely and effectively used to promote trade and tourism, support small and medium-sized enterprises, and boost microfinance. It is being used increasingly in government, procurement, and education. Strategically developing digital technology will have a huge impact on the quality of growth.

Fourth, revitalize the global supply chain. During the great lockdown, the global supply chain virtually came to a standstill, resulting in incalculable job losses and economic damage around the world. For example, Bangladesh’s exports of apparel products were affected due to cancellation or suspension of orders, while international contracting projects in Pakistan, Nepal, Uzbekistan, and Georgia were largely suspended due to the interruption of raw materials supply. The pandemic has highlighted the need for urgent reform of the global supply chain. We must pursue high-level multimodal transport, more effective trade facilitation, and stronger trade and supply chain financing mechanisms. In addition, further enhancing the international network of global supply chains will help to ensure that goods continue to flow in the face of disruptions. The global supply chain is the main artery of the world economy and its smooth flow is the basis of economic recovery.

Developing Asia has experienced many crises and disasters and has always bounced back. Following the Asian financial crisis, which severely hit the banking sector, the region adopted painful but necessary regulatory reforms of its systemically important financial institutions. These reforms introduced vital resilience into the Asian banking system, enabling it to survive the Global Financial Crisis a decade later. The COVID-19 pandemic should give us similar inspiration — the more severe the crisis, the greater the chances for reform and revitalization.

As we confront the new normal, a return to business as usual looks unlikely and may not fully restore the economy. Instead, a unique revitalization in these areas can offset losses and help realize developing Asia’s potential.

 

Shixin Chen is Vice-President (Operations 1) of the Asian Development Bank. He is responsible for operations in the South Asia Department and the Central and West Asia Department.

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