WITH the national government continuously finding ways to provide opportunities through sports, Milo Philippines reaffirmed its support to the former and lauded its efforts to further cultivate the country’s sports program.
Speaking at the recently-concluded Batang Pinoy National Finals organized by the Philippine Sports Commission (PSC) in Puerto Princesa, Palawan, Milo Sports Manager Lester P. Castillo said they are very proud of their involvement in Batang Pinoy, which is geared towards championing Filipino youth athletes and uplifting the sporting community through grassroots sports.
“We are happy to be among the supporters of PSC’s Batang Pinoy National Finals that has been a proponent of getting more young Filipinos into sports,” said Mr. Castillo.
Adding, “We believe that sports teach children character-forming values such as teamwork, discipline and confidence. These are the same values that children need to be successful later on in life as they continue to pursue their ambitions. The PSC’s Batang Pinoy has long advocated for the development of physical qualities and moral values, a vision that we at Milo share with them.”
Milo’s involvement in the Batang Pinoy program, Mr. Castillo said, is an extension of Milo’s thrust through programs like the Milo Summer Sports Clinics, Milo Little Olympics, Milo Brgy. Liga and the National Milo Marathon.
Among these are the establishment of the country’s first Sports Academy, done in cooperation with the Department of Education, and the rolling-out of the Philippine Sports Institute-Sports Mapping Action Research Talent Identification.
Both initiatives were unveiled in the Batang Pinoy in Palawan.
“This unprecedented development entails a brighter future for grassroots sports development in the Philippines,” said Mr. Castillo.
“We are very fortunate to have been given a chance by the PSC to support the National Finals of Batang Pinoy. Hopefully our team can find ways to continue the collaboration with the PSC in preparation for future Batang Pinoy programs. Such partnerships can continue enabling the youth to become champions not only in sports but also in life,” he added.
BAGUIO AS CHAMPION
Meanwhile, Baguio City was declared the champion in the Batang Pinoy after winning the most number of gold medals.
It won 61 top hardware from over 600 gold medals handed out in the competition while also bagging 25 silver and 70 bronze medals. Cebu took second place with a 36-34-35 medal haul. Davao was third with 31-30-41.
Over 8,500 athletes from 249 cities and provinces nationwide saw action in the prestigious youth tournament, which was staged by the PSC with help from DepEd, Milo, Department of Interior and Local Government and the people and officials of Puerto Princesa City. — Michael Angelo S. Murillo
BEIJING — Australia and France reached the basketball World Cup quarter-finals with a match to spare after tight wins over their respective rivals while holders the United States edged closer to the last eight with the 69-53 defeat of Greece on Saturday.
The Czech Republic also boosted their hopes of advancing to the knockout stage of the competition with an impressive 93-71 victory over Brazil thanks to an effervescent performance by their Chicago Bulls guard Tomas Satoransky.
Australia overcame a strong challenge from the Dominican Republic in an 82-76 win over the Caribbean nation while France ground out a dramatic 78-75 victory against Lithuania.
The Americans enjoyed plain sailing although Giannis Antetokounmpo, last season’s most valuable player in the NBA regular season, made a bright start as he netted seven of Greece’s opening nine points.
A steely defence by the US forced the Greeks to take a barrage of difficult perimeter shots while the champions took advantage of their athleticism at the other end of the court.
The US had six players in double scoring digits, with Kemba Walker leading the way on 17 points. Harrison Barnes got 15 and Myles Turner added 14 while Jaylen Brown, Joe Harris and Donovan Mitchell chipped in with 11 each.
France produced three perfect quarters against Lithuania but almost spilled a 16-point lead in the final period as the Baltic nation, roared on by a vociferous band of supporters, turned the tide at one stage.
A Jonas Maciulis three-pointer allowed the Lithuanians to nose ahead 72-70 in the home straight before Evan Fournier and Nando De Colo forced the final twist in the last two minutes.
Fournier finished with a game-high 24 points and De Colo added 21 as the duo overpowered Lithuania’s towering centre Jonas Valanciunas, who had 18 points and eight rebounds but missed a crunch free throw in the last minute.
The Australians were made to work hard for their win against the Dominicans, who trailed throughout the pacy contest but stayed on the Boomers’ heels as they matched them for speed.
Patty Mills sank 19 points and dished out nine assists and Chris Goulding scored 15 points for Australia, who will face France on Sunday to decide top spot in their pool.
Beaming after three successive wins in the preliminary group stage, the Brazilians were brought crashing down to earth by a rip-roaring Czech side who notched their third straight win after an opening defeat by the US. — Reuters
For much of the fortnight, it looked like Serena Williams was finally prepped for the moment she long wanted to claim. Since her convalescence from pregnancy-induced complications in 2017, she had been a picture of inconsistency. A variety of injuries and an increased emphasis on family life stunted her return to the top of the sport. And while she proved good enough in spurts to contend for titles, she appeared tentative and unable to close the deal under the klieg lights. Thusly, she wound up with bridesmaid finishes in her last two appearances at Wimbledon and in the United States Open last year.
Nonetheless, a near-dominant run en route to yesterday’s match at Flushing Meadows changed conventional wisdom’s assessment of Williams’ chance to tie Margaret Court’s all-time record of 24 Grand Slam singles titles. Apart from a brief second-round stumble against Caty McNally, she romped through the competition to set up a widely anticipated coronation. Her booming serves and punishing groundstrokes were on point, and she seemed ready to meet the challenge against first-time major finalist Bianca Andreescu. Her sharp play gave the impression that she wouldn’t fold the way she had against Angelique Kerber, Simona Halep, and Naomi Osaka with the hardware in sight.
Unfortunately, Williams was again far from her best yesterday. In fact, she saved her worst for last. Against the supposedly inexperienced Andreescu, she displayed the same uncertain disposition that manifested itself in her immediate past attempts at glory. She was particularly shaky from the service line, and it told on her capacity to dictate points. Meanwhile, her opponent did an outstanding impression of her old ascendant self, displaying power and precision and, most importantly, passion that could withstand the pressure of position.
Indeed, Williams was decidedly the lesser from the get-go. To the shock and dismay of the packed Arthur Ashe Stadium crowd overwhelmingly in support of her projected march to greatness, she failed to summon a modicum of the form that fueled her latest run at Flushing Meadows. In retrospect, she didn’t do nearly enough to win, not in the face of her previous performances, and not against a determined Andreescu. And, on a prospective note, she would do well to learn from her spate of disappointments.
True, there is no shame in finishing second four times in the last six major tournaments. If nothing else, Williams has underscored her continued relevance even at 37. That said, she’s no longer the same force able to summon a higher gear on demand. And when those on the other side of the net aren’t old enough to remember the way she ran roughshod over the competition with ease, her task becomes harder still. In her post-mortem, she promised to do better. For fans, the hope is that she will do so soon. Else, she may want to steel herself for be inevitable. No one vanquishes Father Time, and he’s fast approaching.
Anthony L. Cuaycong has been writing Courtside since BusinessWorld introduced a Sports section in 1994. He is a consultant on strategic planning, operations and Human Resources management, corporate communications, and business development.
THE Department of Health (DoH) will release next month details of its plan to jointly regulate the e-cigarette industry with the Department of Trade and Industry (DTI), after it issued an order in June that called for such producers to be licensed.
In an interview with BusinessWorld, Food and Drug Administration (FDA) Director IV Ana Trinidad F. Rivera said that the DTI has prepared its own policies for the upcoming guidelines.
“The implementation (of the guidelines) for the device will be joint with DoH and DTI,” said Ms. Rivera.
DoH Administrative Order (AO) 2019-0007 issued in June required all makers, sellers and distributors involved in the Electronic Nicotine and Non-nicotine Delivery Systems (ENDS/ENNDS) industry to obtain a license to operate (LTO) from the FDA. The AO also called for the registration of END/ENNDS products and regulation of labeling and packaging.
DoH Undersecretary Rolando Enrique D. Domingo told BusinessWorld previously that the department planned to regulate e-cigarettes and vape devices after reports of explosions of these devices, injuring users these devices caused explosions and injuries to users.
On the other hand, he said that the release on the list of permitted flavors for E-Liquids is still being finalized. Registration of these products will begin by next month.
“We’re finalizing (it) so by next month, we’re going to start registration,” he told BusinessWorld.
The Health Undersecretary, who also is the FDA Officer-in-Charge, said in an earlier report that the FDA will begin taking applications for LTOs in December.
Ms. Rivera said the FDA is set to meet with the World Health Organization (WHO) this week regarding the flavors of e-liquids that will be permissible but noted that flavors targeting young customers will be prohibited, as underlined in the AO
“Next week we will be having a meeting with the WHO regarding the flavors. (There are) flavors that have health effects,” she said, adding that there is possibility that the list of permitted flavors will be more than the mint and tobacco as raised by the DoH and Department of Finance (DoF).
She added that apart from releasing a memorandum on the permitted flavors of e-liquids, the FDA “will be coming out with separate memos for the labels, for the license (LTO), and for the (product) registration.” — Gillian M. Cortez
ALBAY 2nd district Rep. Jose Ma. S. Salceda has filed a bill seeking to protect the rights of freelance workers and to exempt them from taxes initially.
Mr. Salceda filed House Bill 1527, which if passed will become the Freelance Workers Protection Act.
He said the measure “provides a remedy in the event that an employer refuses to pay a freelancer for services rendered” and cited the need to set up protections because the freelance economy is growing.
“Freelancers are often considered self-employed,” Mr. Salceda said. “With more and more freelancers, we are confronted with an urgent need to protect this new sector and empower them with ease of doing business.”
The bill requires any party retaining the services of a freelance worker to issue a written contract for P10,000 or more, with the contract to be executed before work begins, and sets a 30-day payment deadline after the job is completed.
“Once a freelance worker has commenced performance under the contract, no hiring party may require as a condition of payment that a freelance worker accept less than the specified contract price,” read the bill.
The bill also makes it easier for freelancers to register with the Bureau of Internal Revenue (BIR) and in other government agencies.
The measure also seeks to exempt freelance workers from payment of income tax for the first three years of work reckoning from the date of registration with the BIR.
Freelancers with income of below P300,000 will be exempt from tax, while those earning P300,001 to P10 million are required to pay a 10% rate. Violators are subject to a fine of P250,000. — Vince Angelo C. Ferreras
THE BUREAU of Internal Revenue (BIR) could save as much as P230 million annually in transaction fees if taxes are paid online, the Department of Finance (DoF) said.
Shifting BIR’s online payment system to PESONet from the traditional over-the-counter payment will lower transaction fees charged by banks to P25 from P40 currently, Finance Undersecretary Antonette C. Tionko said in a statement.
This will save the government around P230 million annually if 80% of total transactions or over 15 million internal revenue tax payments are migrated to digital processes, it said.
The PESONet-enabled payment system was launched on Aug. 15, allowing clients to pay through participating bank’s digital channels such as Lank Bank of the Philippines and the Rizal Commercial Banking Corp.
“The BIR has launched a digital tax payments system allowing Filipinos to conveniently pay their taxes online using the electronic funds transfer service PESONet, in line with the Duterte administration’s goal to cut red tape and improve the ease of doing business to better serve the public and attract more investors,” Finance Secretary Carlos G. Dominguez III was quoted as saying in the statement.
DoF said it hopes to include other bills and utilities in digital payment systems as well as expand the number of participating banks.
The online tax payment system is a partnership between private sector and government.
PESONet is the first automated clearing house (ACH) under BSP’s National Retail Payment System (NRPS) policy framework.
PESONet is a batch electronic fund transfer credit payment service, processing batch transfers and crediting the amount to the receiver within the day, if sent within the cut-off period.
Along with PESONet, InstaPay was also launched in April last year as an ACH, which processes real-time transfers up to P50,000 per transaction through bank accounts or e-wallets from service providers.
In December, BIR launched its electronic Tax Software Providers Certification System (eTSPCert), an online certification system that authorizes and verifies third-party providers of electronic tax solutions. This was launched through a partnership with United States Agency for International Development (USAID).
BIR, the biggest revenue-collecting agency, collected P1.247 trillion in the seven months to July, up 10.47% from a year earlier. — Beatrice M. Laforga
GOVERNMENT subsidies to state-owned firms increased in July, the bulk of which went to the Land Bank of the Philippines (LANDBANK) as it started releasing fuel subsidies to jeepney drivers for this year, the Bureau of the Treasury (BTr) said.
Subsidies issued by the national government to Government-Owned and -Controlled Corporations (GOCCs) hit P38.288 billion in July, up 18% from a year earlier and from P7.040 billion in June.
According to the latest BTr cash operations report, LANDBANK received the lion’s share of the total subsidies at P18 billion in July, part of which funded the fuel subsidy to jeepney drivers this year which started during the month.
“That’s for the distribution for jeepney drivers I think. It is not for LBP (LANDBANK) operations but a cash transfer program,” National Treasurer Rosalia V. De Leon said in a phone message to reporters.
Under the Pantawid Pasada program, around 179,000 jeepney drivers and operators will receive P20,000 worth of fuel subsidy this year, four times higher than the P5,000 extended to them last year.
The subsidy is meant to mitigate the effects on the drivers of the increased excise tax on fuel since the passage of the Tax Reform for Acceleration and Inclusion (TRAIN) Law last year.
Meanwhile, the National Housing Authority received the second-highest subsidy of P8.278 billion in July, followed by National Irrigation Administration with P7.565 billion and National Electrification Administration with P1.1 billion.
National Power Corp. received P810 million while the Sugar Regulatory Administration received P739 million.
In the seven months to July, GOCCs subsidies totalled P64.986 billion, significantly lower than the P100.214-billion worth of subsidies provided a year earlier
Meanwhile, 10 GOCCs did not receive subsidies during that month, including Bases Conversion Development Authority, Development Academy of the Philippines, Philippine Crop Insurance Corp. and Small Business Corp., among others.
GOCCs operate as self-sustaining bodies and return a part of their profits generated to the treasury in the form of dividends.
The government extends budgetary support to state-run firms who need funding aid for their programs, projects and other operation expenses.
The national government expects to provide P187.1-billion worth of budgetary support to GOCCs this year. — Beatrice M. Laforga
BusinessWorld is publishing the following letter from the Governance Commission for Government-Owned and -Controlled Corporations (GOCCs) in response to a Sept. 4 item published in this newspaper. The letter has been lightly edited due to space considerations:
MR. ROBY A. ALAMPAY Editor-in-Chief
MS. BEATRICE M. LAFORGA Reporter
Dear Mr. Alampay and Ms.Laforga,
This is in reference to the news article of Ms. Beatrice M. Laforga entitled “GOCCs seen losing sight of program effectiveness” published in BusinessWorld on 04 September 2019. While we appreciate the media bringing to light some of the challenges faced by our GOCC sector in the knowledge-sharing forum held on September 4 and 5, the Governance Commission would like to clarify three points in the news article.
First, in the lead of the article, the statement that performance-based incentive programs are “eroding the effectiveness of government corporations” are attributed to Director Barcena which he did not say. This statement is followed by Director Barcena’s reply to the question about the challenges faced by GCG.
A more accurate response which he explained on the forum was that GOCCs want to get their bonus so they prefer to be measured based on what is completely within their control, which are their outputs, and not on what is only within their influence, which are the desired outcomes of the outputs. Hence, getting GOCCs to shift the measurement of their performance from output to outcome is challenging.
Performance incentives do not erode GOCC effectiveness. On the contrary, a performance-based incentive system tied to an outcome-focused performance evaluation system tied to an outcome-focused performance evaluation system is what pushes GOCCs to be effective, as well as efficient. In the afternoon session, the speaker from India even echoed that India similarly undertook the challenge to shift from output to outcome-based performance.
Second, Director Barcena’s statement which says “One of the problems in the Philippines is that whenever you compensate executives in government, there’s always a public backlash” is incomplete. The statement omitted the rest of Director Barcena’s explanation stressing that this is the reason why it is important to communicate to the public that unlike before, whatever bonus granted now is based on the good performance of the GOCC. The need for such communication was in fact affirmed by the moderator of the session.
Third, in the very same discussion, Director Barcena said that “as a governance commission, the standard is we must also benchmark with the private sector.” It is important to note that following this statement, Director Barcena added that the purpose of this was to attract and retain the best and brightest in the industry.
We entreat that the author of the article to treat this matter with utmost caution as while we value our working relations with our GOCCs, the Governance Commission fulfills its mandate fully and with due vigilance.
We hope these points clarifies some misconceptions in the said article.
Very truly yours,
IRVING V. OCCEÑA
Director III/Chief of Staff,
Office of the Chairman
Financial markets globally are preparing the shift from referring to Interbank offered rates (IBORs) as a benchmark for financial products and services to alternative reference rates (ARRs).
For decades now, IBORs have been the reference rates for variable-rate financial instruments with the London Inter-bank Offered Rate (Libor), the most widely used IBOR, underpinning trillions of dollars’ worth of financial contracts. Libor is referred to worldwide for many financial products — bonds, loans, derivatives, mortgage-backed securities, and others. It represents the average rate at which internationally active banks obtain funding from wholesale and unsecured markets. Libor is also used to gauge market expectations on central bank interest rates, liquidity premiums in the money markets, and even on the state of a banking system during periods of stress.
In 2012, however, a group of banks was accused of manipulating their IBOR submissions during the financial crisis and a series of scandals ensued. In 2017, UK and US regulators simultaneously declared the uncertainty of the use of IBOR as a benchmark rate after 2021. Initiatives to reform the benchmark were made but actual transactions supporting Libor rates continued to dwindle and markets further questioned the integrity of the rates as a benchmark. Regulators proposed the solution to develop and adopt instead ARRs. These ARRs are believed to be more appropriate as reference rates as they are “near-risk free” and are based on actual transaction volumes.
Regulators worldwide began laying down concrete policy steps for the transition. Relevant ARRs have been selected for major currencies with strategic transition plans to minimize market disruptions. The US Alternative Reference Rates Committee (ARRC), for example, has issued a 4-year timeline starting in 2018 for the transition from the US Libor to the Secured Overnight Financing Rate (SOFR). ARRs for other major currencies include the Reformed Sterling Overnight Index Average (SONIA) for GBP Libor, the Swiss Average Rate Overnight (SARON) for CHF Libor, and the Tokyo Overnight Average Rate (TONAR) for JPY Libor and JPY Tibor.
As ARRs are selected and regulators provide for a transition procedure, financial institutions must assess early on the potential impact of the change of benchmark in order to re-assess their business strategies and make the uncertain, certain. As discussed in a recent EY publication titled End of an IBOR era, the top 10 challenges that banking, capital markets organizations, and other financial market participants will face in transition to the ARRs include:
1. Client outreach, repapering and negotiating contracts. Institutions should consider the necessity to re-negotiate existing contracts that will mature past 2021 based on the new reference rates.
2. High litigation, reputation and conduct risk. Spreads should be re-assessed based on the differences between the IBOR and the ARRs.
3. Market adoption and liquidity in ARR derivatives. The market must account for a transition in the adoption of ARR derivatives, thus affecting the liquidity in the market.
4. Absence of ARR term rates. As most ARRs will initially be an overnight rate, defining term rates for ARRs needs to be accelerated to facilitate the timely and smooth transition of cash products.
5. Differences in ARR and transition timelines across G5 currencies.
There is also the need to harmonize the timing of the transition and publication of daily ARRs across the G5 currencies (dollar, euro, pound, Swiss Franc and yen) to address the impact on the FX swap markets.
6. Regulatory uncertainty. There is a need for regulatory guidance to be issued early on if only to allow markets to plan and work on their transition plans.
7. Operations and technology changes. As IBOR has already been embedded deeply in operational procedures and technological infrastructures, changes to systems may have to be planned early.
8. Valuation, model and risk management. A wide range of financial and risk models will have to be developed, recalibrated, and tested in order to incorporate the new reference rates. This poses a challenge given the lack of available historical time series data.
9. Accounting considerations. Financial institutions will need to review changes against accounting standards.
10. Libor may yet survive. The Financial Conduct Authority recently hinted at the potential use of synthetic Libor for existing contracts that may go beyond 2021. Additionally, the ICE Benchmark Administration also indicated the possibility that Libor may still be used for selected currencies and tenors. The lack of clarity and firm decision pose a challenge for institutions given the huge amount of “To Dos” needed to prepare the onset of year 2021.
The Philippines should keep up with, if not be ahead of, these changes and prepare early as well. The domestic financial industry can see this as an opportunity to accelerate the Philippine Capital Market Agenda by establishing local reference rates. Regulatory guidance will play a crucial role at this point. Institutions also need to understand the structural differences between the IBOR and the ARRs and re-assess the impact to ensure their business models are abreast with the industry developments.
In the next article, we will continue the discussion on expected IBOR transition, looking at some of the other business areas that institutions should start re-assessing, such as operations, risk management and regulatory frameworks, accounting and procedures that companies can adopt to ensure an efficient and effective transition.
This article is for general information only and is not a substitute for professional advice where the facts and circumstances warrant. The views and opinion expressed above are those of the authors and do not necessarily represent the views of SGV & Co.
Janice Joy M. Agati and Redgienald G. Radam are Senior Directors from SGV & Co.’s Financial Service Organization service line.
We are firm in defending and asserting the rice tariffication reform despite the current transitional problems that it faces in its implementation. The reform will benefit both Filipino rice farmers and Filipino consumers.
First, we present a historical background.
The Philippines, being a member of the World Trade Organization (WTO) since 1995, has to comply with its rules that entail the elimination of trade barriers, nevertheless, the Philippines was granted an exemption from the removal of its quotas on rice importation. This exemption was originally meant to expire in 2004, but was extended until 2014, and further stretched till the passage of the Rice Tariffication Law in early 2019.
The long regime of quantitative restrictions, ostensibly to protect farmers, had severe costs. For one thing, the protection meant that the Philippines had to compromise other sensitive economic sectors by opening them up to more competition. For another thing, quantitative restrictions bred massive corruption, created an ineffective and incompetent import monopoly, and imposed a disincentive on farmers, beset with inefficiencies, to shape up. The government became lax and felt no pressing need to enhance our farmers’ productivity since it relied on the import quota to shield farmers from competition.
Because of the failure of agricultural modernization due to poor institutions and weak policies, including the short-sighted quantitative restrictions on rice, the country’s agricultural production has stagnated. In terms of efficiency and productivity, the Philippines has lagged behind its ASEAN counterparts such as Vietnam and Thailand. Our farmers incur higher costs of production and hence could not compete with the more efficient rice-producing farmers from Vietnam or Thailand. The ultimate effect has been the deterioration of the well-being of our farmers.
Worse, those who suffered the economic burden of the quantitative restrictions were the whole Filipino population (for we are all consumers including the farmers themselves who in the main are net consumers).
A consequence of the import quota was higher food prices. Higher rice prices heavily contributed to over-all inflation. This was most pronounced in the inflation spike in 2018. The main culprit was the surge in rice prices, resulting from the mismanagement of imports that resulted in a rice shortage. Rice makes up for about 10% of the consumer basket. For the poorest Filipinos, rice accounts for about 23% of its total consumption spending.
But the unusual rise in inflation in 2018, which many critics mistakenly blamed on the effects of the comprehensive tax reform package, became an opportunity to introduce a hard reform. The higher-than expected inflation was triggered principally by the unwarranted spike in rice prices, resulting from the mismanagement of imports to meet supply. This forced the hand of government to remove the quantitative restrictions and shift to the tariffication of rice imports.
Tariffication is still a form of protection. The high tariff (35% of declared value) drives up the price of imports and the revenue derived from the tariff is earmarked to benefit farmers. The Rice Tariffication Law’s also provides funding of P10 billion to provide seeds, mechanization, technical assistance, and credit. Any amount above P10 billion that can be generated from the tariff can be used for cash transfers and other forms of financial assistance to the farmers.
In other words, the law still maintains a significant degree of trade protection, but it does not impose the supply bottlenecks and institutional monopolies. Moreover, it has created a significant budget to enhance the productivity and well-being of rice farmers.
What was supposed to be a limited period of quantitative restrictions had a short-term objective of giving time for local rice producers to become more efficient and productive. But after a generation of an import-quota regime, the intended goal of making our rice industry competitive and improving rice farmers’s income has not been realized.
Rice tariffication is thus a most significant reform. However, because the country’s reliance on the quantitative restrictions lasted so long, the farmers face hard adjustments in the early implementation of the reform, the so-called transition pains.
Imports have significantly increased. The country is projected to import about 2.4 million metric tons of rice in 2019. The retail prices of rice have fallen greatly, relative to 2018 prices, and prices are anticipated to go down further. This is good for the consumers, but rice farmers face an enormous challenge.
Two problems have arisen. First, retail prices have not fallen as much as farm-gate prices have. This suggests a role for the Department of Trade and Industry and Philippine Competition Commission to investigate whether there is market power at the wholesale/trader segment. Consumers have not yet realized the full gains of the reform.
PHILIPPINES STAR/MICHAEL VARCAS
Second, the price drop in farm-gate prices has now reached at- or below-cost levels for many rice farmers, and this certainly threatens their livelihood. The Rice Competitiveness Enhancement Program (RCEP) provisions for seeds and mechanization, among others, will benefit farmers by reducing their production costs, increasing their farm yields, and ultimately raising incomes. However, these gains are expected to be realized in the medium term. But the short term is very critical.
Here, we present a proposal to address the immediate problems.
The cash transfer, similar to the 4Ps, with the sole condition being that the beneficiary is a rice farmer, is absolutely necessary. The transfer should give the farmers income relief while the Rice Competitiveness Enhancement Program is still being rolled out. Cash transfers, together with the zero-interest loans that the Department of Agriculture (DA) has introduced, have an immediate, tangible, and direct impact on the farmers.
We estimate that of the two million rice farmers, about 600,000 to 700,000 are vulnerable (are impoverished or at risk of poverty). A cash transfer of P5,000 per farmer per year would cost about P3 billion to P3.5 billion, excluding administrative costs. But we can go farther than that by providing cash transfers to all farmers owning rice land of two hectares and below. They constitute 1.7 million farmers of the Philippine total of two million rice farmers. After all, all small rice farmers need the support to adjusting to the new policy regime.
There is enough fiscal space for a cash transfer of P5,000 for a cropping season (the amount is based on a study done by the Philippine Institute for Development Studies or PIDS) to be given to the 1.7 million rice farmers. This amount per farmer perhaps is quite generous, especially given that there will be other interventions for rice farmers. Hence, the amount can still be reduced reasonably. Be that as it may, the total amount for such unconditional transfer to cover 1.7 million farmers is P8.5 billion. This is a small price to pay for the reform.
The Department of Social Welfare and Development (DSWD) is in the best position to do the transfers. It has the experience and lessons, the logistics and the infrastructure.
The next question is where to get the P8.5 billion. The revenue from tariffication is projected to reach P15 billion, thus freeing P5 billion for cash transfers. Perhaps the remaining P3.5 billion (excluding the administrative costs) can be obtained from the government’s unprogrammed funds?
Simultaneous with this, funds for seeds, credit, and mechanization should be disbursed soonest. Planting season has begun.
Admittedly, the law’s current formulation is rigid. While financial assistance can be funded, it is conditioned on tariff collections exceeding P10 billion. As it stands, collections are projected to reach P15 billion and Congress ought to consider advancing these funds towards the rice farmers in need.
Another task is to update the existing registry and targeting systems such as the DA’s Registry System for Basic Sectors in Agriculture or RSBSA and the DSWD’s Listahanan.
We also welcome the DA’s introduction of no-interest loans amounting to P15,000 for every farmer and payable in eight years. It is a form of cash transfer. Farmers can repay these loans, given the long period of repayment and given a well-designed system of monitoring and enforcement.
On top of this, the National Food Authority (NFA) should aggressively buy rice from local producers, especially in the areas with depressed prices. Such buying can influence higher prices towards alleviating the impact on farmers of low palay prices. The NFA, too, must be quick in disposing older stock, even at a cheap price to supplement their aggressive buying. This will not only result in freeing space for NFA to buy more local rice, but will also benefit consumers through lower prices of rice. Local government units and other government agencies must likewise be involved in buying local rice for their constituents to contribute to the over-all effort.
Rice tariffication is ultimately to the benefit of the whole people, but we must act quickly to safeguard the welfare of Filipino rice farmers.
Laurence Go, Jessica Reyes Cantos, AJ Montesa, and Filomeno Sta. Ana III are all members of Action for Economics Reforms’s rice policy team.
The recent alarm over falling rice prices after import-quotas were replaced by tariffs points up a larger problem that will increasingly confront Philippine society — the conflict between the interests of a growing middle class and poorer minorities. On the one hand, the historic measure produced its intended effect: it has lowered rice prices, bringing relief to the large, mostly urban rice-consuming public. (After the avoidable fiasco of 2018, inflation is now a record low of 1.7%.) On the other hand, the same measure has wreaked havoc on the livelihood of rice farmers and landless farm workers, who count as some of the poorest Filipinos. To be sure, the government purports to ameliorate the damage. But the one-time loan it offers to rice farmers is obviously not enough to facilitate the permanent shift — in crops, technologies, mindsets, and occupations — that the new trade-regime imposes.
Still, the rice issue is only the latest in a lengthening series of instances where middle- and upper-class interests are enhanced while those of a less numerous, less privileged minority are demoted or ignored. The tax reform under TRAIN, for example, provided relief (surely well-justified) to middle-class income earners by lowering income tax rates. But the lost revenues were recouped through indirect taxes (e.g., on petroleum, sugary drinks) that penalized the poor, many of whom do not earn compensation incomes (farmers and fisherfolk, for example).
The law providing free tuition in state universities is another case in point. It alleviates the burden for middle class families for whom college education is a real option — but does nothing for the majority of the poor and vulnerable for whom even completing high school is a major hurdle. The same is true of the recent measure providing free MRT rides to students: it benefits mostly commuting urban college students and does nothing for elementary and high school pupils who attend local schools in their communities. It is even more irrelevant to those pupils in the hinterlands who must walk kilometers daily to go to school. Other examples of measures that similarly favor the nonpoor include the successive salary increases given to government employees, the various benefits given to police and enlisted men — and, yes, even the senior citizens’ discounts on medicines (whose benefits we enjoy with a guilty conscience, knowing their regressive incidence).
Then finally, of course, there is Duterte’s deadly war on drugs — which is noticeably applauded by a middle class that demands law and order by any means, notwithstanding the mounting body count of mostly poor drug addicts and the collateral casualties among their family members and communities.
By contrast, the same solicitousness and generosity is nowhere to be seen when it comes to the marginalized — the laylayan. Consider for example the casual insensitivity when it comes to the rehabilitation of a ravaged Marawi: “I don’t think that I should be spending for their buildings… Hindi ako maggagasta ng ano. Maraming pera ang mga tao diyan… Kasali na ’yung shabu.” (I will not spend. The people there have alot of money… Included there is shabu.) Or again, take the inadequate compensatory amounts to relieve the TRAIN law’s effects. Or even the laughable one-off loan of P15,000 the government offers to offset the impact of rice-tariffication especially among small farmers.
None of this is surprising, however, if we consider the elephant in the room: the Philippines will soon be (if it is not already) a mainly middle-class society where the poor are in the minority. The Human Development Network estimates there were more households (36%) that were middle-class or better in 2015 compared to households that were considered poor (32%). (The balance were considered nonpoor although “vulnerable”). Official statistics are even kinder, if not necessarily more credible, with only 16% of families considered poor in the first semester of 2018.
Make no mistake: measures that benefit mainly the middle classes are by no means wrong. Just like the poor, the middle classes deserve all they can get from their government. From the viewpoint of politics, their growing numerical superiority may simply reflect the idea that policy should follow that maxim of the “never to be forgotten Hutcheson” (Adam Smith’s old teacher): “[T]hat action is best, which procures the greatest happiness for the greatest numbers.” Who then can blame a hedonic democracy if it should choose to provide for its most numerous citizens?
There is also an argument for efficiency from old-style welfare economics. Known as the “Compensation Principle” and credited to V. Pareto, it says that regardless of the numbers involved, a policy is desirable and should be undertaken if the potential winners from it can compensate the losers. If rice buyers benefit so much from tariffication that they can afford to pay off rice producers to make them “whole,” then tariffication should definitely be on the agenda. Around the 1950s, however, a weaker (some say more cynical) version of this principle was suggested by J.R. Hicks and N. Kaldor and has become an implicit guide to many policy-makers: if the gainers from a policy could hypothetically compensate the losers from it, then the policy should be implemented anyway, even if no compensation is actually made. That is, economists should worry about the size of the efficiency gains, not their distribution.
Hence, if Marawi’s destruction yielded benefits to the majority that were substantial enough to compensate its residents for their grief and pain, then indeed its devastation was justified. And when the time subsequently came to compensate the Maranaos for their losses and suffering, well, maybe… or then maybe not. Either way unleashing hell was justified. Under the same principle, we would be justified in ignoring the Agtas’ objections to the Kaliwa Dam, or the environmental concerns of communities affected by mining. And if compensation for the effects of rice tariffication or indirect taxes under TRAIN was inadequate, well then, tough luck. Mabuti nga meron, e. As for tokhang, well, there’s this benefit to the majority… you see where all this is headed. It allows one to do almost anything — always in the name of a majority, of course.
In the past, unbridled ethical abuse of that principle was held in check by a combination of politics, law, solidarity, and religion. Where the affected poor were a significant number, actual and full compensation (as Pareto himself demanded) would be enforced through a political process. Even absent the numbers, the law might still protect minorities from the tyranny of the majority through rights and claims enforced by the courts. Or then again solidarity and a sense of social justice, often fostered by religion or social ideology, would cause the majority to look beyond their plates and empathize with the less fortunate.
But many of these old forces are weaker now, and not just because of Duterte. The poor are in the minority. Rights are under attack; the law is perverted and weaponized. Grand ideologies are out of fashion. Religion is on its back foot.
In this brave new world, the middle classes — the new majority — must stand alone and confront themselves in the mirror. Will they remain the timid and self-satisfied creatures of Hobbiton? Or are they up to defining a new and just future not only for themselves but the whole country and society?
Emmanuel S. de Dios is a professor emeritus at the University of the Philippines.
The country can fall into a debt crisis if exports don’t pick up. Here’s why…
Last week, the Department of Budget and Management (DBM) reported that the national debt will top $151 billion by the end of 2019, and $167.3 billion by the end of 2020. This is due to massive borrowing to fund the government’s infrastructure program.
Government authorities say that acquiring more debt is a necessary evil given our need to fill the infrastructure gap. The hope is that when these infrastructure projects are completed, better roads, bridges and ports will translate into a spike in economic activity and, inevitably, more revenues for government. These revenues are what will repay the loans.
At this point, Government is not worried about its rising debt load. They say that a 41% debt-to-GDP ratio is still within manageable levels. Besides, tax revenues have been rising steadily. On the back of the TRAIN law, collections of the Bureau of Internal Revenue rose by 10.6% while collections from the Bureau of Customs rose by 8.5%. Further, non-tax revenues grew by 6.9% due to higher dividends from government-owned and -controlled corporations and profits from PAGCOR. Government expects even more tax revenues to flow in once the CITIRA Law (the second tranche of the tax reform program) is passed.
With tax revenues on the rise, government is confident that it will continue to maintain a healthy balance between debt and revenues. This is true… for now. But I worry about our current account deficit.
For those unaware, a country’s current account is the surplus (or deficit) after taking into consideration trade in goods, trade in services, investment incomes, OFW remittances, and travel receipts. From a surplus of $601 million in 2015, it swung into deficit territory in 2017, clocking in at negative $2.52 billion and worsening to negative $7.9 billion in 2018. The Bangko Sentral ng Pilipinas sees the deficit widening to negative $10.1 billion this year.
Deficits will have to be filled by debt. So unless we reduce the deficit, or, better yet, turn it into a surplus, the country’s debt load will continue to rise.
The problem lies in our trade deficit (exports, minus imports). The gap is so wide that foreign direct investments, OFW remittances, and tourism revenues can no longer cover for it.
In 2018, merchandise exports dropped 1.8% to $67.488 billion from $68.713 billion in 2017. This occurred while imports grew by a whopping 13.4% from $96.093 billion to $108.928 billion. This resulted in a trade deficit of $27.38 billion and $41.44 billion, for 2017 and 2018, respectively.
The good news is that we have an astute Secretary of Trade and Industry who is well aware of the problem. Last year, Secretary Mon Lopez crafted a plan to accelerate exports of both goods and services so as to minimize the trade deficit. The plan, dubbed the Philippine Export Development Plan 2018-2022, was completed last June. It was ratified by President Duterte.
At the heart of the plan is to accelerate exports to between $122 billion and $130 billion by 2022 on the back of three action points.
The first is to improve the overall climate for export industries. This will be done by removing regulatory impediments for exporters, by raising productivity and competitiveness, by improving benchmarks of quality for export goods, by improving access to export finance, and, by enhancing exporter’s innovative capacities.
The second is by exploiting opportunities from trade agreements. The Philippines enjoys preferential export access and special tariff terms with certain countries by virtue of trade agreements in which we are a signatory. Among them are the ASEAN Economic Community, the Asia-Pacific Economic Cooperation (APEC), the European Free Trade Association and its General System of Preference-Plus status, among others. The Department of Trade and Industry (DTI) recognizes that the country has not maximized its preferential export rights to many markets, thus, Secretary Lopez’ plan lays out the ways and means to do so.
The third is to develop a new set of export winners. Products identified as having good export potentials are electronics, processed food, fresh vegetables and beverages. Surprisingly, footwear, textiles, yarns, fabrics, and garments were products that waned in the 1990s but are now showing signs of a comeback.
In terms of services, the IT-BPO sector is still seen to generate the lion’s share of export revenues. However, tourism-related services (e.g. services provided by hotels, restaurants, travel agencies, tour operators, etc.) is growing at twice the pace of IT-BPOs. This is a category to watch out for. Financial services, construction services, and product assembly services are also showing healthy upticks.
In addition, the DTI finds it necessary to create a robust atmosphere for start-ups and venture capitalists. Start-ups are trailblazers of innovation. They lead in design enhancements and are agile enough to adjust their internal processes to gain a competitive edge.
All these taken into consideration, it will still take much more to turbo-charge our export industries. The prohibitive provisions of the constitution relating to foreign investment, expensive power cost, difficulty in doing business, and government’s lack of spending on research and development (R&D) are some of the reasons why our manufacturing sector has not developed at the same pace as our neighbors.
These impediments need to be sorted out in order for our manufacturing sector to thrive and for us to export more. There is a lot of catching up to do as our export revenues are but a third of Vietnam’s.
To accelerate our industrialization, the DTI recently launched a new industrial plan called the Inclusive Innovation Industrial Strategy, or i3S for short. Its purpose is to develop globally competitive industries, large and small, using innovation as an enabler.
Having identified our new export winners, the goal is to enable our exporters to tap new markets and/or expand market share either through the introduction of new innovative products, new product features, or more competitive pricing.
For industries that produce intermediate parts, the goal is for them to deepen their participation in global supply chains through cost efficiency innovations.
The road is long before our export revenues can cover our current account deficit. The good thing is that the plans have been laid-out to make it happen. Its all about the execution now.
