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Approved building permits up 10.4% in Q1 2019

Approved building permits up 10.4% in Q1 2019

G20 finance chiefs to say trade row ‘intensified’

FUKUOKA, JAPAN — Group of 20 finance leaders said on Sunday that trade and geopolitical tensions have “intensified” but failed to express a pressing need to resolve them, in a final draft communique that said global growth is likely to pick up.

After rocky negotiations that nearly aborted the issuance of a communique, the finance ministers and central bank governors gathered in Fukuoka, southern Japan, affirmed language on trade issued in Buenos Aires last December.

“Global growth appears to be stabilizing, and is generally projected to pick up moderately later this year and into 2020,” said the final draft, seen by Reuters.

“However, growth remains low and risks remain tilted to the downside. Most importantly, trade and geopolitical tensions have intensified. We will continue to address these risks, and stand ready to take further action,” the communique said.

The communique also said that G20 finance leaders had agreed to compile common rules by 2020 to close loopholes used by global tech giants such as Facebook and Google to reduce their corporate taxes.

The Buenos Aires G20 summit in December 2018 launched a five-month trade truce between the United States and China to allow for negotiations to end their deepening trade war. But those talks hit an impasse last month, prompting both sides to impose higher tariffs on each other’s goods as the conflict nears the end of its first year.

The G20 finance leaders’ final communique language excluded a proposed clause to “recognise the pressing need to resolve trade tensions” from a previous draft that was debated on Saturday.

The deletion, which G20 sources said came at the insistence of the United States, shows a desire by Washington to avoid encumbrances as it increases tariffs on Chinese goods. The statement also contains no admissions that the deepening US-China trade conflict was hurting global growth.

The International Monetary Fund warned last week that the trade conflict would cut global growth next year, and financial markets had sold-off heavily as US-Sino ties soured.

US Treasury Secretary Steven Mnuchin said on Saturday he did not see any impact on US growth from the trade conflict, and that the government would take steps to protect consumers from higher tariffs.

TRUMP-XI SUMMIT
The widening fallout from the U.S.-China trade war has tested the resolve of the group to show a united front as investors worry if they can avert a global recession.

The bickering over trade language has dashed hopes of Japan, which chairs this year’s G20 meetings, to keep trade issues low on the list of agendas at the finance leaders’ meeting.

Mr. Mnuchin said U.S. President Donald Trump and Chinese President Xi Jinping would meet at a June 28-29 G20 summit in Osaka.

Mr. Mnuchin described the planned meeting as having parallels to the two presidents’ Dec. 1 meeting in Buenos Aires, when Trump was poised to hike tariffs on $200 billion worth of Chinese goods.

Mr. Trump took that step in May and will be ready to impose similar 25% tariffs on a remaining $300 billion list of Chinese goods around the time of the Osaka summit.

At the Buenos Aires meeting, the G20 leaders described international trade and investment as “important engines of growth, productivity, innovation, job creation and development. We recognize the contribution that the multilateral trading system has made to that end.”

The leaders in that communique called for reform of the World Trade Organization rules that were falling short of objectives with “room for improvement,” pledging to review progress at the Japan summit. — Reuters

Megaworld wants townships to switch to RE sources by 2025

By Arra B. Francia
Senior Reporter

MEGAWORLD Corp. wants all of its townships to be fully reliant on renewable energy sources by 2025, in a bid to make its developments sustainable for the future.

“Our goal by 2025 is all of our townships will have renewable sources,” Megaworld Chief Strategy Officer Kevin Andrew L. Tan told BusinessWorld in a recent interview.

“We want to switch our supply to renewable sources. So we’re asking all of our power suppliers to make that switch already. That will be the transition for the next three years,” Mr. Tan added.

The listed property developer currently has 24 townships across the country, the latest of which is called Empire East Highland City which is being developed with its subsidiary Empire East Land Holdings, Inc. The 24-hectare estate is located along F. Felix Avenue in Cainta.

Megaworld’s other townships include Eastwood City in Quezon City; Newport City in Pasay City; McKinley Hill, McKinley West, Uptown Bonifacio, and Forbes Town, all in Fort Bonifacio, Taguig City; The Mactan Newtown in Cebu; Iloilo Business Park in Mandurriao, Iloilo City; Sta. Barbara Heights in Iloilo; and Boracay Newcoast in Boracay Island, among others.

In line with its “live-work-play” concept, Megaworld townships have a mix of residential, office, commercial, and retail establishments.

Mr. Tan said the company will implement the shift by township, with the first changes to be seen in Iloilo Business Park.

“We are actually doing it in Iloilo first, given that there’s some new developments there on the distributor side and the supply side. We piloted our solar power there,” he explained.

Iloilo Business Park spans 72 hectares and is the company’s largest investment in Western Visayas. Megaworld is spending P35 billion to develop residential condominiums, office towers, a lifestyle mall, hotels and convention centers, retail areas, and a transport hub in the township in the next 10 years.

The company also said it will incorporate solar panels into the roof of its P1.2-billion Upper East Mall inside its Upper East township in Bacolod City. The three-storey mall will be Megaworld’s first green mall featuring sustainable and energy efficient designs.

Megaworld grew its net income attributable to the parent by 16% to P3.8 billion in the first quarter of 2019, after consolidated revenues also increased 15% to P14.9 billion.

It is spending P65 billion in capital expenditures this year to support the property development in its townships.

The company is part of tycoon Andrew L. Tan’s holding firm Alliance Global Group, Inc., which also has core interests in liquor, gaming, quick-service restaurants, and infrastructure development.

Jollibee targets to open 5 more Guam stores within next 5 years

HOMEGROWN food giant Jollibee Foods Corp. (JFC) is expanding its footprint in Guam as it plans to have five stores in the US island territory in the next five years.

In a statement over the weekend, JFC said it plans to increase its presence in Guam following the opening its first store there last April which showed the strong demand for customers.

“As a growing business center and an island of incredible diversity and taste, Guam will make a great home for Jollibee…We are very excited to be here, and are looking forward to what lies in store as we grow to five stores over the next five years,” JFC Chief Executive Officer Ernesto Tanmantiong said in a statement.

The listed firm’s first store in Guam seats 205 people and is located across Micronesia Mall in Dededo, the island’s most populous village.

“As we grow our business in Guam, we are excited to contribute to the local economy through employment. In fact, 100% of our staff at our store in Guam are locals and permanent residents of Guam,” according to Dennis Flores, who sits as the JFC head of international business for Europe, Middle East, Asia, and Australia.

The Guam store marks JFC’s 38th store located in American states and territories, including New York, Florida, Texas, California, and Hawaii.

At the same time, the company is also looking to have 150 stores in the US and 100 stores in Canada in the next five years. It also has 50 stores planned for Europe, 25 of which will be located in the United Kingdom.

JFC’s international stores look to woo overseas Filipinos working in different parts of the world. It has also attracted local customers, particularly in its Vietnam, Brunei, Singapore, Hong Kong, and Manhattan stores.

The company said it will open at least 500 new stores this year, equally split between the Philippines and overseas locations. Most of the new international stores will be in Vietnam at 120, while 40 will be opened in North America.

JFC allotted P17.2 billion in capital expenditures to support this aggressive expansion and old store renovations.

Store count by the end of the first quarter stood at 4,543 across different brands such as Jollibee, Chowking, Greenwich, Red Ribbon, Mang Inasal, Burger King, and Pho24.

JFC posted a 14.7% drop in net income attributable to the parent to P1.54 billion in the first quarter of 2019, amid a 14.1% increase in revenues to P40.35 billion. The company was weighed down by the consolidation of recently acquired US burger chain Smashburger, as well as slower same-store sales growth due to high inflation for the period. — Arra B. Francia

Lopez-led EDC signs deal to supply clean power to Batangas medical center

FIRST GEN Corp. said it signed a two-year contract with a Batangas-based medical center to supply power for its operations.

In a statement over the weekend, the Lopez-led firm said together with its subsidiary Energy Development Corp. (EDC) it signed the deal with Mary Mediatrix Medical Center (MMMC) to supply one megawatt (MW) of geothermal power from its Bacon-Manito (Bacman) geothermal power plant in Bicol.

“This contract symbolizes our commitment not only to our partnership but also to our environment. It is a good opportunity that First Gen-EDC offered us this alternative energy solution,” MMMC President and Chief Executive Officer Robert M. Magsino was quoted in the statement as saying.

“Not only will we be able to generate substantial savings through this initiative, but we will still be able to deliver high quality healthcare services to our patients without compromise,” he added.

First Gen’s EDC is one of the largest geothermal producers across the globe and the leading renewable energy company in the country with an installed capacity of 1,475 MW.

MMMC is a hospital in Southern Luzon that started operations in 1994 and has been awarded an ISO 9001:2008 in 2013, or a certification on quality management system.

“Geothermal power provides clean, renewable and reliable energy source that allows us to reduce our operation’s negative impact to the environment by reducing our carbon footprint. With this in mind, we look forward to mutually beneficial and strong partnership with First Gen-EDC,” Mr. Magsino said.

First Gen earlier said it is setting aside up to $250 million for this year’s capital expenditure, most of which will be used by EDC.

“For consolidated [capex], it’s about $220 to $230 [million], bulk of that will be with EDC, it’s about $150 [million], then the rest would be with gas,” Emmanuel P. Singson, First Gen Corp. senior vice-president and chief financial officer, said.

However, EDC President and Chief Operating Officer Richard B. Tantoco said the consolidated amount could reach $250 million to include additional budget for a geothermal-related project.

“Some of it will be for projects, and then some of it will be for things that we’ll do in the power plant like cooling tower upgrades,” he said. “So it’s investments that will optimize the assets’ flexibility.”

First Gen posted an attributable net income of $41.4 million in the first quarter, up 104.4% than in the same period last year due to higher contributions from its subsidiaries. — Denise A. Valdez

Kia PHL keeps this year’s sales target at 10,000

KIA Philippines is keeping its sales target at 10,000 units for this year, amid expectations that the auto industry is poised for a recovery.

“We’re keeping the target for now because we’re not yet in the middle of the year,” Kia Philippines President Emmanuel A. Aligada told reporters in Pasay City last week.

He backed the forecast of the Chamber of Automotive Manufacturers of the Philippines, Inc. (CAMPI) that sales will improve in the second half, adding Kia’s sales growth is “up and running” compared to the industry’s overall growth.

Kia Philippines is targeting to sell 10,000 units in 2019, a surge from 2,238 units sold in 2018. Last year’s sales were 57% lower than 2017’s, as demand for new cars plunged due to higher taxes and rising inflation.

However, Kia’s January to April sales is already “a little over” 2,000, marking a 35% growth from the comparable period last year and nearing the full-year 2017 sales.

“We’re working still on the same elements, product lineup, awareness, [which] is a concern because we’re absent for a long time so we’re catching up on that,” Mr. Aligada said.

Ayala Corp., through its subsidiary AC Industrial Technology Holdings, Inc., acquired the distributorship for Kia vehicles in the country. The move intended to revamp the Kia brand as well as expedite its domestic growth.

Aside from expanding its dealership network, the company is working with banks to offer low downpayment options for auto loans. The promo allowed a downpayment of P13,000 for some Kia models, significantly lower than the previous minimum of P50,000.

Kia has teamed up with five banks for the promo, namely Bank of Philippine Islands, Inc., BDO Unibank, Inc., East West Banking Corp., Rizal Commercial Banking Corp. and the Philippine National Bank.

“We came up with a new low downpayment program about last month and I think that is what is getting a lot of reaction in social media,” Mr. Aligada said, adding the company has been receiving a flow of inquiries after the new offer.

He said Kia is in talks with three more banks to expand the promo.

At the same time, Kia is eyeing to roll out one more model toward the end of the year.

“The one that we will launch, it will be a popular vehicle… Smaller than the SUV…. Smaller than the Sorrento and Sportage,” Mr. Aligada said.

So far this year, Kia brought in the sports sedan Kia Stinger, a revamped Kia Forte, and the China-manufactured Soluto. — Janina C. Lim

The wisdom of the great unwashed?

Francis Galton, the great Charles Darwin’s half cousin, first noticed a curious fact in 1907: the average of the guesses of members of the crowd on the weight of an ox in the Plymouth country fair proved more accurate than the opinions of each selected recognized expert among the crowd. There is wisdom in the crowd. “Consensus forecasts” is one modern reincarnation; but now it is the average of a “crowd of experts.” The “Delphi method” goes further by using a crowd of experts who, in later rounds, are allowed to modify original predictions based on knowledge of results in earlier rounds with the expectation that the opinions will converge to the true value. The collective intelligence revealed by “social swarms” of networked players mediated by a collective intelligence platform follows the same logic in the digital space, and with surprisingly accurate predictions. The failures of collective rationality are, however, no less spectacular — booms and busts in stock market, Tulipmania, Ponzi schemes, Benito Mussolini, Hugo Chavez.

Surowiecki (2004) set down the conditions that make for one and not the other — members of the crowd must have their own pertinent private information (diversity) and coldly decide based on this information, not on how others decide (independence). These conditions are hard to satisfy in real life but seemed so in the Galton meat market experiment. On the other hand, the wisdom of the crowd becomes spectacularly wrong when decisions are subject to emotion (mobocracy), imitation, herd behavior or information cascades — that is, when individual decisions are made based on how others decide.

In a democracy, majority voting and one-man-one-vote is the platform that mediates collective decision-making. Socrates (sic Plato’s Republic) attacked democracy as a prescription for chaos and advocated totalitarianism under an enlightened dictator as ideal, pointing to the Spartan monarchy as evidence. This was the dominant opinion until the French Enlightenment philosophers chafing under the absolute monarchy of the Bourbons dared to reflect on democracy as alternative to absolute monarchy. One result of enduring beauty is the Condorcet Jury Theorems due to French Academy member Marquis de Condorcet. He proved that with enlightened voters (competence of greater than even chance to be right), the decision of the crowd is likely to be more accurate than that of the monarch; more so with a larger polity; with unenlightened voters (mobs), the monarch beats the crowd and more so in larger polities. Condorcet paid the highest price for the truth of his own theorem — he was arrested and imprisoned by the rampaging Montagnards mob and died, some say poisoned, in his cell. The conditions for the validity of Condorcet are identical to those that validate Galton’s “wisdom of the crowd.” Galton, unbeknownst to himself, had stumbled on Condorcet a century later. It took another 50 years, around the 1950s, for the world, now beknownst to itself, to formally rediscover Condorcet.

Why are we in June 2019 harping over these rather abstruse if remarkable social science moments? In May 2019, the Philippine polity voted overwhelmingly to reaffirm its faith in President Rodrigo Duterte. The people dealt the opposition’s Ocho-Diretso slate a 0-8 thrashing. And few will say that it was a flawed election; the results hued closely to pre-election surveys. Prominent journalist and respected social critic, Vergel Santos’ op ed article entitled “The Philippines Just Became More Authoritarian, Thanks to the People,” in the New York Times suggests that vox populi has been heard. It was not a stolen election and, however distasteful the result to some people, it is the people’s decision.

One reading is that the people have reaffirmed its social contract with Dutertismo: less political space in return for more economic space. The people have voted to hand the last bastion of check and balance, the Philippine Senate, to Duterte. He now has a free hand. Did the Great Unwashed give the prim and proper of the Philippines a lesson in discernment? Only time will tell.

And what can this mean? For one, oppositionist obstructionism can no longer be blamed for meager progress in the economic space. Consequently, there is less call to extend a state of emergency in Mindanao to the whole country. Will this new boost of power be used to enable the market to expand economic space? Or will it be used rather to indulge in populist excess that stifles the market? This is the mother of all questions. Deng Xiaoping of China used his autocratic power to enable the market towards shared prosperity; Hugo Chavez of Venezuela used his electoral reaffirmation to pursue aggressive populism that killed the market and engendered shared poverty.

In its first three years, Dutertismo has hued gingerly to the shores of respect for the market; Duterte has largely, if with some slips, honored his promise to leave economic policy to his economic team. What will the next three years bring? Beware of populist excess either from Duterte or from his zealous appointees. It can empty the treasury and leave little for growing the economic pie; it can sap the energy of the market as will the proposed ENDO law. Populist excess was what first denied Metro-Manila water concessionaires the rightful reimbursement for contracted income tax privilege and then penalized them for the water crisis not their making. But it was not Duterte’s; it was the water regulator’s altogether, perhaps misreading the boss’ intentions á la Becket. When Duterte at first correctly concluded that the regulators should be fired for incompetence but then switched to threats to review and void the concession contracts, he was letting his populism trump the market. Unilateral dissolution of contracts without adequate compensation would stifle the market and usher in the twilight of the “rule of law.” That is the Rubicon that not even the reaffirmed Duterte can cross without self-damage.

The great Enlightenment theologian and philosopher, St. Thomas Aquinas, identified the Rubicons that not even the Almighty God can cross — HShe cannot sin; HShe cannot clone Himerself, and HShe cannot make a triangle with more than 180 degrees. Either action will destroy the very essence of Godhead. Likewise, trifling with the rule-of-law will destroy economic progress and turn the triumph of the May elections into the curse of the Great Unwashed.

 

Raul V. Fabella is a retired professor of the UP School of Economics, a member of the National Academy of Science and Technology and now an Honorary Professor at Asian Institute of Management. Weaving ideas in coffee shops is an integral part of his day. He gets his dopamine fix from hitting tennis balls with wife Teena and bicycling.

Central bank nod for LTNCDs drives Security Bank stock

THE NEWS on Security Bank Corp. receiving regulatory approval to issue up to P20 billion worth of long-term negotiable certificates of time deposits (LTNCDs) last Tuesday drew interest for some investors, but it was heavily offset by the sell-off of Philippine equities that day following the performance of the Nasdaq index that drove market sentiment at home.

A total of 3.08 million Security Bank shares worth P524.77 million exchanged hands from June 3 to June 7, data from the Philippine Stock Exchange showed.

Week-on-week, its share price fell by 1.8% to P171.90 on Friday from its May 31 closing of P175 apiece. However, its share price was up by 11.2% for the year.

One of the factors that drove the stock’s movement was the Bangko Sentral ng Pilipinas’ (BSP) approval of Security Bank’s plan to raise up to P20 billion through LTNCDs.

“Security Bank traded in a wide range for two days [between P167.9 per share to P175 on June 4-5] when the news was disclosed, but it managed to close flat a day after the disclosure,” Timson Securities, Inc. Equity Trader Jervin S. de Celis said an e-mail.

“So, instead of buying [Security Bank] shares when the news about the long term notes were approved, investors waited for the stock to go a little lower…,” he added.

Like regular time deposits offered by banks, LTNCDs offer higher interest rates. However, it cannot be pre-terminated although it can be sold on the secondary market, making them “negotiable.”

Security Bank’s board of directors approved the issuance of up to P20 billion in long-term papers in multiple tranches.

In a previous press conference, outgoing Security Bank President and Chief Executive Officer Alfonso L. Salcedo, Jr. said the LTNCDs will likely be issued “within the second half” of this year.

The last time the bank issued LTNCDs was in May 2018 when it raised P5.8 billion, marking the second tranche of its P20-billion program and following the P8.6 billion raised in November 2017.

On the same day of the disclosure, however, Philippine stocks fell, following the 1.6% decline by the tech-heavy Nasdaq index, which was dragged by Alphabet, Inc., Facebook, Inc., and Amazon.com on worries that the companies are targets of US government antitrust regulators.

On the domestic front, the bellwether Philippine Stock Exchange index (PSEi) slumped 139.51 points or 1.72% to close at 7,945.37 that day. Prior to this slide, the main index had recorded gains for five straight days supported by heavy foreign buying.

“[The Security Bank stock] was not spared from the sell-off in the PSEi on June 4 when it opened at P175, which was its intraday high… then closed at P170, the lowest price of the day… A day after the disclosure, the stock went [to as] low as P167.90 which investors took as a chance to buy at a bargain until it closed at P172.10,” Mr. De Celis explained.

“Market players were probably a bit scared to take long positions on June 4 when they disclosed the news…It’s like catching a falling knife by taking a long position in a falling market,” he added.

The bulk of the stock’s trading activity happened on the next trading day following Security Bank’s disclosure on LTNCDs, with a volume turnover of 2.18 million shares and a value turnover of P369.07 million.

For China Bank Securities Corp. Research Director Garie G. Ouano, the LTNCD issuance is a “short-term concern.”

“Since this amount (P20 billion) would approximately double SECB’s outstanding LTNCDs, the concern could be its potentially negative impact on SECB’s net interest margin (NIM),” Mr. Ouano said in a separate e-mail.

“Over the longer term, the LTNCD issuance is likely to facilitate loan growth,” he added.

Security Bank’s attributable net income of P2.38 billion in the first quarter of the year was 1.5% higher than the P2.35 billion in the same period a year ago.

“In terms of earnings growth drivers, [Security Bank] is among the banks best positioned to benefit from easier monetary policy and declining yields since the risk to NIMs from repricing is minimal,” Mr. Ouano said, adding that the bank’s loan-to-deposit ratio is “the lowest among index banks.”

Timson Securities’ Mr. De Celis said due to the lower rates and bank reserve cut, Security Bank is seen to benefit from the expansion of its loan segment and earnings.

Mr. de Celis pegged the stock’s short-term support at P161 and resistance at P181 pesos.

For China Bank Securities’ Mr. Ouano, the stock’s support and resistance levels over a two-week horizon are at P165.05 and P181.7, respectively. — MAM

Resilience and heart

This entire story about a series of tobacco tax increases was triggered by House Bill (HB) 4144, which the pro-tobacco House leadership hastily approved in late 2016. This bill wanted to increase the then unitary rate of PHP 30 per pack to a dual-tier rate of PHP 32 and PHP 36, respectively. The reformers from both inside and outside government opposed it because the proposed rates were low and the two-tier system reverses the previous reform of having a single tax for all brands regardless of prices, thereby resulting in less revenues and allowing smokers who cannot afford the higher price to shift to the lower-taxed cigarettes.

To counter the bad proposal, Congressman Joey Sarte Salceda filed HB 4575; his bill increases the unitary rate to PHP 45 followed by an increase of PHP 5 each year until the rate reaches PHP 60. Unfortunately, this superior proposal was not taken into consideration by the Lower House, which passed HB 4144 without public scrutiny.

In 2017, the battle shifted to the Senate. But the Senate was not keen on tackling the issue because it was in the midst of deliberating other tax reforms, packaged as the Tax Reform for Acceleration and Inclusion or the TRAIN law.

Through persistence, the advocates finally found a champion in Senator Manny Pacquiao in October 2017. Aiming for one million less smokers by 2022, he filed Senate Bill (SB) 1599, which increases the rate to PHP 60 per pack in the first year followed by a nine percent increase annually. A boxing champion proved to be a fitting champion against tobacco.

Two weeks later, Senator JV Ejercito, then chair of the Committee on Health, filed his own PHP 90 cigarette tax proposal. His main intention was to generate funding for the Universal Health Care (UHC), which he sponsored.

Despite this, Committee on Ways and Means Chairperson, Senator Sonny Angara, chose not to table the tax bills for discussion. Senators Pacquiao and Ejercito, together with Senators Risa Hontiveros and Bam Aquino, manifested to include the tobacco tax in TRAIN, but it did not happen.

It then came as a surprise that the bicameral conference committee bill on TRAIN in December 2017 included a hike in the tobacco tax of PHP 5 per pack in the first year, followed by incremental increases of PHP 2.50 until having a rate of PHP 40 by 2022.

As a whole, this was a weak tobacco tax provision. Although the 17-percent increase in the first year was significant, the succeeding rates were very low to prevent an increase in the number of smokers. It sure felt like the quest for higher tobacco taxes was to end there.

The year 2018 brought with it much political noise in the face of the higher-than-expected inflation that was wrongly attributed to TRAIN. Despite the fact that the surge in inflation was mainly a result of the rise of the Dubai crude oil price and the mismanagement of rice policy, the politicians were especially sensitive to tax measures that would increase prices.

Politicians all the more became sensitive to taxes because this was the year before the midterm elections. Legislators, especially those running for re-election, did not want to take risks by being associated with increasing taxes.

However, 2018 was also a year of opportunity, for the Universal Health Care (UHC) bill was overwhelmingly supported by the public and the politicians. Everyone wanted the UHC bill to be fully funded; thus, the campaign to increase tobacco taxes found its way at the top of the 17th Congress’ legislative agenda.

Following the ratification of the UHC bill, the Lower House, led by House Speaker Gloria Macapagal-Arroyo and Ways and Means Committee Chairperson Estrellita Suansing, passed HB 8677, which proposed to increase the tobacco tax rate by PHP 2.50 per year until the rate would settle at PHP 45. The rationale: fill the UHC funding gap of around PHP 62 billion for the UHC’s first year.

At this point, the Department of Finance (DOF), the Department of Health (DOH), the medical profession, and civil society joined forces to campaign for the passage of a much higher tax on tobacco.

In early 2019, Senator Angara, despite being a candidate in the midterm elections, continued the discussions on the proposed tobacco tax bills of Senators Pacquiao and Ejercito. Around this time too, Senator Win Gatchalian joined the Senate champions when he filed his bill of increasing the tobacco tax to PHP 70 per pack.

The advocates hoped that the Senate would approve a good tobacco tax measure before its adjournment to give way to the midterm elections. But they were left hanging with Senator Angara’s commitment to submit a Committee Report upon the resumption of Congress.

Last month, when the Senate resumed session after the midterm elections, advocates only had a sliver of hope for there were only eight session days to pass the tobacco tax bill. The number of days was short, but the process was long: interpellation, amendment, third reading, bicameral conference, and ratification. Senators themselves expressed their reservations in passing a tax measure at the tail-end of the 17th Congress.

But the outpour of support from the public as well as the coordinated efforts of the DOF and DOH proved the age-old adage to be true, “Kapag gusto, maraming paraan; kapag ayaw, maraming dahilan”. Despite the naysayers and strong opposition from the tobacco industry, the ultimate goal of safeguarding the health of the Filipino people shone through.

With the bill certified as urgent and the House Speaker’s commitment to adopt the Senate version, the measure made it out just in the nick of time to be ratified by both Houses before the sine die adjournment. The approved bill increases the tobacco tax rate from the current PHP 35 to PHP 45 in the first year, followed by successive PHP 5 increases until the rate reaches PHP 60 in 2023. An annual tax adjustment of five percent replaces the current four percent. Taxes on e-cigarettes and vapes have also been introduced though at low rates.

Ultimately, the tobacco tax is a victory for health. The bill is estimated to raise about PHP 15 billion in the first year and reduce the number of smokers by 200,000 by 2023.

Among many lessons, two stand out as keys to the reform’s success: resilience and heart.

Many thought that having the reform passed seemed like an impossible task. The people supportive of it, however, were not paid lobbyists who only sought to profit from the outcomes. They were true blue advocates who were steadfast in their hope to uplift the lives of Filipinos. Hence, no matter how many times it felt like a dead end, the pursuit of higher tobacco taxes never wavered.

Crucial reforms can still be won in spite of challenging and less-than-ideal circumstances. No matter how tempting it might be to surrender and declare defeat, take heart. All is not lost.

 

Karla Michelle Yu is a coalition builder and campaigner for Action for Economic Reforms.

AC Industrials brings in Maxus

By Manny N. de los Reyes

AYALA CORP.’s automotive business arm, AC Industrials, launched last Wednesday the Maxus brand in a festive event at the Blue Leaf Filipinas in Parañaque City.

Maxus Philippines thus becomes the sixth automotive brand partner under AC Industrials’ wing, which includes other world-renowned car brands Honda, Isuzu, Volkswagen, Kia and KTM motorcycles.

Maxus Philippines introduced its flagship model, the G10 MPV, and the full-size V80 van, which comes in three variants — Comfort, Flex and Transport.

The Maxus brand traces its roots to Britain’s Leyland Steam Van more than 100 years ago in 1896, followed by the start of Leyland Motors in 1907. This company eventually expanded its products to include sedans, buses and other commercial vehicles throughout its long history. The Maxus nameplate first appeared with the launch of the “Maxus” prototype LD100 van at the end of 2004. The distinctive Maxus V80 and Maxus G10 first rolled out in 2011 and 2014, respectively, with the Maxus G10 establishing the Maxus brand image.

Through this 123-year history, Maxus has become one of Europe’s most influential and recognized commercial vehicle brands, and a leader in the design, production and distribution of international commercial vehicles.

Leyland DAF Vans (LDV), a successor company to Leyland Motors, launched the Maxus brand in 2004, and in 2010, Shanghai Automotive Industry Corporation (SAIC) acquired the assets of the LDV Group and continued the Maxus brand, which has current distributorships in Latin America, Australia, New Zealand, Europe and Africa, among others. In the United Kingdom, Australia, and New Zealand, Maxus vehicles continue to be sold under the LDV brand.

Maxus has been investing in new technologies, prototyping a pure electric wide-body light bus in 2014, an all-electric MPV in 2016, and a hydrogen fuel cell vehicle and Internet-connected SUV in 2017.

It is this European heritage, coupled with the powerful global support of SAIC that provides AC Industrials with the confidence to introduce the Maxus automobile brand in the Philippines. AC Industrials and Maxus Philippines CEO Arthur Tan said: “The Maxus brand continues AC Industrials’ strategy of providing automobiles and motorcycles that not only speak of the rich heritage of their countries of origin, but are also the best examples of a global collaboration in vehicle engineering, design, assembly, and distribution.”

During the Maxus launch program, which was themed “Max It Out!” Maxus Philippines introduced the initial models to be offered locally.

MAXUS G10
Slightly longer than a Toyota Alphard, the Maxus G10 is a 9-seat MPV that offers spacious interior amenities, highlighted by adjustable seating for all seats, which includes four captain’s seats in the second and third rows and 60:40 split rear bench seat with tumble, flexible and spacious luggage room, a 7-inch touchscreen radio with USB and Bluetooth and 6-speaker system, a 220-volt power supply, and front and rear air-conditioning system.

The G10 features double-layer welding technology that meets European MPV active and passive safety standards, driver, front passenger and side air bags, 3-point seatbelts for all seats, ISOFIX child seats, and front and rear parking sensors. The G10 rides on front McPherson struts and 5-link coil springs at the rear. Chassis tuning was done by no less than world-renowned sports car and handling specialist Lotus and GM Pan-Asia.

The P1,680,000 G10 is powered by a Euro 4 1.9-liter 150ps/350Nm diesel engine equipped with a VGT turbocharger mated to a 6-speed automatic.

MAXUS V80 COMFORT, FLEX AND TRANSPORT
The Maxus V80 Comfort is a tall 13-seater van that can serve as a large and spacious family van. The widest in its class, the V80 Comfort can be loaded to up to 1.1 tons, and is powered by a 2.5-liter CRDI diesel engine with VGT. The V80 Comfort boasts dual front air bags, ABS, EBD, ISOFIX, and rear proximity sensors and comes at a price of P1,570,000.

The 3-seater V80 Flex is the cargo van version of the V80 Comfort. With the same body dimensions, engine, safety features, and load capacity as the V80 Comfort, the V80 Flex is ideal for small- and medium-sized entrepreneurs (SMEs) who require powerful and efficient transport of their cargo. The V80 Flex offers spacious, flexible interiors. The Maxus V80 Flex retails for P1,190,000.

Lastly, the V80 Transport variant offers an 18-seat passenger capacity which is ideal for school and shuttle service. It is equipped with the same engine and safety features of the other V80 variants. The Transport version comes with a price of P1,288,000.

Maxus Philippines President Felipe Estrella, in describing the company and its vehicle offers, said: “All of our automotive brands offer unique value propositions to particular segments of the motoring market, and we envision Maxus to be very competitive in the commercial vehicle category, particularly in the passenger van and MPV segments. Not only does its strength lie in transporting families, Maxus also adds a distinct proposition to cargo transport and shuttle services, offering our multitude of Pinoy small and medium-sized entrepreneurs the opportunity to get their shuttle and cargo businesses going in style, comfort and power.”

Maxus vehicles have a periodic maintenance service (PMS) interval of the first 5,000 kms and every succeeding 10,000 kms, or once a year, whichever comes first. This is more convenient and more cost-efficient compared to the industry-standard 5,000km PMS interval. The general warranty is 3 years or 100,000 kms, whichever comes first.

Maxus Philippines also offers a 24/7 emergency roadside assistance, pickup and delivery service for customers, and on-site servicing for corporate fleet accounts.

The first Maxus showroom and service center will be at the Greenfield District in Mandaluyong City. Subsequently, dealerships at ASEANA Manila Bay in Parañaque City, Quezon Avenue in Quezon City, and Cebu in the Visayas region will open. More dealers across the country will open following the establishment of its initial network.

For more information on Maxus Philippines and the G10 MPV and the V80 Comfort, Flex and Transport vans, log on to www.maxus.com.ph.

Sin no more

“Republic Act 10351, or the Sin Tax Reform Law, is one of the landmark legislations under the Aquino Administration. It is primarily a health measure with revenue implications, but more fundamentally, it is a good governance measure. The Sin Tax Law helps finance the Universal Health Care program of the government, simplified the current excise tax system on alcohol and tobacco products and fixed long standing structural weaknesses, and addresses public health issues relating to alcohol and tobacco consumption” (www.dof.gov.ph/index.php/advocacies/sin-tax-reform).

“Many thought it was impossible to pass the Sin Tax Reform Bill: the enemy is strong, loud, organized, and has deep pockets. But, as we have proven time and again, nothing is impossible with the Filipino nation rowing in one direction, heart in the right place, and ready to stand up for its principles,” President Benigno S. Aquino III said at the signing of the Sin Tax Reform Act, December 20, 2012 at Malacañang Palace.

Though civil society rallied for its approval, and the bill was certified urgent by Pres. Aquino, it took months of deliberations before Congress passed the Sin Tax Law (STL), finally winning by just one vote in the Senate. It has been hailed as “the single most important health policy legislation of the past decade” in the Philippines (Kaiser, Kai, Caryn Bredenkamp, and Roberto Iglesias. 2016. Sin Tax Reform in the Philippines: Transforming Public Finance, Health, and Governance for More Inclusive Development. Directions in Development. Washington, DC: World Bank).

The 2016 World Bank review cited above critiqued STL’s performance in the last three years of the Aquino administration, at the cusp of its conveyance to Pres. Rodrigo Duterte’s management. By law, a congressional committee was mandated to review the impact of the STL in July 2016.

“We consider the Sin Tax Law or Republic Act 10351 to be a very good law. Our position is to fully implement the law and let it run its course,” the new Finance Secretary Carlos Dominguez III said in a statement (The Philippine Star Dec 9, 2016). The STL provided for a multiyear transition to a new tax regime, with full implementation stretching to 2017 when all cigarettes will be subject to a single unitary excise tax of ₱30 ($0.70) per pack after a quadrupling of the lowest excise tax tier of ₱12 in 2013 from ₱2.72 in 2012. After 2017 the excise tax would be increased automatically by 4 percent per year. The STL retained revenue earmarking for tobacco-growing regions (almost equal to 15 percent of tobacco revenues), with a major increase in these transfers slated for 2015, based on 2013 revenue realizations (World Bank study, 2016).

By 2016, the STL beneficiary, the Department of Health (DOH) budget was triple its 2012 level (in nominal terms), reaching ₱122.6 billion. By end-2015, the coverage of the poor and near-poor in the National Health Insurance Program (Philhealth) tripled to 15.3million families (Ibid.). Sin tax revenues were also subsequently used to subsidize the insurance coverage of senior citizens, further expanding access to care among the more vulnerable. Moving to a unitary excise tax (abolishing the easily manipulated multi-layered ad valorem taxes) promoted greater transparency and accountability in the allocation of health insurance subsidies by using existing official poverty-targeting mechanisms and by mandating annual accountability reports on the implementation of the STL by all concerned agencies (Ibid.).

To Sec. Dominguez’s consternation, instead of the mandated review of the landmark STL, the House Ways and Means Committee approved within a record one week House Bill 4144, which reversed the STL, and aimed to bring back the onerous two-tier tax system (lower tax for cheaper cigarettes), which under RA 10351 was set to be unitary beginning Jan. 1, 2017 (The Philippine Star, op. cit.). The Department of Finance already had its plan to raise excise tax on tobacco and alcohol anew by 2018 under its comprehensive tax reform program (CTRP).

Civil society and social rights groups protested rabidly on the to-and-fro for the new Sin Taxes in the House of Representatives, especially that 85 percent would be earmarked for Universal Health Care (UHC) and 15 percent for displaced/reoriented tobacco farmers. The DoF had warned that no way would the maximum tax proposed by Representatives of P45/pack be enough to fund even the first year of UHC’s implementation (2020). The program is estimated to cost around P257 to 258 billion, which the government can cover from its current funding sources from the national budget, the Philippine Amusement and Gaming Corp. (PAGCOR) and the Philippine Charity Sweepstakes Office (PCSO) in the amount of P195 billion. But without “sin” tax reform, UHC will be left with a funding shortfall of around P62 billion (dof.gov.ph).

“Sin taxes are not whimsical impositions by greedy governments. Such taxes are carefully calibrated according to the social costs incurred by consumption of certain products,” Sec. Dominguez said (dof.gov.ph May 17, 2019). After two and a half years of both houses of Congress flip-flopping on the tax rates, Senate Bill 2233 (basically adopted from the DOF and DOH recommendation) was approved with a vote of 20-0, increasing the excise tax on cigarettes by P45 per pack effective Jan. 1, 2020; P50 per pack in January 2021; P55 per pack in January 2022 and P60 per pack effective Jan. 1, 2023. This will be followed by a five-percent annual tax hike starting Jan. 1, 2024 (The Philippine Star June 4, 2019).

Finally, finally. But some mischievous minds are saying that it was curious that after that much delay in deciding on the sin tax rate increases, it was signed immediately by both Houses of Congress (overnight transmission and uncharacteristic approval in toto by the Lower House), and delivered practically at the close of the 17th Congress. Siempre naman, the May 13 mid-term elections were just over. Was it not good timing for incumbent legislators to wash hands and show pro-tobacco lobbyists: what can we do — there is social clamor for the urgent health issues on addictive tobacco use, and the DOF clamor to fill the funding gaps of UHC. Neat escape, because if ever there was indeed some lobbying against the increased sin taxes, “utang na loob” or the debt of gratitude would not be on the incoming 18th Congress but would be extinguished with the outgoing 17th Congress.

The World Bank review of the STL recognized “a challenging (Philippine) political economy characterized by pronounced rent seeking and elite capture… in which special interests had often proved hostile to major reforms seeking to serve the broader public interest” (Kaiser, et. al., op. cit.). But the tobacco industry is big, and formidable. Area planted in 2017 stood at 31,214 hectares which produced 48.22 million kilograms of tobacco, of which 58.61 million kg valued at $319 million, increasing five percent increase in both volume and value per year.

(Philippine Star June 11, 2018). The Philippines and Indonesia are among the countries with the highest numbers of smokers worldwide, according to a research study which shows 35 percent smokers among Filipino men, a number which remained the same until 2015.

What can the government do, besides doling the placebo of increased “Sin taxes” to save the lungs of smokers (and secondary-smoke foisted on non-smokers)? “Our Department of Health (DOH) estimates that 87,000 Filipinos succumb annually from complications caused by cigarette smoking. In other words, ten Filipinos die every hour from cigarette-smoking related illnesses,” Senator Franklin Drilon said of the Sin Tax Law (inquirer.com March 03, 2014).

Perhaps Pres. Duterte should ban tobacco smoking, and stop tobacco planting and manufacturing for local and for export, instead of over-exerting for War on Drugs. “You are for human rights; I am for human life,” he says.

 

Amelia H. C. Ylagan is a Doctor of Business Administration from the University of the Philippines.

ahcylagan@yahoo.com

Coffee enterprise hoping to promote peace in conflict areas

By Vincent Mariel P. Galang
Reporter

SOCIAL enterprise Coffee For Peace, Inc. said it hopes to promote coffee growing in conflict areas with an eye towards meeting domestic demand which is currently served largely by imports.

“The concept of “Coffee for Peace” started during our involvement in peace and reconciliation in 2007 in the Pikit area of Midsayap (Cotabato). We were listening to the stories of conflict about land and resources from two different parties, the Bangsamoro Maguindanao people and migrants from the Visayan region. We observed that serving coffee to them to sit down and dialogue, facilitates clarification of issues that would lead to conflict resolution,” Felicitas B. Pantoja, chief executive officer of Coffee For Peace (CFP), told BusinessWorld in an email interview.

Incorporated in 2008, Coffee For Peace aims to promote harmony within communities through joint coffee production by training them to produce coffee.

Ms. Pantoja said 70% of Philippine coffee demand is serviced by imports from Vietnam, Indonesia, and Malaysia.

The company mainly targets communities in conflict areas which have standing coffee trees.

“These areas are mostly where our tribal communities live, and where some rebels are hiding. These also should be forested, but due to indiscriminate logging practices by private companies and slash-and-burn farming by some tribal communities, those areas are left barren and with only cogon grass for cover,” she said.

Ms. Pantoja said that coordination with the local government is a must, but it is important to not look like they are teaming up with the government or with the rebels to achieve reconciliation.

“As a developmental social enterprise, we have to classify which level of conflict we have to enter. First, we respond to the communities’ demand. It involves a lot of listening and social preparation,” she explained.

To date, CFP has trained around 880 farmers in six locations. The company has two cluster communities in Davao Del Sur; three clusters in Bukidnon, one in Mt. Matutum; two communities in Kalinga; one in Mindoro; and one in Antique.

“The communities in Mindanao Island are mostly reconciled communities. They are the communities in low-level conflict and that is why they are able to progress because of the reduced threat,” she said.

Aside from providing a livelihood, it has also helped increase their income by 300%. It has also reforested 21% of the areas in which it operates.

With an initial capital of P500,000, the company has been able to sell over 2,000 kilos of roasted coffee beans annually across the country, as well as to customers in Canada and the United States.

Its other products include green coffee beans and blends served in its coffee shop. The company is looking into producing Arabica coffee, since it has identified various Arabica sub-varieties in the country like Typica, Mysore, Yellow Bourbon, Red Bourbon, Mondo Novo, and Pacamara.

It is now working on building a Food and Drug Administration (FDA)-approved facility for roasting coffee beans to maximize its distribution in supermarkets, grocery stores and trade fairs.

“We are also working on recycling our waste into a product that can earn money like the coffee pulp. Once all of this is set up, we can replicate the model in other countries and we can use this for social franchising,” she said.

“The skill of conflict management helps the community remain intact. Of course, there will always be conflict, but what matters is how you handle it. And these is where we guide the natural peace leaders in the group,” she said.

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