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How PSEi member stocks performed — February 24, 2020

Here’s a quick glance at how PSEi stocks fared on Monday, February 24, 2020.

 

Malacañang lowers 2020 OFW remittance growth assumption

THE coronavirus outbreak is expected to shave 0.8 percentage points off the growth of overseas-worker remittances, bringing the total amount expected to about $34.2 billion, Malacañang said in a briefing Monday.

Cabinet Secretary Karlo Alexei B. Nograles said growth estimates in Overseas Filipino Worker (OFW) remittances have been adjusted downwards to 2.2% to account for the impact of the outbreak of coronavirus in China and beyond. The virus is formally known as Covid-19.

Mr. Nograles characterized the hit to growth as “minimal.”

“We have adjusted our growth projections to 2.2% and now expect $34.2 billion in remittances for 2020. Nevertheless, this shall still (be) another record high in Overseas Filipino remittances,” he said.

The Bangko Sentral ng Pilipinas (BSP) last week reported an OFW personal remittance total for 2019 of $33.46 billion, up 3.9%.

Mr. Nograles said that China remittances only account for 0.1% of total OFW remittances. Macau and Hong Kong have shares of 0.4% and 2.7% respectively.

Mr. Nograles added that remittances from other countries where OFWs reside such as the US, the United Arab Emirates, and Saudi Arabia can take up the slack when remittance growth from China and its territories falls off.

“Remittances from other source countries such as the US, UAE and Saudi Arabia may help compensate for the possible slowdown in remittances coming from China, Macau and Hong Kong and we are encouraged by historical data that shows that Philippine remittances have been resilient even in the face of global downtrends,” he said. — Gillian M. Cortez

House panel finds significant underspending in RCEF budget

A HOUSE COMMITTEE has found significant underspending in the Rice Competitiveness Enhancement Fund (RCEF), with about P1.3 billion in spending accounted for out of the program’s P10-billion budget in the first year of the Rice Tariffication Law.

The spending levels were disclosed to the House Committee on Agriculture and Food’s rice subcommittee by the Department of Agriculture (DA) Monday.

Assistant Secretary Dr. Andrew B. Villacorta told the subcommittee that the P1.3 billion worth of RCEF funds was spent on seed and equipment.

RCEF is a component of the Rice Tariffication Law signed in February 2019. It receives P10 billion a year from rice import tariffs in order to finance the modernization of the rice industry. Authorized spending items are purchases of equipment, seed and fertilizer, as well as training and access to credit.

The Rice Tariffication Law, or Republic Act 11203, removes the restrictions on rice import volumes. Starting in March 2019, importers were instead charged a 35% tariff on imported grain from Southeast Asia.

Competition from cheap grain imports softened the market for domestically-grown rice, depressing farmer incomes.

The law stripped the National Food Authority (NFA) of its importing functions and limited its operations to domestic procurement of palay, or unmilled rice, after a shortage in subsidized NFA rice stocks in late 2018 triggered an inflation crisis.

The NFA pays farmers a support price of P19 per kilogram. However, the NFA does not have sufficient funds or storage to buy the entire harvest, leaving farmers to accept price offers in the single digits in some places from private traders.

Representative Josephine Ramirez-Sato of Occidental Mindoro said relief measures for farmers should include regular subsidies.

“Before the passage of the Rice Tariffication Law, wala talaga tayong institutionalized and regular subsidies given to the farmers, kaya hindi talaga tayo magiging competitive sa Vietnam or Thailand. Every planting season, naga-abang ang mga farmers (We have no institutionalized subsidies for farmers, which holds back our competitiveness compared with Vietnam or Thailand. Rice farmers are left hanging every planting season),” Ms. Ramirez-Sato said.

Agriculture Secretary William D. Dar said RCEF-funded operations include 245 technical briefings, the distribution of various training materials, and 14,595 scholarship grants.

Land Bank of the Philippines (LANDBANK) released P459.63 million worth of loans to 2,469 farmers and 19 cooperatives. — Revin Mikhael D. Ochave

CITIRA passage seen helping stem exit of multinational firms

THE PASSAGE of a corporate tax reform bill is expected to remove investor uncertainty which could help counteract the effects of a recent spate of closures among multinational firms operating in the Philippines, a senior legislator said.

Representative Jose Maria Clemente S. Salceda of Albay, who also chairs the House ways and means committee, said the recent closures highlight the urgency of passing the proposed Corporate Income Tax and Incentives Reform Act (CITIRA) “to end the wait-and-see mode of companies” and turn their investment pledges into actual investments which will create jobs to “offset losses from recently-announced closures.”

CITIRA, which will gradually bring down corporate tax rates while rationalizing incentives, is awaiting Senate approval after having been passed by the House in September, with the recent closures of Philippine operations by a Japanese automaker, a US bank and a Finnish telecommunications firm being enlisted in the effort to hurry the Senate along before session is suspended for the Easter break.

Mr. Salceda said he could call in the Department of Trade and Industry (DTI) to brief the House on the “trade-related aspects” affecting manufacturing competitiveness in the Philippines after the decision by Honda Cars Philippines to shut down automobile production in Sta. Rosa, Laguna.

“The committee is studying how to optimize tariff rates as a safeguard. Anti-dumping, countervailing, and other trade laws now in effect were also authored by this representation. The DTI may be called to the House to brief the leadership on what it proposes, given the trade-related aspects of manufacturing issues in the country,” Mr. Salceda said in an aide-memoire Monday.

Mr. Salceda has said that the committee is open to adopting a Senate version of CITIRA “that is fiscally acceptable, including the Fiscal Incentives Review Board (FIRB) expansion, and does not facilitate transfer pricing and other corporate maneuvers to avoid tax, such as breaking up into smaller companies to avail of what some Senators propose as lower taxes for smaller firms.”

Mr. Salceda said the broader issue of manufacturing competitiveness demands analysis of national factors such as the cost of doing business, to “determine the most suitable response” to the closure of businesses.

“But it appears that the problems these firms had were imported from abroad. In any case, we are studying the issues. Right now, our national fundamentals are still stable. Tomorrow, I am briefing Congressional leadership and propose calm but decisive action,” he said.

Aside from Honda, Wells Fargo & Co. and Nokia Corp. are also “leaving the Philippines not because of country-specific reasons, but because of issues of cost and competitiveness within the companies themselves,” Mr. Salceda said, adding that the companies’ problems in the Philippines are “basically imported.”

“There are firm-specific issues among all the cited companies. Wells Fargo was slapped with a $3 billion fine in the US. Honda has been overwhelmed by competition in the small-sedan segment. And Nokia has retreated globally as a technology firm,” he said.

Mr. Salceda said Honda’s problems are “primarily competitiveness-related” as its market share has been eroded by competitor Toyota Motor Corp.

Wells Fargo & Co. is downsizing its business process outsourcing operations in the Philippines, leaving only 50 tech workers out of 750 by the end of 2020, Mr. Salceda said.

He said the restructuring is part of the company’s “global workspace strategy,” which he believes simply indicates that it wants to “reduce costs after having been hit by a $3-billion fine.”

Meanwhile, the Nokia Technology Center Philippines in Quezon City is closing down this year, which, according to Mr. Salceda, will affect 700 IT professionals and administrative staff.

“The move is not isolated to the Philippines. The planned closure of Nokia Technology Center Philippines is parallel to Nokia’s problems in its home country in Finland, where it will make 180 job cuts as part of a plan to slash 500 million euros in operating costs,” he said. — Genshen L. Espedido

Power demand growth seen requiring more plants, use of ILP

THE so-called “power bloc” of legislators concerned with energy-sector issues said the energy department is not approving power plants fast enough to keep up with growing demand, and called for measures to slow down this growth ahead of another likely electricity shortage during the dry months.

Dalawa po ang posibleng dahilan nito: kakulangan ng mga planta na 1) tumatayong ancillary services ng grid at 2) kakulangan ng mga bagong planta na pupuno sa tumataas ng taunang demand ng kuryente (There are two possible explanations: the lack of power plants which provide ancillary services to the grid and of new plants to keep up with the annual growth in power demand),” Association of Philippine Electric Cooperatives (APEC) Rep. Sergio C. Dagooc said in a news conference.

Mr. Dagooc said that the government owns only one ancillary plant in Luzon which it plans to auction this year.

He added that only two power plants in the Visayas are newly-commissioned. Mindanao has one power plant and Luzon has none.

Samakatuwid, ang kakulangan ng mga bagong planta ay nagpapatunay lamang na hindi na po sapat ang available capacity upang tugunan ang annual demand growth rate lalong-lalo na dito sa Luzon at medyo kulang ang Department of Energy (DoE) sa kanilang trabaho. Ito kasi ang mandate nila, pero mukhang baka iba na ang kanilang pinagkakaabalahan (The dearth of new plants proves that capacity is insufficient to meet demand growth, especially in Luzon, and that the DoE has not fulfilled its mandate. It looks like it is preoccupied with other things),” he said.

Rep. Adriano A. Ebcas Ako Padayon Pilipino Party List, which was formed by power co-ops and focuses on electricity consumer rights, recommended the adoption of the “demand-side management” to help mitigate power shortage in the dry season. Mr. Ebcas said this would require electric cooperatives to “implement load curtailment or load-shedding from large power consumers as needed.”

Kaming mga electric cooperatives are in close coordination with the Department of Energy para sa implementasyon ng Interruptible Load Program (ILP) sa Luzon, Visayas at Mindanao (We electric co-ops are in close coordination with the DoE to implement the ILP on Luzon, the Visayas and Mindanao),” he said.

ILP was established by the DOE and the Energy Regulatory Commission (ERC) to help mitigate supplies deficiency in the Philippines “until new capacity become available on the grid.” It enlists large power consumers to use their internal power-generating resources during shortages.

Mr. Ebcas also encouraged companies with embedded generators to “de-load and participate in ILP in order to leave enough supply for residential consumers, especially during peak hours.”

“Under this program, ILP participants will be compensated by the distribution utility for their fuel cost. Ito rin ay nanghihikayat para sa ating mga ECs na maghanda at gumamit ng mga embedded generation sets kung sakaling hindi maabot ng aming mga supply ang mataas na demand ng kuryente (I also hope this persuades co-ops to use their own generation sets in the event supply is lacking or demand is high),” he said. — Genshen L. Espedido

Rice tariffs decline 23.1% year-to-date

RICE IMPORT tariffs declined 23.1% year-on-year in the year-to-date period ending Feb. 14, amid a sharp decline in inbound shipments, the Bureau of Customs (BoC) said.

Citing a report from the BoC, the Department of Finance (DoF) said in a statement that import tariff collections totaled P1.71 billion, against P2.22 billion a year earlier.

Volumes fell 61.8% year-on-year to 209,320 metric tons (MT).

The Rice Tariffication Law, or Republic Act No. 11203, was signed in mid-February 2019, and took effect in March. It removed restrictions on rice imports, and instead imposed a 35% tariff on shipments of rice from Southeast Asian trading partners. The tariffs will help fund the modernization of the rice industry.

In the 2019 period when the law was effective, the government collected P12.3 billion from 2.03 million MT of imports.

Until Feb. 14, 2020, total collections have amounted to P14.01 billion since the law took effect.

Finance Secretary Carlos G. Dominguez III said the revenue gives the government “ample means to do even more to make our agricultural production more efficient and extend direct aid to small farmers.”

The government must set aside P10 billion a year for five years from the tariffs to support the Rice Competitiveness Enhancement Fund (RCEF), which will fund farm mechanization, agricultural credit and training, and inputs such as fertilizer and seed.

The DoF said the law generated billions in fresh revenue in less than one year of implementation, “a complete reversal of its P11-billion average annual loss during the pre-RTL regime.” — Beatrice M. Laforga

Tunnel boring machine arrival signals imminent start to digging phase of subway line

THE Department of Transportation (DoTr) unveiled on Monday parts of the specialized underground equipment which will be used to help build the Metro Manila build its first subway line, heralding the imminent start of the line’s tunnel construction phase.

The tunnel boring machine (TBM) from Japan automates the digging process by reinforcing the tunnel as it digs, reducing the need for a separate operation to shore up the tunnel wall to prevent the works from collapsing.

“TBMs have the advantage of limiting the disturbance to the surrounding ground and producing a smooth tunnel wall. This significantly reduces the cost of lining the tunnel, and makes them suitable to use in heavily urbanized areas,” the DoTr said in a statement.

Transportation Undersecretary for Railways Timothy John R. Batan has said that the target was to begin tunneling works within the year.

“This unprecedented utilization of a massive construction resource is testament to the commitment of the DoTr in ensuring the delivery of major transport infrastructure in the soonest possible time,” the department said.

The government broke ground for the first three stations (Quirino Highway, Tandang Sora and North Avenue) of the subway project in February last year after the DoTr signed a P51-billion deal for that package with the Shimizu joint venture, which is comprised of Shimizu Corp., Fujita Corp., Takenaka Civil Engineering Co. Ltd. and EEI Corp.

The Philippines and Japan signed in March 2018 the first tranche of the P355.6-billion loan for the Metro Manila subway project.

While the public will have to wait until 2025 for full operations of the 36-kilometer subway, the government targets partial operations — covering the first three stations — by 2021. — Arjay L. Balinbin

PHL to promote more food exports to UK

THE trade department’s Export Marketing Bureau (EMB) hopes to promote food exports to the UK following its exit from the European Union (EU).

“I’m sure they are more than willing — if not, they’re going to be very eager — to dance with us separately from the EU,” EMB Director Senen M. Perlada said in a phone interview Friday.

He said the focus is products from Philippine companies that have certifications from the British Retail Consortium (BRC),which he describes as a “stringent, Rolls Royce-quality certification.”

The BRC sets quality standards for food safety, packaging, consumer products, and storage.

Mr. Perlada said the EMB will be promoting “supermarket items” including processed food and beverages, canned tuna products, snack food, noodles, biscuits, craft gourmet chocolate, and dried fruit and nuts.

He added that the EMB will also be promoting tropical fruit by-products like coconut water, virgin coconut oil, and MCT oil, as well as sugar, sauces, and condiments, among others.

MCT oil is derived from coconut, and its medium-chain triglycerides are thought to provide health benefits.

The UK is retaining a preferential trade scheme with the Philippines that mirrors the latter’s EU privileges after Britain concludes its transition from the EU on Dec. 31, 2020. Under the General Scheme of Preferences plus (GSP+), the Philippines enjoys zero tariffs on up to 6,274 Philippine products exported to the EU.

UK trade envoy to the Philippines Richard Graham told reporters last week that the UK may review opportunities to expand GSP+ in the future, but will maintain the current scheme in the meantime.

Mr. Perlada said the Philippines has not yet proposed changes to the current arrangements with the UK.

“In general, I think the attitude of the UK is to have it business as usual without introducing any drastic changes,” he said. — Jenina P. Ibañez

NCR wholesale prices of construction materials rise in Jan.

WHOLESALE PRICE growth of construction materials in Metro Manila accelerated in January, though the rise in the retail price indicator slowed, the Philippine Statistics Authority (PSA) said.

The construction materials wholesale price index (CMWPI) grew 1.8% year-on-year in January, against a rise of 1.2% in December. ‘The retail-level index, known as the construction materials retail price index (CMRPI) in the National Capital Region slowed to 0.6% in January, after coming in at 0.7% in December.

The acceleration in CMWPI growth was driven by the following commodities: hardware (4.9% from 1.9%), galvanized iron sheets (3.9% from 3.5%), reinforcing and structural steel (0.01% from minus 0.8%), tileworks (16.1% from 4.1%), glass and glass products (7.1% from 0%), electrical works (3.2% from 3.1%), painting works (1.1% from 0.3%), PVC pipes (7.5% from 3.7%), and fuels and lubricants (9.1% from 2.7%).

Slower prices increases were noted in sand and gravel (3.9% from 4.7%), plywood (0.04% from 1.5%), lumber (3.4% from 3.6%), and plumbing fixtures and accessories/waterworks (4.3% from 4.9%).

Growth in concrete product prices was 0.7%, unchanged from the previous month. Flat growth was also noted in asphalt and machinery and equipment rental.

“This wholesale price increase may be attributed to the increase in major construction developments over more retail-type constructions,” UnionBank of the Philippines, Inc. Chief Economist Ruben Carlo O. Asuncion said in an e-mail.

The year-on-year slowdown in the CMRPI in January was led by carpentry materials (0.6% from 1% in December), masonry materials (0.2% from 0.7%), and painting materials and related compounds (1% from 1.3%).

Meanwhile, retail prices accelerated for electrical materials (0.5% from 0.4%), plumbing materials (0.9% from 0.2%), and tinsmithing materials (0.9% from 0.7%).

“Miscellaneous” construction materials declined 0.1% in January, reversing the 0.3% growth recorded in December.

“Major buildings all over the metropolis are continuously being built and it is expected that construction materials prices, in general, are expected to steadily rise as well,” Mr. Asuncion added. — Jobo E. Hernandez

Property, plant, and equipment vital to business operations

Investing in Property, Plant, and Equipment (PPE) is generally a good indication of growth for many businesses. PPE assets represent a fairly large investment with future economic benefits for most companies. While we are just a few months away from filing season, it is high time that we review our treatment of property, plant. and equipment, both for tax and accounting purposes.

PPE BY DEFINITION
International Accounting Standard (IAS) 16, the standard that prescribes the accounting treatment for PPE, defines property, plant, and equipment as tangible items that are held for use in the production or supply of goods or services, for rental to others, or for administrative purposes and that are expected to be used during more than one period. As such, PPE represents important assets necessary for any business operations.

Typical examples of PPE are buildings, equipment, machinery, transportation vehicles, land, furniture, and fixtures that are used in the business.

PPE MEASUREMENT
For accounting purposes, an item of PPE that qualifies for recognition as an asset is initially measured according to its cost, which includes the actual purchase cost and those expenditures that are ordinary and necessary to bring the asset in place and in condition for its intended use, such as: its purchase price, including import duties, nonrefundable purchase taxes, after deducting trade discounts and rebates; any costs directly attributable to bringing the asset to the location and condition necessary for it to be capable of operating in the manner intended by management (e.g., costs of site preparation, professional fees, initial delivery and handling, installation and assembly, etc.); and the initial estimate of the costs of dismantling and removing the item and restoring the site on which it is located.

Many expenditures for long-lived assets will surely benefit a business for a certain period. The question is: should these expenditures be capitalized or depreciated over their useful life? For tax purposes, PPE acquisitions should be capitalized over the useful life of the asset that substantially extends beyond the year. The useful life of an asset is usually determined by the taxpayer. However, the initial estimate of the costs of dismantling and removing the item and restoring the site is not part of the cost for tax purposes.

Under IAS 16, PPE is carried either at cost or at revalued amounts, less accumulated depreciation and impairment losses. There should be a reasonable allowance for depreciation to be deducted from gross income. With the fixed asset’s cost as the basis for depreciation, any adjustment due to impairment should not be included for tax purposes.

DEPRECIATION
PPE declines in value over time. Depreciation is the process of allocating the cost of the asset over its useful life to account for a reasonable amount of exhaustion, wear, and tear of the property used in business. It represents how much the value of the asset has been used up. In general, businesses can depreciate assets both for tax and accounting purposes.

A reasonable allowance for depreciable asset is generally allowed under existing tax rules. However, no depreciation deduction will be allowed in the case of property that has been amortized to scrap value and is no longer in use.

There are many types of depreciation, such as the straight-line method and accelerated methods. Existing tax rules prescribe depreciation methods that the taxpayer may choose from, but it will depend on the experience of the taxpayer in determining the method of depreciating the asset. However, should there be any change in the depreciation method used in the business, approval from the Bureau of Internal Revenue (BIR) is needed.

LIMITATION ON DEPRECIATION EXPENSE
Under Revenue Regulations (RR) No. 12-2012, the BIR imposed a limit on the deductibility of depreciation allowance, maintenance expenses, and input value-added tax on motor vehicles as follows: substantiation of the purchase with sufficient evidence, such as with official receipts and other records indicating the price, motor vehicle identification number, chassis number, etc.; the taxpayer has to prove the direct connection of the motor vehicle to the business; one vehicle for land transport is allowed for the use of an official or employee with a value not exceeding P2.4 million; with no depreciation allowed for yachts, helicopters, airplanes, and land vehicles with a value over P2.4 million, unless the vehicle is used in the company’s transport operations or represents a lease of transport equipment.

DERECOGNITION OF PROPERTY
When no future economic benefits are expected from the use or disposal of the PPE, it is derecognized. The gain or loss arising from the derecognition of an item of PPE shall be included in the profit or loss when the item is derecognized. On the other hand, there are certain conditions to be complied with before this is allowed as a deduction for tax purposes.

While property, plant, and equipment are considered vitals component to business operations, this item on the balance sheet should not be taken for granted. It is important that investment and expenditure in PPE are properly monitored, as this signals profitability, responsibility, and taxability.

Let’s Talk Tax is a weekly newspaper column of P&A Grant Thornton that aims to keep the public informed of various developments in taxation. This article is not intended to be a substitute for competent professional advice.

 

Maricel P. Katigbak is a manager of Tax Advisory & Compliance division of P&A Grant Thornton, the Philippine member firm of Grant Thornton International Ltd.

pagrantthornton@ph.gt.com

What is oligarchy?

The term “oligarchy” again enters our popular imagination. With the celebration of the EDSA People Power Revolution today, there are those who will point out that this revolution succeeded in merely doing what the word “revolution” literally imputes: replacing the singular will of the dictator Ferdinand Marcos with the interests of diversified economic and political elites.

It is easy to grasp why this sentiment is turning into a legacy of the revolution. In the 34 years since People Power, our country’s democratic institutions (especially the bureaucracy) are subject to the whims of political and economic elites that thrive under a culture of corruption, impunity, coercion, and patronage. Our society and economy are subject to recurring crises in resources, energy, the environment, health, peace and order, among others.

Social cleavage along class, religion, sexuality, and ethnicity impedes attempts of cohesion, solidarity and discourse. The Duterte administration pays lip service to the cause of displacing this web of oligarchic interests. For while the President pronounces his hatred for this or that oligarch, they end up merely replacing an entrenched set of oligarchic interests with a mix of old and new oligarchs of their own.

The ongoing attempt of the administration to strong-arm the cancellation of the ABS-CBN broadcasting franchise presents us with a very public glimpse into these nefarious attempts of oligarchic replacement and revolution.

In order to strengthen our views on these issues, perhaps now is a good time to again ask: what really is oligarchy?

Perhaps indicative of the persistence of oligarchies within political civilizations, one of the most dominant definitions of oligarchy comes from the Greek philosopher Aristotle. In The Politics, Aristotle defines an oligarchy as the rule of the wealthy over the State, where wealthier men have greater privileges than their poorer citizens: “For the real difference between democracy and oligarchy is poverty and wealth. Wherever men rule by reason of their wealth, whether they be few or many, that is an oligarchy, and where the poor rule, that is a democracy” (III viii 1279b 17 — 20).

Aristotle warns us that an oligarchy arises precisely when a society mistakenly views wealth and its accumulation as the highest good that human beings can attain (regardless of how many are ruling), and as such are keen to affirm the leadership of its wealthiest members over all others. For Aristotle, an oligarchy breeds a self-destructive society as wealth is an end that is incompatible with that of the common good. Ultimately, Aristotle suggests that a “polity” can only really be effective and just when both oligarchic and democratic forces are balanced (or effaced) in such a way that the political institutions are unable to give too much power to one over the other.

Another widely cited definition comes from the German sociologist Robert Michels. In his work Political Parties: A Sociological Study of the Oligarchical Tendencies of Modern Democracy (1911), he defines oligarchy as an “organization which gives birth to the domination of the elected over the electors, of the mandataries over the mandators, of the delegates over the delegators. Who says organization says oligarchy.” This is what scholars now call “the iron law of oligarchy.” Michels argues that the concentration of power in an organization or society to those at the top is an intrinsic and inescapable effect of scaling up any form of human organization, whether it be political parties, churches, or nation-states. He states that: “It is the inevitable product of the very principle of organization… Every party organization which has attained to a considerable degree of complication demands that there should be a certain number of persons who devote all their activities to the work of the party.”

What enables these persons to attain oligarchic control are their access to resources that ordinary members of an organization might be incapacitated to have access to, such as: superior knowledge, control over the means of communication with the membership, and skill in the art of politics and organization.

For Michels, it does not matter whether the original aims of the organization are collectivist or democratic. Any complex social organization will inevitably create a more privileged few whose interests become inimical to the many for “a universally applicable social law, every organ of the collectivity, brought into existence through the need for the division of labor, creates for itself, as soon as it becomes consolidated, interests peculiar to itself. The existence of these special interests involves a necessary conflict with the interests of collectivity.”

From these two definitions stem our popular understanding of oligarchy: the rule of a wealthy few over an organization such as the State, such that their interests gain priority over the needs of the many or the common good. We must emphasize that oligarchic rule is a distinct form of minority rule as we tend to mistake any elite rule as oligarchic rule.

Jeffrey A. Winters, a political scientist from Northwestern University, reminds us in his work Oligarchy (2011) that other types of elite rule (defined as extreme concentrations of power to the few) are subject to various modes of power dispersal or democratization that are relatively executable. However, the source of oligarchic power, i.e., wealth and its accumulation, is notoriously difficult to disperse or equalize.

In the kind of world we live in today, massive amounts of wealth inevitably leads to the capture of political power in order to maintain and protect that wealth. Key to defining oligarchs today, according to him, is in understanding that “oligarchs alone are able to use wealth for wealth’s defense.” This “wealth defense” has two components: “property defense (securing claims to wealth and property) and income defense (keeping as much of the flow of income and profits from one’s wealth as possible under the conditions of property rights).” Oligarchy, therefore, “refers to the politics of wealth defense by materially endowed actors.”

Winters applies this framework in understanding oligarchies to a short section in his book devoted to the Philippines. In it, he describes Filipino oligarchy as “fully matured” even well before Marcos’s “sultanistic oligarchy” during martial law. He also laments the fact that oligarchs in the Philippines, in contrast to other oligarchs from other countries, have never been fully disarmed. As such, an integral tactic of wealth defense in Philippine society remains in (government-backed) violence and coercion.

Filipino oligarchic power is also expansive in the sense that it is not concentrated on a specific ethno-linguistic group (compared to our neighbor Indonesia). Finally, the political shifts in power throughout Philippine history had never really imbued Philippine political institutions with a “high” sense of the rule of law, which Winters argues is necessary to constrain oligarchic behavior.

If it is true that the concentration of power to the few is an inherent feature of any organization, and that the Philippine experience with oligarchy is deeply-rooted in its history, culture, and politics, wherein lies our hope in going beyond oligarchic rule?

Jacques Rancière, a French philosopher, in his work the Hatred of Democracy (2005), reminds us that at the heart of any argument for any hierarchical order based on domination is oligarchic logic. Rancière, echoing Michels, writes: “There is, strictly speaking, no such thing as democratic government. Government is always exercised by the minority over a majority.”

What can debase this oligarchic logic is what Rancière calls the scandal of democracy. This scandal is the kind of democracy that is not based on any claims of natural rule or hierarchy. He writes: “the scandal lies in the disjoining of entitlements to govern from any analogy to those that order social relations … it is the scandal of a superiority based on no other title than the very absence of superiority.”

Democracy therefore is the disruption of hierarchical (oligarchic) logic by those who have no right to rule. Democracy, for Rancière, is “not based on any nature of things nor guaranteed by any institutional form. It is not borne along by any historical necessity and does not bear any. It is only entrusted to the constancy of its specific acts. This can provoke fear, and so hatred, among those who are used to exercizing the magisterium of thought. But among those who know how to share with anybody and everybody the equal power of intelligence, it can conversely inspire courage, and hence joy.”

Perhaps an example will help elucidate these passages. I was recently asked by a student why the EDSA People Power Revolution is categorized as a form of democratic action, given that at its root, it would not have happened if it were not for the coup d’état launched against President Marcos and the subsequent plea of the late Cardinal Sin to protect the coup leaders holed up in Camp Crame.

What we must bear in mind against this response is that it was precisely the presence of the people in EDSA which exemplifies the undefined logic of democracy that can disrupt oligarchic logic. If it were true that only oligarchs and the elites mattered, we would have in our history either the continuance of the dictatorship or the installation of just another military regime against that dictatorship. But it took the power of unintelligible people with no titles, capacities, claims to rule, or expertise — and their presence in a space that they had no right to be in — to give us a glimpse of the real meaning of democracy.

Regardless of how it began, the outcome of the People Power Revolution relied on a democratic gamble. This rare, brief manifestation of demos (people) and their kratos (power) was enough to force these two warring oligarchic logics to a direction that neither of them had planned nor expected. Whether this direction can be maintained or had already been lost, I can only hope that I will see us manifest this capacity again when we most need it.

 

Miguel Paolo P. Rivera is an Instructor at the Political Science Department at the School of Social Sciences, Ateneo de Manila University — Loyola Schools.

Prepare for the worst

As of Sunday, 8:13 p.m., Feb. 23, 2020, the COVID-19 global snapshot was this: 78,830 confirmed cases and 2,469 deaths. Of the total, 76,936 confirmed cases and 2,442 deaths were in China. The rest are scattered in 30 countries worldwide and one cruise ship, the Diamond Princess.

World Health Organization (WHO) director-general Tedros Adhanom Ghebreyesus believes the world still has a chance to contain it, but that opportunity is narrowing. The trouble is that the WHO still has no idea how the virus might spread around the world, hence, the call for a harmonized global effort to contain and defeat it. But that depends on the data the world is fed.

Researchers now believe “patient zero,” the original person with the infection, brought the disease to the Wuhan market from “another location.” Wuhan hosts China’s most advanced virus research laboratory, the Wuhan Institute of Virology, its only biosafety level 4 super-lab dealing with serious infectious diseases. China’s been accused of silencing dissenting voices. A whistleblower was punished for warning about the outbreak before he caught the illness and died in Wuhan. Videos circulating on social media show scenes of convulsing patients and people being tended to by doctors wearing hazmat suits.

Bill Gates warned at the AAAS (American Association for the Advancement of Science) meeting in Seattle just hours before the first case was confirmed in Cairo, Egypt, that COVID-19 in Africa could overwhelm health services and trigger a pandemic that could cause 10 million deaths. US Republican Senator Tom Cotton says it’s time for the Chinese Communist Party CCP) to reveal what it knows about COVID-19 after the country’s CCP daily newspaper, Global Times, cited new research claiming that the virus is transmitted from human to human, and didn’t originate from animals at the seafood market. The outbreak has infected and killed patients all over the world.

Italy reported its first death early Saturday among 17 confirmed cases, including its first known instance of local transmission. Reported infections more than quadrupled prompting officials to order schools, restaurants, and businesses to close. Authorities called off the Venice Carnival.

In South Korea, reported infections had more than doubled to 433. Of the new cases, most were traced to a person who was at a church in Daegu. Cases in one hospital jumped from 16 to 108 overnight.

In Japan, hundreds of passengers on the cruise ship Diamond Princess have been infected, with three deaths so far. In China, a person infected five relatives without ever showing signs of infection; a Chinese warship’s crew has been quarantined; and Chinese banks are reportedly destroying, deep-cleaning, and disinfecting cash to prevent the virus from transferring to humans.

Business recovery is too early to discuss, yet, China’s moving heaven and earth to project a return to normality. In Laos, Chinese Foreign Minister Wang Yi “noted a decline” in newly detected Chinese cases. ASEAN members were leaned on to “relax bans” on Chinese nationals and other travel restrictions. China’s central bank predicted a “limited short-term” economic impact and said the country was “confident in winning the fight” against the epidemic. It sought to “ease global investors’ worries” about COVID-19’s potential damage to the world’s second-largest economy by recently cutting several of its key lending rates, including the benchmark lending rate. It urged banks to extend cheap loans to the worst-hit companies which are “struggling to resume production” and are running out of cash.

Some analysts believe China’s economy could contract in 1Q2020 from 4Q2019 due to the combined supply-and-demand shocks caused by the virus and strict government containment measures. On an annual basis, growth could fall by as much as half from 6% in the fourth quarter. A rebound in the spring assumes that the virus is contained early and that factories hit by staff and raw material shortages could normalize in the next few weeks. However, transport restrictions remain in place in many parts of the country. While more firms are reopening, disruptions are starting to spill over into global supply chains as far away as the United States.

Finance leaders from the Group of 20 major economies were set to discuss risks to the world economy in Saudi Arabia this weekend. The International Monetary Fund said it was too soon to assess what the virus impact would be on global growth. The ASEAN bloc, China’s second-largest trading partner, is willing to cooperate with Beijing but the extent of enthusiasm varies widely.

China’s sending mixed signals. One: “We are taking harsh measures by locking down 400 million and of that 250 million under quarantine. They can’t travel and infect other countries.” Two: “Come on in, the water’s fine. Lift your travel restrictions and come to China.”

Due to our proximity to China, we face greater risks than other countries. Apart from tourists, students and businessmen with permanent business visas, mainlanders are found in POGOs (Philippine Offshore Gaming Operators), small-scale businesses, construction projects, and mining. We have more than 230,000 OFWs working in China, Hong Kong, and Macau. Manila ranks 14th out of 30 global cities receiving airline passengers from 18 high-risk cities in China.

As such, all persons except Filipino citizens and permanent resident visa holders were temporarily barred from entering the country. A temporary ban on Filipinos from traveling to China or its special administrative region was also instituted. A mandatory 14-day quarantine for Filipinos returning from China or its special administrative regions was announced. Visa upon arrival (VUA) for Chinese nationals has been suspended. The biggest impact will be felt in trade, travel and tourism. The Banko Sentral ng Pilipinas (BSP) noted that the outbreak could cut GDP growth by 0.8% if it lasts for six months.

Trade, tourism, travel, transportation, consumption, agriculture and manufacturing value chains, global supply chains, shipping, food security, customs revenues and more are getting a daily beating worldwide. SMEs are being hammered. Is there financial bridging plan for all of them? How about a stimulus package when the signs are clearly on the downtrend? Global recession is looming on the horizon. We must brace for impact while ensuring our local economy is shielded as much as possible.

 

Rafael M. Alunan III is a former Secretary of Interior and Local Government and chairs the Philippine Council for Foreign Relations.

rmalunan@gmail.com