INVESTORS took positions on Puregold Price Club, Inc. last week with analysts attributing it to its earnings result and its addition to a global equity index.
The grocery operator was the top actively traded stock last week with a total of P4.41 billion worth of 95.81 million shares exchanged, data from the Philippine Stock Exchange showed.
Shares in the Lucio L. Co-led company closed at P46 apiece on Friday, down 0.3% from its May 22 closing price of P46.15 apiece. Year to date, its price per share gained 14.9%.
“[The Puregold] stock was actively traded during the week following the release of full-year 2019 earnings as well as the anticipation for its first quarter 2020 results,” Unicapital Securities, Inc. Research Head Justin Lawrence J. Tembrevilla said in an e-mail.
He said its first-quarter results were expected as a “positive surprise” compared with other listed companies as most Puregold stores and S&R warehouses remained open during the Luzon-wide lockdown.
For Diversified Securities, Inc. Equity Trader Aniceto K. Pangan: “it is mainly a non-discretionary consumer stock that has been upgraded by MSCI to its list of big stocks replacing Security Bank Corp. this month of May.”
Anna Corenne M. Agravio, equity analyst at Regina Capital Development Corp., also described Puregold’s inclusion to the MSCI index as the biggest driver for investors.
“With news of [Puregold] being added to the index, investors likely bought it up in anticipation,” Ms. Agravio said in an email.
“In addition to this, [Puregold] is under less COVID-19 (coronavirus disease 2019) pressures than most listed stocks, since panic-buying led to a strong surge in sales a few days before the ECQ (enhanced community quarantine) was declared as evidenced in its recently released earnings,” she added.
The adjustments on the MSCI Global Standard index released on May 13 saw Puregold replacing Security Bank effective at the close of market on Friday.
On the same day, the company disclosed to the bourse that its consolidated net income grew 16.8% to P1.76 billion in this year’s first three months compared with last year’s P1.51 billion. Its net sales also expanded by 17.4% to P40.95 billion in the same period.
The retailer attributed the income growth to stronger than expected sales of its existing Puregold stores and S&R Membership warehouse clubs due to “higher consumer spending and pantry loading prior to the [lockdown] as well as the low inflation environment in 2020.”
The Puregold group ended the past quarter with 443 stores nationwide. These include 384 Puregold stores, 20 S&R membership shopping warehouses, and 39 S&R New York Style quick-service restaurants which were higher by four Puregold stores, two S&R shopping warehouses, and one quick-service restaurant compared with year-end figures.
On Wednesday, it reported its consolidated core net income increased year on year by 16% to P6.75 billion in 2019 while net sales inched up by 9.5% to P154.49 billion.
“Near-term, bottom line may be challenged despite healthy sales due to any and all unexpected costs brought about by the pandemic; but long-term, the potential for upside is still high,” Regina Capital’s Ms. Agravio said.
Unicapital Securities’ Mr. Tembrevilla shared this view as spillover effects from the health crisis will likely take its toll on consumer spending in the coming months.
“[Puregold] can achieve a high single-digit to low double-digit sales growth through store expansion, but not without challenges,” he said.
“Disposable income could take a hit due to the higher incidence of unemployment as the economy was on a standstill during ECQ. The dip in remittances as a result of job displacement of overseas Filipinos could also dampen consumer spending going forward,” he added.
For this week, Ms. Agravio sees Puregold’s resistance “solid” at P50, while support is positioned anywhere between P43 and P45.
THE Department of Trade and Industry (DTI) said restaurants resuming dine-in service may not offer buffets and must put up table partitions and mark floors to ensure proper social distancing.
In its guidelines for restaurant operators, the DTI said limited dine-in operations will only be allowed for areas that have shifted to a modified general community quarantine (GCQ). No areas have been declared to be under modified GCQ, the most liberal of the lockdown categories.
The guidelines, released Sunday, also prescribe a “no mask, no entry” policy for restaurants, as well as floor mats or disinfectant foot baths at the entrance, unless the restaurant is inside a mall that already provides these. The entrance must have rubbing alcohol and health checklists. A roving officer will ensure a distance of one meter between each person in line, and those with temperatures over 37.5 degrees celsius and other COVID-19 (coronavirus disease 2019) symptoms should not be allowed to enter the premises.
Dining tables and chairs must be sanitized after each use and maintain a distance of at least one meter on each side. Face-to-face seating will only be allowed with dividers. Furniture with porous materials should be covered in plastic.
The DTI is asking the establishments to keep dining areas well-ventilated, provide accessible sanitation equipment, and contactless transactions. The DTI added that order and bar counters should be disinfected every half hour.
Buffets are a key restaurant strategy for minimizing food waste, because diners must eat what’s on offer and restaurants need not guess which items on the menu to keep in stock. Buffets are a big draw for hotels, and some restaurants base their entire business models on all-you-can-eat, betting on a higher average bill per customer while at the same time minimizing service and inventory costs.
Depending on the type of restaurant, orders may be placed at a counter which will provide for hand sanitation after payment. They may also be escorted to an assigned table where they will select from a menu already on the table. In the latter case, the server must sanitize his or her hands after placing an order or taking payment.
Kitchen workers must wear masks, sanitize equipment and wash hands regularly. Staff not involved in food preparation may not enter the kitchen.
The guidelines also ban self-service offerings and play areas, but require a designated take-away area for picking up orders, contactless drive-through counters, and separate hand washing sinks for customers. Restaurants must also provide small trays for accepting cash.
For delivery and pick-up service, DTI asked restaurants to assign drop off sites outside their buildings and to include vehicles and drivers in its hygiene protocols.
DTI is asking restaurants to await further announcements on when dine-in operations will be permitted. The guidelines supplement the DTI-Department of Labor and Employment (DoLE) Interim Guidelines on Workplace Prevention and Control of COVID-19, released on April 30. — Jenina P. Ibañez
THE Philippines is offering one of the smallest fiscal packages in Asia in response to the economic impact of the pandemic, Nomura Global Research said in a note Friday.
“Aggregating all measures, the most support has been announced in Singapore, Malaysia, Australia and Korea, and the least in Indonesia, China and the Philippines,” Nomura Global said.
It added that the Philippine pandemic measures amount to about 5% of gross domestic product (GDP), against Singapore’s 19.2% and Malaysia’s 17.7%. Bringing up the rear were Indonesia (4.2%) and China (4.9%).
A database maintained by the Asian Development Bank (ADB) estimates the Philippine fiscal response at $19.823 billion as of May 18 or about 4.53% of the economy.
The Philippines has so far implemented a P200-billion social amelioration program for some 18 million low-income families, a P51 billion in wage subsidy for employees of small businesses, a recovery program of about P130 billion to P160 billion over three phases to provide support for businesses.
After the crisis in 2020, the Philippine fiscal deficit is expected to rise to about 8% of GDP, against 3.55% in 2019, according to Nomura Global.
“A significant fiscal deviation and a sluggish recovery suggest that it will take longer for economies to revert to their initial fiscal positions,” it said.
Nomura Global also said that fiscal measures are unlikely to boost growth as economic activity remains severely disrupted. However, such measures are needed to ward off permanent economic damage caused by the outbreak.
Nomura Global said it expects central banks to be more proactive through aggressive secondary-market bond purchases, relief measures, and liquidity support. However, catch-up fiscal action is still needed, it said.
“We do not mean to downplay the role of monetary policy… Monetary accommodation may be necessary, but it is unlikely (to be) sufficient on its own,” it said. — Luz Wendy T. Noble
THE trade department said it will offer livelihood kits with seed capital of between P5,000 and P15,000 for participants in the Balik Probinsya program, to help them start businesses after leaving the cities.
Trade Undersecretary Abdulgani M. Macatoman said in an online news conference Thursday that the businesses to be funded include small neighborhood stores.
He added that there is no limit to the number of people enrolled in the program that may be given starter kits.
The government is counting on 1 million Metro Manila residents to move to the provinces over the next six months under the “Balik Probinsya, Bagong Pag-Asa” program, which is designed to decongest the capital.
“’Yung livelihood seeding program na nagkakahalaga na P203 million na ready po na maipamigay natin… at madadagdagan pa po ‘yan dahil of course may stimulus package po na pwedeng idagdag. Lahat po ng mag-eenroll natin dito ay sinisigurado na mabibigyan natin ng ayuda dito sa mga starter kit, (We have P203 million ready to hand out for livelihood seeding, and expect more funds when the stimulus packages are approved. Everyone who enrolls is certain to receive aid via the starter kits,” Mr. Macatoman said.
The P203 million was sourced from the DTI’s Pangkabuhayan sa Pagbangon at Ginhawa, an assistance program for disaster victims.
“Sa ngayon ‘yung specific na amount, na fund for this Balik Probinsya program ay hindi natin po masasagot ‘yan. Ang pwedeng sumagot diyan ay ang ating Department of Budget and Management (DBM). The agency that can answer that question is the DBM).”
Executive Order 114 authorizing the Balik Probinsya program calls on the DBM to identify funding sources, while agencies may realign their appropriations for the program.
Over 30,000 Metro Manila residents have signed up for the program. The first batch of over a hundred people returned to Leyte on May 20.
Mr. Macatoman said the trade department will wait for the go signal from local governments on their health protocols before assistance is offered to beneficiaries. — Jenina P. Ibañez
POWER consumption of retail customers at the Wholesale Electricity Spot Market (WESM) fell drastically as their businesses were shut during the quarantine period.
The Independent Electricity Market Operator of the Philippines (IEMOP) noted that spot-market customers bought a total of 5,540 gigawatt-hours (GWh) of electricity at P1.50 per kilowatt-hour (kWh), in the April billing period, compared to 6,111 GWh in March, priced at P2.47/kWh.
“Both Luzon and Visayas customers, most of them were not operational during the ECQ (enhanced community quarantine),” IEMOP Chief Operating Officer Robinson P. Descanzo told reporters in a briefing last week.
The market operator said the highest daily metered quantity of electricity bought by retail customers at WESM Luzon at 27,190 megawatt-hours (MWh) in April was 44% lower compared to March.
The spot market in the Visayas saw a 66% drop in the minimum daily metered quantity bought by retail customers in April at 1,116 MWh.
Retail customers, who are mostly from the manufacturing sector, are those sourcing at least 1 megawatt of electricity from suppliers.
IEMOP also saw the maximum daily metered quantities in MWh bought by wholesale customers in April to have reduced in both the Luzon and Visayas markets, down 14% and 10%, respectively.
Both retail and wholesale market customers buy most of their electricity from suppliers via bilateral contracts, while around 10% are from spot volumes.
As of December 2019, 1,408 contestable customers, or those holding an Energy Regulatory Commission certificate of contestability, are registered with WESM. Most of them or 735 registrants are involved in commercial businesses, while the rest are from the industrial sector.
There were 70 retail electricity suppliers registered with the market in 2019.
“Compared sa 2019, ang summer months natin mababa ang mga presyo because mababa ang demand (Compared to 2019, prices during the dry season this year dropped due to lower demand.)” Mr. Descanzo said.
Usually, prices rise at WESM during the dry months of March to May as businesses consume more power but supply is tight because power generators are usually running at capacity, except for hydropower plants, which contribute less electricity.
During the lockdown period from mid-March to May 15, power plants in the country generated 8,671 MWh on average, lower compared to an average of 10,394 MWh recorded before the quarantine phase. The decline in output was due to the lower system requirement.
“Overall, during the ECQ period, bumaba iyong demand natin (demand fell) by almost 15% compared to the pre-ECQ levels,” he said.
The strictest form of lockdown was lifted in some areas by mid-May. Starting June 1, most parts of the country will be under modified general community quarantine, the most permissive of the quarantines thus far. — Adam J. Ang
The COVID-19 pandemic caught the world off guard, adversely affecting peoples’ lives and businesses on an unprecedented scale. According to the EY Global Risk Survey in 2020, four out of five of companies’ board members and CEOs across the globe said their businesses were not well-prepared to face the pandemic crisis head on.
Companies have been employing various, often reactive actions, and even alternative methods to address the growing concerns impacting their businesses. These add pressure as they try to keep their business operations afloat. Furthermore, it has dramatically changed the risk landscape and given rise to new risk hot zones:
Health, safety and mobility: The community transmission of the virus poses a huge health risk. This immensely affected the life and ways of working for customers, business owners and employees as their mobility becomes limited.
Macroeconomics: The health crisis crippled the global economy. Supply chains across countries remain stressed, disrupting both demand and supply.
Cybersecurity: The lockdown has forced people to work remotely and connect virtually. The spike in use of technology and cyberspace opens cracks for cybercriminals to hack, phish and even infect vulnerable IT networks and infrastructure.
Compliance and stakeholder perception: The pandemic has caused governments to implement urgent measures and programs to fight the novel coronavirus, disrupting various industries. This event has further challenged companies to fulfill their obligation to issue fair disclosures to their stakeholders and maintain their societal brand and reputation.
These disruptions open opportunities for the company’s Internal Audit (IA) function to play a pivotal role as companies are challenged to successfully steer a course towards survival and growth amidst the pandemic.
IA can build trust by exhibiting reliability and continuing to be engaged as co-stewards of the company. It presents a real opportunity to collaborate with other business functions and enable company continuity. This can be achieved by being at the forefront of this pandemic through rapid assessments to identify focus risk areas; being agile in engaging and responding to stakeholder needs; and the continuous monitoring of the pandemic risks and impact on the company.
ACTIVATING IA AS A TRUSTED BUSINESS ADVISOR
IA is in a unique position as its experience allows it to assist in evaluating and managing internal and external business risks in the changing risk landscape. It can provide strategic business continuity advice, acting as consultants and crisis managers. It can start assessing business readiness on the new risk hot zones and potentially identify other risk areas.
Results of the assessment can be used to further understand the current impact of the disruption, foresee upcoming impacts that the disruptions may bring about, and plan how to appropriately respond to ensure public safety, business continuity and social responsibility.
LEVERAGING COLLABORATION TO DRIVE CHANGE
IA is a key contributor in defining the necessary actions that key stakeholders should consider in addressing new threats as a result of the “new normal.” Constant communication is critical to keep key stakeholders aware of and aligned with plans despite the continuing uncertainty.
IA can have more frequent, real-time discussions with the Audit Committee and Management to provide real-time advice on escalating risk focus areas, including critical action plans that they can consider taking.
As governments apply strict social distancing guidelines and curtail travel, IA can assist businesses and provide advice on adjusting to a remote work environment, such as how usual controls can be executed or mitigating possible changes in roles.
It is also a good opportunity to proactively engage and collaborate with external auditors to discuss the impact of the situation, especially for some procedures that may need to be performed differently due to limited face-to-face interaction.
ADVANCING TECHNOLOGY TO ANTICIPATE EMERGING RISKS
IA can implement a process supported by data analytics and technology to continuously monitor emerging risks. This will open avenues for key stakeholders to collaborate within various business functions. It will also be able to determine areas in their critical processes to stress-test and proactively identify resiliency plans and crisis protocols that can support sustainability of business functions.
STEP CHANGE: NOW, NEXT AND BEYOND
As companies slowly regain momentum to address the impact of the pandemic and prepare for their new normal, there is increasing pressure to reprioritize company resources and drive spending where it matters most.
NOW
IA as a function is called on to adapt to disruption by being more innovative and dynamic in its approach. There is a need to reassess audit priorities and expand the IA lens to clearly evaluate the impact of the pandemic on the organization’s financial, IT and operations risks.
IA can invigorate decision-making as IA resources can be repurposed to directly support the business by providing real-time advice on crisis management, business continuity, cybersecurity issues, employee well-being, brand protection and working capital management.
It is also a good opportunity for IA to proactively revisit control design changes and discuss internal control focus areas. In particular, key controls on processes such as inventory count or financial close may need to be performed remotely because of social distancing requirements, or in the event that the individual executing the control is ill for an extended period.
NEXT
Audit scope may shift focus to escalating risks such as data privacy and information security, liquidity and working capital, employee health and well-being, business resiliency and regulatory changes. As IA reprioritizes the audit plan, it needs to assess whether IA resources have the right skills, methodology and technology to enable them to execute its work.
IA work can be continued, but with considerations on cost and the least disruption to the business. With the possibility of an extended economic downturn, more IA departments may face budget cuts. Hence, IA will need to find innovative solutions to enable them to do more with less. It may also consider performing analytics-based procedures which can be performed remotely, or leverage on third party IA service providers as subject matter experts for audits where IA either does not have expertise yet or are in locations currently restricted in lieu of on-site audit procedures.
BEYOND
Chief Audit Executives (CAEs) should continue to innovate their ways of working and interaction with key stakeholders. Short sprints and focused, real-time reports may replace traditional detailed reporting. Internal auditor requirements may also need revisiting as the need for data analysis and automation skills increases while on-site procedures decrease due to social distancing protocols. A flexible workforce structure can also be considered, such as the use of third-party resources, developing an offshore workforce and enabling business rotations to give access to the right subject matter skills at the right place and time.
CAEs must examine their efforts to transform their organization through a new lens with renewed motivation and optimism. IA should continue to act in an advisory capacity to the business to address escalating and emerging risks upfront. As companies face difficult budget decisions, having an IA function that is viewed as a trusted business advisor is key in withstanding tightening budgets and workforce reductions.
While there is no one-size-fits-all solution, CAEs as leaders can be catalysts for change in defining the new normal. The question is, in a world of uncertainty, will they just watch the events unfold or will they have the resilience to reimagine and reinvent the future?
This article is for general information only and is not a substitute for professional advice where the facts and circumstances warrant. The views and opinion expressed above are those of the authors and do not necessarily represent the views of SGV & Co.
Partner Christiane Joymiel Say-Mendoza, Manager Pia Isabella Pagdanganan, and Manager Meleusipo C. Fonollera are from the Advisory Service Line of SGV & Co.
THE government has helped more than 81,000 overseas Filipinos affected by the global coronavirus pandemic, according to the Department of Labor and Employment (DoLE).
“The Labor department has provided cash, food and medical assistance to 81,388 overseas Filipino workers (OFW),” it said in a statement on Sunday.
Food and medicines were given to 3,637 OFWs from Asia and the Pacific, 66,271 from the Middle East and Africa and 9,403 from Europe and the Americas, it said, citing data from the Philippine Overseas Labor Offices.
In a separate statement on Sunday, the agency said the number of stranded OFWs have reached 98,615, citing reports from more than 40 Philippine labor offices abroad.
These workers were either affected by lockdowns, distressed and wanted to come home or could not return home because of travel restrictions.
“Of the total stranded OFWs, 83,483 are in the Middle East while 12,050 of them are in Europe and the American region and 3,082 in nearby Asian countries,” the Labor department said.
Its initial estimate of 300,000 OFWs affected by the global pandemic has increased to 320,000. — Gillian M. Cortez
THE Department of Health (DoH) on Sunday urged the public to report unlicensed clinics that treat foreigners infected with the novel coronavirus.
In a statement, the agency said treatment should only be sought from licensed health facilities and physicians who give medicines approved by the Food and Drug Administration.
“Doing otherwise might result in harm,” DoH said. “While we have not received any reports about clandestine hospitals for Filipino patients, we encourage everyone to report these unlicensed facilities because they endanger our health,” it added.
The Health department said it was coordinating with the authorities about the clandestine facilities, while contact tracing continues.
Police raided an underground medical facility in Pampanga and Makati last month catering mostly to Chinese nationals.
The Bureau of Immigration placed two Chinese nationals on the alert list for operating the underground hospital at the villa in Fontana Leisure Park in Clark Freeport.
They will not be allowed to leave and will be referred to the bureau’s intelligence and legal divisions if encountered in the airport. They were arrested in the raid but were released without being charged.
Justice Secretary Menardo I. Guevarra has said he would order the National Bureau of Investigation and Immigration bureau to find illegal clinics in the country. — Vann Marlo M. Villegas
Samal resort owners seek local gov’t help for furloughed workers, long-term alternative livelihood
SAMAL, accessible by boat from Davao City, is a popular beach destination for day-trippers, weekend tourists, and long-term guests. While Samal can resume tourism activities under its quarantine classification, Davao City will remain under the stricter category at least until June 15. — BW FILEPHOTO
THE summer months of April and May are typically the busiest for Samal Island, the top beach destination in Davao Region given its proximity to the Davao airport. But this year, with the coronavirus disease 2019 (COVID-19) pandemic, the more than 100 resorts on the island have been forced to close. And resort owners are seeking help from the local government, primarily for workers who have been furloughed due to the halt in tourism activities. Pastor M. Lozada, Jr., president of the Samal Resort Owners Association, said while some of their members have been able to keep paying their employees, they are also spending to maintain facilities despite zero income since mid-March when the lockdowns started. “All resort owners do not have income, but we need to maintain our facilities and to sustain this, we need to produce cash, but we are running out of cash,” said Mr. Lozada, speaking in mixed English and Filipino, in a phone interview. He said very few of the affected workers were included in the list of beneficiaries for the cash aid from the national government under the social amelioration program (SAP). He added that this is merely a short-term subsidy, along with the relief packages distributed by the local government, which do not address the anticipated long-term impact of COVID-19 on the tourism industry. “Very few of them received the SAP. And even if they were given rice and sardines, that is not the solution. What is needed is they be given work,” Mr. Lozada said.
NOT SOON
Resort owners on the island, officially named Island Garden City of Samal, do not expect tourists to start coming soon even when travel restrictions are eased and airports are reopened. “Tourism is really dead here in Samal. And we are expecting that most of the people who will be going to the resorts, when everyone is allowed to go out, mostly will be locals,” he said. But, he added, neither are they betting big on local visitors because “they are (also) mostly with no jobs.” Latest local government data show the island received an average half a million day-trip tourists annually and over 250,000 who stay a night or more. Samal Mayor Al David Uy, in an interview over Davao City Disaster Radio last May 15, said they are already planning tax discounts for resort owners, which will be applied during the business permit renewal next year. “We will give discounts to resort owners next year. If we look at Samal tourism at this point, it is zero,” Mr. Uy said. Mr. Lozada, however, said a tax discount is “immaterial” and that the more pressing problem that needs to be addressed is unemployment. Samal, established as a city in 1998, remains agriculture-based with coconut and copra production as top sector. — Maya M. Padillo
Business groups denounce impunity of officials violating quarantine protocols
BUSINESS groups denounced the prevailing culture of impunity with reports of public officials violating quarantine protocols but not immediately held liable by law enforcers.
In a statement on Sunday, different private sector organizations said they have been supporting the “whole-of-government, whole-of-society” response against the coronavirus pandemic, noting that its members as well as their employees and officers were compliant with measures to contain the spread of the disease.
“We are therefore greatly disappointed — even appalled and dismayed — about news reports of public officials violating with impunity the IATF (Inter-Agency Task Force) and DoH (Department of Health) protocols intended to protect public health,” they said in a joint statement, without naming any official.
They noted that from March 17, the start of the strict lockdown, until April 17, almost 30,000 civilians had been arrested — with 6,616 undergoing inquest while 23,016 cases were for filing.
The total increased to nearly 41,00 by May 1.
Financial necessity and unfamiliarity with the new rules led to detention of people for days, which increased their risk of exposure to the virus in overcrowded facilities, they said.
They cited the rule of the Supreme Court reducing bail and allowing recognizance for the release of the accused.
The signatories are the American Chamber of Commerce of the Philippines, Canadian Chamber of Commerce of the Philippines, Financial Executives Institute of the Philippines, Institute for Solidarity in Asia, Inc., Institute of Corporate Directors, Judicial Reform Initiative, Makati Business Club, and Management Association of the Philippines.
They added that those arrested “suffered detention, costs, humiliation, and inconveniences, and some endured unwarranted jail time when unopened courts or government offices, or even limited bank branches, could not process their bail in a timely manner.”
The groups said they trust that the government will strictly observe and enforce the rule of law “and serve as role models in discipline and moral ascendancy.”
“Upholding the law and ensuring faith in our justice system stand as the bedrock of our democracy, and will enable the economy to survive and recover from these most trying times. The sacrifice of our people deserves nothing less,” they said.
Major General Debold M. Sinas, head of the National Capital Region police, celebrated his birthday with a party early this month despite protocols prohibiting mass gatherings.
He has been charged for violating quarantine protocols, along with 18 other policemen, but has not been ordered to step down from his post.
Senator Aquilino L. Pimentel is also facing charges for breaching quarantine protocols when he accompanied his wife who was due to deliver their child at the Makati Medical Center last March.
Mr. Pimentel tested positive for coronavirus.
According to the World Justice Project 2020, the Philippines has one of the weakest rule of law in the East Asia and the Pacific region, ranking 91st out of 128 countries in the Rule of Law index, same as last year.
The country rose in the ease of doing business ranking at 95 from 124 last year, according to the World Bank Doing Business 2020 report, citing the abolishment of the minimum capital requirement for domestic companies and by easing construction permit processing and streamlining process to secure occupancy certificates. — Vann Marlo M. Villegas
Senator wants probe on OWWA assistance to returning overseas workers
PHILSTAR
A RESOLUTION seeking to look into the operations of the Overseas Workers Welfare Administration (OWWA) in assisting returning overseas workers has been filed in the Senate.
Minority Leader Franklin M. Drilon filed Senate Resolution No. 417 after finding OWWA’s assistance to workers displaced by the coronavirus disease 2019 (COVID-19) as “insufficient and dismal.”
Mr. Drilon said the agency has yet to tap its P20-billion OWWA Fund, sourced from overseas Filipino workers (OFWs) and has so far only facilitated the provision of food packages, transportation and accommodation of workers.
The Fund “could be and should be utilized to help OFWs affected by the COVID-19 pandemic by providing them adequate financial, livelihood and other assistance,” the resolution read in part.
It may be used to benefit returning workers through insurance coverage, legal assistance, placement assistance, remittance services, skills and career development, among others.
On top of this, OWWA has a P1.58 billion allocation under the 2020 national budget, Mr. Drilon noted.
President Rodrigo R. Duterte on May 26 ordered the agency, along with the labor and health departments, to immediately send home 24,000 repatriated workers who have been stuck in quarantine facilities in Metro Manila for over two months.
Labor Secretary Silvestre H. Bello said on Friday some 19,000 workers have already been transported to their hometowns.
Meanwhile, the Department of Foreign Affairs continues to repatriate Filipinos affected by the pandemic that has infected 6.1 million and killed more than 370,000 people worldwide.
Some 150 overseas Filipinos from Malaysia and India arrived on Saturday, bringing the number of repatriates to more than 31,000 since February.
In its May 30 report, the Department said there are 2,869 confirmed cases involving Filipinos abroad, including 1,554 active cases. The remaining 975 have recovered, while 340 have died.
In another development, the Philippine Overseas Employment Administration (POEA) warned the public against schemes online promising employment after the ongoing country-wide quarantine.
“The public is warned of promises of online scammers for job interview and deployment after the ‘lockdown’ or after ‘lifting of the quarantine,’” reads POEA Advisory No. 62 dated May 22.
These online advertisements usually ask for reservation fees and/or personal information.
POEA said legitimate online employment advertisements must state the following, but not limited to: Name of the licensed recruitment agency, the agency’s registration number, job positions, qualifications, and salaries.
Payments must be made to the recruitment agencies.
“Absent these information, the POEA urges the public to ignore the advertisements,” it said.
POEA’s Website has a verification system for licensed recruitment agencies and available jobs. — Charmaine A. TadalanandGillian M. Cortez
Senate panel finalizes Bayanihan law extension, stimulus package
THE measures extending President Rodrigo R. Duterte’s special powers until September and the proposed economic stimulus package are being finalized, the Senate committee on finance said on Sunday.
Senator Juan Edgardo M. Angara, who chairs the panel, said they are planning to endorse the extension of the Bayanihan to Heal as One Act and the economic stimulus during Monday’s session.
“Trying for tomorrow,” Mr. Angara said in a phone message, “Just awaiting comments from senators and agencies before finalizing committee report.”
The panel, joint with the committee on economic affairs, last week tackled the Bayanihan law, which granted Mr. Duterte the authority until June to realign the budget to fund measures in response to the coronavirus disease 2019.
Congress will adjourn on June 3 and is set to open the second regular session on July 27. At least four economic stimulus bills have been filed, with proposals ranging from P108 billion to P600 billion.
Mr. Angara said the panel has yet to agree on the amount.
The House of Representatives has approved on second reading the proposed Philippine Economic Stimulus Act, which will inject P1.3 trillion between 2020-2023 to aid workers and businesses. — Charmaine A. Tadalan
Party-list rep files bill for mandatory registration of stranded, abandoned workers
CONSTRUCTION Workers Solidarity Party-List Rep. Romeo S. Momo has filed a bill mandating the registration of all stranded and displaced workers to expedite government aid in times of crisis such as the ongoing coronavirus outbreak.
Under House Bill 6813, employers will be required submit a list of all affected workers within five days from the declaration of a lockdown to the barangay or local government as well as to the field office of the Department of Labor and Employment.
Mr. Momo said while stranded workers are supposedly covered by the Social Amelioration Program of the government, “some still fall through the cracks and remain unassisted and because of the direness of the situation, many of the stranded workers, majority of which are construction workers, were forced to beg or use social media to call for donations and relief goods.”
If passed into law, employers face fines or imprisonment for non-compliance.
The bill is currently pending at the committee level in the House of Representatives. — Genshen L. Espedido
Poe appeals for faster cell site rollout for digital learning
THE Senate committee on public services appealed to President Rodrigo R. Duterte to order a faster rollout of cell sites across the country for improved connectivity as the education sector is expected to tap more digital learning options amid the coronavirus threat.
“We appeal to the President to put to task all sources or causes of delay in the construction of the necessary infrastructure to enable us to connect effectively with our students who are aspiring for better lives,” Senator Grace S. Poe-Llamanzares, committee chair, said in a statement on Sunday.
The Department of Information and Communications Technology had said there are currently only 20,000 towers in the country and 50,000 cell sites are pending installation.
The Department of Education has set the reopening of classes on August 24, with minimal face-to-face interactions through alternative learning platforms. — Charmaine A. Tadalan
Courts in GCQ areas to continue virtual hearings
THE Supreme Court will allow trial courts in areas under the general community quarantine (GCQ) category to continue conducting hearings through videoconferencing.
In a statement Sunday, Court Administrator Jose Midas P. Marquez said this was approved by Chief Justice Diosdado M. Peralta in a circular, following the physical closure of courts due to the strict lockdown as part of mitigation measures to stop the coronavirus spread.
“Hence, for example, if a party wishes his/her case to be heard via videoconferencing, the proper motion just needs to be filed, and the court, using its sound discretion, can either grant or deny the motion,” Mr. Marquez said, adding that it applies to both civil and criminal cases.
Courts in areas that were first placed under eased lockdown were allowed to open with skeleton staff starting May 18. — Vann Marlo M. Villegas
Current economic policy is focused on fighting the pandemic. The Central Bank has loosened monetary policy, and the national government has hiked its expenditures by allowing a higher deficit.
The steep rise in government expenditures is meant to expand and strengthen the health care system and provide social amelioration. Money is flowing to procure medicines, testing kits, and other medical supplies and equipment; augment the healthcare workforce; transfer cash and in-kind assistance to the poor; provide wage subsidies; and lend assistance to micro, small and medium entrepreneurs.
But the immediate objective of loose monetary and fiscal policies is not to pursue economic growth but to protect health and save lives. The massive spending for health and social amelioration goes hand in hand with a deliberate policy of having a community quarantine to slow down the spread of COVID-19. This essentially locks down the economy.
Although the focus is on saving lives, even if it means trading off economic activity temporarily, the government has set in motion the actions and the reforms that have to be undertaken for the economic recovery.
We do not know exactly when the recovery will happen and how quick it will be. We still do not know much about COVID-19. We do not know when the vaccine will be introduced. Fear of getting infected by a highly contagious disease cannot be fully vanquished when our information about the virus is limited and our weaponry to quell it is incomplete. The title of the book authored by British economists John Kay and Mervyn King, says it all: we face “radical uncertainty.”
Despite this radical uncertainty, policy-makers have a grasp of the required critical reforms for economic recovery. Tax reforms are absolutely necessary in light of a deficit that is running now at 8% of Gross Domestic Product (GDP). Such a level of deficit spending has to unwind once the crisis created by the pandemic subsides. On the other hand, the new normal will require a sustained higher level of spending for health and human development, science and technology, and new types of infrastructure.
It is thus providential, in a manner of speaking, that tax reforms, embodied in TRAIN (or Tax Reform for Acceleration and Inclusion) law, were enacted before the outbreak of the pandemic. The tax reforms have given the country much wider fiscal space to spend in the time of crisis or emergency. It has made the country creditworthy as indicated by the investment grade that credit-rating agencies have given to the Philippines. Thanks to the tax reforms, The Economist has ranked the country sixth among emerging economies in terms of financial strength.
Nonetheless, the comprehensive tax reform program remains incomplete. One critical package that should have been passed much earlier is now being deliberated. This is about the rationalization and restructuring of fiscal incentives together with the reduction of corporate income tax. Formerly called CITIRA (Corporate Income Tax and Incentives Reform Act), it is now dubbed CREATE (Corporate Recovery and Tax Incentives for Enterprises Act).
This reform has long been overdue, but it has gained traction recently. Ideally, Congress should have passed it on the heels of TRAIN. But the intransigence of the Philippine Economic Zone Authority (PEZA) and the hazards of compromise obstructed the bill’s early passage.
Because of the economic crisis brought about by the pandemic, the reform on corporate income tax and fiscal incentives has to adapt to the new complexity. It has to respond to both the short term, which is about the stimulus, and the long term, which is about tax and economic restructuring.
In this context, CREATE differs from CITIRA. The main change is in terms of the speed of reducing corporate income tax. CITIRA was prudent by allowing a gradual decrease in the income tax. Concretely, CITIRA would have allowed a drop of one percentage point of the tax rate every year, currently at 30%, till it reached 25%. Thereafter, further tax decreases to settle at the rate of 20%t would be made contingent on the desired sustainable level of government deficit. This was the design and the approach to avoid huge revenue losses and make the reform revenue neutral.
But the pandemic has changed the calculus. Fiscal stimulus has become urgent. Hence the bill has been redesigned as CREATE, which will immediately and in one single stroke reduce the corporate tax from 30% to 25%t. On top of this, the proposal is to extend the application of net operating loss carryover (NOLCO) for business losses in 2020 from the current three years to five years.
In sum, the original intent of revenue neutrality has to give way to the expediency of the stimulus, resulting in a net revenue loss.
The essential features found in CITIRA are retained in CREATE. Specifically, the reform makes the incentives transparent, time-bound and performance based. The reform also introduces a governance and review board to ensure that applications for incentives meet the rigorous economic criteria.
Moreover, CREATE will move away from the “one-size-fits-all” regime that relies heavily on tax incentives towards a wider and more balanced menu of tax and non-tax incentives. This menu brings innovativeness, adaptability and sophistication that all the more requires having competent governance, which is organizationally expressed in the Fiscal Incentives Review Board.
As noted earlier, CREATE is responsive to the immediate challenges brought about by the pandemic. CREATE is both a stabilization mechanism and a longer-term reform for investment promotion and tax efficiency and equity. The short term and the long term may be independent of each other, but they are not contradictory,
The immediate and sharp reduction of corporate income tax from 30% to 25% exemplifies the short-term goal of a stimulus. But we make an important caveat on the tax cut. The lessons of previous economic recessions, as well as what the literature tells us, show that the effectiveness of a tax cut as a fiscal stimulus is limited. This is because gains from the tax cut (the beneficiaries are mainly the upper classes and corporations) are not necessarily used for consumption that increases aggregate demand. Corporations, for example, might just save the windfall as a strategy to ride out the pandemic, or for those remaining profitable, they might use the gains derived from the tax cut to reacquire stocks or give dividends to the wealthy shareholders.
On the other hand, corporate tax reduction for firms with high labor intensity can have higher social benefits.
Thus, there is room to improve the design of the tax cut to make it truly responsive to a stimulus that will ultimately benefit workers and their households. The tax cut must find a way to be translated into wages that will boost aggregate demand.
Hence, our proposal is to make the immediate corporate tax reduction from 30% to 25% contingent on job preservation or job creation. This is a social bargain. The firms will be entitled to the swift income tax reduction only if they would retain their workforce or, better, increase employment. The heart of the stimulus is found in the bill’s title: CREATE. Tying the corporate tax reduction to creating jobs is thus essential.
Filomeno S. Sta. Ana III coordinates the Action for Economic Reforms.
