How PSEi member stocks performed — July 2, 2019
Here’s a quick glance at how PSEi stocks fared on Tuesday, July 2, 2019.
GSIS head resigns for ‘personal reasons’
GOVERNMENT Service Insurance System (GSIS) President and General Manager (PGM) Jesus Clint O. Aranas said he resigned Tuesday, for “personal reasons” according to his communications staff.
In his resignation letter addressed to President Rodrigo R. Duterte, Mr. Aranas tendered his resignation as the head of the state-run pension fund effective July 2.
“I resign, secure in the knowledge that I have unwaveringly advanced the interest of GSIS and its members in discharging the functions of the said office always in obeisance to all laws and never once compromising my integrity or that of the office I now relinquish,” Mr. Aranas said.
GSIS Vice President for Corporate Communications Margie A. Jorillo confirmed the resignation to BusinessWorld, saying Mr. Aranas stepped down for “personal reasons.”
“As of now, designation of OIC (officer in charge)-PGM, subject to GSIS Board approval,” Ms. Jorillo said in a text message when asked what the GSIS leadership is focusing on.
In a separate message, Executive Secretary Salvador C. Medialdea confirmed that the Office of the President (OP) received the resignation letter.
“Yes, it has but he did not disclose his reason,” Mr. Medialdea said.
Mr. Aranas’s resignation came days after the pension fund was ordered by the Commission on Audit to return about P260.5 million from the pension fund’s Galing ng Pagkilala incentive, finding that this was disbursed without the approval of the OP and the Department of Budget and Management (DBM).
“Foregoing considered, the grant of Pagkilala incentive, without the prior recommendation and approval of the DBM and Office of the President, respectively, resulted in illegal expenditure which is not allowed in audit,” the CoA said in its 2018 annual audit of GSIS.
The GSIS also announced recently that it will go ahead with the sale of a portion of Manila North Harbor, which is operated by the International Container Terminal Services, Inc. (ICTSI). The port operator claims the pension fund has no authority to do so.
The land is estimated to be worth about P33.632 billion, based on the zonal valuation as of May 9.
“As a government entity that exists to ensure the integrity of the funds of its members, GSIS is determined to sell it through public bidding upon the approval of the Board,” Mr. Aranas said in a statement on June 26.
Mr. Aranas was asked to comment but had not replied at deadline time.
Mr. Aranas was appointed to head the GSIS in November 2017. Prior to his appointment, he served as deputy commissioner of the Bureau of Internal Revenue. He also served as national treasurer of Partido Demokratiko Pilipino — Lakas ng Bayan, Mr. Duterte’s political party. — Karl Angelo N. Vidal
PEZA to commission independent study on impact of eco-zone incentives
THE Philippine Economic Zone Authority (PEZA) said it will commission an independent study to establish which of its fiscal incentives the are effective in driving economic growth, to establish the case for retaining the perks when the legislation comes before Congress.
“We will be hiring either SGV or PriceWaterhouseCoopers because we want to have a performance audit of PEZA from the time it was created in 1995 to 2018 so we will really know the efficiency of PEZA and the contribution of every incentive. Kasi baka may mga areas na tama naman see DoF (There may be some parts of the Department of Finance’s critique of the incentive refine are correct). I want to see it myself,” PEZA Director-General Charito B. Plaza said in a briefing last week in Taguig City.
The DoF is proposing tax reforms that rationalize the system of fiscal incentives, including the 5% rate on gross income earned (GIE) and income tax holidays, which the department claims cost the government billions in foregone revenue.
PEZA estimates of the benefits derived from incentives diverge from the DoF’s.
Ms. Plaza added it is the National Economic Development Authority’s (NEDA) duty to conduct a cost-benefit analysis under Republic Act 10708 or the Tax Incentives Management and Transparency Act (TIMTA) of 2015.
“If only NEDA had done the cost-benefit analysis as required by the TIMTA law… Wala daw specialist pa si NEDA (NEDA says it lacks specialists) to interpret and do the cost-benefit analysis. Kaya nga DoF (which is why DoF) bases its position on its own computations and we have our own,” Ms. Plaza added.
Under the TIMTA law, NEDA is required to conduct the analysis annually based on the aggregate tax incentives report compiled annually from data provided by investment promotion agencies.
The independent study PEZA is planning to commission will also include an analysis of social benefits of fiscal incentives, according to Ms. Plaza.
“Growth in the Calabarzon area, for example, where the LGUs (local government units) are earning a lot because they have a share of the 2% GIE and real property taxes while their constituents are given jobs, (exemplifies) the multiplier effect” of such investments, Ms. Plaza said.
She added the Calabarzon region has the “highest social progress that cannot be quantified, that can’t be seen but can be felt.”
Ms. Plaza added she hopes the review will be completed within the year and help PEZA make the argument for retaining incentives when the bills go before the 18th Congress.
The reform bills also aim to reduce corporate income tax to 20% by 2029 from 30% currently while overhauling the current system of fiscal perks. — Janina C. Lim
ILO expecting trillions of dollars in lost productivity as planet warms
THE International Labor Organization (ILO) said heat-related stress resulting from global warming will result in productivity losses equal to more than $2 trillion by 2030 worldwide.
In its “Working on a warmer planet: The impact of heat stress on labour productivity and decent work” report, the labor arm of the United Nations (UN) said that its projections in the next decade the lost productivity is equivalent to the output of 80 million jobs.
“Projections based on a global temperature rise of 1.5°C by the end of this century suggest that in 2030, 2.2% of total working hours worldwide will be lost because of higher temperatures, a loss equivalent to 80 million full-time jobs. This is equivalent to global economic losses of$2,400 billion,” ILO said in a statement on Monday.
In the Philippines, total projected work hours lost due to heat stress are estimated at 2.33% in 2030, the equivalent of 1.217 million full-time jobs.
Heat stress is defined as intolerance to heat, typically for temperatures beyond 35°C. ILO said that this is considered and occupational health and safety hazard that needs to be addressed.
While the report said workers in all industries will be affected by heat stress, some will be more at risk than others.
“Workers in all sectors are affected, but certain occupations are especially at risk because they involve more physical effort and/or take place outdoors. Such jobs are typically found in agriculture, environmental goods and services (natural resource management), construction, refuse collection, emergency repair work, transport, tourism and sports,” the report said. They added even factory workers in indoor settings are at high risk if temperatures in the workplace are not properly regulated.
ILO’s research department head Catherine Saget said that economic losses will not be the only result of global warming, which will also affect labor conditions and contribute to job displacement.
“In addition to the massive economic costs of heat stress, we can expect to see more inequality between low and high income countries and worsening working conditions for the most vulnerable, as well as displacement of people. To adapt to this new reality appropriate measures by governments, employers and workers, focusing on protecting the most vulnerable, are urgently needed, “ Ms. Saget, who is also one of the report’s authors, said.
“Although governments are instrumental in creating a regulatory and institutional environment that facilitates behavioral change at the workplace level, the role of both employers’ and workers’ organizations is no less crucial to a successful implementation of adaptation measures,” the report said. — Gillian M. Cortez
DILG to distribute over ₱11 billion to support 1,373 low-income local governments
THE Department of Interior and Local Government (DILG) said it allocated P11.714 billion to support 1,373 municipalities under its Assistance to Municipalities (AM) program.
DILG Secretary Eduardo M. Año said that the program will help fund priority infrastructure projects such as roads, bridges, drainage systems, potable water supply, evacuation centers, and drug rehabilitation centers.
“Layunin ng AM program na matulungan ang mga munisipyo lalong lalo na yung mga 4th to 6th class at iyong nasa malalayong lugar para matupad ang kanilang mga programa at mabigyan ng serbisyo ang kanilang mga mamamayan,” said Mr. Año in a statement Tuesday. (The AM program aims to help municipalities, especially those who are considered 4th to 6th class, and those that are in far flung areas, to ensure that their programs are implemented and services are delivered to residents.)
From the AM funds, P1.17 billion will support 134 AM projects across 75 local government units (LGUs) in Ilocos Region; P818-million for 145 projects in 89 towns in Cagayan Valley; P1.269 billion for 207 development projects in 116 towns in Central Luzon; P1.153 billion for 259 projects in 123 towns in Calabarzon; P509 million for 108 projects in 71 towns in Mimaropa; P851 million for 177 projects in 107 towns in Bicol Region; P656 million for 134 projects in 75 towns in Cordillera Administrative Region (CAR); and P11 million for a project in the National Capital Region (NCR).
P1 billion was allocated for 173 projects in 136 towns in Eastern Visayas; P965 million for 169 projects in 117 towns in Western Visayas; and P834 million for 196 projects in 116 towns in Central Visayas.
P553 million will be given to 103 projects in 103 towns in Zamboanga Peninsula; P673 million for 116 projects in 84 towns in Northern Mindanao; P304 million for 74 projects in 43 towns in Davao Region; P387 million for 71 projects in 45 towns in Soccksargen; and P551 million for 76 projects in 67 LGUs in Caraga.
DILG said that the criteria for budget allocation include equal shares, fiscal capacity, per capita share, and LGU performance.
Further, Mr. Año said the funding is subject to the submission of some requirements.
They include certifications like the DILG Good Financial Housekeeping and the DILG Local Development Council Functionality Assessment; the assessment of Public Financial Management (PFM) Systems and adoption of corresponding PFM improvement measures; and submission of notarized certifications for fund release signed by the local chief executive.
DILG said “only those LGUs who have complied with the mandatory requirements will be endorsed by the DILG for the direct download of AM funds from the Department of Budget and Management down to the LGU level.” — Vince Angelo C. Ferreras
The June 9 Reed Bank Incident: Chinese gray zone operation in action?
The warm waters of the South China Sea are rich, which make them highly contested fishing grounds. China is the largest littoral state around this body of water, and it has a huge population to feed. It has built several supporting harbors and infrastructure in the last few years in the area, enabling it to deploy the largest fishing fleet in the South China Sea. The Chinese Maritime Militia (CMM) leads and protects China’s huge armada of fishing vessels.
The CMM’s purpose is to keep Chinese aggression at sea below the level of naval operations, thus complicating the littoral states’ responses to China’s maritime expansion. It hides behind a civilian facade, which allows it to hide behind the cloak of deniability. This gives China a powerful incentive to dissemble and deny the evidence of the militia’s invisible role of asserting Chinese maritime claims in the East and South China Seas. The CMM is not a maritime law enforcement agency even as it supports China’s goal of gaining control over the whole of the South China Sea through gray zone operations.
It was US naval analysts who alerted the world about China’s gray zone operations, including the deployment of non-naval coastguard and CMM fishing vessels geared to enlarge Chinese presence in the contested waters. An American analyst defines gray zone operations as “actions in the sea that often blur the line between military and non-military platforms, actions, and attribution for events, and are often, but not always, undertaken to assert” a territorial claim. Claiming that there is such a thing as Chinese gray zone operations, however, ignores how China has perfected a type of political warfare nearly 4,000 years ago, one which considers the use of force as a last resort and aims to defeat an enemy without actually fighting.
AN ACCIDENT OR A CMM OPERATION?
On the midnight of June 9, 2019, a Chinese fishing vessel rammed and sank a wooden Filipino fishing boat, the F/B Gem-Ver 1, then anchored at Reed Bank. After the collision, the Chinese vessel turned off its signal lights and sailed away as the Filipino boat sank. The 22 Filipino fishermen abandoned their boat and struggled to keep themselves afloat for more than six hours. Fortunately, a Vietnamese fishing vessel was in the vicinity and rescued all the Filipino fishermen.
On June 12, Philippine Defense Secretary Delfin Lorenzana publicly announced the incident and criticized the Chinese for abandoning the Filipino fishermen to the mercy of the sea. Mr. Lorenzana said “the cowardly action of the Chinese fishing vessel that abandoned the Filipino fishermen is not the expected action from a responsible and friendly people.” He called for a formal investigation of the incident and appealed to authorities to take the appropriate diplomatic steps.
On June 13, the Chinese foreign ministry came out with a dismissive statement, calling the June 9 Reed Bank incident as “an ordinary maritime traffic accident.” China was still investigating the matter, said Chinese foreign ministry spokesperson Geng Shuang. “If relevant reports are true, regardless of the country from which the perpetrators came from, their behavior should be condemned,” he added, even as he castigated the Philippines for politicizing the incident without verification.
Philippine Navy (PN) Vice-Admiral Robert Empedrad challenged the Chinese position. According to him, it was a deliberate maneuver by the Chinese vessel to ram a smaller wooden Filipino boat. “The Filipino boat was anchored,” he said. “Based on the International Rules of the Road, it had the privilege because it could not evade an incoming ship. So the boat was rammed. This is not a normal incident.” He added: “It was the Chinese disregard for the safety and well-being of the 22 Filipino fishermen that made the incident doubly reprehensible.”
Supreme Court Associate Justice Carpio argued that no ordinary Chinese fishing vessels would engage in the ramming of other fishing boats for fear of inflicting damage to their own vessel. According to him, a CMM vessel probably sank the Filipino boat since it has a reinforced steel hull designed for ramming fishing vessels of other coastal states in the South China Sea.
Mr. Carpio observed that CMM vessels often loitered in the territorial waters off Philippine-occupied Pagasa (Thitu) island and other Philippine-occupied rocks in the Spratlys to intimidate Filipino occupants. The alleged ramming and sinking marks a possible quantum escalation of China’s aggressive acts against the Philippines. This incident might be the start of a new Chinese “gray zone” offensive to drive Filipino fisherman away from their traditional fishing grounds in the Reed Bank.
LET THE CHINESE FISH IN PHILIPPINE EEZ!
The captain of the ill-fated Gem-Ver 1 confirmed the navy chief’s account that the incident was deliberate since the crew of the Chinese vessel saw his fishing vessel before the collision. Ship captain Jonnel Insigne said that the Chinese vessel turned its lights on seconds before it rammed the Gem-Ver 1 and fled the scene with its lights off after the smaller wooden Filipino boat began to sink with all its catch and equipment. He told reporters that they thought the Chinese would pick them out of the water after the boat sank but they left the Filipinos alone in the dark. After interviewing the fishermen, the Department of Foreign Affairs (DFA) confirmed that an investigation was ongoing but intelligence reports were “confident” that the Philippine boat was stationary when it was hit by the Chinese vessel.
Instead of considering the June 9 incident as a possible CMM operation, however, the current administration immediately adopted the Chinese government position that it was an “ordinary maritime incident.” It has also agreed to a joint investigation with China. To add insult to injury, President Rodrigo R. Duterte also wants the Chinese fishermen to fish in Philippine waters because the Philippines and China are friends. Such a position does not only violate the Philippines Constitution, it offers to China’s huge fishing armada and the CMM the opportunity to conduct more gray zone operations that will afford Beijing the capability to drive Filipino fishing boats away in the West Philippine Sea.
Renato Cruz De Castro is a Trustee and Convenor of the National Security and East Asian Affairs Program, Stratbase ADR Institute.