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Pilo Hilbay: Our defender against China

Many Filipinos may not know Florin “Pilo” Hilbay yet — but they should. Hilbay is among our rare public servants with the courage to speak out against the Duterte administration’s policies towards China. For Hilbay, what belongs to the Philippines should remain for the Philippines and he is willing to risk life and liberty to protect our interest.

For those worried about China’s creeping invasion, Hilbay is the man who will fight the cause. After all, he has done it before. Armed with one of the sharpest minds of our generation, Hilbay dragged China to court and won.

The China-Hilbay saga started in 2013, when, in a unilateral act of aggression, China announced that the Spratlys, Parcel islands and Maclesfeild bank would be administered by Sasha city, a territory of China. No less than a senior colonel of the Chinese military was put in charge. Suspicions were rife that China would build a military base to support its navy and air force — something China vehemently denied. Years later, the suspicions were proven true.

The Chinese roped off the entrance of the Scarborough lagoon, preventing Philippine vessels from entering, including those of our fishermen. The Chinese military accosted Philippine vessels that traversed the area, confiscated their contents and detained the crew. It was a blatant disrespect of our sovereignty.

The Aquino administration resisted China’s bullying tactics and moved swiftly to defend our sovereignty. It did what any law-abiding republic would do given the situation — it took China to court. It was the only claimant of the disputed territories with the political will to do so. Neither Vietnam, Taiwan, Malaysia or Brunei resisted China’s illegal occupation in the same aggressive manner.

In 2014, the Philippines filed a case against China before the Permanent Court of Arbitration of the United Nations Convention of the Laws of the Seas (UNCLOS). Pilo Hilbay was our Solicitor-General back then and he led our charge at the Hague. He argued that China’s territorial claim was in defiance of the UNCLOS accord to which both China and the Philippines are signatories. He further argued that the basis of China’s claim, its nine-dash line, was conjured out of convenience only in 1947 in contrast to Philippine historical claims whose basis are nautical records dating back to the 15th century.

The nine-dash line is a preposterous claim by any account. If it is to be given credence, then Italy would have the legal grounds to claim the entire continent of Europe. It is absurd. It is for this reason that the international community including the US, Japan, Australia, the EU and ASEAN (except Cambodia) supported the Philippines’ legal argument.

In 2016, the tribunal ruled in the Philippine’s favor saying that China’s nine-dash Line is invalid. It further ruled that China has no legal claim nor historical rights over Philippine Exclusive Economic Zone and that it had behaved unlawfully. Hilbay and his team won the case for the Philippines. This gave us legal grounds to demand that China vacate the disputed territories.

Despite the ruling of the courts, China remained belligerent. In an act of defiance, it even expanded its territorial grab and accelerated the construction of its military base. In a statement, it said that it rejects arbitration and will continue to assert its historical claims over the territories even if it defies international laws.

Following the Philippine’s victory in the Permanent Court, the next step would have been to assert our legal claim by evicting China, even by force. Unfortunately, President Barrack Obama did not support the Philippines in this respect. We can only speculate that Obama’s decision was borne of out of fear of economic retribution. We could not evict China by ourselves which is why they still occupy our territories up to this day.

CHINA AND THE DUTERTE ADMINISTRATION
Contrary to what most believe, the estimated 11 billion barrels of oil, 190 trillion feet of natural gas and rich fishing resources is not China’s primary motivation.

After many years of working on the Philippines’ case versus China, Hilbay believes that China’s motivations are three-fold. They are to control world trade, to secure its vulnerable borders and to justify its illegal territorial grab.

On the aspect of trade, the West Philippine Sea is where one-third of world trade passes through. It is the channel by which 2.2 billion consumers can be accessed. To control the West Philippine Sea is to control global trade. Many speculate that once China has fully militarized the area, it will be in the position to require all ocean vessels to obtain prior clearance before they are allowed passage. They may even charge a toll like they do in the Panama Canal. In short, freedom of passage will no longer be a free right in these waters. This will give China unprecedented control over the flow of goods in the most populous region in the world.

On the military side, the West Philippine Sea is the easiest way to penetrate the Chinese mainland. China needs to control the area to secure its most vulnerable access point.

As for the territorial grab, the more islands China claims as its own, the more it can invoke ITLOS Laws to further annex another 200 kilometers of Exclusive Economic Zone. This is a ploy called the “continuous annex strategy.”

As an aspiring world superpower, China needs to present itself as a benevolent, responsible nation. Calling out China for not respecting the rule of law is something the Duterte administration could do to apply pressure. It has in fact done the opposite.

By not pressing forward with our claims and our victory at the Hague, the Duterte administration has made China’s land grab costless to them and free of repercussion. Mystifyingly, it even treats China like a preferred guest by adopting policies that appear to be skewed to China’s favor and at Philippine expense.

Consider this: Our government has not questioned China’s defiance of the court ruling before the UNCLOS body. This has kept them in good standing with the UN even if they defied a treaty in which they are signatories. It has relaxed immigration laws for Chinese workers even if it takes away jobs from Filipinos and even if the privilege is not reciprocal; it has awarded China lucrative deals in our telecommunications industry even at the risk of national security; it has gone soft on defending our fishing rights especially in the coasts of Zambales, Pangasinan and Ilocos Sur where our fishermen are bamboozled by Chinese patrol vessels; More damagingly, it has entered into a memorandum of understanding with China for joint exploration of the West Philippine Sea. Note, when this MOU progresses to become a binding contract, it will effectively invalidate our victory at the UNCLOS courts.

The concessions given to China are excessive. It belies strategic sense. The question is, why is the Duterte administration bending down to the floor for China?

Is it for investments? Certainly not. Records show that despite all the promises of Chinese investments, our intake from them was a measly US$28.8 million in 2017 and US$198.7 in 2018. China’s investment to the Philippines are dismal.

Is it for soft loans? While China talks big about easy availments of official development assistance, even NEDA Secretary Ernesto Pernia admits that Chinese ODA are among the most difficult to obtain. In addition, Chinese ODAs are not the only game in town as Japan offers comparative, if not better terms.

Is it for trade concessions? We have not received anything extraordinary outside the unrestricted entry of our bananas into China. China has not changed the deceleration trend of our exports.

Is it for military alliance? It makes no sense since China is the invader of our territories and, hence, our enemy.

Is it for diplomatic re-alignment? Pursuing an independent foreign policy is something we all agree with. However, the reality is that government has in fact pivoted away from the US and towards China. What we have is not an independent policy but a pro-China policy.

So again, we ask….. why the excessive deference for China?

Hilbay can only speculate the reasons why. I have no clue. All I know is what I see — that Filipino sovereign and economic interests are seemingly compromised in favor of the invader. Knowing that it is inflicted by our own government adds insult to injury.

I have many friends working for this administration and all of them are supportive of government’s pro-China policies. I’d like to think that their loyalties are not to China per se but to the Chief Executive whom they serve.

As Hilbay and I delved deeper into China’s progressive invasion, I dropped my pen, put my palms on my face and made a deep sigh of frustration. It was an unguarded impulse….. my remorse over the state of affairs revealed itself. It was not professional for me to show emotions in a high-level discussion, so I apologized.

Hilbay told me that he has seen the same raw emotions among thousands of Filipinos across the archipelago. The feelings of frustration, fear and uncertainty are so strong that most don’t even want to talk about it.

All these underlines the fact that we need a strong opposition in the Senate. Policies of government need to be mitigated… they need to be vetted without partisan bias. Having a balanced Senate serves our best interest, even those who rabidly support this administration.

Hilbay brought China to court and won. He will do it over again if he needs to. This is why we should all remember his name. More than political dynasties, convicted plunderers, and showbiz personalities, Pilo Hilbay deserves a seat in the Senate. Let’s put him there.

 

Andrew J. Masigan is an economist

DoF sees possible S&P upgrade within a year

THE Department of Finance (DoF) said a credit rating upgrade from S&P Global Ratings is “possible” within a year’s time, to account for reforms in the tax regime and greater ease of doing business.

Undersecretary Gil S. Beltran said the Philippines a credit rating upgrade from S&P could be in the works “within one year” as the government continues to rationalize the tax system.

“One year. It’s possible we get it in one year. Especially if we get the four tax reforms in place,” Mr. Beltran told reporters Saturday during the 2019 Economic Journalists Association of the Philippines Business Journalism Seminar in Baguio City.

In April 2018, the credit rater bumped up its outlook on the Philippine economy to “positive” from “stable,” raising the chances of a credit rating upgrade in the short term. It took stock of tax reform and improved fiscal policies which support solid economic growth.

The Philippines currently holds a “BBB” rating from S&P, which is a notch above minimum investment grade. The rating had a “stable” outlook since April 2015 prior to the 2018 revision.

The government is pushing for comprehensive tax reform to simplify the regime and generate more revenue to support its infrastructure program and expand social services.

Signed into law in December 2017, the Tax Reform for Acceleration and Inclusion Act or the first package imposed excise taxes on certain commodities and updated income tax brackets which raised take-home pay for many taxpayers.

Meanwhile, the package 1B or the Tax Amnesty Act was enacted on Feb. 14, providing relief for delinquent accounts up to year 2017. However, provisions on the relaxation of the deposit secrecy law and the automatic exchange of information with foreign tax authorities were not included in the signed law.

Mr. Beltran, who is also the chief economist of the DoF, said the Philippines may face problems when it comes to attracting foreign investors due to the current state of bank secrecy.

“We cannot even join the ASEAN (Association of Southeast Asian Nations) Trading Link because the investors cannot check the level of creditworthiness of the issuers of the bonds that are in the market.”

A higher credit rating improves the chances for a country to borrow funds from foreign sources at cheaper rates.

Earlier this month, S&P scaled down its growth forecast for the Philippines further to 6.3% from 6.4% previously, citing weaker global demand for exports, as well as higher borrowing costs due to the central bank’s rate hikes in 2018, which will dampen domestic demand.

Apart from S&P, Mr. Beltran said other “big” debt watchers Moody’s Investors Service and Fitch Ratings may upwardly adjust its credit rating as well “If we pass all the tax reform, and then we implement the ease of doing business…”

Enacted last year, the Ease of Doing Business Act aims to eliminate corrupt practices and cut bureaucratic red tape. However, its implementation hangs in the balance as its implementing rules and regulations are still pending.

“For Fitch, we are stable, which means we have to do more to be able to get an upgrade. And for Moody’s, we have to do more to get an upgrade because after being stable for a year, you can get upgrade to positive,” Mr. Beltran said.

The Philippines holds investment grade ratings from Moody’s Investors Service (Baa2, stable) and Fitch Ratings (BBB, stable). — Karl Angelo N. Vidal

Power generators welcome probe into shutdowns amid collusion fears

By Victor V. Saulon
Sub-editor

THE country’s biggest association of power generation companies said its members are ready to answer questions about the status of their plants as calls grow louder for a probe into a possible collusion after deficient energy reserves resulted in rotational brownouts last week.

The Philippine Independent Power Producers Association, Inc. (PIPPA) said during the weekend that its member generators were working doubly hard to resolve the power supply problem, which it attributed to the increase in consumer demand.

“PIPPA members are prepared to answer any and all inquiries as to the status of their plants. In the meantime, we would like to request for the public’s patience and trust that these technical difficulties will be fixed in the soonest possible time,” it said in a statement.

The group described itself as an association of 28 companies engaged in power generation that account for 82.8% or 13,549.4 megawatts (MW) of the grid’s installed capacity. Its members have power plants all over the Philippines.

“All our member generators, especially those who are encountering technical difficulties, are fully transparent and in constant coordination with the lead agencies with the submission of real time data and updates in order for these agencies to predict and come up with an adequate energy supply and reserve,” PIPPA said.

It said members with forced or unplanned outages were trying to address the problem and were committed to be fully functional as soon as their issues are resolved in compliance with the directive and mandate of the Department of Energy (DoE).

Its statement came after Senator Sherwin T. Gatchalian, who heads the Senate’s energy panel, called for an investigation into the unexpected brownouts that hit several towns and cities in Luzon. He said the power failure came after the DoE had given its assurance that there was ample supply of electricity reserve throughout the dry season.

“The brownouts felt by our constituents in Luzon these past few days are totally unacceptable,” he said.

“If there’s enough power supply, then how come that there are towns and provinces in Luzon that are experiencing rotational brownouts,” Mr. Gatchalian said.

“Definitely, heads must roll this time. We owe it to the power consumers to give them accurate information on the power situation in the country,” he said.

During the weekend, consumer advocacy group CitizenWatch Philippines also asked the DoE and the industry to explain the power supply situation, after areas in Luzon suffered from power outages.

“The issuance of two consecutive red alerts was more than those issued in the previous years. In 2018, the Luzon grid was not placed under any red alert status while in 2015 and 2017, only one red alert was announced,” said Hannah Viola, convenor of CitizenWatch Philippines, in a statement.

The DoE expected power demand on Saturday to ease, but another plant went on an unscheduled outage, reducing available capacity and prompting the National Grid Corp. of the Philippines (NGCP) to issue a “yellow alert” notice. On that day, available capacity was at 10,326 MW while peak demand reached 9,933 MW.

The alert notice means the grid operator was already tapping into its contingency reserve after its dispatchable reserve was fully spent. Both reserves are equivalent to the biggest operating plant online — the two identical units of the power plant in Sual, Pangasinan each with a capacity of 647 MW each.

South Luzon Thermal Energy Corp. (SLTEC) was able to bring back its unit 1 online on Saturday, helping ease the power shortage after it achieved full load at 8:50 a.m. with a net output of 121 MW, its operator said. The plant, with an installed capacity of 135 MW, was out since March 20.

Ahead of SLTEC’s return, another plant went on an unscheduled outage at 12:41 a.m. The 70-MW unit 1 of Panasia Energy Holding Inc.’s power plant in Limay, Bataan was shut down because of “tripping from actuation of turbine overspeed relay,” the DoE said.

No date was given so far as to when it will be back online.

On Thursday last week, the 150-MW unit 2 of SMC Consolidated Power Corp. (SCPC) in Limay, Bataan was shut down because of a boiler tube leak. It is expected to be back on April 16.

The three other plants on unscheduled outage are the 647-MW unit 1 of TeaM Sual Corp. in Sual, Pangasinan; the 150-MW unit 2 of Southwest Luzon Power Generation Corp. (SLPGC) in Calaca, Batangas; 420-MW unit 3 of Pagbilao Energy Corp. in Pagbilao, Quezon. They will back on April 18, April 21, and April 16, respectively.

As of Sunday, the DoE said the country’s power system was operating as normal even as 1,437 MW in capacity was out.

Senate planning final push on ‘endo’ bill in May

THE Senate will continue plenary deliberation on the bill penalizing labor-only contracting when the legislative session resumes in May, targeting final approval by the time Congress adjourns on June 7.

The chamber closed plenary debate on Senate Bill No. 1826, or the “Security of Tenure and End of Endo Act,” on Feb. 6 and is set to tackle amendments at plenary level before second reading. Its counterpart measure, House Bill No. 6908 has already hurdled third and final reading on Dec. 2017.

When asked about the chances of the bill passing, Senate President Vicente C. Sotto III told BusinessWorld over the phone on Sunday, “I hope so. Best effort.”

The Security of Tenure bill has been identified by the Legislative-Executive Development Advisory Council as a priority. It was also among the measures President Rodrigo R. Duterte pushed for during his Third State of the Nation Address in July 2018.

Senator Joel J. Villanueva, who chairs the Senate committee on labor, employment and human resources development, confirmed in a separate phone message the bill will be taken up in the plenary upon resumption of session on May 20.

Congress is currently on a Feb. 9-May 19 break to accommodate the midterm elections on May 13. It will resume from May 20 to June 7, which gives both Houses three weeks or nine session days to tackle remaining legislative measures. Any unfinished bills will have to be refiled in the 18th Congress, which opens on July 22.

“Once we resume session in May, the period of amendments on the SoT (Security of Tenure) bill will commence. We remain committed to push for its passage to finally give stronger protection to our laborers,” Senator Villanueva told BusinessWorld in a separate phone message Sunday.

“I am certain that my colleagues in the Senate are equally willing and ready to work with us in pushing for a genuine reform for workers’ rights.”

The bill will amend Presidential Decree No. 442, or the “Labor Code of the Philippines,” by prohibiting labor-only contracting and defines penalties for noncompliance.

The bill considers a working arrangement to be labor-only contracting when: a job contractor, whether licensed or not, merely recruits and supplies or places workers to a contractee, regardless of whether or not he or she has substantial capital; the workers recruited are performing activities which are directly related to the principal business of such an employer; and if the workers of the job contractor are under the control and supervision of the contractee.

“The Senate Committee Report on Security of Tenure introduced several amendments to the current provisions of the Labor Code to further protect the rights of our workers, such as emphasizing that labor-only contracting is absolutely prohibited,” Mr. Villanueva said.

He added the bill will also be “requiring all contractors to secure a license from the DoLE (Department of Labor and Employment) and providing requirements to be issued such license, as well as simplifying the classification of workers to regular (which includes project and seasonal employees) and probationary employees.” — Charmaine A. Tadalan

PEZA wants separate incentives regime for exporters in upcoming bill

THE Philippine Economic Zone Authority (PEZA) said it will submit to the next Congress its proposed amendments to the current incentive regime, distinguishing more clearly between firms serving a mainly domestic market and exporters.

Speaking to BusinessWorld in Taguig City last week, PEZA Director General Charito B. Plaza said the agency now has a draft proposal to amend Republic Act 7916 or the Special Economic Zone Act of 1995.

Ms. Plaza said she cannot at the moment disclose other provisions of the draft.

However, in July 2018, Ms. Plaza discussed the possibility of turning PEZA into a government-owned and controlled corporation, and be transferred under the Office of the President from the Department of Trade and Industry (DTI).

She also wanted the PEZA board to have the authority to recommend to the President subsidies to be granted to economic zone locators, especially those who propose to invest at least $1 billion.

“We hope to have it filed in the next Congress. [The draft intends to amend] the PEZA law [particularly in terms of] separating the incentives package for exporters and domestic firms,” Ms. Plaza said.

A separate package will address the needs of various types of business to account for changes in the treatment of exporters in the next round of tax reforms contained in the so-called TRABAHO bill, Ms. Plaza said.

“Our incentives have to compete. Other countries have separate incentives for domestic-market firms and exporters and they are competing,” she added.

She first floated such proposals as a compromise to the changes in store under House Bill 8083, known as the Tax Reform for Attracting Better and High-Quality Opportunities (TRABAHO) bill.

The measure intends to cut the corporate income tax (CIT) to 20% from 30% by 2029, on a staggered basis.

The Senate version proposes slashing the CIT to 25% in the first year of implementation.

However, both intend to remove certain fiscal incentives that the Department of Finance has blamed for lowering its tax collections, particularly the 5% gross income earned incentive.

The House passed the TRABAHO bill on third reading in September 2018. The measure now awaits further action from the Senate which may convene in late May to pass its own version.

PEZA and other ecozone locators have warned that the TRABAHO bill’s passage will result in massive lay-offs as several investors threatened to pull out if the bill is enacted.

Last year, PEZA-registered investment pledges fell 41% to P140.24 billion amid uncertainties stemming from the TRABAHO bill and the upcoming Senate elections.

In the first two months of the year, PEZA investment pledges fell 16.52% to P17.522 billion, with Ms. Plaza attributing this to a wait-and-see attitude ahead of the elections. — Janina C. Lim

CTA orders SMDC to pay P576-M tax deficiency

THE Court of Tax Appeals (CTA) has ordered SM Development Corp. (SMDC) to pay a 2009 tax deficiency amounting to P576.1 million.

In an 88-page decision on April 8, the CTA second division partially granted the petition of SMDC, canceling its deficiency value-added tax (VAT) for lack of merit and the corresponding documentary stamp tax (DST) deficiency for 2009.

However, it found the corporation liable for deficiency income tax, withholding tax compensation (WTC), expanded withholding tax (EWT), and fringe benefit tax (FBT) worth P576.1 million.

SMDC was also ordered by the CTA to pay delinquency interest with the rate of 12% computed from Jan. 1, 2018 until its full payment in the amount of P426.9 million, pursuant to the Tax Code as amended by Republic Act No. 10963 of the Tax Reform for Acceleration and Inclusion Law.

“Based on the computation above, there was an overpayment of the total amount due by petitioner in the amount of P135,234.05. Hence, with this payment, the assessment on DST is thus cancelled,” the CTA said.

The CTA said that there had been no underdeclared sales which would could be attributed to deficiency assessment in VAT and income tax.

SMDC sought the cancellation of its alleged tax deficiencies for 2009 amounting to P2.1 billion. However, the Court only canceled P221 million VAT and P17.4 million DST deficiencies.

“(T)he deficiency income tax, WTC, EWT, and FBT assessments for taxable year 2009 are affirmed but with modifications. Accordingly, petitioner is ordered to pay respondent the amount of…P576,107,688.31, representing basic deficiency tax, twenty-five percent (25%) surcharge, twenty percent (20%) deficiency interest and 20% delinquency interest imposed on the basic deficiency income tax, WTC, EWT, and FBT,” the CTA ruled.

The modification was due to the partial payment made by SMDC on the tax deficiencies as computed by the Court, among others.

The decision was written by Associate Justice Juanito C. Castañeda, Jr. and concurred in by Associate Justice Catherine T. Manahan. — Vann Marlo M. Villegas

DTI seeking to boost export sectors likeliest to provide ‘decent’ work

THE Department of Trade and Industry (DTI) said it is using a new assessment tool that will help identify which export industries generate “decent” work or the most job opportunities, while also facilitating exporters’ compliance with EU norms.

DTI- Export Marketing Bureau (EMB) Director Senen M. Perlada said in an interview with BusinessWorld that the DTI has adopted a toolkit that emerged from the International Labor Organization’s (ILO) “Strengthening the Impact of Trade on Employment” (STRENGTHEN) Project.

“If we’re able to increase our exports, especially our manufacturing exports, that’s directly related to employment… the toolkit gives us a basis so we can identify sectors that are high potential for employment,” he said.

ILO’s STRENGTHEN project aims to assist policy makers in creating blueprints to improve job generation through strengthened trade policies. Part of the project is a toolkit that will evaluate the effects of trade on job generation.

Mr. Perlada said that the toolkit will help both big and small businesses especially since the ILO project, which is in partnership with the European Union, will allow them to comply with EU standards and provide decent work for employees.

“It will help lead us to which sectors are really providers of decent work… by being able to comply with the provisions of the EU, we are able to ensure decent work for more people,” he said.

Mr. Perlada said that DTI has initially identified such sectors using the toolkit. One of them is the coconut industry.

“Through the value chain, literally everything from the coconut is useful. All the way to the distribution, from the edible to non-edible… we would really like to be able to promote more of those sectors that provide those kinds of employment especially if (the job) doesn’t need higher education,” he said.

He said the DTI hopes to identify the types of exporters that generate decent work or additional employment.

“The toolkit is used as a model to calculate, let’s say for example: supposed I increased my export of virgin coconut oil by two containers a month, what does that mean in terms of additional employment?” Mr. Perlada.

The STRENGTHEN project was first implemented in the Philippines in 2016. The project was undertaken in partnership with the Department of Labor and Employment (DoLE); National Economic and Development Authority (NEDA); Technical Education and Skills Development Authority (TESDA); and other stakeholders and local government units (LGUs). — Gillian M. Cortez

Evolving to match future markets

Traditionally, businesses have used the term “markets” to refer to economies. Hence the terms “developed market” or “emerging market” are usually associated with countries at a certain level of development. However, given the changing times and consumer paradigms, businesses may need to shift their focus to smaller “markets.” Cities, for example, are expected to grow further. A United Nations study projects that by 2050, 68% of the world’s populations will live in urban areas, with corresponding effects on infrastructure and the environment, as well as consumption behaviors.

Because of new technology and needs, consumers are already changing the way they work, live and play. Smart technology is continually transforming cities and consumers, as discussed in an EY article, “Will the next global market be a country, city or individual?” The article shares some insights from EY ASEAN and Global Emerging Markets Leader for Consumer Products and Retail Chandan Joshi on his predictions for future cities, businesses and consumers.

THE CITIES OF THE FUTURE
Technology has brought an unprecedented wave of transformation across the world, disrupting almost every aspect of life as we knew it. Even concepts as basic as money and finance, for example, are rapidly evolving with developments such as mobile cash, bitcoin and cryptocurrency, digital banking and online shopping.

Tomorrow’s cities may evolve in very different ways, and be markedly different from existing ones. While city planning has always been the purview of the government, we will see increasing public involvement in city development in the future, especially as connectivity and data-sharing increase among consumers, governments, companies and infrastructure providers. Community-based and participatory approaches to designing future cities will become increasingly popular, as ready access to data raises awareness, understanding, and involvement in urban issues among citizens. We are already seeing this with some applications that rely on crowdsourced data such as Waze, which helps manage traffic flow in the city.

We are also likely to have more areas shifting from multi-use to every-use. Currently, there are spaces where commercial and residential uses intermingle. It is very likely that future cities will have spaces where the lines will blur between work and leisure, retail and entertainment, personal and communal, which means that real estate providers will have to consider ways to make developments more multifunctional, flexible and modular to meet future needs. The rise of telecommuting and other flexible work arrangements will change the way people work, and the way spaces are utilized. The optimal use of scarce real estate space will become an increasingly important theme in the future.

Higher levels of connectivity will also mean more virtual interaction, making it increasingly easier for people to form virtual communities that disregard location. As people come together due to shared values and interests, traditional marketing geo-demographic indicators such as age, gender, location, economic bracket and others will decrease in relative relevance.

THE CONSUMERS OF THE FUTURE
While physical and virtual boundaries continue to blur, and data and technology become even more integrated into daily living, the focus on individual consumers will likely remain constant. Even if virtual communities become the norm, consumers will still expect to be served as individuals, perhaps to an even more bespoke level. The traditional sources of customer insights that companies currently rely on, such as market surveys and focus groups, may rapidly become obsolete when customers expect customized service based on their meal plans, exercise needs, social activities, medical conditions and other personal data. With the increased use of data infrastructure and analytics, future businesses may be able to identify the precise needs of consumers in real-time.

One example of such services was explored in London and Los Angeles, where participants in an EY FutureConsumer.Now program looked into the potential of vitamin-fueled, bespoke energy shots tailored to specific individuals based on their nutritional needs, and manufactured at point of sale using recipes that leverage real-time biometric data. Imagine the possibilities where you can walk into a shoe store and have footwear made-to-order on the spot quickly using 3D printing technology or similar platforms.

Additionally, we are already seeing how more and more consumers are transitioning to subscription or shared models, such as with ride-sharing, content-sharing, homesharing and similar platforms, rather than direct ownership. Consider the recent announcement by Google of its Stadia gaming service, which allows consumers to access game libraries online without needing to purchase their own gaming consoles or expensive computer setups. As more people buy into the sharing economy in the future, there may be increasing demand for such services as pay-to-wear apparel lines, pay-to-use sports gear or even furniture. This also poses an increasing challenge for companies to make the consumer experience as convenient and pleasurable as possible.

THE BUSINESSES OF THE FUTURE
While technology is disrupting all industries and sectors, it is likely that the greatest impact will be on consumer products and retail. Many consumer goods companies today are already proactively adapting to change by further individualizing their products and services to scale. However, many companies also still need to invest in their data infrastructure, analytics capabilities and supply chain flexibility.

Supply chains of the future will need to be more agile, not just in terms of managing demand and developing product innovation, but also be able to address the real-time needs of customers, as captured and interpreted by their data analytics capabilities. Some companies may need to restructure and decentralize operations to be more neighborhood-based. While this means serving a smaller number of consumers at a time, it also means increasing customer satisfaction.

Shifting from macro to micro markets may also have an impact on resource allocation and sustainability. This highlights the possible need for businesses to develop more resource-sustainable products, while at the same time leveraging sophisticated technologies like blockchain to streamline and better manage operations across their entire network.

THE FUTURE IS NOW
The greatest change for companies to undergo is not in terms of their operations, but in their mindset and cultures. They need to see the future as bringing yet-unforeseen opportunities, rather than unanticipated threats. They need to see that consumers no longer just buy products, but buy experiences. The key is to BE the change leader, rather than a victim of change. By being at the forefront of innovation, companies can take an active and significant role in shaping the world for future consumers, possibly leveraging on technology to develop new solutions or even uncover new and untapped markets that may not even exist yet.

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.

 

Ramon D. Dizon is the Transaction Advisory Services (TAS) leader of SGV & Co. Smith Lim is a TAS senior director at SGV & Co.

Analysts flag concerns on carving up Palawan

By Arjay L. Balinbin
Reporter

PARTITIONING Palawan into three separate provinces will open up more opportunities for local politicians than for economic growth, according to analysts.

On April 5, President Rodrigo R. Duterte signed Republic Act No. 11259 dividing the islands of Palawan into three separate provinces, namely: Palawan del Norte, Palawan Oriental, and Palawan del Sur. The Palace released certified copies of the new law last Saturday, April 13.

Palawan del Norte includes Coron, Culion, Busuanga, Linapacan, Taytay (capital), and El Nido.

Palawan Oriental covers Roxas (capital), Araceli, Dumaran, Cuyo, Agutaya, Magsaysay, Cayancillo, and San Vicente.

Palawan del Sur includes Aborlan, Narra, Quezon, Rizal, Española, Brooke’s Point (capital), Bataraza, Balabac, and Kalayaan.

The three provinces will be created upon approval by the majority of voters in a plebiscite scheduled in May 2020. The election of the first set of officials will be held in May 2022.

Sought for comment, Ateneo School of Government professor Edmund S. Tayao said in a phone interview on Saturday: “I have no idea whether it would entail [economic] opportunities other than opportunities for local political groups to have more positions to vie for because, essentially, they are creating two additional provinces out of one, which means you will be electing two additional governors and additional members of the provincial council and, of course, two additional vice governors.”

Palawan is the country’s largest province in terms of land area at 17,030.75 sq km. In 2016, there were 583,057 registered voters in the province, according to the Philippine Statistics Authority’s June 2018 data.

The measure splitting Palawan into three provinces was filed by Palawan Congressmen Franz E. Alvarez (first district), Erick F. Abueg (second district), and Gil P. Acosta (third district).

Senator Juan Edgardo M. Angara sponsored the bill at the Senate.

Mr. Alvarez is with the National Unity Party (NUP), which forged alliance with Mr. Duterte’s PDP-Laban in 2016; Mr. Abueg ran under the Partido Pagbabago ng Palawan, which is affiliated with Lakas Kampi CMD; and Mr. Acosta is PDP-Laban’s provincial vice-president for Palawan.

According to Mr. Tayao, “Some would probably argue that this would mean bringing the government closer to the people, but even if you only have one provincial government, you have a number of municipalities, anyway, and that basically brings the services down to the people, and so if we go by that logic, there’s actually no need to create more provinces.”

Also sought for comment, University of the Philippines Political Science assistant professor Perlita M. Frago-Marasigan said via chat: “Local politicians may also argue that this move will bring economic development to towns that have been neglected because smaller provinces mean residents will be closer to the multiple centers of power. However, when it is advocated by local politicians whose political ambitions are equally shared by other members of their political families, then redistricting will likely be construed as strategic, particularistic, and selfish.”

Mr. Tayao further explained, “If we are going to compare the Philippines with other countries, we have a very fragmented local governance set-up. If you are going to compare the Philippines with Indonesia, the Philippines is only 15.7% of the total land area of [its Muslim neighbor], which has only 33 provinces. We now have 83 provinces with the addition of two more provinces.”

Creating more positions, he also said, “will increase the cost… Second, it will basically decrease the pie or the internal revenue allotment because you will now have more provinces. Third, it will be more difficult to raise revenues, mainly because you have smaller jurisdiction.”

Also noting that there will be more positions to compete for, Ms. Frago-Marasigan said: “But if the local posts will be monopolized by members of the same political clan or clans, then it is highly probable for their personal and particularistic interests to get in the way of public service.”

“For local politicians, this means reconfiguring their power geographically. For, local residents, this geographic change will affect their lives directly but whether for better or for worse remains to be seen. If territorial power remains concentrated in the hands of a familial few who control these chief local positions and political and economic advantages, I do not see how redistricting will improve the conditions of local residents,” she explained.

In a phone message, Natividad Cristina J. Gruet of the University of Asia and the Pacific-School of Law and Governance said: “As far as I know, [the] declining mining productions, which is the biggest chunk of their economy, is being replaced by service industry — I assume to be tourism for the most part. If designed well, there could be a potential focus on stronger tourism and agri[culture] and aquaculture per new province. But it can also create turf wars and policy inconsistencies [among] three provinces which could lead to more uneven development, especially in areas that do not have mining and tourism.”

For Political Science professor Marlon M. Villarin of the University of Santo Tomas, “politically dividing the province into three parts will give people equal representation in the local governance. It will be socially beneficial because dividing the province will make the local government more responsible and accountable. Economically, it will make the entire province more responsive to both local and global demands.”

Whether the division is necessary, Ms. Gruet said “the plebiscite will answer it.”

Mr. Villarin said, “Public education or consultation will be crucial in determining the results of the plebiscite considering that there are local officials who are really willing to make a countermove towards this intended end.”

There can be both opportunities and risks, according to Ms. Frago-Marasigan. “The new political and geographic divisions may mean that there will be more people to mobilize to implement national programs and more people to be held as accountable for unfulfilled promises. The risks include opening up the territories to political and economic managers who may not be exactly aware of the pressing problems and concerns of the local residents. Creating more local governments means engaging the local communities and residents. This can only happen if there will be genuine participation of the people and constant consultations with them for future local development plans or actions.”

Ms. Frago-Marasigan said that “when a province is divided into small separate provinces and it occurs shortly before the election period, it is called gerrymandering.”

“Politicians do not just propose to divide a province for no reason. So you ask why. The timing and the context matter. What province is being divided into how many areas, for instance? And why is it being done at a given time? Redistricting or gerrymandering will improve the chances of winning of parties or personalities, especially if political and economic territories are strategically divided,” she noted.

But for Mr. Tayao, “When you say gerrymandering, it’s mainly applicable to Congressional seats. That means you are creating a representation on areas which are your bailiwick [or] under your control. To me, the only appropriate term here is fragmentation because the smaller the government unit, the weaker it is able to perform given the many functions and the powers that are afforded to it under the law.”

Former Presidential Spokesperson Harry L. Roque, Jr., who is a native of Palawan, said via text message that the move to divide his home province was not a form of gerrymandering.

“Nope. Gov. [Jose] Alvarez [is] on third term this coming elections. Who will benefit?” he said.

More than 200,000 smoking ban violators caught in the capital

SMOKING IN public places, prohibited under a Presidential declaration as well as through various local government ordinances, remains widespread with 209,906 violators caught in Metro Manila over the 10-month period from June 13, 2018 to April 14 this year. The National Capital Region Police Office (NCRPO), which keeps track of the apprehensions, said the smoking ban topped the list of violated local rules, followed by the curfew hours for minors with 55,327. Walking shirtless in the streets came in third with 47,207, and drinking in public spaces at 42,763. The NCRPO said of the of the total number of violators, 601,823 were only given a warning, while 180,611 were slapped with corresponding fines, and 134,551 are facing charges filed by the police. Executive Order No. 26, entitled Providing for the Establishment of Smoke-Free Environments in Public and Enclosed Places, was issued by President Rodrigo Duterte in May 2017 and took effect on July 23 that year. — Vince Angelo C. Ferreras

Celebrating bangus and fishermen

THE ANNUAL Gilon-Gilon ed Baley street dancing competition, participated in by the 31 barangays of Dagupan City, was held Friday, marking the start of the city’s Bangus Festival, which will culminate with the grand Bangusan Street Party on April 30. This year’s Gilon-Gilon champion was composed of the clustered southern barangays of Caranglaan, Bacayao Norte, Bacayao Sur, Mayombo and Herrero-Perez. Caranglaan Barangay Chairman Teresa T. Coquia, the cluster leader, said she believes that they bested the four other clusters because their street dancers focused on telling the story behind gilon, which means harvesting bangus (milkfish), the city’s most well-known product. “We chose to focus on the efforts and sacrifices made by our fishermen so that they could provide for the future of the children. That’s why we told the story of a fisherman’s son graduating because that’s what our parents and families here strive for,” Ms. Coquia said in a statement from the City Information Office. Other activities lined up for the Bangus Festival in the coming weeks include various sports competitions, trade fair, and rodeo and cooking competition.

DILG tells Mindanao LGUs to maximize local disaster fund for preparedness measures

THE DEPARTMENT of Interior and Local Government (DILG) called on more local government units (LGUs) in Mindanao to utilize their local disaster funds for preparedness and mitigation measures instead of just for emergency response in calamity situations. Edgar Allan B. Tabell, chief of the DILG-Central Office Disaster Information Coordinating Center (CODIX), noted that this reluctance among LGUs stems from various cases of being disallowed by the Commission on Audit (COA). But he explained that COA will approve preparedness projects if these are in line with the approved local Annual Investment Program (AIP). “LGUs… have AIP, which is a list of what will be spent or should be spent on, and this should be approved by the… council or local executive,” he explained during the launch in Davao City last week of the Operation Listo: Disaster Preparedness Manual Version 3. Under Republic Act 10121, the Act Strengthening the Philippine Disaster Risk Reduction and Management System, LGUs are required to allocate at least 5% of their annual income as local disaster fund. Of this 5%, the 30% should serve as a quick response fund and the remaining 70% could be used for disaster preparedness, prevention, mitigation and rehabilitation, the DILG official explained. “Everything under AIP is allowed, whether buying a product or spending for activities like drills or information materials,” he added. The enhanced Operation Listo manual now includes a guide for provincial governors in terms of the minimum standards that should be implemented before, during, and after a disaster. — Maya M. Padillo

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