VP HOPEFULS SQUARE OFF IN DEBATE
“DEMOCRACY is messy. Every day my life is messy. But if you want everything to be quiet and orderly and allow, you know, just things to proceed without vigorous debate, that is not what democracy is about.”—Bernie Sanders, in an interview with The Associated Press, as he pushed the Democratic Party to adopt his progressive agenda at this summer’s convention in Philadelphia. AP
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“THIS speaks to the notion a lot of people had when this first happened, which is that it was a rush to judgment.”—David Weinstein, a Florida attorney and former federal civil-rights prosecutor, after Baltimore prosecutors failed for the second time in their bid to hold the city’s police accountable for the arrest and death of Freddie Gray when an officer was acquitted in the racially charged case that triggered riots a year ago. AP
“FOR me, there’s never a time.... It’s just really difficult for us to try and agree to any kind of a thing like this with Vietnam, I guess.”—Vietnam War veteran Steve Rylant of Loveland, Colorado, after President Barack Obama lifted the US embargo on selling arms to America’s former enemy. AP
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MANILA TO DEMAND BANGKOK’S COMPLIANCE TO 2011 RULING
PHL, Thailand returning to WTO on tobacco row
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HE Philippines is set to confront Thailand in June at the World Trade Organization (WTO) to demand compliance to a 2011 tax ruling on tobacco imported from the Philippines, because the livelihood of 1.9 million Filipino farmers is at stake if Bangkok continues to ignore the WTO verdict.
INSIDE
Ceferino S. Rodolfo, Board of Investments managing head and trade undersecretary for Industry Development and Trade Policy Group, said the Philippines set the schedule of the first round of negotiations on June 2, after the country has initiated its compliance-review procedure against Thailand. This is part of the Philippines’s availment of the compliance review mechanism provided in the Dispute Settlement Understanding of the WTO, as Thailand has failed to S “WTO,” A
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Contraceptives slowed growth of population
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HE country’s annual population-growth rate has slowed, as more people in the predominantly Roman Catholic country use contraception. Results of the 2015 census show the population grew 1.72 percent last year, down from 1.9 percent during the previous census in 2010, the Commission on Population (PopCom) said. The population of100.98 million was half-a-million lower than what was forecast in 2010, PopCom Executive Director Juan Antonio A. Perez III said. The Philippines is the 12thmost populous country in the world, according to United Nations data. Its population will reach 103.48 million by the end of this year, under calculations using the
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HEALTH&FITNESS HEAL HEALT H&FITNESS WARRIORS IN TROUBLE BusinessMirror
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| THURSDAY, MAY 26, 2016 mirror_sports@yahoo.com.ph sports@businessmirror.com.ph Editor: Jun Lomibao Asst. Editor: Joel Orellana
HE’S A KICKER M
WARRIORS IN TROUBLE Oklahoma City beat Golden State, 118-94, on Tuesday to take a 3-1 lead in the series and move within one win of prematurely ending the Warriors’ record-breaking season. B C B
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KLAHOMA CITY—Suddenly, the Golden State Warriors team that a short time ago was being favorably compared to the all-time great teams of National Basketball Association (NBA) history is now on the brink of elimination from the Western Conference finals. Oklahoma City beat Golden State, 118-94, on Tuesday to take a 3-1 lead in the series and move within one win of prematurely ending the Warriors’ record-breaking season. Russell Westbrook had 36 points, 11 rebounds and 11 assists for his first tripledouble of the playoffs after posting 18 in the regular season, and Kevin Durant added 26 points and 11 rebounds, and Serge Ibaka added 17 points and seven rebounds for Oklahoma City. Golden State, which won a league record 73 games in the regular season, lost consecutive games for the first time this season. The Warriors must win Game Five on Thursday in Oakland to keep their season alive. “We all have to bounce back,”Warriors Coach Steve Kerr said. “The idea now is to go home and get one win. Do that, and we put some pressure on them and we’ll see what happens.” Klay Thompson led Golden State with 26 points. Two-time league Most Valuable Player Stephen Curry was limited to 19 points on six-for-20 shooting, but Kerr insisted he was not still being affected by the knee injury that troubled him in the late stages of the regular season. “He’s not injured,” Kerr said. “He’s coming back from the knee, but he’s not injured. He just had a lousy night. It happens, even to the best players in the world.” Oklahoma City got a boost from an unlikely source. André Roberson, a player the Warriors have ignored at times during the series, scored a career-high 17 points and grabbed 12 rebounds. Nine teams have rallied from 3-1 deficits in NBA playoff series to win 4-3. “We’re in a good place, but like I said, this game is over,” Westbrook said. “We’ve got to move on to the next game. Every game is different.” The Thunder led 30-26 at the end of the first quarter, then gained control in the second. In the most unlikely of connections, Adams threw a bullet pass to Roberson near the basket for a dunk that gave the Thunder a 56-43 lead with just over four minutes left in the first half. Oklahoma City finished with a flurry and led 72-53 at halftime. The Thunder matched the most points they have scored in a first half in franchise playoff history, a mark they set the previous game against the Warriors. It also matched the most points Golden State has allowed in a half this season for the second straight game. Westbrook had 21 points, nine assists and five rebounds in the first half, and Durant had 18 points and six boards. Thompson tried to keep the Warriors in it, scoring 19 points in just over seven minutes to start the third quarter. But the Thunder maintained their composure, led 94-82 at the end of the period and remained in control in the fourth. “This is a tough situation to be in, but the series isn’t over,” Curry said. OKLAHOMA City’s André Roberson (21) shoots over Golden State’s Klay Thompson (11) and Harrison Barnes (40) in the second half of Game Four. AP
A pattern of play that’s so impressive B S A USA Today
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KLAHOMA CITY—High above the Chesapeake Arena floor, where the Oklahoma City Thunder have been making so much basketball magic of late, there’s a banner hanging from the rafters amid the darkness that has a lonely look to it. “2011-12 Western Conference Champions,” it reads across the way from the five division banners on the opposite side.
It may have company soon. After a season, in which the Thunder were always in the shadows, this much has officially come to light now that they’re up 3-1 over the Golden State Warriors in the Western Conference Finals: They’re coming together in the kind of wild and wonderful way that could most certainly lead to a title. This 118-94 whooping in Game Four on Tuesday did more than just give them a 3-1 series edge. It continued a pattern of play so impressive—seven wins in nine games against the San Antonio Spurs and Warriors teams
that stole the headlines all season—that it’s impossible not to believe in their overwhelming brand of basketball. For the first time since Games Two and Three of the 2015 Finals, the Warriors lost consecutive games because the Thunder’s stars meshed so seamlessly with their reserves. Thunder point guard Russell Westbrook had 36 points (12 of 27 shooting), 11 assists and 11 rebounds, logging his first triple-double of this postseason. His three-pointer with 3:15 left unofficially ended it, putting the Thunder up, 114-91, while he high-fived fans who lived up to their “Loud City” name. Kevin Durant had 26 points and 11 rebounds, his relentless defense setting the toughest of tones. The Warriors, who couldn’t survive a miserable shooting night from back-to-back Most Valuable Player (MVP) Stephen Curry (six of 20), now face a daunting bit of history heading into Game Five on Thursday.
IAMI—Draymond Green has a history, and in this case it seems to have been helpful. He’s a kicker. Only a minute before the overly excitable Golden State forward kicked Oklahoma City’s Steven Adams in the groin area during Game Three of the Western Conference finals on Sunday night, his leg flailing upward either clumsily or intentionally depending on perspective, he was under the basket as teammate Stephen Curry missed a three-pointer. Green went up and tried to tip in the rebound. He missed. Here’s the notable part of that otherwise nondescript play: His right leg went up in similar fashion that time, as well, a reaction easily unnoticed because no defender was within reach of his size 15 foot, nobody got kicked and nobody ended up in a heap on the court in pain afterward. So Green has done this before. Lots of times, it turns out. There was an aggregated bunch of clips posted to social media showing Green’s legs going all sorts of directions after shots and drives, sometimes making contact and sometimes not. And Green does have a reputation for being aggressive, like most great defenders do. He’s the sort of player that doesn’t mind being called a pest. But dirty or suspension-worthy? In this case, damning video and the fact that he got Adams in the groin area in Game Two, as well, notwithstanding, it didn’t seem so and the National Basketball Association (NBA) agreed. So after spending the bulk of Monday deliberating what to do next, the decision came down that Green will be eligible to play in Game Four of the series on Tuesday in Oklahoma City. (By the way, the Thunder lead the series, 2-1—easily overlooked amid Kickgate.) Predictably and immediately, there was Twitter outrage because Twitter’s favorite thing is outrage. Green wasn’t suspended, yet Cleveland’s Dahntay Jones got a one-game ban just one day earlier for striking Toronto’s Bismack Biyombo in the groin area. And the NBA surely knew that letting Green play in Game Four would get conspiracy theorists to say that the league not having a one-size-fits-all approach was done to favor the champions. Green is a starter, an elite defender for the Warriors. Golden State needs him. Jones is a backup who has scored 20 points all season. Cleveland hardly needs him. Yet, in this case, it’s Green’s history that oddly enough seemed to work in his favor. He’s hardly a poster child for good behavior; he leads the NBA in postseason technicals this year, and tied for third-most in the regular season in that department. He’s also one more flagrant away from an automatic suspension in these playoffs. But for now, he plays on. “During a game, players—at times—flail their legs in an attempt to draw a foul,” NBA Executive Vice President for Basketball Operations Kiki VanDeWeghe said in the release announcing the league’s decision on Green. He’s right, but that might not have been what this was. This seemed like just more crazyleggedness from Green. He didn’t get away scot-free. The foul was upgraded to a flagrant-2 and will cost Green $25,000. The upgrade to the flagrant-2 was the NBA’s way of saying he should have been ejected on Sunday, although making him stick around for the rest of Oklahoma City’s 133-105 win was probably a harsher punishment than getting to watch it from the sanctity of the locker room would have been. AP
SPORTS
Of the 232 teams that have trailed 3-1 in a seven-game playoff series, only nine came back to win the series (three of 53 in conference finals and division finals). They shot just 41.3 percent overall, and no one struggled more than Warriors forward Draymond Green. Having feared a suspension after his Game Three crotch kick of Thunder big man Steven Adams, Green finished with six points (one-of-seven shooting), two assists and 11 rebounds in 38 minutes while committing six turnovers. His minus-30 rating was the worst among Warriors starters and second-worst behind 2015 Finals MVP Andre Iguodala (minus 32). By the time halftime arrived and the scoreboard looked broken yet again— Thunder 72, Warriors 53, this after their 72-47 lead at the break in Game Three—it was quite clear that the Thunder had the kind of winning formula that could fracture the Warriors. With those long arms of Westbrook, Durant and forward
Serge Ibaka omnipresent on the perimeter, they had Curry skittering for open space and missing 10 of his first 11 shots. The Thunder, with Coach Billy Donovan so often playing their enormous version of a small-ball lineup with Durant and Ibaka in the frontcourt, forced 13 turnovers that led to 13 points. The Thunder also won the rebounding battle, 56-40. The Warriors, who had the fourth-best defense in the league during the regular season, simply couldn’t stop a Thunder trio that went retro at the right time. Durant (18 points) and Westbrook (21) scoring big was no new revelation, but Ibaka— who had averaged 11.2 points in the 14 playoff games coming in—added 15 points before the break. They finished the half on a 28-13 run, all while becoming the first team to score at least 72 points in a half during a playoff game since 1987 (the Lakers did it against the Denver Nuggets on April 23 and April 25).
same growth formula, Perez said. He said the use of modern contraceptives has increased, with 45 percent of couples using modern contraceptives as of last year, up from 38 percent recorded by a national survey in 2013. “We have noted an increase in the use of modern contraceptives between 2013 onward,” Perez said in a telephone interview, adding that and a natural C A
WORLD’S BEST Famous for its majestic karst limestone formations, lagoons, marble cliffs, prehistoric caves and waterfalls, Palawan has been voted by Condé Nast as the World’s Best Island, twice in a row. Considering that we have much to offer than most Asian countries, the turtle-slow rise of our tourism growth over the last 20 years is mind-boggling. Read the Broader Look on A6-A7. NONIE REYES
HE Bangko Sentral ng Pilipinas (BSP) is hoping to deploy the other half of its new liquidity rules for banks before the end of the year in compliance with international standards on banking supervision. In an interview, BSP Deputy Governor for the Supervision and Examination Sector Nestor A. Espenilla Jr. said they are eyeing to complete the necessary developments and processes needed to start the implementation of the net stable funding ratio (NSFR) liquidity regulation, months after it has approved for implementation the liquidity coverage ratio (LCR) framework. The LCR, which was approved for implementation in March, and the NSFR are components of the new liquidity standards under the Basel 3 reform agenda. Both frameworks will require banks to ensure that they have sufficient liquidity service requirements over a certain period of stress. The LCR’s period of stress coverage is for 30 days, while
the NSFR’s is for over a year. Espenilla said they are still in the consultation process, part of which is getting the inputs of local banks in terms of how the new liquidity rules will operate in the Philippine environment. Beyond that, the deputy governor further said they are also developing guidelines to guide banks and communicate expectations on how they should be managing their liquidity. “This is part of a series of risk-management guidelines we’ve already done. It’s part of that series of initiatives, also on technology. There are many components,” Espenilla said. The new liquidity-ratio compliance is also said to be coordinated with the new interest-rate corridor system being put in place by the central bank next month. Upon the implementation of the NSFR, Espenilla said they will most likely give ample time for banks to transition for compliance, as is the typical approach of the central bank. Bianca Cuaresma
Can Duterte impose his anticrime tactics nationwide?
Sports THE Warriors’ Klay Thompson slumps on the bench in the final moments of Game Four. AP
The percentage of Filipino couples using modern contraceptives as of 2015
New liquidity rules for banks out within the year–BSP
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OR cab driver Eddie Laran, who grew up in the most violent slum in Davao City, it’s not hard to see why Mayor Rodrigo R. Duterte is the right person to run the Philippines. “Duterte made Davao a peaceful place,’’ Laran, 46, said in a mishmash of the national language and a local indigenous dialect. “He really got rid of crimes and dealt with all the hardheaded criminals.” It’s the campaign stor y of Duterte, the 71-year-old mayor from
PESO EXCHANGE RATES n US 46.8610
the Philippines’s fourth-most populous city, who shot to prominence as the presidential front-runner—and then election victor—by promising to clean up the country in the way he crushed crime in Davao. But Duterte may find it much harder to impose his anticrime measures across the archipelago of more than 7,000 islands, not least because Davao was an extreme case. By the 1980s, shootings were a daily occurrence, especially in areas where army-
Doing what he did in Davao to fight crime will be very difficult to do on a national scale.’’ — V
backed militias battled police and communist guerrillas. Robberies and kidnappings were rampant. “On average, six to seven people would be found dead each day, often these would be members of the police and the military,” incoming police chief Ronald M. de la Rosa, who was a junior officer in Davao in the late-1980s, said in an interview. “We were living in fear, not knowing when they would strike when you leave the house, or if they will attack you
in the comfort of your home.” At a briefing this month, Duterte said he wants to implement the kind of policies he used in Davao—such as curfews for minors and bans on public drinking and late-night karaoke sessions—on a nationwide scale to ensure peace and order. To make good on his campaign promise to fight crime, Duterte said he intends to issue shoot-to-kill orders against criminals, or to execute them by hanging. C A
n JAPAN 0.4261 n UK 68.6139 n HK 6.0327 n CHINA 7.1445 n SINGAPORE 33.9253 n AUSTRALIA 33.6556 n EU 52.2125 n SAUDI ARABIA 12.4993
Source: BSP (25 May 2016 )
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Guarding the country’s northern frontier
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NDER clear and sunny skies last month, a contingent of military officials sailed and flew into the country’s northernmost chain of islands in Batanes, using the military’s most modern ship and one of the newly-arrived C-295 Persuader medium-transport plane, to lay further the foundations of the country’s overall security strategy. The visit to Itbayat and its northernmost island chain of Mavudis or Y’ami for three days, which was joined by members of nongovernmental organizations, was for a combination of territorial or maritime-domain awareness and civil-military operations, highlighting the role and importance of the pockets of islands for strategic defense. Itbayat, and more particularly the jagged and undeveloped Mavudis, which borders Taiwan, is a key security figure, not only for the country’s defense, but even for its allies, including the United States, as it sits on the Bashi Channel, the strategic waterway that Chinese warships, including submarines have to cross in the event that they attack Guam and Hawaii. The channel connects the West Philippines Sea (South China Sea) and the Pacific Ocean. The civilianunoccupied Mavudis is the country’s “northern frontier” and is considered as the last security defense against China, which has already secured the South China Sea through its bases in the area, if it will be transformed into a military facility. The country’s northernmost island, which measures about 4 square kilometers in land area, and
the farthest from Batanes could also be considered as the first line of defense for the US if war were to come from the west. In the view of Armed Forces officials, Mavudis should also serve as the antidote to China’s military strategy of “salami slicing,” the tactic that Beijing’s used in booting out Manila from its occupied territories on the South China Sea, since it is located right inside the country, and is not the subject of dispute. “The island [property fortified] should [be able to] check Chinese naval assets that are launched into the Pacific Ocean through the Bashi Channel, regardless where these ships and other vessels are coming from, be it from Scarborough or from the other bases of China at the West Philippine Sea,” said one military official. China has said it plans to begin construction in the Scarborough Shoal next year, turning the shoal into a floating military base, thus, providing it an unimpeded access to the whole of Luzon and strategic access to the Bashi Channel. During the trip to Mavudis, military officers, led by the Armed Forces Northern Luzon Command Chief Lt. Gen. Romeo Tanalgo and
MISS EARTH Candidates of this year’s Miss Philippines Earth pageant visit the office of Pilipino Mirror, which is one of the event’s media partners. Receiving them are D. Edgard A. Cabangon (center), Pilipino Mirror president and publisher; Arnold Cabangon (left), Fortune Life president; and Benjamin V. Ramos, CityState Savings Bank president.
The island [property fortified] should [be able to] check Chinese naval assets that are launched into the Pacific Ocean through the Bashi Channel, regardless where these ships and other vessels are coming from, be it from Scarborough or from the other bases of China at the West Philippine Sea.”—M other government officials, including those from the Bureau of Fisheries and Aquatic Resources (BFAR) hoisted the country’s tricolor at Hill 200. Soldiers who surveyed the island before the first visit of government officials to the area claimed they found stocks of trash with Chinese
markings that were littered around, indicating the irregular presence of poachers there. Reports also said that, aside from illegal fishing, foreign intruders also come to the island to hunt for wild goats and other previously domesticated animals that were left on the island by Ivatans who
attempted to settle there. The trip to Mavudis was fired off by a similar visit to Itbayat, where Mayor Ruelle Ibañes said the presence and activities undertaken by the officials emphasized the need for him and his constituents to protect their waters from foreign poachers. “We are very grateful for this. We have been looking forward to this for decades and I hope that our presence out there [Mavulis] will be sustained, because we can only do so much in preserving our territorial integrity, as well as our source of livelihood, which is fishing,” he said. Ibañes complained that his town’s waters are continuously being violated by Taiwanese, Vietnamese and Chinese fishermen. “Even fishermen from the capital town of Basco on small fishing boats go there to fish and usually encounter big fishing boats from Taiwan, Vietnam and those from Mainland China out there,” he said.
Can Duterte impose his anticrime tactics nationwide? C A
“Robbery with homicide with rape: double the hanging,” Duterte said. “Hang first then there will be another ceremony for the second time, so that the head will be completely severed from the body. I would like that.” Davao still recorded the most murders among the Philippines’s 15-biggest cities from 2010 to 2015, according to police data. There were 1,032 murders in Davao during the period, 10 times more than Makati City. “Doing what he did in Davao to fight crime will be very difficult to do on a national scale,’’ said Prospero de Vera, a professor of public administration at the University of the Philippines (UP) in Quezon City. “In Davao he tells criminals to get out of the city. Will he tell criminals to get out of the country?’’ While Duterte’s approach may raise concerns over human rights and police powers, for many in a country that has been held back for years by corruption and crime, his reputation and hard-line rhetoric are appealing. Preliminary results show the firebrand politician won 39 percent of the vote in this month ’s elections, beating four rivals. In the Philippines the candidate who wins
the most votes becomes president for one six-year term, even if they don’t have a majority. Part of Duterte’s support is from people, like Laran, who joined the infamous “Alsa Masa” militia in the 1980s to fight communist rebels in Davao’s Agdao district, a once impoverished slum that was a recruitment zone for left-wing insurgents. Davao City administrator Melchor Quitain says some people used to call the area the “killing fields.” Within the narrow streets along the coast that once saw executions at the rate of more than one a day, Laran now lives peacefully with his family of five, earning a living as a taxi driver. It’s a transformation he credits to Duterte. Agdao’s streets are still mostly lined with ramshackle low-rise buildings, packed together, but the roads are now paved, people can walk them at night and commercial buildings are springing up along the main thoroughfares. That stability has brought investment and migrants from elsewhere in the country, another pillar of Duterte’s voter appeal. His focus on security turned the city from a “laboratory for urban warfare” to an investment destination, says Ivan Cortez, head of Davao’s Investment Pro-
motion Center. Davao, a two-hour flight south of Manila, gained $8.5 million in investment in 1988 when Duterte began the first of seven stints as mayor. Last year the city attracted $845 million. “The government provides the basics for business to flourish,’’ Cortez said in an interview. “If he can provide the basics, including peace and order, infrastructure and policies, businesses will come.” Attracting foreign investors and making it easier to do business are part of Duterte’s national economic agenda, incoming Finance Secretary Carlos G. Dominguez said at a briefing in Davao earlier this month. Duterte plans to continue the macroeconomic policies of outgoing President Aquino and spend the equivalent of 5 percent of GDP on infrastructure, he said. Like Aquino before him, Duterte has promised to rein in corruption. As mayor, he would ask potential investors to tell him if there were any irregularities in securing permits and licenses and warn them not to try bribes to speed things up, because permits could legally be secured in 72 hours, Cortez said. That’s not always the case. A few meters from Duterte’s office in city hall, people wait in long lines to have their papers processed by the business bureau.
Business permits
URSULA PADERO, a bookkeeper for seven years, said she’s used to shuttling from one government office to another and waiting for weeks to secure business permits for her clients. She said graft still exists among city officials, with some accepting bribes to facilitate the release of permits. And for her, it may be too late to try and improve things, even in Davao. “I don’t think the mayor can pay attention to this practice, especially now that he already has a bigger obligation,” Padero said. “All this hype about Davao is not borne out of statistics,’’ de Vera said at the UP. “If you go to Davao, many problems of urban areas are still there, such as criminality and prostitution.’’ Duterte’s reputation as someone who got things done for Davao’s 1.4 million residents may put pressure on him as president to produce results quickly for the other 100 million Filipinos. “Davao was not created overnight,” de Vera said. “He had to deal with changing attitudes there for two decades. Unfortunately, he only has six years. It takes a lot of time to put in systemic change, and he does not have the luxury of time.’’ Bloomberg News
Contraceptives slowed growth of population decrease in fertility because women are choosing to have less children could also be a factor behind the slower population growth rate. A national law that provides government funding for contraceptives was passed in 2012 despite strong opposition from Catholic Church leaders. The law took effect after the Supreme Court ruled in 2014 that it was constitutional, except
for a few provisions. Perez said the census results, which were officially unveiled last week, also showed family size differed among socioeconomic classes. Richer Filipinos have one or two children, while the poorest have five or more children, or two children more than what women say they want, he added. “We also noted in the census that it is
the poorer regions of the country out of Manila, which have higher fertility, and we presume large numbers of the poor are in those regions,” Perez said. With the slower population growth rate, he said the Philippines’s population is expected to double in 40 years, or two years longer than had been expected, giving the country more time to prepare and to exert more efforts to reduce the
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unmet need for family planning of some 4 million to 5 million couples who want to limit or space their children. But he said a suggestion by the Philippines’s likely next president, Rodrigo R. Duterte, for families to limit their children to three cannot be mandated. Perez said under the law, families are given informed choice to decide on the number of children they could have. AP
Tanalgo said the military will support all undertakings of the town government in securing Mavudis, noting that civilian participation is a key factor in securing and safeguarding the country’s maritime domain in the area. He said the Northern Luzon Command is putting up its own “triangle defense,” apparently referring to the security enclosure that China has put up in the South China Sea with the interconnected and strategic locations of its bases there. Tanalgo said the maritime domain security strategy in Batanes involves the provincial and local government units, their constituents and the military, which is their backer. Security wise, a plan was also already afoot for the construction of an airstrip in Itbayat. In March the Department of Nationa l Defense announced it was also putting up a maritime facility in Mahatao, also in Batanes, as part of the government’s effort to secure its maritime territory. The facility would include a Navy detachment, and it could also be used by the Coast Guard and the BFAR. “We envision a naval base that shall have accessible naval installations which could provide logistics, training and others support services in the conduct of prompt and sustained fleet and marine operation,” Defense Secretary Voltaire T. Gazmin said then. “This place was chosen as the most strategic area as testified by historical fact during World War II. It has also naturally protected and safer harbor spaces for our naval vessels, considering that the province of Batanes has been the frequent route of storms and typhoons, especially during the rainy season,” he added. Other than irregular patrols, the Navy and the Coast Guard have no permanent detachments in Batanes, leaving its vast waters exposed to intrusions by foreign fishermen and other violating sea-ocean going vessels.
WTO. . .
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comply with the ruling of the multilateral trading system. The Philippines brought a formal complaint to the WTO against Thailand back in 2008, saying Bangkok is unfairly imposing taxes on cigarette imports from the Philippine unit of Philip Morris. The Philippines also said Thailand’s customs valuation process ran counter to the WTO Agreement on Customs valuation that sets transaction value as the primary basis for Customs valuation. The Philippines won the case against Thailand in 2011, with the WTO ruling mandating the Bangkok to adjust its Customs valuation methods, effectively upholding the Philippines’ methodology in valuation. The dispute was revived after the Thai Public Prosecutor’s Office brought criminal charges against Philip Morris Thailand earlier this year, claiming that 272 import entries of the firm’s products were under-declared. Thai authorities alleged in January that Philip Morris Thailand evaded some $551.27 million worth of taxes by under-declaring import prices for 272 batches of cigarettes from the Philippines between 2003 and 2006. Philip Morris Thailand executives categorically denied this and condemned the charges, saying the move was “meritless, unjust and in violation of Thailand’s obligations to comply with the WTO Customs Valuation Agreement.” Rodolfo explained the imports in question were covered by the WTO ruling, thus, the Thai authorities have no basis to dispute the decision. “We’re going to ask what is their basis for thei r findings (of tax evasion) and their methodology,” Rodolfo told reporters. “In effect, they’re reversing the WTO ruling by pressing charges against Philip Morris Thailand,” he added. If the Philippines will take the issue lying down, Philip Morris Thailand will have to pay the hefty penalties demanded by authorities. This will have an adverse effect on the livelihood of 1.9 million direct and indirect employees. “Philip Morris Thailand procures its tobacco from the Philippines, these are grown by Filipino tobacco farmers. If they have to pay the penalties, Philip Morris may close down its business in the country. We may lose our main buyer of tobacco leaves, and our tobacco farmers will suffer the consequences,” Rodolfo added.
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Thursday, May 26, 2016 A3
TMAP bats for tax-bracket adjustment ahead of alternative revenue measures
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HE Tax Management Association of the Philippines (TMAP) said on Wednesday the adjustment of tax brackets to factor in the effects of inflation should be enacted immediately, even without the other tax reforms meant to make up for the resulting revenue shortfall.
TMAP President Benedict Tugonon said the adjustment of the tax brackets is “already an issue of fairness and justice,” which has to be addressed by the incoming administration immediately, even without alternative sources of revenues. “On the long-overdue adjustment of the income-tax brackets to index it to inflation, such adjustment should be implemented soon without the need to look for alternative source of revenue,” Tugonon told the BusinessMirror. “The brackets have remained unadjusted since 1987, and this is already an issue of fairness and justice. In effect, those who have
been faithfully paying income taxes paid more than what they should have paid had the brackets been adjusted or indexed to inflation in the past,” he added. The tax reform promised by incoming President Rodrigo R. Duterte would essentially adjust the tax brackets so that those who have P500,000 in annual taxable income would not have to pay the highest income-tax rate of 32 percent. This reform is being pushed for enactment within the first 180 days of the Duterte administration. But the various tax-reform proposals will cost the government some P158 billion to P222 billion in foregone revenues, according to
estimates made by Finance Secretary Cesar V. Purisima. This is why the economic team of incoming Finance Secretary Carlos G. Dominguez III is looking for ways to make up for the expected revenue shortfall. One of the tax measures that Dominguez is contemplating is the increase in the value-added tax (VAT) rate. According to Purisima’s estimates, raising the VAT rate from 12 percent to 14 percent will immediately give the government P82 billion. Removing all VAT exemptions, except for goods and services relating to agriculture, health, banking and education, will provide another P80 billion in revenues. The move to increase the VAT rate, however, is considered antipoor. Besides, Duterte had categorically dismissed the proposal to increase the VAT rate to make up for the foregone revenues from his promised tax reform, and instead is looking to increase luxury taxes and “sin” taxes on alcohol and tobacco. In TMAP’s pre-election survey among presidential candidates to determine their policies on tax reform, Duterte categorically said “no” to increasing the VAT rate.
₧222B
The estimated revenues that the government will lose due to Duterte’s tax-reform proposals
He also said he would not revisit the current exemptions to VAT, nor will he include more transactions to be subject to VAT. Duterte also said “no” to increasing the excise-tax rates on petroleum products, but will instead increase excise tax on alcohol products, luxury or high-end automobiles, and other nonessential goods to boost tax collection. Tugonon said that after the indexation of the tax brackets to reflect the inflation that has eaten up the purchasing power of taxpayers since 1987, the Duterte administration should broaden the tax base by encouraging voluntary compliance through more efficient tax administration. “As additional source of revenue, the government should look for ways to broaden the tax base by increasing the number of registered individual taxpayers and improve
CONTRACTUALIZATION INSIGHT
GAIC Manpower Services Inc. Group Manager and PALSCON Vice President Henry B. Nuqui, one of the speakers at the 616th General Membership Meeting of People Management of the Philippines, talks about contratualization as one of the country's top employment generators. The meeting was held at the Mayuree Ballroom of Dusit Thani Manila in Makati City. ALYSA SALEN
voluntary compliance, especially those from the informal economy. President-elect Duterte can use his popularity to campaign or ask people to register and dutifully pay their tax obligation. This campaign can be accompanied by a tax amnesty or condonation of penalties to encourage voluntary registration and payment,” Tugonon said. A civil-society group, likewise, opposed the increase in the VAT rate as being anti-poor. According to Social Watch Phil-
ippines lead convenor and University of the Philippines Prof. Leonor Magtolis-Briones, any increase in the VAT rate would worsen the poverty rate, which is already at a high 26.3 percent in the first half of 2015. “Given our high incidence of poverty and the high unemployment rate, we are not in favor of raising the VAT. In other countries, they can pay 18 [percent] or 19 percent of VAT, but for us, the poor cannot pay that much,” Briones said in a press conference last week.
Asean
BusinessMirror www.businessmirror.com.ph
A4 Thursday, May 26, 2016 • Editor: Max V. de Leon
Singapore economy gets boost from manufacturing
PHL needs to open door for wider competition Asean-EU Perspective
HENRY J. SCHUMACHER
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AQUARISTS from the River Safari feed West Indian manatees on Wednesday in Singapore. The River Safari, a river-themed wildlife park which recently opened, has chosen the manatee to become the park’s animal icon. It currently has 14 West Indian manatees, which are considered vulnerable on the list of threatened species. Through captive breeding of manatees, the River Safari hopes to contribute to the species’ population. To date, over 10 manatees have been born in Singapore. AP
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INGAPORE’S economy performed better in the first quarter than the government had earlier estimated, led by a surge in manufacturing that may not be repeated as exports remain under pressure. Its GDP expanded an annualized 0.2 percent from the previous three months, the Ministry of Trade and Industry in an e-mailed statement on Wednesday. That compares with the department’s April estimate of zero percent and the median forecast of 0.6 percent in a Bloomberg News survey of 12 economists. Singapore is among the most vulnerable in Asia to swings in global demand. With the world economic outlook weakening this year, the boost to Singapore’s manufacturing last quarter, fueled mainly by pharmaceuticals, may prove to be short-lived. “There’s not too much to get excited about here,” said Song Seng
Wun, an economist at CIMB Private Banking in Singapore. “It’s better than initially expected, but the economy is still plodding around until we see a more meaningful pickup in global demand.” The government is projecting a decline in nonoil domestic exports of 3 percent to 5 percent this year, according to a separate report released by International Enterprise Singapore on Wednesday. That compares with a February projection of zero to 2-percent expansion. Loh Khum Yean, permanent secretary at the Ministry of Trade and Industry, said the global economic outlook had worsened since February. He cited a possible drop
0.2%
Singapore’s annualized growth from the previous three months
in demand from China and fasterthan-expected interest-rate increases in the US as key risks for Singapore. “Against this backdrop, the Singapore economy is expected to grow at a modest pace in 2016,” he told reporters. The data justifies the central bank’s unexpected move in April to ease its policy stance, saying it won’t seek currency appreciation, CIMB’s Song said. Consumer prices have declined every month since November 2014. The Singapore dollar gained about 0.1 percent to 1.3801 against the US dollar as of 11:30 a.m. local
time, while the Straits Times Index climbed 1.1 percent. The government on Wednesday maintained its 2016 GDP growth forecast of 1 percent to 3 percent. The manufacturing sector expanded an annualized 23.3 percent in the first quarter, while construction grew 10.5 percent.
Services slump
THAT was offset by a 5.9-percent plunge in the services sector, the biggest quarterly drop since the 2008-2009 recession. The finance and insurance industry contracted an annualized 15.2 percent, while wholesale and retail trade services dropped 10.3 percent. “Despite some tentative improvement in growth momentum in March and April, risks are skewed to the downside,” Wei Zheng Kit, an economist at Citigroup Inc. in Singapore, said in a note to clients. If further disappointing data puts the central bank’s “implicit expectations” of 1.6-percent to 1.7-percent growth at risk, it may be prompted to ease policy again in October, he said. Bloomberg News
SEAN has achieved worldwide recognition for being one of the new dynamic kids on the block. The growing purchasing power of the 600 million consumer market and the ongoing progress of the regional community offer an integrated market and production base for both business and consumers. Foreign direct investment (FDI) is a key component of resource flows to Asean countries. FDI flows to Asia grew by 9 percent to $465 billion in 2014, with the Philippines’s inflow around $6.2 billion, or 1.3 percent. I have written about the reasons for this various times already: the Duterte administration starting fresh in less than a month will have to look at this dismal percentage in more detail and design new strategies that will attract FDI, especially in areas where inclusive growth and employment can be created, such as manufacturing, agriculture and tourism. While more jobs won’t be the magic bullet that erases poverty, it should go a long way toward entrenching inclusive growth and effectively combating poverty. Gerardo Sicat, who in 1973 was the first National Economic and Development Authority director general, now repeatedly argues Philippine growth is a long-standing story of sustained labor surplus that creates a high incidence of income inequality. Sicat believes “misguided economic nationalism gave rise to rentseeking, corruption, cronyism and uncompetitive behavior dependent on state patronage.” The government policy of import substitution and protection also corrupted the process of industrialization, because it was based on patronage. And Sicat concludes that “all these outcomes are inherently linked to the restrictive provisions of the Constitution.” There is no doubt in my mind that local and foreign business wants to see a Philippine economy that manages to sustain long-term economic growth and to become a leading economy in the region in terms of market share, total trade and incoming FDI. The question is how do we get there? How do we move from largely remaining in a catch-up game with other Asean countries? Most of the other Asean countries have long benefited, and continue to do so, from clever industrial policies and business-friendly reforms that have led to exponential growth in FDI in the past years. The Philippines has the potential to move away from that catch-up game and strive toward becoming a regional leader in terms of foreign investment and trade, thanks to its solid macroeconomic foundations; a consumer-driven economy, combined with a pool of over 100 million consumers with a low median age, significant market gaps that need to be filled; and sectors with high growth potential, such as tourism, ICT/BPM/ KPM/Creative Industries, agri-food supply and value chains, automotive, infrastructure, energy and health care. Lifting investment restrictions on foreigners, moving toward more competition in sectors saturated by few domestic players, providing competitive investment incentive schemes and improving the ease of doing business across the country, based on best practices in Philippine Economic Zone Authority zones, will all contribute to transforming the Philippines into a more attractive destination for FDI. A change of mind-set needs to happen by both the private sector and government; we recognize that this is not an objective that can be solely achieved by government efforts, or solely by the private sector. There needs to be a cooperative approach, with government making decisive moves to pass the necessary reforms and the private sector offering supporting the implementation of those reforms in a fair, transparent and effective way, in a mutually beneficial public-private partnership. For the Philippines to reach that potential, however, business as usual is not enough. Instead, there is a need for a dynamic and proactive approach to addressing the major factors that have so far kept the Philippines back compared to its peers in the region. And opening the door much wider to international competition is definitely the strategy to follow. That strategy will benefit Juan de la Cruz, who will get better products and services at a better price.
Indonesia push to boost lending risks backfiring as banks’ performance suffers
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NDONESIA’S efforts to revive economic growth by bringing down lending rates are at risk of backfiring, as they make banks the worst performers in the Jakarta Composite Index. The Jakarta Stock Exchange Finance Index fell 5.4 percent, the most among nine industry groups, since February 29, when the Financial Services Authority said it would cap deposit rates and force banks to make similar reductions to their loan rates. The regulator, known as the OJK, said the move would save banks money and encourage them to disburse more credit to spur lending growth that’s slowed to less than half the average over the last five years. The risk is that a lack of deposits in the banking system, increasing bad loans and the prospect of narrower net-interest margins will make banks more conservative in giving out credit. This could in turn damp economic growth, which trailed estimates to slump to 4.92 percent last quarter from a year earlier. OJK
89.6% Indonesian banks’ loan-to-deposit ratio as of March
Chairman Muliaman Hadad said on Friday that while interest rates have come down, demand for loans remains sluggish. “With nonperforming loans rising and weak economic conditions, there is no way the banks can aggressively lend,” said John Teja, a director at PT Ciptadana Securities in Jakarta. “So the selling pressure on banking stocks will remain and the conditions of the banking industry will remain weak.”
Bad loans
THE drop in the finance gauge since
February 29 is more than 10 times as much as the 0.5-percent decline in the JCI. PT Bank Central Asia, Indonesia’s largest lender by market value, is down 3.7 percent over the period. PT Bank Rakyat Indonesia and PT Bank Mandiri, the next two biggest, have fallen 11 percent and 6 percent, respectively. The OJK capped deposit rates at 75 to 100 basis points above Bank Indonesia’s benchmark rate, depending on the size of the lender. It asked banks to lower lending rates in line with deposit rates and said it would summon those that didn’t narrow their net-interest margins. The monetary authority’s policy rate is 6.75 percent, and it will adopt the seven-day reverse repo rate, currently at 5.5 percent, as its new benchmark in August. It isn’t yet clear if the deposit rates will be tied to the new benchmark. Mandiri’s gross nonperforming loans rose to 2.89 percent in the first quarter, from 1.81 percent a year earlier. The lender has set up
a special unit to anticipate worsening bad credit, the Antara news agency reported last week. BCA’s NPL rose to 1.1 percent last quarter from 0.7 percent. There’s also not a lot of spare capacity in Indonesian banking system. The loan-to-deposit ratio was 89.6 percent in March, compared with 75.2 percent at the end of 2010, OJK data show. Lending growth was 8.4 percent in March from a year earlier, from an average of 20 percent in the five years through 2015.
High margins
“ THE challenge is that banks aren’t willing to lend is because there aren’t enough deposits,” said Bharat Joshi, who helps manage $3.5 billion as head of Indonesia investments for Aberdeen Asset Management in Jakarta. “Margins will come down and banks will have to be more competitive going forward” he said, adding that he’s underweight Indonesian lenders. The banking sector’s net-interest
margin of 5.4 percent is the highest in Southeast Asia, according to a Fitch Ratings report released in March. Any measures that undermine these margins could be negative from a bank ratings perspective and, while lower lending rates will improve the competitiveness of Indonesian businesses, below-equilibrium rates could lead to inefficient investment, Fitch said. The central bank has seen an average 57-basis-point drop in deposit rates and 22-basis-point decline in lending rates in April, Deputy Governor Perry Warjiyo told reporters in Jakarta last week. Bank Indonesia is considering loosening mortgage rules to help stoke credit growth, Senior Deputy Governor Mirza Adityaswara said in an interview on Tuesday. The OJK is forecasting 13-percent loan growth this year, although that may be revised in June, Chairman Hadad said in an interview in Jakarta. “Things were a bit slow in the first
quarter, but that’s the normal cycle,” he said. “If we can push economic growth, loan expansion will follow.”
Sluggish economy
BANK Indonesia lowered its full-year growth forecast last week to 5 percent to 5.4 percent, from 5.2 percent to 5.6 percent. Expansion has only exceeded 5 percent in one of the last five quarters and was 4.79 percent for 2015, the least since 2009. Rising bad loans and the sluggish economy w ill limit loan growth this year, although banks will get a boost if the government manages to pass its tax-amnesty bill, said Jeffrosenberg Tan, an associate director at PT Sinarmas Securities in Jakarta. “Banks are more concerned about preserving their capital and keeping their loan books tidy rather than aggressively lending,” he said. Without the tax amnesty, “credit growth will remain weak as companies are still reluctant to invest and expand,” he said. Bloomberg News
A BusinessMirror Special Feature
ISRAEL 68th INDEPENDENCE DAY
www.businessmirror.com.ph
Thursday, May 26, 2016
A5
68th Israeli National Day C
ONGRATULATIONS the Filipino people and the Government of the Philippines for a successful celebration of democracy. Our best wishes to presumptive President Rodrigo Duterte and all elected leaders of this nation. May God bless them with wisdom of heart and mind to serve and lead this nation to prosperity and good life to all. We look forward to further develop our special relations on the foundation of our historic friendship. Israel celebrates its 68th birthday, a life time for an individual but not so for a nation of more than 3,000 years journey in history. Our country has many names, all of them rooted in the most popular book ever written—the Bible… We started with “Canaan,” The Promised Land, and The Land of Milk and Honey, later to become the Kingdom of Israel, and the Kingdom of Judah 2,000 years ago the Roman empire renamed it Palestina or in English – Palestine as a punishment to the rebellious Judean kingdom who was seeking freedom from the Roman occupation. For the last 2,000 years, this land is also known as the Holy Land.... Today, we celebrate the 68th birthday of the old/new name—Israel, and rebirth of Israel after 1,900 years is no short of a miracle. In recent years we enjoy a new name, first time nothing to with the bible… Israel is nicknamed as the Startup Nation… for Israel today became one of the leading hi-tech hubs of our time with the highest number of Startup companies after Silicon Valley and the No. 2 country with traded companies in NASDAQ… Check Waze, Intel’s Pentium or Cellron, drip irrigation, Cherry tomatoes, disk on key, voicemail and the first texting system—ICQ—to name just a few, all made in Israel.... So, we started our journey in history as the Promised Land and today we are a land of many promises, between the Holy Land and the
startup nation, we promise you never a dull moment and if there is a dull moment we make sure to change it… In 1958, our first prime minister David Ben Gurion decided that the 10 years old Israel at the time must share its nation-building experience with the newly founded nations of the world in Africa, Asia and South America, and since then, more than 130,000 people from every corner of
(FROM RIGHT) Foreign Affairs Secretary Jose Rene Almendras, Israel Ambassador Effie Ben Matityau and Dean of the Diplomatic Corps and Apostolic Nuncio Giueseppe Pinto The Philippines is not an ordinary relationship for us – the world enjoyed our hospitality in a large vaIsrael and the Jewish People. This unique relationship starts riety of know-how programs in Israel, and many before our two nations became fully independent. more abroad under MASHAV, Israel’s international In 1937, Manuel L. Quezon the first President of the comdevelopment agency. monwealth came across the growing plight of the Jewish comPhilippines was always a special partner; over the years with more than 6,000 participants. In recent years, we host more than 500 agriculture students from 29 universities and colleges for an annual 11 months OJT program in Israel.
TOURISM Minister Yariv Levin (right) meets Tourism Secretary Ramon Jimenez Jr.
PHILIPPINE Department of Tourism participates in International Mediterranean Tourism Market in Israel with X-Factor Israel champion Rose Fostanes as guest.
FILIPINOS in Agritech Israel
ISRAEL Chamber of Commerce of the Philippines panel with incoming Agriculture Secretary and former North Cotabato Governor Emmanuel Piñol
THE EMBASSY, in partnership with the IdeaSpace Foundation (left photo), selects Philippine representative Franch Lorilla (right photo) in the DLD Tel Aviv Digital Conference.
ISRAEL’S education and water companies showcase their innovative technologies in the Philippines.
munities under the Nazi regime. On purely moral grounds and conviction, President Quezon decided to open the gates of the Philippines to Jewish refugees and made arrangements to absorb 170,000 people. Unfortunately, politics and the start of World War II in the Philippines enabled only 1,300 to reach the shores of this country, saving them from certain death. Manuel Quezon’s goodwill was defined as the “open door policy” and it was met with the open hearts and friendship of the Filipino people. His policy and deeds earned him and this nation a grateful Jewish nation and gave him and this nation a great moral victory at a time when most of the world suffered a great moral collapse and defeat. But this is not the only pillar in our relations. Ten years after, in 1947, it’s another Manuel (a beautiful Hebrew name) who makes a difference in the life of our nation. This time, it’s President Manuel Roxas with Vice President Elpidio Quirino on his side, the Philippines became the only Asian country in the United Nations to cast a vote in favor of the creation of the State of Israel, and that was a critical vote, which makes it possible for us to celebrate our National Days ever since. So, we have 1,301 good reasons to thank you Philippines—and friends in need are friends indeed became the foundation of our relations, and much has happened over the years. Looking back at the year passed since our last National Day, we can note with great satisfaction the many developments in areas like food security, technology, homeland security and tourism, with some important turning points like, the visit to Israel of
Dr. Patricia Licuanan, Chairperson of Commission on Higher Education; the visit of Israel’s Minister of Tourism Yariv Levin in Manila; and the visit to Israel of Secretary Fredelita Guiza, Presidential Assistant on Food Security and Agricultural Modernization alongside so many other visits of businesses, professional groups and individuals. Our thanks and appreciation to President Benigno Aquino and his government for their friendship and support of our developing relations, we wish him and the members of his government good health, happiness and success in their future endeavors.
EFFIE BEN MATITYAU Ambassador of Israel
The Friendship Stamp issued by two Postal Services honoring and commemorating a shining moment in Philippine history—the saving of Jewish people from the Holocaust. It earned the Philippines a great moral victory, when a large part of the world suffered a moral collapse and defeat.
TheBroa
Business
A6 Thursday, May 26, 2016
Southern PHL to fuel to
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B R P | Special to the BusinessMirror VG C @villygc L L @llectura
NEW Yorker unwittingly changed the course of Philippine tourism one day in December. As the sole of Gabby Grantham’s shoes kissed the tarmac on December 21 last year, the Filipino-American unwittingly became the Philippines’s 5 millionth visitor. Grantham symbolized the country’s climb from the mire of decadeslong single-digit growth figure in tourism.
Eleven days and a new year later, the total number of arrivals to the country hit 5,360,682. The economic impact of that 2015 figure was worth P227.62 billion in earnings, or an increase of 5.94 percent from 2014. Significantly, it was the brightest year in Philippine tourism’s history. Kudos were given to Tourism Secretary Ramon Jimenez and his team. But while it looked good on paper, the figure on the country’s arrivals was still not enough to put the Philippines on Asia’s Top 10 most visited countries list. In its latest report, the United Nations World Tourism Organization ranked China as No. 1 followed by Hong Kong, Malaysia, Thailand, Singapore, Macau, South Korea, Japan, Taiwan and Indonesia, in that order. As for Southeast Asia’s six major economies, Malaysia is topnotcher, with 27.4 million visitors annually. Thailand is second, with 24.8 million; Singapore third, with 15 million; Indonesia fourth, with 9 million; and Vietnam fifth, with 7.9 million visitors. The Philippines is sixth, with 5.3 million visitors, while the second-tier countries Cambodia, Laos and Myanmar are close by with 4.4 million, 4 million and 3 million, respectively. France, the United States, Spain, China and Italy are the Top 5 countries with the most number of tourists annually. Interestingly, despite the recent terror bombings in Paris, France maintained its top spot in the rankings. The turtle-slow pace of the Philippines’s tourism growth over the last 20 years is mind-boggling, considering the country has much to offer than most Asian countries. The conundrum comes as one of the archipelago’s 7,500 (as of the latest count) islands was voted by travel bible Condé Nast as the “World’s Best Island” twice in a row. The big gap between Malaysia and the Philippines is staggering. Tourism sector stakeholders are hopeful this will change in due time. With more vigorous push from various sectors of the hospitality industry, the country’s tourism industry just might leapfrog to new heights in the next few years. The impetus for growth, according to Samuel Lim of the Philippine Chamber of Commerce and Industry (PCCI), would come from the Southern Philippines.
Go South
MINDANAO will finally open up the Middle East market because of the similarity of food (halal), social norms and cultural practices, according to Lim, Philippine Chamber of Commerce and Industries vice president for Tourism. He told the BusinessMirror that Mindanao “would be a good alternative for the more than 20 million tourists going to Malaysia.” Lim cited the many attractions the island-group offers, including the unique, pink beach in Zamboanga and Britania in Surigao del Sur. The latter is a group of 10 island resorts connected by fine, white-sand bars, “affording the tourist the opportunity to literally ‘walk on the water’ and go from one
island to the next.” “The Bukidnon mountain ranges are beautiful, and that is where the Benedictine monks grow some of the finest coffee beans,” Lim said. Davao, specifically, would pace the country’s tourism growth, he added. “Coming back from Davao and talking to the tourism industry people there, I believe Philippine tourism will boom because we will now have an additional international gateway, Davao, which is nearest to our Asean [Association of Southeast Asian Nations] neighbors.” Lim added that because of Davao, the BIMP-Eaga (Brunei Darussalam-Indonesia-MalaysiaPhilippines East Asean Growth Area) “will finally become a reality.” The lure of Davao, Lim said, comes from its offers of islands adventure and the highland attractions, among which are sightings of the Philippine Eagle, Buda mountain resorts—“better version of Baguio”—and Mount Apo. He said Davao also offers “the widest variety of fruits and seafood!” Lim said with the Manila, Cebu and Davao gateways, the whole archipelago “is now open for business.” This he also credits to the eightth ‘A’ (“Assurance of safety”) “now in place as promised by the president-elect [Rodrigo Duterte].” “We are on our way to becoming the most exciting new destination.”
Growth pains
HOWEVER, Lim said things are not yet falling in place. “The Davao hotel business is bursting at its seams,” he told the BusinessMirror. According to him, the frontoffice people are harassed by the sudden influx of tourists, telephone operators are not answering incoming phone calls promptly and the efficiency of housekeeping has fallen behind the demand. “When I checked in my room in one of the top hotels in Davao, a shirt of the previous visitor was still hanging in the closet and there was no soap for the shower.” He added hotel staff also “did not make up the room [which I found out when] I left at noon and came back at 9 p.m. The hotels were short of food because of the great number of guests. Lim said the “OK lang, puede na” service “will discourage tourists from coming back and may be bad publicity for the place.” But, overall, Lim said the main culprit in the slow pace of tourism growth is infrastructure. “The next two administrations should focus on serious answers to enable the Philippines to accommodate 20 million tourists in the next decade.” Lim is also urging Philippine officials to talk long term and build an airport with the capacity to handle that number of tourists. “It can be done,” he said. “It is all a mindset.”
Infra ills
CONSTRUCTED in 1978, the Ninoy Aquino International Airport (Naia) was originally designed
to handle 4.5 million passengers only per year. It already reached its maximum capacity 20 years ago. Observers say cosmetic and short-term solutions would not do if the country wants to be more competitive—at least on the regional level where eight of the world’s 10 best airports are located. Presently, the airport cannot handle more than 5 million passengers a year, because its existing facilities are already operating at maximum capacity. Two years ago, San Miguel Corp. offered to build an entirely new and modern international airport terminal that will pole vault the Philippines to the future and stand shoulder-to-shoulder with the rest of the world. The plan included building four runways capable of handling 150 million passengers annually and can efficiently handle 250 takeoffs and landings per hour. The Naia’s two existing runways can handle only 42 takeoffs and landings per hour, and both are being used by domestic and international airlines. To note, airporthandling capacity is different from tourist-arrival figures. Worsening congestion in the Naia is making SMC revive its worldclass airport proposal for the incom-ing Duterte administration. SMC President Ramon Ang said that when finished, the cost of the airport would be much less than the estimated $10 billion. Ang hinted of a possible alliance with the Philippines’s biggest con-glomerates that would include those of Manny Pangilinan, Henry Sy and Jaime Zobel de Ayala. The proposed airport will be located in a 1,600-hectare reclaimed area in Manila Bay.
PPP’s 2-cents
ACCORDING to Public-Private Partnership (PPP) Center Executive Director Andre C. Palacios, development of infrastructure in the Philippines is crucial if it would like to attract more tourists to the country. One of the key thrusts of the government for economic expansion—the infrastructure program of the Aquino administration—is mostly made up of transport deals, such as the development and construction of airports, seaports, highways and rail systems. These, according to Palacios, are critical as they provide better connectivity and ease of travel for tourists and common people alike. “Tourism will be one of the key drivers of Philippine economic growth in the next decade. We urgently need more public infrastructure to make this happen,” he said. “More roads and mass transportation, more efficient airports and seaports [are needed] for better mobility and connectivity.” He cited, for example, the multibillion-peso modernization of the Mactan-Cebu International Airport that is currently being undertaken by Megawide Construction Corp. “A lot of transport PPPs are linked to tourism. We need them for mobility,” Palacios said. “Look at the Mactan-Cebu airport project, it is actually boosting tourism in Cebu and Visayas.”
LUZ LUZ: “We need to create better first impression for visitors. We need more passenger capacity within our overall airport system if we want to increase the number of international visitors and domestic tourists.”
LIM: “The main culprit is infrastructure. The next two administrations should focus on serious answers to enable the Philippines to accommodate 20 million tourists in the next decade.”
Since the listed company took over the operations and maintenance of the airport down south, several airlines, both local and foreign, have decided to add and launch new flights in and out of the air hub.
holders, including power produc producers and power distribution utilities, are always on the lookout for opportunities to boost business, while providing consumers with reliable and efficient power supply. He, however, declined to comment on the power outage in the Naia last month that added another blot on the image of the country’s airport. The Miaa suffered one of the biggest blackouts—6 hours long– before partial power was restored last month. Only then were the batteries, found to be defective in October last year, were bought. One Naia ranking official who requested not to be named said privatizing the Naia would speed up procurement. Nonetheless, the lure of the Philippines as a destination failed to dim another sector riding on tourism: hotels.
Power allure
THE Department of Energy (DOE), meanwhile, welcomed developments in the tourism sector, saying this would lead to a stronger uptake in power demand. “Increased tourism activity in [any] area normally results in increased energy demand,” said DOE Assistant Secretary Patrick Aquino. Earlier this year, the Research and Statistics Division of DOT reported that tourist arrivals for February 2016 reached 549,725 compared to 456,524 arrivals in February of 2015, a double-digit growth of 20.42 percent. In just two months, the Philippines hit a record-breaking 1,091,983 tourist-arrival figure, a strong performance due to aggressive marketing blitz spiced up with international events that were held in the country in the preceding months. These triggered awareness increase and visitor influx. About 544,948 visitors entered the country through various airports, and the Naia, the country’s primary gateway, welcomed 66.37 percent of the total visitor volume. The top-spending market again was Korea, followed by the US, China, Japan and Australia. Aquino said industry stake-
Hotel openings
TWO major hotel brands spread their wings and set foot on Bonifacio Global City over the last two years. Grand Hyatt and Shangri-La added branding muscle to their already strong presence by showcasing their trademark hospitality. Earlier, Hyatt’s City of Dreams, Nobu Hotel, Marriott Newport City, Novotel and Mercure Ortigas ignited the opening surge. Hotel rooms in Metro Manila will reach a 26-year high and growth for the country’s hotel industry is expected to rise in the next five years.
With that, hopes are high that the Philippines can easily surpass its 6-million target by the end of this year. But the big question is, can it achieve its 10-million tourist arrival goal within the next two years? It is mathematically possible if the country’s airport-handling capacity can do it. According to real-estate consultancy firm Pinnacle: “Even with a slight dip, we are doing much better than most countries in Southeast Asia, where occupancy drops ranged from 2.1 percentage points to as high as 8.6. Only Thailand and Vietnam bucked the trend with a slight increase in occupancy,” Pinnacle said. Another leading real-estate company, Colliers foresees that “established branded hotel chains will come in to take over old, locally managed resorts that are in excellent locations but are past their prime. Boutique and lifestyle hotels in tourism areas will be the trend in hotel development over the years to come,” it said. The Philippines is one of Asia’s most active countries in the hotel opening scene. It is set to dazzle anew with the launching of Conrad Manila, the global luxury brand of Hilton Worldwide, in June this year. The luxurious 347-room hotel aims to inspire seasoned travelers and the local market by redefining the status quo and upgrade their impeccable taste to a new dimension. With Conrad Manila’s entry, rooms are expected to exceed the country’s current 30,500 total in the next two years. Approximately, 3,300 new hotel rooms were completed in Metro Manila from 2014 to 2016. A physically handsome hotel, Conrad Manila will offer best-inclass service and amenities. To date, it has already exemplified excellence prior to the grand opening, winning the Philippines Property Award as Best Hotel Development, Best Hotel in Architectural Design and Best Hotel Interior Design.
aderLook
sMirror
www.businessmirror.com.ph | Thursday, May 26, 2016
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ourism-growth engine HARALD FEURSTEIN, newly appointed general manager of Conrad Manila
Iconic design
PICTURE this: The whole shape of Conrad Manila is iconic, derived from a ship that has permanently docked in Manila Bay waters. Inside is a unique blend of modern art and Filipino artistry, inspired by air and sea wave elements across the bay. In one of its breathtaking lounges, the design allows one to experience an infinite ringside view of Manila’s jaw-dropping sunset, better than what one would have probably previously experienced. On a Friday and Saturday, a stay at the hotel becomes a multiple treat. As soon as dusk settles, fireworks joyfully welcome a guest’s distinguished presence. Here, like everyone else, a visitor’s stay is celebrated for being an honored guest. “The Conrad way is luxuriously excellent, physically and experientially. We aspire to inspire so that we exceed expectations. We anticipate and we have things ready for you even before you ask,” said Harald Feurstein, newly appointed general manager of Conrad Manila. An Austrian with excellent credentials like the hotel, Feurstein has worked with the best hotels in Asia and was Conrad Manila’s first employee from ground zero till the beautiful structure surfaced behind the SMX Convention Center. “I consider it a badge of honor being part of Conrad Manila’s history from Day One,” Feurstein takes pride in saying. He is upbeat about Manila’s tourism prospects and acknowledges that the Philippines has a bright future ahead, even brighter than the rest of the former Southeast Asian dragons which have lorded the scene in the last 15 years. “With consistent above-average 6-percent growth, the Philippines is poised to shine even more,” he said. How will the hotel market its way in reaching its core market?
Feurstein said, “Diversification will be the key.” “Hotels are not just for tourism anymore. We do not want to rely on a single market alone. We would like to be known as the most innovative among luxury hotel brands in the Philippines. We want to promote domestic leisure, ‘staycation’ and show the unique Conrad way of excellence with our MICE [Meetings, Incentives, Conferences and Exhibitions/Events] capabilities,” he said.
Destination concept
“CONRAD Manila is for the new generation of smart luxury travelers for whom life, business and pleasure seamlessly intersect,” according to Feurstein. As a global luxury brand with 23 properties across five continents, Conrad connects guests to people and places around the corner or halfway around the world. Feurstein will be responsible for the growth of the brand in the country. “It is a privilege for us to reintroduce Hilton Worldwide through the first Conrad hotel in the Philippines, especially in these exciting times, as the country is on the brink of rapid economic growth across all sectors,” said Feurstein, who reports to Peter Webster, Hilton Worldwide’s regional general manager for Singapore, Indonesia and Philippines. “I am certain that the hotel will be a significant addition to Manila’s dynamic cityscape. With Harald’s 25-year industry expertise and deep knowledge in hotel operations, I am confident that Conrad Manila is primed for great success in this growing Philippines tourism market. It will be a landmark where one-of-a-kind, inspired experiences will be created for guests,” Webster said. Born and educated in Austria, Feurstein already planned to work in a hotel when he was young. “It was my goal and I had no doubts about pursuing it as a career,” he
said. After graduating from college, he worked as a nightclub waiter and bartender. He then worked his way up, moving to Switzerland, his first job outside of his home country. He spent the rest of his professional life in Asia, and considered each country his home. “All of them has a place in my heart, every place is special,” he intimated. Feurstein has been actively participating in the development oversight of Conrad Manila since last year. His involvement took him across all facets of hotel management, from planning a good strategy to positioning the hotel as a choice destination for luxury travelers with one aim—give the Philippines a strong competitive advantage in the international hospitality landscape. Prior to his assignment in Manila, Feurstein was GM of Hilton Pattaya, Conrad Bangkok, Hilton Cebu Resort and Spa, Hilton Kuching and Hilton Batang, and director of business development for Hilton Beijing, Hilton Seoul, Hilton Kuching and Petaling Jaya. He was former food and beverage manager of Hilton Petaling Jaya, Hilton Kuching, Hilton Batang and Norfolk Hotel, and F&B director of Hyatt Regency Kinabalu and Grand Hyatt Fukuoka. His hospitality career has taken him across the world to continents such as Europe, Africa and Asia. His past experiences in Asia have taken him to China, South Korea, Malaysia, Japan, Vietnam and now the Philippines. A man who describes himself as very adaptable to different cultures, Feurstein loves to do a balancing act. “I love to make people do their best and I am always deeply supportive in developing their career,” Feurstein said. The tall, bespectacled man loves to lead by example. “When people see it in their leader, they inevitably try to do it,” he said. He is very demanding at work because he said he has a purpose. “I’d like to be in a team surrounded by people with a sense of purpose, because I have a set of goals that I started and want to finish them. I’d like to steer a ship and allow people to do what they’re good at,” he added. Outside of work, Feurstein is also a man of action with a lot of passion for extreme sports like participating in lung-busting ultramarathons. He has participated in many events of this kind in the Philippines. He has also endeared himself to the Philippines and its people and pays homage to the Filipino whom he said are naturally hospitable. “Hospitably is naturally ingrained in the Filipino. When you are naturally hospitable, half the battle is won,” he said.
Luxurious amenities
“WE don’t just check you in and check you out,” Feurstein said. “We give you the total package,” he punctuated. Conrad Manila has a 24-hour fitness center, a sparkling outdoor infinity pool, tranquil Con-
rad Spa and an Executive Lounge for guests staying in an Executive Room or suite. The hotel’s intelligent rooms are equipped with motion sensors that recognize a guest’s arrival, equipped with wired and Wi-Fi Internet access, Bluetooth-enabled entertainment technology, 42inch flat-screen HDTV, espresso machines and hydrotherapy rain showers, with magic mirrors in the bathrooms available in all suites for an uninterrupted entertainment experience. Suites and executive rooms offer picturesque bay or city views, plus access to the Executive Lounge. The luxurious Presidential Suite features a spacious outdoor terrace, a private pool and stunning Manila Bay views. Brasserie on 3 is the all-day dining restaurant serving an extensive buffet selection at breakfast, and an à la carte menu for lunch and dinner. China Blue by Jereme Leung offers a modern Chinese dining experience, with an especially created menu that blends contemporary cooking techniques with local flair. One can enjoy afternoon tea at C Lounge, which transforms from a laid-back lounge at daytime to a sophisticated destination bar after the sunset. A guest can sip cocktails while soaking up the sunshine in the Pool Bar. For 96 years, Hilton Worldwide has been dedicated to continuing its tradition of providing exceptional guest experiences. The company’s portfolio of 12 worldclass global brands is comprised of more than 4,500 managed, franchised, owned and leased hotels and timeshare properties. It has more than 745,000 rooms in 97 countries and territories, including Hilton Hotels & Resorts, Waldorf Astoria Hotels & Resorts, Conrad Hotels & Resorts, Canopy by Hilton, Curio—A Collection by Hilton, DoubleTree by Hilton, Embassy Suites by Hilton, Hilton Garden Inn, Hampton by Hilton, Homewood Suites by Hilton, Home2 Suites by Hilton and Hilton Grand Vacations.
Medical tourism
AS part of the property developers’ effort to attract foot traffic in their facilities, firms decide to join the medical-tourism bandwagon as putting up clinics into their properties such as malls to building tertiary hospitals across its cities. Ayala Land Inc., the country’s second-largest real-estate developer, has acquired a noncontrolling Batangas-based Whiteknight Holdings Inc., a company that partly owns Mercado General Hospital Inc. MGHI owns the 100-bed tertiary hospital Daniel O. Mercado Medical Center based in Tanauan, Batangas, which provides service to residents in the Cavite-LagunaBatangas-Quezon area. The said company also owns and operates hospitals and ambulatory surgical centers in Batangas,
Cebu and Manila. The acquisition of Whiteknight will allow Ayala Land to build a strategic partnership with the Mercado Group, which will then operate the hospitals and clinics that will be located inside Ayala-owned properties. The company earlier said it plans to build at least 20 clinics and hospitals in the next five to six years, as setting up such health facilities will complement the company’s mixed-use developments by generating more foot traffic to its malls. Jaime Ysmael, the company’s chief finance officer, said the company initially plans to build 10 clinics and 10 hospitals in Ayala Land’s property developments in key cities across the country. “We intend to continue expanding [the business] and we believe health care is a very good complement to the existing business we have, especially as we create new communities,” Ysmael said. Ysmael, however, said the company will focus more on the clinics, which will be under Qualimed brand, as it attracts foot traffic to its malls. The company, however, will limit its building of large hospitals, but mostly on primary diagnostic with a few rooms. Ayala Land already opened its hospital in Iloilo, and plans to put up a branch in its development in Nuvali in Laguna, Altaraza in Bulacan, North Point in Negros and in other parts of Metro Manila. On the other hand, the hospital group of Metro Pacific Investment Corp. (MPIC) has been snapping up hospital assets across the country, some of which it has turned around the operations while expanding others. MPIC now has 11 hospitals that it either owns or part owner, the last of which was the purchase of a 20-percent stake in the company that operates Manila Doctors Hospital and a 51-percent stake in Sacred Heart of Malolos in Bulacan. In addition, the group also invested in a mall-based diagnostic and surgical center MegaClinic in SM Megamall, and has indirect ownership in two health-care colleges Davao Doctors College and Riverside College Inc. in Bacolod. Businessman Manuel Villar is also joining the hospital venture but not mainly for tourists but to serve its communities. Villar, chairman of publicly listed Vista Land & Lifescapes Inc., said he will go into operating its own chain of hospitals, starting out in Vista City in Daang Hari in Las Piñas called VitaMed. “We are starting small. About 150 beds, but expandable to 300 beds. It actually has unlimited expansion possibilities, since we have a large property in Daang Hari,” he explained. Villar said they have partnered with doctors for the hospital business and they will be providing the medical services.
WHY TOURISM MATTERS
More work
REAL-ESTATE watchers say more brands are due to enter Manila until the end of 2017. To reach its goals, the Philippines must act on important issues in order to be a major player in the Asian travel industry. One of them is the Naia, which has been constantly figuring in the world’s worst airport surveys. Guillermo Luz, cochairman of the National Competitive Council of the Philippines, said, “Overall, the Naia delivers a less-than-satisfactory travel or customer experience for the passenger.” This is only highlighted when compared to the facilities and services of other international airports located right in the region, such as in Singapore, Hong Kong, Bangkok and Kuala Lumpur, according to Luz. “We need to create better first impression for visitors,” Luz said. “We need more passenger capacity within our overall airport system if we want to increase the number of international visitors and domestic tourists.” He reiterated that the country’s main airport should play a role in “projecting our national brand.” “The customer experience at the airport should be aligned with our international reputation for our warm hospitality,” he said. “It should also be a venue for projecting our culture visibly and through the service [that] passengers experience.”
Doing more
LIM added that if Davao becomes the international gateway for the whole of Mindanao, the arrival facilities, airport and seaports have to gear up for three to four times its capacity “now to accommodate passengers of international airlines, coming via Ro-Ro [roll onroll off] and cruise ships.” Davao has to extend its runway and possibly reactivate the old airport for domestic flights, Lim said. The access, interconnectivity to the other major cities by air, sea or land has to be given priority. The accommodations, especially outside of Davao and Cagayan de Oro, need to catch up with the demand for predictable and consistent quality hospitality standards. He added the government “has to look into the great many natural attractions that need investment for tourist-grade facilities.” “Activities have to be coordinated and offered as one-day, two-day and three-day all-in vacation packages,” Lim said. “The natural hospitality of the people has to be molded into world-class and efficient skills, while the advertising may have to focus on Mindanao as the exciting and natural and mystical ‘lost/last’ frontier, now open for tourism.” Major infrastructure, peace and order and foreign visitorsafety issues should be better addressed, Lim said. Until these are not given priority and acted upon, observers say the country’s achievement will plateau and growth will be disappointingly low.
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The World BusinessMirror
Thursday, May 26, 2016
briefs
ISRAELI OFFICIAL SAYS DEAL REACHED TO EXPAND GOVT
JERUSALEM—An Israeli official says a deal has been reached to expand the coalition government by bringing in the ultranationalist Yisrael Beitenu party of Avigdor Lieberman. According to the agreement reached on Wednesday, Lieberman will become the country’s new defense minister. Moshe Leon, a representative for Lieberman, says a deal will be signed later in the day. A government official confirmed both sides have reached an agreement. The official spoke on condition of anonymity under regulations. AP
CHINA: TAIWAN’S FEMALE LEADER ‘EXTREME’ BECAUSE SHE’S SINGLE
BEIJING—A newspaper published by China’s official Xinhua News Agency says the new president of rival Taiwan is more “extreme” in her politics because she’s an unmarried woman lacking the emotional balance provided by romantic and family life. The comments were part of an editorial, which appeared on Tuesday on the web site of the International Herald Leader and denounced President Tsai Ing-wen as a strident advocate of self-governing Taiwan’s formal independence from China, something Beijing says it will use military force to prevent. AP
DAUGHTER SEEKS U.S. HELP OVER MISSING HK PUBLISHER
WASHINGTON—The daughter of a Hong Kong-based publisher believed abducted by Chinese authorities eigth months ago appeared on Tuesday before a US congressional commission urging Washington’s help to win his release. Author Gui Minhai, a Swedish national, is one of five men associated with a publishing house whose disappearance late last year raised international concern that Beijing is clamping down on the semiautonomous Chinese city’s freedom of speech. College student Angela Gui told the Congressional-Executive Commission on China that she last spoke to her father by phone about one month ago but she does not know where in China he is. AP
RENOWNED CHINESE WRITER YANG JIANG DIES AT AGE 104
BEIJING—State media say renowned Chinese writer Yang Jiang has died at age 104. The Paper, a state-owned news web site, says Yang died on Wednesday morning at Peking Union Medical College Hospital in Beijing. It says her death was confirmed by her publisher, the People’s Literature Publishing House. Hong Kong station Phoenix TV also confirmed Yang’s death, the cause of which was not given. Born in 1911, Yang became a household name in China for her novels, plays, essays and translated works. AP
GERMAN CONSUMER CONFIDENCE STRONG DESPITE BREXIT CONCERNS
BERLIN—A closely watched survey shows German consumers remain confident, but underlying figures indicate rising financial concerns, amid negotiations over Greek debt and the possibility of a British exit from the European Union. The GfK research group said on Wednesday its forward-looking consumer climate index rose to 9.8 points for June from 9.7 in May, driven by increases in consumers’ expectations about the general economic situation and their own propensity to buy. AP
FRANCE TAPPING FUEL STOCKS AS STRIKES CAUSE GAS SHORTAGES
PARIS—France has begun using its fuel reserves to deal with gasoline shortages caused by strikes and protests over a divisive labor reform. The head of the group overseeing France’s petroleum industry, Francis Duseux, said Wednesday on RMC radio that the government has approved the use of fuel stocks for the past two days. Duseux said there are about three
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Italy, Netherlands and Sweden vie for UN Security Council seat
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NITED NATIONS—Italy, the Netherlands and Sweden all made their cases on Tuesday for why they should be elected to a nonpermanent seat on the United Nations’s most powerful body.
The open debates at the UN are the first in the UN’s 70-year history to subject candidates for Security Council seats to questions from member-states and non-governmental organizations. The three countries are vying for two open seats on the 15-member Security Council reserved for Western nations, with their ambassadors explaining why their country
deserved to be elected to a two-year term beginning in 2017. All 193 member-states will vote for five new council members on June 28. The World Federation of United Nations Associations hosted the debates to promote greater transparency in the election of countries for nonpermanent Security Council seats. Five new members are elected every year.
“I believe Sweden is different. We are militarily nonaligned. We have a small country perspective. We act in solidarity, being the largest per-capita contributor to development assistance, to climate finance and to the United Nations,” said Swedish Ambassador Olaf Skoog, adding that, among the candidates, his country has been off the Security Council the longest and has served the fewest terms. The Kingdom of the Netherlands, which also includes the small island nations of Aruba, Curacao and Saint Maarten, highlighted its commitment to fighting climate change as much of the country sits below sea level and the islands are increasingly vulnerable to rising tides caused by the melting polar ice caps. “The challenges the world faces
193 The number of memberstates whose representatives will vote for five new UN Security Council members on June 28
are enormous and I think the UN headquarters could be the headquarters for all those who want a better world, maybe for all those who want to be realistic optimists,” Netherlands Ambassador Karel van Oosterom said. Italy’s Ambassador Sebastiano
Cardi touted his country’s geographic location as the only Mediterranean nation vying for a seat on the council. “If we are elected we think we will bring in the council our direct experience of situations that are happening right in our area, in our region, our experience of negotiating, our experience of always resorting to negotiation and dialogue instead of more robust solutions,” Cardi said. On Monday Kazakhstan and Thailand made their cases to be elected for a seat reserved for the Asia-Pacific group. Two council seats are uncontested, which means Ethiopia is virtually certain to be elected for the open Africa seat and Bolivia for the Latin America and Caribbean seat. AP
Rights group: Israeli army probes of soldiers a fig leaf J
ERUSALEM—A leading Israeli rights group said on Wednesday it will stop seeking investigations of Israeli soldiers suspected of abusing Palestinians, arguing that internal military probes have failed to deliver justice and effectively help whitewash half a century of occupation. In a rebuke to the military justice system, the Israeli group B’Tselem said military investigations are deeply flawed and create a “mere semblance of justice.” Hagai El-Ad, the group’s executive director, said B’Tselem would stop cooperating with a system it cannot trust. “The system’s real function is cover-ups,” he said. He said once the group reached that “painful conclusion...we found it morally unacceptable for us to continue working in the same way.” T he I sr ae l i m i l it a r y s a id B’Tselem’s stance was biased and did not reflect reality. In a statement on Wednesday, it insisted the military was “committed to the rule of the law and its legal system acts with utmost professionalism and thoroughness.” The military said all its lawenforcement decisions are subject to external review, including that of the attorney general and the Supreme Court. It said it would continue to investigate “any and all claims of misconduct, including those from B’Tselem.” B’Tselem said that since the late 1980s, it has demanded investigations in hundreds of cases, including of Israeli soldiers suspected of
TWO Palestinian women cry during the funeral of their relative Ahmed Shehadeh, 36, who was shot and killed by Israeli troops, in the West Bank city of Ramallah, on May 4. Shehadeh rammed his vehicle into a group of Israeli soldiers in the West Bank, wounding three of them, one seriously. AP
killing, injuring, beating or using Palestinians as human shields or damaging their property. Since the outbreak of the second Palestinian uprising in 2000, B’Tselem has called for investigations in 739 cases, the group said. In a quarter of the cases, no investigation was launched and
in nearly half, the investigation was closed without further action, the group said. Charges were brought in only 25 cases, and 13 were referred for military action. In addition, 132 cases are still being processed, and investigators could not locate 44 complaints, the group said.
B’Tselem said investigations have been slow and perfunctory, and that soldiers’ accounts are routinely accepted at face value, without supporting evidence. The group was vague about what alternatives Palestinians now have, although El-Ad said it would still help Palestinians seek
justice through other means. “We will continue to investigate cases, interview witnesses, trying to collect data to the best of our professional ability and to publish that information to the public,” he said. “Whether that is going to be successful or not, time will tell,” he added. AP
Protests turn violent outside Trump rally in New Mexico
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LBUQUERQUE, New Mexico—In one of the presidential campaign year’s more grisly spectacles, demonstrators at a Donald Trump rally in New Mexico threw burning T-shirts, plastic bottles and other items at police officers, injuring several, and toppled trash cans and barricades. Authorities labeled it a “riot.” Police responded by firing pepper spray and smoke grenades into the crowd outside the Albuquerque Convention Center. During the rally, the presumptive Republican presidential nominee was interrupted repeatedly by protesters, who shouted, held up banners and resisted removal by security officers. T he ba nners inc luded t he messages “Trump is Fascist” and “We’ve heard enough.”
At one point, a female protester was physically dragged from the stands by security. Other protesters scuffled with security as they resisted removal from the convention center, which was packed with thousands of loud and cheering Trump supporters. Trump responded with his usual bluster, instructing security to remove the protesters and mocking their actions by telling them to “Go home to mommy.” He responded to one demonstrator by asking, “How old is this kid?” Then he provided his own answer: “Still wearing diapers.” Trump’s supporters responded with chants of “Build that wall!” The altercations left glass at the entrance of the convention center smashed. A lbuquerque l aw yer Doug
Antoon said rocks were flying through the convention center windows as he was leaving on Tuesday night. Glass was breaking and landing near his feet. “This was not a protest, this was a riot. These are hate groups,” he said of the demonstrators. Albuquerque police said several officers were treated for injuries after getting hit by rocks thrown by protesters. At least one person was arrested from the riot, police said. During the rally, protesters outside overran barricades and clashed with police in riot gear. They also burned T-shirts and other items labeled with Trump’s catchphrase, “Make America Great Again.” Tuesday marked Trump’s first stop in New Mexico, the nation’s most Hispanic state. Gov. Susana
Martinez, head of the Republican Governors Association and the nation’s only Latina governor, has harshly criticized his remarks on immigrants and has attacked his proposal to build a wall along the US-Mexico border. The governor did not attend the rally and has yet to make an endorsement. Trump read off a series of negative statistics about the state, including an increase in the number of people on food stamps. “We have to get your governor to get going. She’s got to do a better job, OK?” he said, adding: “Hey, maybe I’ll run for governor of New Mexico. I’ll get this place going.” The governor’s office fired back, saying Martinez has fought for welfare reform. “The potshots weren’t about policy, they were about politics,”
sa id spokesman Michael L o nergan. “And the governor will not be bullied into supporting a candidate until she is convinced that candidate will fight for New Mexicans, and she did not hear that today.” Trump supporters at the rally said they appreciated his stance on boosting border security and stemming the flow of people crossing the border illegally, but some said they were frightened by the violent protests outside. Karla Molinar, a University of New Mexico student, said she participated in disrupting Trump’s speech because she felt he was attacking members of her family who are living in the country illegally. She said she believes Trump is using them as scapegoats for the nation’s problems. AP
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Thursday, May 26, 2016
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China’s Wanda prepares for battle with ‘old brand’
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EIJING —Mickey Mouse has a new and deep-pocketed challenger: China’s shopping-mall king. The developer t hat bought Hol ly wood studio Legendary Entertainment is preparing to fight Disney to lead China’s—and possibly the world’s—theme-park industry. Wanda Group and its billionaire founder, Wang Jianlin, are inaugurating a sprawling entertainment complex on Saturday in China’s southeast three weeks before the June 16 opening of Disney’s first mainland Chinese park in Shanghai. Wanda’s 20-billion-yuan ($3-billion) site in the city of Nanchang has an outdoor theme park and teacupshaped buildings that house a shopping mall, cinemas, restaurants, a film park and the world’s largest ocean park. It has 10 hotels. Wanda has lots of cash and a huge home market but lacks Disney’s brand power and decades of themepark experience. Still, Wanda exudes confidence it can win. Publicly laying down a challenge, Wang told Chinese state TV in comments broadcast on Sunday he plans to “overtake Disney” as the biggest global tourism company by 2020. “The frenzy of Mickey Mouse and Donald Duck and the era of blindly following them have passed,” Wang said. Disney is “entirely cloning previous intellectual properties, cloning previous products, with no more innovation.”
Not worthy
DISNEY said in an e-mailed reply to The Associated Press that Wang’s comments were “not worthy of a response.” Wang’s boldness is a sign of China’s growing cultural confidence after three decades of explosive economic growth. The ruling Communist Party is eager to see China create pop culture to rival Hollywood. There was much angs when DreamWorks’s first Kung Fu Panda movie came out. Commentators demanded to know why China couldn’t make a hit film about its own national animal. The battle of the theme parks also demonstrates the growing importance of China’s public, who have evolved quickly from a nation of farmers and factory workers to one of the most important consumer markets. The government is in the midst of a marathon effort to nurture self-sustaining economic growth by encouraging consumer spending to reduce reliance on trade and investment. Tourism plays a key role in that. The outlook for theme parks in China is rosy. Annual visitor numbers are forecast to more than double from 133 million in 2014 to 282 million in 2019, according to Euromonitor International, a research company.
New brand
WANDA already has three themepark resorts in China that also include other facilities, such as shopping malls, theaters and a ski resort. Nanchang is the first of a planned series of “Wanda City” sites meant to mix culture and tourism. Wanda boasts its “multiple-business model” of rides, film, culture and shopping is an advance over Disney’s more narrowly focused entertainment. “Disney is an old brand, while Wanda is a new one,” Wanda Spokesman Liu Mingsheng said. Wanda plans to build 15 to 20 Wanda Cities by 2020, according to Liu. The company’s competitive spirit isn’t confined to its home turf. Wanda also has ambitions to beat Disney globally. Wanda signed a deal in February with French retailer Auchan Group to develop a €3-billion ($3.4-billion) project called EuropaCity adjacent to Charles de Gaulle Airport in Paris. That will mean competition for Disneyland Paris. Both EuropaCity and Shanghai
Disneyland have attracted attention from national leaders in France and China, reflecting the huge scale of their investment and hopes for tourism to drive economic growth. Wang met with French President Francois Hollande to discuss the 80-hectare (200-acre) project in Paris, which is due to have a theme park, hotels and a conference center.
Sales fuel
FOR its part, Disney Chairman and CEO Robert A . Iger was granted a meeting with Chinese President Xi Jinping in Beijing last month. Xi, who rarely meets foreig n business leaders, expressed his congratulations for the planned Shanghai opening. Wa nd a , fou nded i n 198 8 , started out building apartments and shopping malls. Operating cinemas led it into film and then sports promotion. Wang has said that path follows the transformation of China’s economy from one reliant on investment in factories and housing to a consumer market fueled by sales of clothes, entertainment and other goods. This year the company acquired Legendary Entertainment, maker of the Batman trilogy, for $3.5 billion, becoming the first Chinese company to control a major US film studio. In 2012 Wanda bought US cinema chain AMC Entertainment Holdings, becoming the biggest global movie theater operator. At home, the company is creating an $8-billion movie studio complex in Qingdao on China’s east coast. Last year Wanda bought Swiss sports marketing company Infront Sports & Media, which produces World Cup broadcasts for Fifa, and took a 20-percent stake in Spanish football team Atletico Madrid.
High prices
DISNEY can draw on a brand built up over 90 years through classic movies and instantly recognizable characters. But Wanda is counting on a wider array of malls, cinemas and other leisure activities to attract more people to its theme parks— and keep them dry year-round. “I personally feel that the climate isn’t advantageous to open an entirely outdoor theme park in Shanghai, with heavy summer rainfall, the rainy season lasting dozens of days, and the winters also quite cold,” Wang said, referring to Shanghai Disneyland. He said Disneyland’s high prices would also drive away customers. The Disney resort, a joint venture between The Walt Disney Co. and Chinese state-owned consortium Shanghai Shendi Group, is one of the largest foreign investments in China. It encompasses Shanghai Disneyland, two hotels, gardens and a shopping, dining and entertainment district. Disney says most attractions are indoors.
Traditional culture
THE site of Wanda’s first park, Nanchang, is the capital of Jiangxi province, a largely agricultural province and one of China’s poorest. It is designed on a Chinese theme, with buildings shaped like blue-and-white porcelain tea cups. Wanda City “is the new global culture and tourism brand that Wanda is striving to build,” Liu said. The company has already broken ground on 10 more locations. Wanda’s model could attract more visitors, especially older ones, “who may be more interested in traditional culture, rather than theme parks,” said Fangting Sun of Euromonitor International. The mix of indoor and outdoor attractions can offer “better experiences regardless of weather and time,” while shopping and cinemas might encourage visitors to stay longer and spend more, Sun said. AP
IN this May 16 photo, shoppers stand and look at closed stores in Tokyo’s Ameyoko shopping district, a big bazaar selling everything from food clothing and jewelry at bargain prices. AP
Group of 7 seeks way forward for aging, faltering economies
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OKYO—Leaders of the Group of Seven rich nations will undoubtedly voice unity over fighting terrorism, pandemics and tax evasion at their summit in Japan this week. Finding a consensus on how to breathe life into their sluggish economies is proving more elusive.
Aging work forces, sagging productivity and lingering damage from the 2008 financial crisis are complicating efforts to spur growth, while the effects of the slowdown in China and the other big developing economies ripple across the globe. At a presummit meeting in northern Japan’s Sendai, finance ministers and central bank governors of the G-7 failed to concur on a coordinated approach to fighting what Nobel prize-winning economist Joseph E. Stiglitz calls the “Great Malaise.” T hey did agree the world ’s growth engine is running on fumes: “ We as the G -7 believe the biggest economic problem is demand. Demand—there is no demand—and that is the biggest problem around the world,” Japanese Finance Minister Taro Aso said. The reluctance of consumers to buy and businesses to invest, despite roc k-bottom interest rates, has caught economists by surprise and policy-makers flatfooted, as the International Monetary Fund, World Bank and governments repeatedly have had to downgrade overly rosy forecasts. Last month the IMF lowered the economic growth projection for 2016 and 2017 for the world’s advanced economies, including Europe, the United States and Japan, where collectively growth has remained below 2 percent since 2010. “It’s a difficult environment indeed,” PepsiCo CEO Indra Nooyi said last month in announcing a drop in her company’s first-quarter sales and profits. “Most of the developed world outside the United States is grappling with slow growth.” When G-7 meetings began in the 1970s, Japan was in the midst of its post-World War II industrial boom. Growth peaked in the late
2%
The ceiling of collective growth rate since 2010 of the world’s advanced economies, including Europe, the US and Japan 1980s, and has mostly stagnated since a massive stock-market and lending bubble imploded in the early 1990s. It has continued to limp and languish despite massive public works spending and, more recently, a barrage of monetary stimulus. In Sendai US Treasury Secretary Jack Lew and other officials said coordinating growth strategies was difficult given the varied challenges and resource constraints of each country. “It’s not a one-size-fits-all,” Lew said. Nonetheless, he made a point of urging Japan not to derail its faltering recovery with a sales tax hike planned for next year and cautioned Tokyo against intervening to drive the yen weaker for the sake of its exporters. The IMF says advanced economies could get a healthy economic payoff by investing in research and development, roads, bridges and other infrastructure, and to rewrite tax codes that discourage people from working. Instead, governments have tended to rely on central banks to keep interest rates low, or—in Japan and Europe—even negative. Meanwhile, some economists, notably Robert Gordon at Northwestern University, worry the world lacks the kinds of techno-
logical advances needed to drive up productivity and growth. Japan’s population is shrinking and aging the fastest among G-7 countries, and its predicament is deepened by productivity that lags behind its G-7 peers. The country appeared poised for a revival, emerging from recession as Prime Minister Shinzo Abe took office in late-2012, promising to “bring Japan back” with share price-plumping plans to fire up growth through government spending and a flood of stimulus from the central bank. The “Abenomics” three-pronged combination of monetary easing, government spending and structural reforms was supposed to end deflation and get households and businesses to spend more in the sort of “virtuous” cycle all major economies have been striving for ever since the global financial crisis. The Bank of Japan’s “big bazooka” of monetar y easing pumped trillions of dollars into the economy, helping to weaken the yen against the US dollar as profits of big exporters, like Toyota Motor Corp., soared. But Japan is still dipping in and out of recession, and a 2-percent inflation target remains far beyond reach. Recent data show the outlook deteriorating, despite a 1.6-percent uptick from annual growth from January to March. A fter more than three years, Abenomics is v iewed mainly as a “marketing slogan,” said Kenneth S. Courtis, chairman of Starfort Holdings and a former Asia vice chairman at Goldman Sachs Group Inc. Japan needs to “take a blow torch ” to regulations and red tape that discourage competition, he says. “There’s a much more critical view of the Abe regime today than in the past,” he said. Most Japa nese compa n ies simply are not investing in their shrinking domestic market, even after the Bank of Japan pushed interest rates on some bank deposits it is holding below zero. The G-7 summit venue of Ise once was a center for silk and cotton processing and shipbuilding. Today its main industries are pearls, “Matsuzaka” fat-marbled beef and tourism. The region is picturesque but sparsely populated: Villages have been emptying out for decades as businesses, mines and entire communities were abandoned.
Some were casualties of earlier shifts in the global market, as factories migrated to China and other developing countries. Stalling growth is not unique to rural Japan: Long-term economic growth in each of the G-7 countries is the worst it has been since the annual summits began 42 years ago, says Howard Rosen, an independent economist based in Washington. In the advanced economies, automation and online commerce have meant the disappearance of many skilled, high-wage jobs. To a growing extent, the meager or unpredictable pay of servicesector and contract or part-time work i s s ap pi ng con s u mers’ purchasing power. As the usual policy tools fail, for the G-7 as a whole what prevails is uncertainty, said Dave Tilstone, president of the National Tooling and Machining Association. His group’s members are showing “a lot more hesitation, more than before, to make long-term commitments. Their customers just aren’t getting those long-term contracts either,” he said. Looming unknow ns include the ups and dow ns of oil prices; whether the Federa l Reser ve w ill raise interest rates again, possibly slow ing the US economy; whether Britain w ill opt to leave the European Union in a June 23 vote; and the outcome of the US presidential election, which could put Donald Trump in the W hite House. Eu rope is st r ug gl ing w it h floods of refugees, as its banks, still holding bad debts left over from the financial crisis, remain wary of lending. “There are deep holes in the banking system, and there is no appetite to deal with it,” said Ashoka Mody, visiting professor at Princeton University. “Someone has to bear the losses and no one wants to deal with the losses.” T hough Ger many a lone has kept its conser vat ive st a nce tow a rd s p e nd i ng , t he ot he r G -7 members have been constra ined in var y ing deg rees by law, politics and financial limitations f rom pursuing needed spend ing increases. “Years ago, they came out with a coordinated growth plan and everyone kicked into gear,” Courtis said. “Now there are very different views and that’s what’s paralyzed the G-7.” AP
A10 Thursday, May 26, 2016 • Editor: Angel R. Calso
Opinion BusinessMirror
editorial
Asean’s $200-billion Internet revolution
A
S global investors and multinational companies are increasingly turning their gaze southward to the 10 dynamic economies that make up the Association of Southeast Asian Nations (Asean), the region continues to compete among the world’s fastest-growing markets. In the field of e-commerce, Asean’s Internet economy—from online shopping to games and advertising—is seen surging to about $200 billion in the next decade, according to a joint research by Google Inc. and Temasek Holdings Pte. That growth will be driven by an increase in the number of Internet users, affordable smartphones and affordable data. There’s doubt the Philippines can avail itself of the $200-billion opportunity, given the current state of the country’s Internet infrastructure. For starters, the Philippines has the slowest average Internet speed among Asean members, at 3.6 megabytes per second (Mbps). We lag behind Lao PDR (4 Mbps), Indonesia (4.1 Mbps), Myanmar and Brunei Darussalam (4.9 Mbps), Malaysia (5.5 Mbps), Cambodia (5.7 Mbps), Vietnam (13.1 Mbps), Thailand (17.7 Mbps) and Singapore (61 Mbps). These figures come from an infographic made by Asean DNA, which describes itself as a site “to promote a better understanding and appreciation of shared values and common characteristics of Asean.” As Filipinos bear the brunt of slow connection, they are made to pay a steep price for unreliable Internet service. On the average, Filipino consumers spend about P1,000 ($22) a month for Internet service, with speeds of up to 2 Mbps (P500 per Mbps), while some telecommunication companies offer speed of up to 5 Mbps for around P2,000 ($44) a month. This is expensive compared to Singapore’s largest telecommunications company Singtel that offers 15 mbps for S$36.9, or about P1,312 ($29) a month (P87 per Mbps). Thailand’s True Internet provides 12 Mbps for about 799 baht, or P1,100 ($25) a month (P92 per Mbps). In a BusinessMirror report, Senate President Pro Tempore Ralph G. Recto said, “Internet service in the Philippines is expensive at $18.19 per Mbps compared with the average of $5.21 across the globe.” The senator then urged incoming President Rodrigo R. Duterte to order whoever he will appoint as chief of the newly formed Department of Information and Communications Technology (DICT) to crack the whip on telecommunication firms that fail to improve Internet services. Recto said Duterte has at his disposal the newly created department to crack the whip on “uncooperative” telecommunication firms. “All the incoming president needs to do is to hire the best man for the job, the best Cabinet secretary for the newly created DICT to ensure better services from telecommunication firms.” Hopefully, the DICT can live up to the task of helping the incoming president win the war against inefficiency in the telecommunications sector. This early, hopes are flying high that Duterte can make the telcos behave along the government’s objective to make nationwide Internet services more efficient and affordable to better serve the public and contribute to national development. Only when we have an Internet speed at par with the fastest in the region can we begin to craft sound strategies to claim our share of the $200-billion opportunity the Asean Internet revolution is expected to create in the next decade.
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John Mangun
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OUTSIDE THE BOX
AST week I wrote that one of the reasons the “Duterte” candidates are winning elections all over the world is that they are offering a change to strong individual leadership from the current weak government leadership. This is embodied in the statement, “I’m in control of the situation.” Prime Minster Justin Trudeau runs on the promise, “I will be the Prime Minister of all Canadians.” Indian Prime Minister Narendra Modi said, “This time, it’s Modi’s government.” The fact that people are running away from “government” is going to continue and unless your worldview is no longer other than “What do you want for Christmas?” you need to understand what is going on. Your future depends on knowing the dynamics that is affecting politics, and, eventually, global and national economies. Donald Trump is probably going to be the next US president against
all odds, as Mayor Rodrigo R. Duterte will soon be inaugurated President of the Philippines. No, there is absolutely no personal comparison between these two men as much as certain people would like to make, except what they represent. That is, the rejection of global “neoliberalism.” In July 1971 the Coca-Cola Co. aired a now famous commercial featuring a multicultural collection of teenagers singing: “I’d like to buy the world a home, and furnish it with love. I’d like to teach the world to sing, in perfect harmony.” In August 1971 the US suspended the ability of governments to convert
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US dollars for gold or any hard asset. Currencies exchange rates from that point on were based on the central banks “singing” in perfect harmony with floating currency rates. Economic and political disputes between nations were now to be handled by a consensus from a group like the United Nations or the World Trade Organization. “Perfect harmony” meant that the greater good was more important than individual national interests and rights. Globalization meant that businesses have become placeless and almost faceless. Iconic Kikkoman Soy Sauce, first manufactured using its current recipe in 1917, is now made in Japan, the US, the Netherlands, Singapore, Taiwan, China and Canada. Mitt Romney ran for US president in 2012. He is a near-billionaire businessman/politician. But Romney never built anything, as his business was doing global deals with companies through the capital markets. Donald Trump is a billionaire businessman and, although global in scope, people can stay at his hotels, play golf on his courses and rent space in his office buildings. Trump as US president cannot
do anything to turn the tide of neoliberalism. But the results of global and national “neoliberalism economics” will turn the tide as first comes the political upheaval and then the economic. The neoliberal economy has become mostly an illusion, as have the markets and governments for that matter, by the way we have traditionally understood them to be. A black America comedian hosts the neoliberal love fest of the Miss Universe pageant where the first and third world meets. But he can’t properly pronounce Miss Columbia’s name and tweets “I want to apologize to Miss Philippians.” He corrected that tweet an hour later to “Miss Philippines”. Neoliberalism is regime change and war in the Middle East to the banks and corporations being the largest political-campaign donors worldwide. It will all eventually come to end, as the people first change their politicians and then their economies. E-mail me at mangun@gmail.com. Visit my web site at www.mangunonmarkets.com. Follow me on Twitter @mangunonmarkets. PSE stock-market information and technical analysis tools provided by the COL Financial Group Inc.
When do Filipinos reap the fruits of a robust GDP?
Lorenzo M. Lomibao Jr., Gerard S. Ramos Lyn B. Resurreccion, Efleda P. Campos
Online Editor Social Media Editor
Chairman of the Board & Ombudsman President VP-Finance VP-Corporate Affairs VP Advertising Sales Advertising Sales Manager Group Circulation Manager
Why Trump will win
Val A. Villanueva
BUSINESSWISE
B
EFORE he finally steps down from office, President Aquino can bequeath to the nation the glowing economic numbers the country has achieved during his six years at the helm of Malacañang.
The recent uptick in GDP growth to 6.9 percent is the highest since the second quarter of 2013. The country is now considered the fastest-growing economy in the region, eclipsing regional giant China, data from the National Economic and Development Authority (Neda) show. GDP is the fiscal value of all the finished goods and services created within a country’s borders in a specific period. Some economists believe that it is indisputably the central of all economic indicators as it endeavors to measure the state of the economy in just one number. In the first quarter, the Philippines’s 6.9 percent GDP growth rate surpassed the 5 percent it registered in the same period last year, beating market expectations of a 6.6-percent growth. Neda predicts that the economy seems to be headed to meeting the full-year target of 6.8 percent to 7.8 percent, barring a significant drop in business confidence in the second half. President Aquino and his economic
team’s macro management of the economy is certainly a laudable feat, considering that the GDP under his watch is bigger that what the other administrations before his had achieved. But why is it that this sterling growth rate hasn’t filtered down to the poor and the downtrodden? Is the GDP an accurate gauge of the people’s well-being, or is it just a number only accountants understand? Remember that GDP as an economic indicator was thought of during the Great Depression in the United States, and served as a planning tool during the last World War. Its main purpose was to motivate industrial production. It only officially became an instrument to measure the United States’s economic activity in 1949 after proving its usefulness during the war. What was established as a gauge to measure market activity has now become a tool to quantify economic wealth and human welfare. But this is not the spirit by which the GDP was designed for. As early as 1934, its creator, Simon Kuznets, had warned
about GDP’s limitations. He believed then that the GDP was a faulty tool to measure human welfare and wellbeing. This issue is highly contentious. Economists clash. Some of them are of the notion that we should not worry about development, but, instead, train our sights only on growth. By doing so, development automatically ensues. Others believe that we should concentrate on development primarily, and see growth as a means to development. For me, GDP as a gross measure of total output cannot discriminate between good and bad. Economic growth is basically only number-crunching. It details how much money changes hands in the economy. Growth can be had if the value and number of commercial dealings grow in the economy. If you cook your own food at home, the GDP doesn’t increase, but it does when you dine out. Raising your own children will not affect GDP, but it will if you entrust them to a day-care center. Here is another example: If loggers flatten a forest and sell the timber, what they earn adds to GDP in the current year, but ominously diminishes the chance the economy can have in the future. This only indicates that GDP does not distinguish between diminishing assets or spawning incremental wealth. Also, crime pushes up GDP. It enhances fiscal transactions because you have to hire guards, buy security systems, purchase insurance, pay lawyers, build prisons and so on. These economic activities raise GDP but are counteractive. GDP only reads the
economic growth from these activities, but does not see the tension and uncertainty that crime brings. Development, on the other hand, could be subjective. It is a very political term, which has a variety of meanings for different people. For me, development should boost the quality of life of all the members of society. We all have potentials and capabilities that would bring us success. Development takes out the restrictions that inhibit us from unravelling our respective capabilities and achieving our full potentials. Among the shackles to socioeconomic growth are poverty, illiteracy, lack of skills, bad health, malnutrition, discrimination (based on caste, gender, race, ethnicity, religion, etc.), totalitarianism and disasters (natural or man-made). In optimizing the gains of the Aquino administration, Presidentelect Rodrigo R. Duterte must not only focus on macroeconomic growth. Through good governance and sound money management, he should strive to build a society where everyone is comfortable, cultured, highly skilled, healthy and well fed, and do not face undue discrimination and political repression, and are not at the mercy of natural or man-made disasters. He has so far garnered the biggest mandate an electorate has accorded a presidential candidate. Hopefully, this will be enough for him to have the political will to effect wide-ranging positive changes in society that will help our country realize sustainable and inclusive growth and development.
Opinion BusinessMirror
opinion@businessmirror.com.ph
Poland’s Europe problem has deep roots
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A kingly priest forever
B N F | Bloomberg View
N a sunny day in Warsaw, it’s difficult to understand why the city’s well-kept streets simmer with anger and discontent over the European vision. The economy has been growing at 3.6 percent, roughly twice the overall European rate. And there’s little or no influx of Syrian or Afghan refugees: Warsaw must be whiter than any other major city in Europe, including Budapest. Yet the far-right Law & Justice Party, led by Jaroslaw Kaczynski and known as PiS, bitterly denounces the European Union (EU) for invading Polish “sovereignty”—language reminiscent of the advocates of British exit from the EU. Poland is, or should be, Europe’s greatest success story. Repeatedly invaded and divided by other European powers, the country didn’t even exist between the late 18th century and the end of World War I. It was divided again when Hitler and Stalin both invaded in September 1939. The country’s post-Cold War independence seems like a miracle of Europe’s peaceful economic order. As for its economy, Poland has grown steadily since 1989. Starting at Communist levels, its GDP per capita has marched inexorably in the direction of the European average, and now stands at more than two-thirds that level. Unemployment is low by European standards. And Poland isn’t plagued by refugees. Why would you flee into the arms of Poland’s relatively ungenerous social safety network if you could get to Germany, much less Sweden? On top of that, Poland has balked at accepting Syrian refugees. For economic migrants and refugees alike, prospects seem better elsewhere in Europe. So why the anti-European sentiment? The superficial answer is that PiS’s defiance of Europe is a situational response to EU criticism of the party’s counterdemocratic attempt to undermine the Polish constitutional court. On this theory, if the EU would shut up, PiS wouldn’t be anti-European. There’s something to this: EU officials can sound paternalistic when lecturing newish democracies about safeguarding institutions. But PiS’s anti-European rhetoric and instincts run deeper. They belong to a strand of nationalism whose adherents tell themselves they would be better off going it alone than allowing Brussels to dictate to them. That nationalist story is tremendously significant—and offers a powerful explanation of how you can have anti-Europeanism even with a good economy and no refugees. It has roots deep in Polish history, the same history from which the EU appears to have saved the country. Poles are reared on tales of their repeated betrayals by European great
powers, most prominently Russia and Germany. Today an increasingly expansionist Russia again seems like a medium-term threat. As for Germany, it’s the main power in the EU, and perceived as such by Poles across the political spectrum, even those who love Europe. Germany isn’t in the invasion business anymore. But economic dominance is still a form of dominance, one that nationalist Poles can be brought to resent. PiS’s supports are logical targets for such anti-European nationalism. Nearly 6 million Poles, close to one-fifth of all eligible voters, cast ballots for the rightist party in last October’s elections. They didn’t skew young, but middle-aged and old. And most came from outside the big cities. It’s plausible to conclude, therefore, that PiS voters feel left out of the Europeanizing process that has made Poland richer. It’s not that these voters weren’t lifted by the rising economic tide—just that they haven’t benefited as much as urban elites. Nationalism works by appealing to intuitions stemming from received cultural verities that don’t have to be historically accurate. So by its nature, nationalism activates feelings that resist rational arguments like: “Don’t worry, things are getting better gradually.” You can see that nationalist-irrationalist strand in PiS’s detestation of Vladimir Putin. Jarostaw Kaczynski, the party leader, believes Putin engineered his twin brother’s death in a 2010 plane crash in Smolensk, Russia. In fact, PiS’s values have a lot in common with Putin’s. Both favor social conservatism and state religion. Both hearken back to some aspects of an imagined Communist era where the state provided. But because PiS is a Polish nationalist party, its script requires it to fear and hate Russia and Russia’s leader. Anything else would betray the understandable sentiment that flows from the history of Russian imperialism. PiS’s anti-European (read: anti-German) feeling is analogous. It doesn’t derive from logic so much as from a powerfully felt victimhood.
Msgr. Sabino A. Vengco Jr.
ALÁLAONG BAGÁ
A
PRIEST forever, such is the servant-king enthroned by God and ruling in holy splendor (Psalm 110:1, 2, 3, 4). Jesus, teaching the crowds and healing the sick and feeding the thousands around Him, acted as the priest-king bringing honor and glory to God and blessing to the people (Luke 9:11-17).
You are a priest forever THIS is a royal psalm extolling the Davidic king endowed by God with dignity and success, and a Messianic psalm, as well, looking forward to the time when the kingly and the priestly office would be one. “The Lord [God] said to my lord [king]: Sit at my right hand [the position of honor and power], till I make your enemies your footstool [till I give you victory in the subjugation and defeat of your enemies].” It is God who is the real king who enthrones the human king, whose kingship is a delegated rule. And it is God who gives the king every honor and who extends the king’s scepter, the symbol of royal rule, to designate the scope of the king’s rule from out of
Zion, the holy mountain of the holy city representing the essence of the Davidic rule. The birthday of the king is the day of his enthronement, the day he enters into a special relationship with God, because on that day God adopts and begets him as son (Psalm 2:7)—“before the daystar, like the dew” symbolizing the freshness of the new royal birth. The new king’s enthronement is always a time of great hope, the people trusting in the intimate bond between God and their king who exercises dominion as assigned by God. Also by divine oath, the Davidic king is granted the priestly status originally belonging to Melchizedek, the priest-king of Salem, the
Taxing a goodwill Atty. Rodel C. Unciano
TAX LAW FOR BUSINESS
T
HE value of a company’s brand name, solid customer base, good customer relations, good employee relations and a good reputation of the business as a whole, is usually referred to as a goodwill. It is something that cannot be seen but adds value to the company’s assets. Being an intangible asset, a goodwill may or may not be given corresponding financial values in financial statements (GR 125508). It is not separately identifiable from the rest of the assets of the company and is usually recognized only upon sale or disposition of the company.
As goodwill is related with the good reputation of the company’s business as a whole, can we consider the sale of goodwill a sale of an ordinary asset subject to the imposition of ordinary income tax under Section 27 of the 1997 Tax Code? In CTA EB Case 1257, the Court of Tax Appeals (CTA) en banc ruled
in the negative. In this case, the CTA canceled the assessment issued by the Bureau of Internal Revenue against a taxpayer for alleged deficiency income tax due arising from the sale of a goodwill, pursuant to Section 27(A) of the 1997 Tax Code. The tax court ruled that a goodwill is not an ordinary asset but a capital asset since
Thursday, May 26, 2016 A11
ancient Jebusite city of Jerusalem conquered by David. As promised by God, each successor of David would have the right to the privileges of that priest-king.
Give them food yourselves
JESUS was there for the people out in the deserted place, preaching to them and healing them of their illnesses. At the end of the day, time for meal, the apostles could only think of sending the crowds away, so that each one could procure food for oneself in nearby populated areas. But Jesus’ command to His followers was to “give them some food yourselves.” They could only wonder “How?” They had only five loaves and two fish, which would hardly suffice for themselves, not to speak of 5,000 hungry men plus women and children. The miraculous feeding of the crowds in the desert with the multiplied bread and fish was a sign of the imminent reign of God. The messianic overtones recalled the action of the prophet Elisha who similarly fed 100 men with 20 loaves of bread (2 Kings 4:42-44). That event witnessed to the might of God for whom he spoke, just as the action of Jesus manifested the power of God in Him. The sign of the loaves fulfilled the
(1) it is not included in stock in trade which would properly be included in the inventory at the close of the taxable year, (2) nor it is held primarily for sale to customers in the ordinary course of his trade or business, (3) nor it is a property used in the trade or business, of a character which is subject to the allowance for depreciation provided in subsection (f) of Section 34 of the National Internal Revenue Code, and (4) nor it is real property used in the trade or business. Citing the old case of WM H. Anderson vs. Juan Posadas Jr., GR 44100, September 22, 1938, the tax court ruled that if the goodwill, that is, the good reputation of the business is acquired in the course of its management and operation, it does form part of the capital with which it was established. It is an intangible moral profit, susceptible of valuation in money, acquired by the business by reason of the confidence reposed in it by the public, due to the efficiency and honesty shown by the manager and person-
The danger of President Trump isn’t dictatorship Megan McArdle
BLOOMBERG VIEW
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ET’S say Donald Trump manages to romp his way to the White House last November. The New Yorker’s Adam Gopnik paints a dire picture of what will follow: “If Trump came to power, there is a decent chance that the American experiment would be over. This is not a hyperbolic prediction; it is not a hysterical prediction; it is simply a candid reading of what history tells us happens in countries with leaders like Trump.”
Gopnik goes on to assure us that “Countries don’t really recover from being taken over by unstable authoritarian nationalists of any political bent, left or right—not by Peróns or Castros or Putins or Francos or Lenins or fill in the blanks. The nation may survive, but the wound to hope and order will never fully heal.” I don’t think I can be accused of being a Trump apologist; I’ve written a lot of words about the man, few of them kind. Nonetheless, I find Gopnik’s essay to be, well, a bit hyperbolic. Take the notion that countries don’t recover from unstable authoritarian nationalists. It sounds true, because it seems as if it ought to be. But Gopnik fails to marshal much evidence. The countries he names had big institutional problems before the dictators arrived and big problems
afterward, so it’s hard to say that the one caused the other. History —even of large, prosperous nations—is littered with unstable authoritarian nationalists, or their smaller-scale equivalent. Precious few are the countries that have not, at one time or other, been ruled by fiercely tribal autocrats with weak administrative skills and size-12 egos jammed uncomfortably into size-4 souls. If your country ever had a monarchy, you can look down the list of kings and pick out your own candidates. Maybe Gopnik only refers to modern countries? Or perhaps, he means that countries require some sort of hard reset after a dictatorship, or that the wounds take a longtime to heal? But some countries seem to have transitioned to democracy all right without a “hard reset,” and saying “these things take time to re-
cover from” weakens Gopnik’s statement to the trivial argument that history has consequences. Moreover, the “modern times” restriction makes it hard to generalize, simply because there just aren’t that many modern democracies around, or enough years of history to study from them. Even then, it seems like a stretch to say that a place like Chile has “never recovered” from a loathsome dictatorship. Chile had a largely peaceful transition back to democracy in the late 1980s, as did South Korea around the same time. I’m sure that psychic scars linger, but are they really worse than, say, the psychic scars of our own civil war which involved, let us not forget, a certain amount of liberty-taking with constitutional rights? And that assumes that Trump, having taken power, would turn into a Perón or a Lenin, and not, say, just a bad president. Leave aside for now the argument over whether he has genuinely scary-dictator instincts (I see worrying signs that he does, but this is unprovable until he tries to do scary-dictator things rather than just bray about them). There are two stages to becoming a scary autocrat. First, you have to get into a position to seize power. The most traditional routes are the military (a task for which Trump’s bone spurs left him tragically disqualified), or winning elected office to abolish or corrupt the electoral process. The former route has its risks,
TRUMP
but once you’ve safely arrived in the presidential palace, it’s pretty easy to dispense with democracy, since you have all the guns. The latter route means you need the rest of government, including all the folks with guns, to go along with you. This certainly does happen, even in countries that have been practicing democracies for a while. But it’s by no means a given. Franklin D. Roosevelt (FDR) took a certain amount of constitutional liberty with his wackier notions, and when the courts pushed back, he hit on the scary idea of basically throwing out some Supreme Court justices and replacing them with others who would rubber-stamp his policies. (The phrasing was nicer than that, but this was the basic idea, and just
the sort of first step that dictators like to take toward cementing themselves as Autocrat for Life). FDR’s own party rebelled, but the Supreme Court began cooperating, too. There were also civil-liberties violations under FDR, notably the internment of the West Coast Japanese population. But while these were appalling abuses and a stain on the national honor, they are within the (unfortunately) normal range of government behavior in your ordinary, middling-decent democracy of the era. So the question is not just whether Trump wants to be a dictator, but what the other branches of government will do if he tries to actually become one. I don’t just mean Congress and the courts; I mean “will
promises about God’s providential feeding of His people (Isaiah 25:6; 65:13-14). The Eucharistic language of the narration reminds us that the other meals of Jesus with the people in addition to the Last Supper lend us an understanding of the full import of the Eucharist. At these meals, all who believed and wished to be with Jesus were fed and satisfied by the power of God. Alálaong bagá, this Sunday of the Most Holy Body and Blood of Christ celebrates the basic fact of His ongoing, saving self-communication to all believers until His second coming—His living presence for us in His gift of body and blood in the Eucharist. He is come that all may live and have life in abundance. Our Eucharistic communion is not supposed to fill us and satisfy us totally. In its very nature, it is only a taste of the plenitude to come and of the “communion” that must be. Our Eucharistic celebration should leave us hungry for more and real fullness, greater sharing and authentic unity for all with God through Jesus and with one another. Join me in meditating on the Word of God every Sunday, 5 to 6 a.m. on DWIZ 882, or by audio-streaming on www.dwiz882.com.
nel thereof in conducting the same on account of the courtesy accorded its customers, which moral profit, once it is valuated and used, becomes a part of the assets. The gain or the loss is ordinary when the property sold or exchanged is not a capital asset. Goodwill is not an ordinary asset, as it is not among the exceptions under the definition of capital assets in Section 39(A)1 of the 1997 Tax Code. Hence, the sale of a goodwill is a sale of a capital asset subject to capital gains tax. The author is a senior associate of Du-Baladad and Associates Law Offices (BDB Law), a member-firm of World Tax Services. The article is for general information only and is not intended, nor should be construed as a substitute for tax, legal or financial advice on any specific matter. Applicability of this article to any actual or particular tax or legal issue should be supported, therefore, by a professional study or advice. If you have any comments or questions concerning the article, you may e-mail the author at rodel.unciano@bdblaw.com.ph or call 4032001 local 140.
the bureaucrats of the civil service follow his orders, and will the people with guns agree to go out and arrest his enemies?” There’s clearly a portion of the electorate that thrills to the more authoritarian and violent parts of his message, and presumably some of those folks are in the military and the civil service. But I’m still fairly confident that the Federal Bureau of Investigation is not, say, going to start tapping journalists’ phones to find out if they’re making fun of President Trump’s comb-over, or disappearing the ones who do. I worry more about Silvio Berlusconi-style corruption and abuse of regulatory agencies, an impulsive foreign policy that could lead us into open conflict with a nuclear-armed power, and executive-power overreach. I also worry about simple incompetence, given how uninterested Trump seems to be in policy. All-out dictatorship is pretty low on the list, because American institutions do not seem weak enough to allow it. That doesn’t mean they never will be. The less people identify with the nation, and the more they identify with some tribe within it, the easier it is to get your faction to make total war on the opposition. But I don’t think we’re quite ripe for the plucking by some would-be autocrat. If Trump’s presidency leads into dictatorship, it is more likely to be as the harbinger of doom than the bringer of it.
2nd Front Page BusinessMirror
A12 Thursday, May 26, 2016
Villar group founders back Mark’s ‘no PPP project’ pronouncement
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@joveemarie
NCOMING Public Works Secretary Mark A. Villar on Wednesday said his parents—Sen. Cynthia A. Villar and former Senate President Manny B. Villar—have given their support to his pronouncement that the Villar group will shelve any plan to secure government deals or participate in any public-private partnership (PPP) projects to avoid “conflict of interest.” “We will not join the PPP bidding, and my parents are aware of this. We will not allow the business of the family to benefit from this,” Villar told the BusinessMirror. Villar, who won anew as representative of the lone district of Las Pinas City, said President-elect Rodrigo R. Duterte appointed him because of his experience in the public and private sectors. “It’s very logical to get people with experience in the real-estate industry, as well as in the public sector. There were many public-works secretaries who have had direct interest in the real estate,” he added.
We will not join the PPP bidding, and my parents are aware of this.”—V Villar earned his Bachelor in Economics, Political Science and Philosophy degreee from the University of Pennsylvania. He received his Master in Business
Administration from The University of Chicago Booth School of Business. Prior to his stint as an elected public servant, Villar served as president of Crown Asia Corp. As a legislator, he served as the chairman of the Committee on Trade and Industry, vice chairman of the committees on Overseas Workers Affairs, Science and Technology, Labor and Employment. Villar also said he is submitting to Duterte a map with all the subdivisions owned by the Villar group to ensure transparency in the agency. The Villar family owns property developer Vista Land. Duterte announced the appointment of Villar as chief of the Department of Public Works and Highways (DPWH) after the incoming president’s political party, the Partido ng Demokratikong Pilipino-Laban ng Bayan (PDP-Laban), and Villar’s Nacionalista Party forged a coalition. “I am assuring the public that Villar businesses will not benefit from my position as DPWH secretary,” Villar told the BusinessMirror.
Substitution
VILLAR said his legal team is now studying the process of substitution for his congressional position. On May 10 the City Board of Canvassers proclaimed Villar as representative of the lone district of Las Piñas. Villar was given a fresh mandate with an overwhelming vote of 174,533, or 86.5 percent of the total votes cast.
SOUTHWEST MONSOON AFFECTING WESTERN SECTION OF LUZON (MAY 25, 5:00 PM)
“There will be a vacant post declared by Congress, and the Speaker will most likely assign a caretaker until such time as Congress will decide if there’ll be a special election in Las Piñas,” he said. “I’ve spoken to my constituent about it, and I told them I’m not leaving Las Piñas. I’m doing this for public service, so it’ll still be in the service of my constituents,” he said A BusinessMirror source said the incoming DPWH chief’s sister, Camille Villar, is also being eyed as Las Piñas representative. Meanwhille, the current secretary of the DPWH called on department officials to remain vigilant, as there is an expected rise in name-droppers and influence peddlers during the transition period. Public Works Secretar y Rogelio L. Singson said he has received reports from the field that “impostors are calling regional directors requesting the names of DPWH big contractors to broker meeting with Villar.” “Be vigilant about calls and messages, as somebody has started to use the name of Congressman Mark, including Mr. Peter Laviña, presumptive President’s campaign spokesperson,” Singson said. He said all contractors doing business with the department are indicated on the list of infrastructure projects per region posted on the DPWH web site, and “there is no reason to provide similar information to any unknown persons.” Singson will his leave office on June 30.
www.businessmirror.com.ph
Projects OK’d by BOI surge 64 percent B C N. P
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@c_pillas29
HE Board of Investments’s (BOI) approved investment pledges rose by 64 percent in the first four months of the year, driven by power and infrastructure projects. At a news conference on Wednesday, Trade Secretary Adrian S. Cristobal Jr. announced that four big-ticket projects were approved within the fourmonth period. “If you look at January-to-April, investments approvals are up by 64 percent versus the same period in 2015. This amounts to P117.3 billion this year, compared to P 71.6 billion last year,” he said. BOI Managing Head Ceferino S. Rodolfo said four major projects helped propel the growth, citing the P16.7-billion project of GMR-Megawide Cebu Corp.; the P15.2-billion from the Light Rail Manila Consortium; the P 14.7-billion renewableenergy project of Bayog Wind Power Corp.; and the P4.9 billion of South Negros Biopower Biomass Project. These four large projects were registered in April alone. Other projects that came in for the first four months included a P12.18-billion Cordillera Hydroelectric Power project. “There’s a sustained increase in the investment of the productive capacity of the economy, reflecting their targeting of the infrastructure and power sectors,” Rodolfo said. Of the total investment pledges recorded, 84 percent were from local investors. The total investment-growth target for the country’s main investment-promotion agency is at 5 percent.