to use traditional monetary-policy tools following the interest-rate cut, China Securities Journal said on Mon-day in a front-page commentary.

The latest interest-rate reduction adds to China’s own steps and that of at least 30 countries that have loos-ened monetary policy this year, as lower commodity prices give room to stimulate. It also illustrates a di-vergence of policy direction between the world’s two biggest economies, with analysts forecasting the US Federal Reserve will lift borrowing costs later this year for the first time since 2006.

Rates firepower“THE People’s Bank has the luxury of having plenty of room to maneuver and is willing to use it,” said Mark Williams, chief Asia economist at Capital Economics Ltd. China is accelerating reforms and seeing volatile external demand, the PBOC said in a statement accompa-nying the decision. The “economy faces relatively large downward pressure,” the PBOC said. “The overall inflation level is low, the real interest-rate level is above the historical average, for which there was room to use the interest-rate tool.”

www.businessmirror.com.ph n�TfridayNovember 18, 2014 Vol. 10 No. 40 P. | | 7 DAYS A WEEKn�Tuesday, May 12, 2015 Vol. 10 No. 215

A broader look at today’s businessBusinessMirrorBusinessMirrorTHREETIME

ROTARY CLUB OF MANILA JOURNALISM AWARDEE2006, 2010, 2012U.N. MEDIA AWARD 2008

Y CLUB

NALISM

C AS “C,” A

S “FDI,” A

PESO EXCHANGE RATES n US 44.6900 n JAPAN 0.3733 n UK 69.0773 n HK 5.7634 n CHINA 7.1971 n SINGAPORE 33.6572 n AUSTRALIA 35.3364 n EU 50.0841 n SAUDI ARABIA 11.9173 Source: BSP (11 May 2015)

WILL PPP, P6.58T INFRA BINGE END PINOYS’ TRANSPORT WOES?

FDI inflows surged 17.9% in Feb2MO FDI STILL DOWN 48.6% ON LOWER REINVESTMENT OF EARNINGS, EQUITY INFUSION, DEBT AVAILMENT

China adds stimulusby cutting rates anew

SPECIAL REPORT

C A

Emperador now wants to acquireLouis Royer

PROJECTS WITH LIVE BIDDINGPROJECTS AWARDEDn Light Rail Transit Line 2 Operations and Maintenancen P122.8-billion Laguna Lakeshore Expressway-Diken P55.1-billion Cavite-Laguna Expressway n P50.18-billion Regional Prison Facilities through PPPn P40.57-billion Development, Operations and Maintenance of Davao Airport n P30.4-billion Development, Operations and Maintenance of Iloilo Airportn P24.5-billion Bulacan Bulk Water Supplyn P20.26-billion Development, Operations and Maintenance of Bacolod Airportn P18.99-billion Davao Sasa Port Modernization n P18.72-billion New Centennial water-supply source n P14.62-billion Development, Operations and Maintenance of Laguindingan Airportn P4-billion Integrated Transport System South Terminaln P2.34-billion Development, Operations and Maintenance of New Bohol Panglao Airport

n P64.9-billion Light Rail Transit Line 1 Cavite Extension deal, awarded in 2014 to Light Rail Manila Consortium of Ayala and Metro Pacific Investments Corp. (MPIC). n P17.5-billion Mactan-Cebu International Airport New Passenger Terminal project, bagged in 2014 by Megawide Construction Corp. and GMR Infrastructure Ltd.n P16.42-billion first phase of the PPP School Infrastructure Program, which went in 2012 to the consortium formed by Megawide Construction Corp. and Citicore Holdings Investment Inc., as well as the BF Corp.-Riverbanks Development Corp. consortiumn P15.68-billion Ninoy Aquino International Airport expressway, given to San Miguel Corp. unit Vertex Tollways Development Inc. in 2013n P5.69-billion modernization of the Philippine Orthopedic Center project, which went to the Megawide-World Citi Inc. consortium in 2013n P3.86-billion PSIP Phase II contract, partially awarded in 2013 to Megawide and the BSP & Co. Inc.-Vicente T. Lao Construction consortiumn P2.5-billion Integrated Transport System Southwest Terminal, won by Megawide and partner Walter Mart Property Management Inc. of billionaire and retail magnate Henry Sy Sr. in January n P2.2-billion Daang Hari-South Luzon Expressway project, bagged by Ayala Corp. in 2011n P1.72-billion Automatic Fare Collection System contract, awarded to the AF Payments Inc. of Ayala and MPIC in 2014

CLEARLY, the risks when the administration changes are inevitable, Marsh Ltd. Senior Vice President for Asia Infrastructure Practice John

Holmes said, explaining that investors and financing agencies are already well aware of this.  

B L S. M

Second of three parts

BM GRAPHICS: ED DAVAD

STATE OF THE PPP PROGRAM

n delays in delivery of right of wayn delays in contract awardingn court cases n inconsistencies in bidding rules

PROJECTS COMPLETED: NONE

B B C

FOREIGN money poured into so-called bricks-and-mortar ventures in the Philippines posted a year-

on-year decline in the first two months to only $622 million, or almost half the amount the Bangko Sentral ng Pilipinas (BSP) reported last year, when this totaled $1.209 billion.

CHINA’S central bank cut in-terest rates for the third time in six months, as it ratchets

up support for an economy grap-pling with a debt overhang and property slump.

The People’s Bank of China (PBOC) reduced the one-year lend-ing rate 0.25 percentage point to 5.1 percent and cut the one-year deposit rate by the same amount to 2.25 percent, effective on Monday. In another step to free up interest rates, the central bank will also raise the limit on what banks can pay savers.

Inf lation remained subdued and exports and imports both slid in April—underscoring the econ-omy’s struggle to match Premier Li Keqiang’s 2015 growth target of about 7 percent. With capital flowing abroad and local govern-ments embroiled in a complex debt cleanup, economists anticipate further easing.

“The economy requires substan-tial stimulus to get back on its feet,” said Frederic Neumann, cohead of Asian economics research in Hong Kong at HSBC Holdings Plc. “But monetary easing on its own may not do the trick: China also requires a fiscal kick to steady demand.”

The central bank still has room

EMPERADOR Inc., a brandy maker controlled by Filipino billionaire Andrew L. Tan, said it expressed

interest to acquire French cognac maker Louis Royer SAS. Manila-based Emperador will submit a preliminary offer on May 13, and this will be subject to evaluation and final decision of seller, it said in a Philippine Stock Exchange filing. Emperador has been buying assets overseas to expand its market outside the Philippines and increase the brands and types of alcoholic beverage it sells in its home market. Last year it acquired whiskey-maker Whyte & Mackay from Diageo Plc.’s United Spirits Ltd. for £430 million, including the assumption of debt. The purchase helped drive a 5-percent growth in 2014 net income to P6.1 billion. “Emperador is currently debt-free and is, therefore, in a very strong fi-nancial position to further expand its business both globally and do-mestically,” the company said in Monday’s statement. Emperador, a unit of Tan’s Alliance Global Group Inc., is the world’s larg-est maker of brandy, accounting for 21 of every 100 bottles of brandy sold globally, the distiller said in March. The distiller also said then that it expects sales to grow 35 percent this year fol-lowing a 7-percent increase in 2014 to P32 billion, after it markets Emperador brandy in countries in Europe and Af-rica, and it introduces eight new prod-ucts in the Philippines. Tan’s Alliance Global also has inter-ests in property development, fast food and gaming. Emperador shares rose 0.2 percent to P11.44 at 11:35 a.m. in Manila.

Bloomberg News

This, BSP Governor Amando M. Tetangco Jr. said, represented a de-cline of 48.6 percent and the result of the lower net inflows of all foreign direct investment (FDI) components for the period.

Because they remain invested in the Philippines for the long haul, the government would rather have FDI than the portfolio investment variety, also known as speculative investment or “hot” money, whose flighty nature makes it fly off the country at the merest hint of trou-ble or promise of greater rewards elsewhere. Hot money typically gets invested in locally traded stocks and bonds that, apart from the fees exacted by the local debt and securities market participants, do not generate neither

tax for the national coffers nor em-ployment for the locals.

FDI in February alone proved 17.9 percent higher to $359 million, from year-ago FDI of only $305 mil-lion. These are inferior FDI num-bers than that posted the previous January, when this aggregated $263 million, and the year-ago figure of $905 million. On year-on-year ba-sis, FDI in January proved 71 per-cent weaker this year than in 2014, the BSP said. According to the BSP, FDI in the first two months aggregated only $622 million, on account of so-called equity and investment fund shares, or simply equity investments, of $333 million, plus the net borrow-ings of the local subsidiaries from

THE automotive industry post-ed another double-digit sales hike in April, continuing a year

of robust growth with 18-percent-or-higher monthly increments.

The Chamber of Automobile Manufacturers of the Philippines Inc. (Campi) and Truck Manufac-turers Association reported that sales in April jumped 18 percent to 21,259 units compared to the same month last year. The local auto industry started the year with a sales increase of 19 percent in January, followed by 23 percent in February and another 23 percent in March.

Auto sales up 18% in April

Will PPP, ₧6.58-T infra binge end Pinoys’ transport woes?  Uncertainties on whether the con-tracts signed will be honored by the next administration arise, businessmen and lending agencies agreed, as political ties—not to mention, pride—become more im-portant than honor.   Japan Bank for International Coopera-tion Manila Representative Hideki Hira-moto cited the problem with the contract to build the third terminal of the Ninoy Aquino International Airport (Naia).   “Unfortunately, this country has a bad track record in terms of change in ad-ministration like in Naia 3,” he told the BM. “�ere is, for the lack of better term, interference by the gov-ernment, and sometimes it’s uncontrol-lable for us. We want to see some more ef-fort in the authority side to mitigate that risk for us.”  �e multibillion-peso contract to build a new terminal at the Naia complex came into the picture when former President Fidel V. Ramos sought the help of the taipans to ra-tionalize the country’s infrastructure needs.   �e joint venture between Fraport AG and PairCargo, known collectively as the Philippine Air Terminals Corp. (Piatco), won the contract via price challenge in 1997. �e construction started after for-mer President Joseph Estrada came into power, and was originally seen to be com-pleted by 2002.   Japanese firm Takenaka Corp. was tapped by Piatco to build the new terminal at the airport complex. �e construction, however, was halted in 2002, when allega-tions of anomalies cropped up. Further de-lays were caused by litigation between the Philippine government and Piatco, and the latter’s German shareholder Fraport AG.  Naia 3 opened in 2008, operating at

half of its annual capacity.   In 2013 the Court of Appeals ordered the national government to pay Piatco roughly P16 billion as just compensation before it could take over Naia Terminal 3. �is payment is yet to be released.   �e terminal became fully opera-tional in August last year, after Takenaka finished the remaining system works of the air hub that include  baggage han-dling, flight-information displays, com-puter terminals, gate coordination and fire-protection systems.  �e full operation of Terminal 3 paved the way for a faster and more pleasant ex-perience for passengers flying in and out of Manila. �e 182,500-square-meter ter-minal now has a daily capacity of 33,000 passengers at peak, or 6,000 passengers per hour. It also has 34 air bridges and 20 contact gates, allowing it to service 28 planes simultaneously.  It took the government four adminis-trations in 17 years to fully complete the passenger-terminal building due to legal and financial issues.  �e same thing is happening with Megawide Construction Corp., a mainstay at the current administration’s Public-Pri-vate Partnership (PPP) Program, right now. Before former Health Secretary Enrique T. Ona resigned from his post last year, the government entered into a PPP contract with Megawide and its partner World Citi Inc. for the modernization of the Philip-pine Orthopedic Center. �e P5.7-billion contract was signed in 2013.   But Ona’s replacement has shown hesitation to proceed with the contract. Current Health Secretary Janette L. Ga-rin ordered earlier this month the cre-ation of a task force to review the 25-year contract forged with the Megawide-World Citi consortium. 

  “We could not move on because of the change of cards, wherein the new health secretary ordered a review on the contract,” Megawide Corporate Information Officer Louie B. Ferrer said in a phone interview. “For us, it is unfair. We have a contract, then suddenly a new secretary comes in and asks for the contract to be reviewed, stopping the progress of the project.”  He said the company has been request-ing for meetings with the new health czar, while it continues to seek for updates on the government’s decision.   “�e plans are already ready; we’ve been spending for the design. We have a team al-ready, a staff, and there is cost involved in that. We’d like the government to act upon it as quickly as possible,” Ferrer said.  �is event, he noted, signals uncertainties.   “It is really unfair for the concession-aire and the investors. It sends bad signals to us. �is is just a change in the admin-istration of the health department; what more if there will be a change in govern-ment?” he lamented.  Aside from these risks, the private sec-tor is also subject to regulatory risks.   MTD Philippines President Isaac S. David recounted his company’s experience with the previous government’s decision to temporarily stop the South Luzon Ex-pressway from implementing a fare adjust-ment—something that was included in the concession agreement forged during the prior administration.  “We’ve experienced the change in ad-ministration in our South Luzon Express-way project. We were supposed to imple-ment the new toll rate, as per contract. But because of protests coming from drivers, we were prevented from imposing the new rates right away,” he recalled.   �en came a temporary restraining order from the Supreme Court, further de-

laying the implementation of the new toll rates.  “Fortunately, our contract was in or-der and, therefore, was allowed to increase the toll rate right after the lifting of the restraining order,” said David, whose com-pany had a stake in the expressway.  �e operator of the thoroughfare to the north is also in between regulatory hurdles. �e North Luzon Expressway was supposed to increase its toll rate in 2012. Under its toll-operations agreement signed with the government, the expressway oper-ator is allowed to adjust its toll rates every two years. It now has a pending cumulative toll-rate adjustment of 15 percent for each vehicle class.   Metro Pacific Tollways Corp. execu-tives have repeatedly expressed their dis-may over the slowpoke implementation of the rate increase. �ey warned the gov-ernment that the lack of rate adjustments could lead to the depletion of the com-pany’s revenues, hence leading to lesser financial muscle to implement the needed expansion of the toll road.   East Zone concessionaire Manila Wa-ter Co. was also barred from increasing its rates. �e Metropolitan Waterworks and Sewerage System (MWSS) entered into a concession agreement with the water-utility subsidiary of Ayala Corp. in 1997, allowing the listed company to be “an agent and contractor” of the govern-ment-owned company.   It has asked the government to reim-burse prospective losses of about P79 bil-lion due to lower water tariffs, citing pro-visions of the letter of undertaking dated July 31, 1997.   �e letter provides for the govern-ment’s undertaking of indemnifying “Manila Water against any loss caused by any action on the part of MWSS, re-sulting in the reduction of standard

rates ‘below the level that would other-wise be applicable in accordance with the concession agreement’.”  Hence, political and regulatory uncer-tainties are two of the main risks that need to be mitigated by the government so its key infrastructure program can be as suc-cessful as it can be.   “�e actual risks remain to be seen. What is most important is the consistency across various administrations. �is is where the subject of sovereign guarantee becomes extremely important. Sovereign guarantees are way to ensure that what-ever government is in power, it will sup-port the PPP Program,” said Valery Tub-bax, who heads Sumitomo Mitsui Baking Corp.’s power and infrastructure advisory segment for Asia.  Sovereign guarantees enhance the bankability of the project, thereby provid-ing the private sector with more financing sources or options. �is tool could also be used to encourage foreign players in financ-ing PPP projects.   But for Holmes, the private sector has already been made aware of these “jeop-ardies,” allowing them to reevaluate their bids for certain projects.   “Investors and sponsors will always recognize this exposure and price this risk into their bid,” the Marsh executive said.   But these risks, European Chamber of Commerce of the Philippines External Vice President Henry J. Schumacher said, should be avoided, if not mitigated, as the key infrastructure program is an initiative that needs continuity to plug the holes in the country’s infrastructure.   “PPP is a good concept to get infra-structure projects going, but the imple-mentation has been poor, mainly on the transport side,” he said.

To be concluded

BusinessMirror news@businessmirror.com.ph Tuesday, May 12, 2015A2

A

BMReports

news@businessmirror.com.ph Editor: Dionisio L. Pelayo • Tuesday, May 12, 2015 A3BusinessMirror�e Nation

In Resolution 9 dated May 5, the C o m e l e c - B AC a n no u n c e d S m a r t -matic’s disqual if ict ion fol lowing a postqualification evaluation conduct-ed by the Special Technical Working Group (STWG). “The committee resolves to declare Smartmatic-TIM as post-disqualified for the lease of the precinct-based OMR sys-tem,” the resolution said. The STWG recommended the disquali-fication of Smartmatic for its failure to submit valid Articles of Incorporation and the demonstration unit failed to meet the requirement that the system shall have at least two storage devices, and shall be capable of writing to the same all data-files, audit log, statistics and ballot images simultaneously.

“In view thereof, this committee resolves as it hereby resolves to declare the joint venture of Smartmatic-TIM Corp., TIM Smartmatic International Holding B.V. and Jarltech International Inc., as post disqualified for the lease of Election Management System [EMS] and Precinct Based Optical Mark Reader or Optical Scan [OP-SCAN] Sytem,” the resolution stated.  Considering that it is the first com-petitive public bidding for EMS and OMR or OP-SCAN System, and there being no valid bid proposal, the Comelec-BAC or-dered the continuation of the suspended second bidding. It also ordered the immediate con-duct of a mandatory review for the lease of OMR.

It can be recalled that on  February 25, the Comelec-BAC disqualified Smartmatic-TIM after it submitted a “nonresponsive” bid that featured several items left without price offers in their financial proposals, and subsequently declared a failure of bidding for the first round. Its competitor, Indra  Sistemas Socie-dad Anonima, was also disqualified dur-ing the first round of the bidding after the company’s bid proposal  exceeded  the approved budget for the project which is P2,503,518,000. In its financial proposal for the OMR project, Indra pegged the OMR lease con-tract at P2,503,518,000, which is exactly the amount of the approved budget. However,  Indra did not include the “Option to Purchase” amount in their total bid proposal, which is another P1,182,977,632.96. However, the Comelec en banc grant-ed protest filed by Smartmatic and de-cided to revive its first-round bidding process for the latter and suspended the conduct of a second bidding for the contract. The Comelec en banc’s action led to the holding of the postqualification by the Comelec-BAC to Smartmatic-TIM’s bid.

Smartmatic had proposed a P1.72-bil-lion budget for the lease of 23,000 OMR machines, with an additional P505 mil-lion if the poll body wants to purchase the equipment. Its bid is around P700 million cheaper than the P2.5-billion Approved Budget for the Contract.

Smartmatic, Indra lose P2.5-billion OMR deal

B J R. S J

THE Commission on Elections- Bids and Awards Committee (Comelec-BAC)  on Monday finally

disqualified Smartmatic-Total Information Management (TIM) Corp. from the P2.5- billion contract for the lease of 23,000 Optical Mark Reader (OMR) machines that will be used in next year’s elections.

By Recto Mercene 

THE government has prepared a hero’s welcome for the late Am-bassador Domingo Lucenario Jr.,

who died in a helicopter crash on May 8 at Naltar Valley in the Gilgit region of northern Pakistan.

Lucenario’s remains will arrive on Wednesday onboard a Pakistani Air Force C-130 “Hercules” transport plane at the Villamor Air Base, in Pasay City, Foreign Affair Spokesman Charles Jose said. A memorial service will be held in Luce-nario’s honor at the Department of Foreign Affairs (DFA) main office in Pasay City on May 14. Asked if Lucenario would be buried at the Libingan ng Mga Bayani, where some of the country’s prominent envoys, like Carlos P. Romulo and Blas Ople, are buried, Jose said the matter was not discussed with the late envoy’s family. Lucenario’s family members went to the DFA on Monday morning to discuss the burial arrangements, but the matter of burial at the Libingan ng mga Bayani was not taken up.

He said the family had announced that Lucenario would be buried at a private me-morial park in Taguig City. Lucenario died with another ambassador and the wives of two other ambassadors in the helicopter crash. The pilots were aso killed. The other 11 passengers of the ill-fated rotary wing aircraft survived.

He and his companions were invited by the Pakistani government to attend the launch of a tourist spot in the region. “It’s a shocking news to us at the DFA. We’re not batchmates but he is a friend, I remember him as a jolly fellow,” Jose said.

This is the first time that a Philippine

ambassador died in the line of duty, while serving in a highly dangerous region.

The Movement of the Taliban in Paki-stan claimed that they shot down the helicopter carrying Lucero and the other envoys, although this has been denied by he Pakistani government, which said that technical problems caused the crash that also killed the pilots. Jose said the DFA is still waiting for the official report from Pakistan about the cause of the crash, although he added that early reports point to technical trouble. He said this was corroborated by eyewit-nesses and the other surviving passengers, saying that that the cause of the accident was mechanical trouble. The Pakistani Army Russian-made Mi-17 helicopter was part of a convoy of three helicopters that were transporting foreign diplomatic personnel to the opening of a ski resort in the Naltar Valley in Gilgit-Baltistan in northern Pakistan. Seven people, including the ambassadors of Norway and the Philippines, the wives of the ambassador of Indonesia and the high commissioner of Malaysia, the two Army helicopter pilots, and a crew member were killed in the crash. Several other foreign dignitaries were injured in the crash.

The helicopter was close to a landing zone when it spiraled out of control and landed on top of a school. There were no casualties on the ground.

The Pakistani government denied the reports, and within hours of the crash, said the helicopter suffered from technical mal-functions.

Pakistan’s Foreign Secretary, Aizaz Ah-mad, called the Taliban’s claim “bogus,” and said the military deployed thousands of soldiers to secure the surrounding area, according to news reports.

Hero’s welcome prepared for fallen ambassador

COMELEC DISQUALIFIES MAIN BIDDERS

THE Department of Trade and Industry (DTI) has an-nounced the availability of a

P1-billion enterprise rehabilitation fund (ERF) from the Small Business Corp. (SBC) to continue the loan program for small and medium en-terprises (SMEs) affected by the on-slaught of Supertyphoon Yolanda on November 8, 2013.

For 2015, the SBC had set aside P750 million for displaced business-es in Eastern Visayas, while the DTI central office approved the allotment of P250-million guarantee fund in-tended for this year’s use.

“SBC can make available a total loan of P1 billion for 2015. This is just for Yolanda-affected areas in Eastern Visayas because SBC can use their regular fund for other regions,” DTI Regional Director Cynthia R. Nierras said.

With this development, the DTI official asked displaced business owners to seek financial assistance if they want to restore their busi-ness through the DTI-SBC special loan program.

“Teams from SBC are ready to evaluate interested applicants and help them get back on their feet. In-cluded in the priorities are delicacy makers, meat processors, retail and manufacturing,” she added.

For January to March 2015, the DTI’s lending arm has already re-leased P62.3 million for 79 typhoon-displaced SMEs in the region.

The SBC offers special loans

BusinessMirror news@businessmirror.com.ph A4

Economy

briefsOMBUDSMAN AFFIRMS INDICTMENT OF 5 PSALM OFFICIALS

OMBUDSMAN Conchita Carpio-Morales on Monday affirmed the indictment of members and officials of the Bids and Awards Committee (BAC) of the Power Sector Asset and Liabilities Management (PSALM) in connection with the alleged illegal award of the contract for the sale/disposal of waste oil from the Sucat Thermal Power Plant. Morales, in a news statement released on Monday, said that facing criminal charges for violation of Republic Act (RA) 3019, or the Anti-Graft and Corrupt Practices Act are BAC Department Managers Rico Valdellon and Lorenzo Jacinto, Division Managers Jacinto Ilagan and Don Thed Ramirez and BAC Disposal Committee member Renato Vehenente. The Ombudsman said that the case stemmed from the illegal award of the contract for the sale/disposal of waste oil from the Sucat Thermal Power Plant to the joint venture firm of Genetron International Co., Atomillion Corp. and Safeco Environment Services Inc. in January 2012. “The concerted acts of illegally causing or facilitating the award of the project to the joint venture, it can be reasonably inferred that they conspired with one another to commit the offense attributed to them,” she said. Jovee Marie N. dela Cruz

HOUSE COMMITTEE APPROVES A MORE INCLUSIVE DEFINITION OF INDIGENT ELDERLYTHE House Committee on Population and Family Relations has approved recently a proposal to amend Republic Act (RA) 9994, otherwise known as the “Expanded Senior Citizens Act of 2010,” for a more inclusive definition of an indigent citizen.

The panel chaired by Rep. Rogelio J. Espina of the lone district of Biliran approved the proposal embodied in House Bill 3172, filed by Rep. Angelina “Helen” D.L. Tan of the Fourth District of Quezon.

Tan, a medical doctor, said the present definition of “indigent senior citizen” under RA 9994 excludes senior citizens who are not sick or disabled and who have pension or other sources of income but who are nonetheless in dire need of additional government assistance in the face of steep price of basic commodities and medical services.

Specifically, the law refers to an indigent senior citizen as “any elderly who is frail, sickly or with disability, and without pension or permanent source of income, compensation, or financial assistance from his or her relatives to support his or her basic needs, as determined by the Department of Social Welfare and Development in consultation with the National Coordinating and Monitoring Board.” PNA

B M N. BCorrespondent

PARTY-LIST Rep. Terry Ri-don of Kabataan has scored Ombudsman Conchita Car-

pio-Morales for sitting on plunder charges filed by youth groups against Budget Secretary Florencio B. Abad for the misuse of pork-barrel funds. Abad was also slammed by Ridon for taking her sweet time on the alle-gations that Abad had disbursed the now-illegal Priority Development Assistance Fund (PDAF) through bogus non-governmental organiza-tions (NGOs) organized by Janet Lim-Napoles. The budget secretary was also lambasted by the Supreme Court (SC) for crafting the Disbursement Accel-eration Program (DAP) that spent P144 billion for projects not funded by the General Appropriations Act, thus, arrogating unto himself the mandate reposed in Congress. Ridon noted that pork barrel whistleblower Merlinda Suñas testi-fied before the Sandiganbayan that Abad was a client and close friend of alleged pork-barrel scam master-mind Janet Lim-Napoles. “Ms. Suñas’s testimony is consist-ent with Napoles’s earlier disclosure that Abad was her mentor in divert-ing public funds to bogus NGOs. This is part of the case we filed before the Office of the Ombudsman in July last year. Now we ask, whatever happened to that case?” Ridon asked Morales. In a 16-page petition filed by Rep. Ridon and several other youth lead-ers on July 8 last year, the petition-ers said that Abad “systematically misappropriated, converted, mis-used, and malversed public funds” through his involvement in both the DAP and the PDAF cases. “It should also be noted that Janet Lim-Napoles, in an affidavit dated May 12 last year submitted to the Department of Justice claimed that Abad was her mentor, having taught her how to use NGOs in maximizing her earnings in transactions involv-ing the PDAF of lawmakers,” the pe-titioners said.

In the complaint-affidavit, the petitioners claimed that “all the ele-ments of plunder exist in the instant case.”

“The respondent systematically misappropriated, converted, mis-used, and malversed public funds

through his executive issuances and the programs implemented by him as secretary of the Department of Budget and Management,” the peti-tioners charged.

“Despite Secretary Abad’s clear violation of the Constitution and other relevant laws, the Aquino administration continues to coddle Secretary Abad, even going to ex-treme lengths to defend him. That is why youth groups decided to again take the initiative and file charges against the budget secretary to hold him accountable,” Ridon said.

“However, the Office of the Om-budsman has seemingly slept on the case and buried it in the pits of ob-livion. How can we believe that this government is sincere in its anticor-ruption campaign when it engages in selective application of the law?” the lawmaker asked.

Ridon reiterated his appeal to Morales to expedite the investiga-tion on Abad’s case. “The public deserves to know the truth. The esteemed Ombuds-man should not give in to pressure by the Aquino administration. We challenge the Ombudsman to act swiftly and judiciously on our com-plaint and make Abad accountable for his crimes against the Filipino people,” Ridon concluded.

‘Conflicting statements’ REACTING to the accusation, Abad criticized what he termed as conflict-ing statements of Sunas who earlier said that the budget chief was “a friend and client” of Napoles. “This is a surprising development, because when she last mentioned my name, it was to deny that I had trans-acted with Napoles. If you recall, this contradicts her earlier statement that I was a ‘client,’ as she explicitly said in her November 2013 affida-vit,” Abad said in a news statement released on Monday. Abad was dragged into the PDAF scam while serving as a congressman of Batanes. Napoles has accused Abad last year of using the Batanes Elec-tric Cooperative as the implementing arm for a P10-million project under his PDAF. Abad denied the allegation.Napoles’ lawyer Dennis Buenaven-tura said based on the copy of affi-davit of Sunas executed before the Ombudsman, Sunas named Abad as a “client” of Napoles before the PDAF scam was uncovered. With Estrella Torres

B B F

MALACAÑANG’S lawyers are asking the Supreme Court (SC) to throw out a petition

filed by Sen. Antonio Trillanes IV ques-tioning the Aquino administration-initiated K to 12 education program aimed at making Filipino students more competetive in the global work force.

“ Mahalaga sa k inabuk asan ng bansa ang K to 12 kaya’t paninindi-gan ng pamahalaan ang kahalagahan nito sa SC,” Communications Secre-tary Herminio B. Coloma Jr. said on Monday.

Coloma justified the K to 12 scheme when asked about the petition filed by Trillanes seeking to junk the admin-istration’s plan to upgrade the educa-tion program in shifting to the K to 12

scheme that, its proponents say, has been widely adopted by developed and developing countries. Coloma added that the Aquino ad-ministration officials are committed to ensure seamless implementation of the K to 12 Program for the ben-efit of the students, as well as their teachers. “Ginagawa ang lahat para sa maayos na pagpapatupad ng programa at isina-saalang-alang ang kapakanan ng mga magaaral at guro,” the Palace official assured.

Coloma confirmed the Palace plan to defeat the Trillanes petition before the SC, with Palace lawyers preparing to convince the majority of the justic-es hearing the case about the merits and other advantages of the Aquino administration’s K to 12 Program.

The National Economic and De-velopment Authority (Neda) said this was included in the Mutual Accountability Framework (MAF) between the governments of the Philippines and Canada recently signed by the two countries. “Linking development priorities and goals between the Philippine and Canadian governments will help ensure sustainability of strate-gies under the Philippine Develop-ment Plan 2011-2016, which have already produced significant results for the Philippine economy,” Eco-nomic Planning Secretary Arsenio

M. Balisacan said. The Canadian government will extend some P441.83 million worth of ODA grants to the Philippines in fiscal years 2015 and 2016. Canada’s fiscal year starts in April and ends in March the following year. In fiscal year 2016 and 2017, the Philippines is set to receive ODAgrants of around P552.29 million and another P625.93 million in fis-cal year 2017 and 2018.

For fiscal years 2018 to 2020, the Philippine government will receive P736.39 million a year, or a total of P1.47 billion in ODA grants.

Tuesday, May 12, 2015 • Editors: Vittorio V. Vitug and Max V. de Leon

Palace justifies implementation of K to 12 Program anew

Lawmaker slams Ombudsman for not pursuing raps vs AbadCanada to extend P3.09-B ODA

to Philippines in next five yearsB C U. O

THE Canadian government will be extending P3.09 billion worth of Official Development

Assistance (ODA) grants to the Philippines in the next five years.

to displaced businessmen with one year grace period and an in-terest rate of 5 percent to 6 per-cent, lower than the 10-percent to 12-percent interest rate for regular financing program.

In 2014 the 324 SMEs from the region received P326-million loan out of the P480-million emergency loan set aside by DTI-SBC for affected areas in central Philippines.

Since the government launched

the loan assistance early of last year until first March 2015, at least 403 SMEs have already been assisted. Loan amount ranges from P200,000 to P2 million, according to Nierras. The DTI reported that of the 18,405 registered SMEs in Eastern Visayas, 13,312 were displaced by last year’s storm. Of the number, 5,322 suffered total damages while 7,990 experi-enced partial damages.

The ERF is envisioned to become

one of the regular financing prod-ucts of SBC in response to the need to rehabilitate SMEs in the event of disaster and calamities resulting in their destruction.

The program has two main cri-teria for borrower selection: one is that the enterprise was an ongoing business, duly registered prior to the calamity; and that the enterprise was badly damaged by the ensuing calamity. PNA

DTI bares P1-billion fund for enterprise recovery in Eastern Visayas

The Philippines-Canada MAF was the third MAF that Canada signed with another government and the first that it signed with an Asian country. The other two MAFs were with Senegal and Ghana.

The Philippines-Canada MAF’s objective is to establish the shared desire between the Philippine and Canadian governments to support broad-based and sustainable eco-nomic growth.

This will be done by creating available resources in support of programs, projects, and activities that will create employment, sig-nificantly reduce vulnerabilities to poverty, and improve the quality of life of all Filipinos. “The continuing support of Cana-da is very important in our effort to make growth inclusive and disaster-resilient and to deepen good govern-ance reforms,” Balisacan said.

The MAF is expected to con-tribute to a more disaster-resilient and gender-responsive enabling environment at national and sub-

national levels of government. It also intends to increase eco-nomic opportunities for low-skilled workers, microentrepreneurs and smallholder farmers, and especially on youth, women, and marginal-ized groups. Also, the mutual commitments in the MAF will level the expecta-tions of both governments, par-ticularly on the development co-operation processes, and thus may address specific programmatic and governance concerns.

These will further increase trans-parency and accountability for re-sults of Philippines-Canada devel-opment cooperation programs.

On June 27, 2014, the Canadian government elevated the Philippines as “Country of Focus” in its bilateral programming toward eradicating global poverty. As of December 2014, Canada has an active or ongoing ODA port-folio of $111.95 million, which are all grants, for 47 projects in the Philippines.

STREET VANITY Assorted silver and bronze bracelets, rings, and necklaces imported from China are displayed and sold at a sidewalk stall in Mandaluyong City at a bargain price of three for P100. ROY DOMINGO

SEN. Antonio Trillanes IV delivers his message before teachers, parents and students holding rally against the Department of Education’s K to 12 Program at the Liwasang Bonifacio in Manila on May 9. PNA

news@businessmirror.com.ph Tuesday, May 12, 2015 A5BusinessMirrorEconomy

Up until now, the contract—sweetened for several times—is in limbo, resulting in the poorer state of the train line that ferries passengers between the northern and southern corridors of Metro Manila.

Lesser trains have been operating—almost half the supposed capacity of the railway system—and yet, more and more people are riding the mass-transit line. Now, the Department of Transportation and Com-munications (DOTC) has a new way of addressing that problem: Bid out a multidisciplinary maintenance deal that would, hopefully, target each component of the train line that needs to be improved.

“Hopefully, we could award the contract by June. Clearly, the purpose of this contract is multidisci-plinary. It will carry a six-month concession period, which will cost about P57 million per month,” Trans-portation Secretary Joseph Emilio A. Abaya said in an interview on Monday.

The components of the P342-million deal include the rolling stocks, tracks and pavement ways, building facilities and equipment, conveyance, communications, power supply and the automatic fare-collection system.

“It will be of great help. Hopefully, when the new maintenance provider comes in, we could address that,” the transport chief said, pertaining to the train line’s limited operations.

The transportation department launched the ini-tial auction for the multibillion-peso contract for the train line’s maintenance provider sometime in the third quarter last year.

The first auction was welcomed by maintenance providers, but they decided to ditch the bidding due to issues on transparency. In the hopes that these multinational companies would be enticed to vie for the much-needed project, the department decided to sweeten the terms of the deal. Despite the relaxing of rules and the improve-ment in cost, railway upkeep-services companies still decided to evade a “potential risk.” The risk, industry sources said, is obvious: The train system itself is already dilapidated. Hence, “maintain-ing” it, in the literal sense, would mean risking the lives of daily commuters coming from the northern and southern corridors of Metro Manila.

Currently, a shadowing team from the transport department is assisting APT Global Inc. in maintain-ing the line. The maintenance provider’s contract ex-pired in the second half of last year, it was, however, extended due to the failed auctions. The government was supposed to pay the winning maintenance provider a hefty amount of P2.38 billion

to maintain the railway system. The amount, however, was not enticing enough, given the poor state of the train line. The negotiated contract, however, requires the ap-proval of the Government Procurement Policy Board (GPPB). The decision of the policy-making body has yet to be released. The owner of the assets of the MRT Line 3 admitted that the train system already poses a certain degree of risk in the lives of the commuters, given its current state. Train experts from Hong Kong also found the line to be in a poor state, especially the rails.

But the government and the private-sector partner could not meet half way.

For one, the government currently implements a P9.7-billion multiyear venture to overhaul the line. The complete makeover is expected to be done within the term of President Aquino. It also wants to buy out the corporate owner for P54 billion. But several private groups are proposing a different scheme to modernize the train system, which has been under fire for years now for its mediocre services.

The group of businessman Robert John L. Sobrepeña is proposing to do a “quick-fix” solution to make the train system safe for public transport. Together with foreign firms Sumitomo Corp. of Japan and Globalvia Infrastructuras of Spain, Metro Global Holdings Inc. is proposing to “fix” the ailing system through a $150-million investment that involves the procurement of a total of 96 new train cars, and the rehabilitation of the existing 73 coaches; increasing its capacity by fourfold to 1.2 million daily passengers. Under the proposal, a single point of responsibil-ity will be implemented: meaning the rehabilitation and the maintenance of the line will be handled by a single company. Separately, Metro Pacific Investments Corp. (MPIC) is proposing to shoulder the upgrade costs of the train system and release the government from the bondage of paying billions of pesos in equity-rental payments.The group of businessman Manuel V. Pangilinan, which earlier entered into a partnership agreement with the corporate owner of the MRT, intends to spend $524 million to overhaul the line. The venture would effectively expand the capacity of the railway system by adding more coaches to each train, allowing it to carry more cars at faster intervals. The multimillion-dollar expansion plan would double the capacity of the line to 700,000 passengers a day, from the current 350,000 passengers.

DOTC eyes award of MRT 3 maintenance contract by June

B L S. M

IT has been months since the transportation department launched several auctions for the maintenance contract of the Metro Rail Transit (MRT) Line 3, but it seems

that the odds are not ever in its favor.

B L L

THE beleaguered president and CEO of the Power Sector Assets and Liabilities Management Corp. (PSALM), Emmanuel R. Ledesma Jr., is seeking

Malacañang’s help to determine if the PSALM Board was authorized to suspend him and appoint an officer in charge (OIC) in his place

“I am requesting for an opinion from your Office as to whether or not the PSALM Board has the author-ity to preventively suspend me and designate an OIC,” Ledesma’s letter to the Office of the Deputy Executive Secretary for Legal Affairs read. His letter, dated May 6, was addressed to OIC Michael Ong. In suspending Ledesma, the PSALM Board relied on Section 18 of Republic Act (RA) 10149, otherwise known as the GCG (Governance Commission for Government-Owned or -Controlled Corporation) law, which read that “the CEO in the charter of GOCCs shall be elected annually by the members of the board from among its ranks. The CEO shall be subject to the dis-ciplinary powers of the board and may be removed by the board for cause.”

In his 27-page letter, Ledesma said that PSALM Board erronously interpreted the provision. He said that the GCG law speaks of a CEO being subject to the disciplinary powers of the board. It refers to a CEO who is “elected annually by the members of the board from among its ranks.”

As such, Ledesma said, “it does not refer to a CEO [who] is directly appointed by the President of the Phil-ippines and sits in the board in an ex-officio capacity.” Ledesma was appointed by President Aquino in September 2010. “The PSALM president is appointed by the president of the Philippines. I was extended by the President of the Philippines on appointment as the President and CEO. It is in this light that the second sentence of Sec-

tion 18 of CGC law becomes inapplicable in the case of PSALM to justify my preventive suspension,” said Ledesma, adding that the “twin orders” of PSALM Board “usurped the powers” of the President.

Further, Ledesma accused the board of violating his right to due process, saying that “their actions…subjected me to multiple administrative proceedings.” “What makes the suspension double illegal is that there was no pending investigation by the PSALM Board. A preventive suspension is supposed to be is-sued pending an investigation,” he pointed out. Ledesma was suspended based on GCG’s findings and recommendations on four issues cited. These are the prepayment of the National Grid Corp. of the Phil-ippines (NGCP) concession fees; privatization of Naga power-plant complex; disputed amount of generation payments under Ilijan Independent Power Producer Administrative Agreement; and governance concerns and issues relating to the internal operations of PSALM, which shows Ledesma’s alleged abuse of discretion, dis-trust of employees, unethical behavior, poor leadership skills and inefficiency in handling the affairs of PSALM.

These accusation were based on a complaint filed by “concerned employees of PSALM.”

The GCG, in a letter to PSALM Chairman and Fi-nance Secretary Cesar V. Purisima, investigated the allegations hurled against Ledesma. Among others, it said that Ledesma failed to exer-cise extraordinary due diligence in allowing the NGCP prepayment without verifying and consulting with the National Transmission Corp. on any outstanding ar-rears as required by the concession agreement, as well as the costs and benefits of such payment. The GCG also said that Ledesma’s actions rela-tive to the right of SPC Power Corp. to top the bids for the Naga power facility were consistent with the preventive legal advise of PSALM’s statutory counsel and the instructions of the governing board at the time they were made.

Ledesma seeks Palace succor to keep PSALM post

B C U. O

DESPITE the International Monetary Fund’s (IMF) op-timistic outlook on the Phil-

ippine economy, local research group IBON Foundation Inc. said the coun-try’s economic growth remains “shal-low and unsustainable.”

IBON said the slowdown in the Philippine economy in 2014 indi-cated that the sources of economic growth are unsustainable and nar-row-based. It added that, even with expectations that public spending and remittance flows will be high, this is not an assurance that growth is inclusive. “The shallow and speculative sources of economic growth are not sustainable, and this was seen in the economy slowing down in 2014. Government spending has also been lower and even if this is increased, it will still not address the main reasons for the economic slowdown. The group also noted the slowdown in overseas Filipino workers’ [OFWs] remittance growth, which is no longer seeing the peak high double-digit growth rates of the past decades,” IBON said. IBON said that, prior to the Phil-ippines, countries like Brazil, Russia,

India, China and South Africa (also known as BRICS) have, likewise, been hyped by the IMF and other agencies as among the world’s fastest-devel-oping economies.

However, IBON said, recent eco-nomic trends in these countries show slowing growth, stagnant wages and massive capital outflows, as well as intensive plunder of their natural resources.

“This is because these countries have not undergone fundamental economic reforms and were merely hyped to draw in speculative foreign capital,” IBON said. IBON said the national gov-ernment must look beyond the hype given by multilateral insti-tutions, like the IMF. It also criti-cized the IMF for “only serving the interests of developed coun-tries and global corporations.”

In its biannual Regional Econom-ic Outlook (REO) report released this week, the IMF forecast the Philippine economy to grow despite global challenges. The REO stated the country’s firm currency, strong OFW’s remit-tances, earnings from the outsourc-ing and tourism sectors, stable gov-ernment spending, etc., all serve to protect the Philippine economy from

volatile global conditions.In 2014 the Philippine economy

posted a growth of 6.1 percent, the slowest since 2011, when the econ-omy posted a full-year economic growth of 3.7 percent. The National Economic and De-velopment Authority (Neda) said the slower fullyear economic growth was largely due to the lackluster eco-nomic performance in the first three quarters of the year. The country’s gross domestic product growth in the first to third quarters was sig-nificantly affected by the govern-ment’s underspending. However, a recovery in government spending in the last quarter of 2014 boosted growth in the fourth quarter to 6.9 percent, an estimate that was above market expectations.

The full-year economic growth in 2014 placed the Philippines as the second fastest-growing economy in Asia, and the country’s fourth-quarter growth placed the country as the third fastest-growing economy in Asia dur-ing the period. The fastest-growing economy in Asia in terms of full-year and fourth-quarter growth was the People’s Republic of China, with a growth of 7.4 percent and 7.3 per-cent, respectively.

PHL growth ‘shallow, unsustainable’–IBON

Tuesday, May 12, 2015

OpinionBusinessMirrorA6

Government fails when it intervenes

editorial

THE last decade has taught the world a clear and unmis-takable truth. Governments have the power to artificially push markets and economies in any direction that the politicians wish these to go.

Europe, with Spain being the particular case, and the US wanted to create a roaring construction and housing industry. Through low mortgage rates, tax incentives for both developers and buyers and government guarantees for banks, a housing boom was created. The policy was sold to the public as a way to economic growth.

But artificial “booms” must come to an end as market forces eventually take over. Spain’s unem-ployment rate is 23 percent and the US homeownership rate is at a 20-year low.

Germany and, once again, the US, assured the public that not only would the environment be “saved” but the economic benefits would be enormous. After billions of dollars of incentives to “green” energy producers and buyers, government subsidies and government guarantees, the US is littered with failed “green” companies and the German people are discovering that, even with government subsidies, electricity prices are the highest in the region.

The goals of government intervention are never fully achieved by manipulating the economy. The German government, in part, justifies its renewable energy push by saying how great it has been for the environment, in spite of the lack of significant economic benefits to ordinary people. But it was also these economic benefits that were promised.

The US housing push was justified in that more and more people from even economic classes that actually could not afford to buy a house would become homeowners. But what the people were not told is that, if anything ever went wrong with the government-created housing “bubble,” subsequent housing rental costs would skyrocket as demand increased, which has happened in the last few years.

The potential unintended consequences of government economic intervention are never con-sidered and often ignored.

A bill has been filed in the House of Representatives to regulate commercial-space rentals for small and medium businesses. A small enterprise is one with assets less than P5 million, and a me-dium enterprise is less than P50 million.

The bill creates a commission that will have exclusive jurisdiction to adopt, formulate and imple-ment policies, guidelines and rules regulating the imposition of commercial rentals. No one knows what the “commission’ will decide to “avoid instances of charging exorbitant rental amounts by commercial establishments.”

So, if the commission lowers rates to “small” businesses, all a company has to do is break up the 10-branch store corporate structure into ten separate business entities to get lower rates. Commer-cial space operators could simply create rented spaces that are so large, that even the “controlled” square-meter rent would be out of possibility for a small tenant.

Further, who would be willing to build a small commercial building catering to small enterprises, if they did not know how much rent they could charge in the future?

The problem with government intervention in the marketplace is that the failures are only rec-ognized after the damage is done.

AN interesting news report that caught my attention recently is worth a closer look from a businessman’s perspective.

I’m referring to a statement made by Ambassador Alfredo Yao, president of the Philippine Chamber of Commerce and Indus-try (PCCI), to the effect that domestic industries are suffering from acute shortage of qualified workers because more and more people are becoming entrepreneurs and because of a skills mismatch.

HAVE you ever noticed how easy it is to get inside an SM mall or department store?

The doors and entrance wall are usually all glass so you can see what is inside. You are welcomed by a blast of air condi-tioning, which is great during these hot months. Even the secu-rity check tries to be as quick and unobtrusive while still relaying the thought that the store is concerned for your safety. The sales staff greets you as you browse through the merchandise and tries to walk the line between being helpful and pushy.

Solving the puzzle: Labor shortage amid unemployment

Let SM handle attracting FDI

THE ENTREPRENEURManny B. Villar

The PCCI president cited the shortage of accountants, bookkeep-ers and construction workers. He said this was becoming a problem for in-dustries, although not to the extent of paralyzing operations.

My initial reaction to rising entrepre-neurship as the cause of the shortage of workers is: I don’t think so. The number of entrepreneurs is increasing because they could not find employment, or be-cause the jobs available don’t pay enough for their needs.

I have long been advocating en-trepreneurship because it is the key to prosperity.

My dream is for the Philippines to become a nation of entrepreneurs rather than a nation of employees. At the same time, I realize that not every-body can run viable self-owned busi-nesses, and that skilled workers and

professionals are vital to the country’s drive toward industrialization.

The country needs a vibrant manu-facturing sector to achieve inclusive growth, according to the Asian De-velopment Bank (ADB). The services sector has been leading the expansion of the economy, but the ADB says it is not enough to create the needed em-ployment because of the lack of link-ages with other sectors of the economy, like industries.

In 2014 the industry sector posted the highest growth rate (7.5 percent) among the three major sectors of the economy, although it was down from 9.3 percent in 2013, according to the National Statisti-cal Coordination Board (NSCB).

The services sector grew by 6 percent, down from 7.2 percent, while the agri-culture sector improved slightly to 1.9 percent from 1.1 percent year on year.

That is one reason SM and the other mall operators are successful as from the first encounter: They want the customer to feel welcome and wanted.

Unfortunately, the Phil ippine government believes that the same approach can be used to attract more foreign investment. It is wrong.

You know pretty much what to expect when you enter a mall or department store. The same is not true when you en-ter a country to do business as a foreign investor. In fact, it is almost the oppo-site. No matter how warm the greeting, every foreign investor to every country knows from experience that there are some hidden unpleasantries waiting just around the next aisle.

But the Philippine government has the mind-set that a “Welcome” sign on the door is more important than what is inside the door.

Look at the language that is used. As recently as last month, former Finance Secretary José Camacho, who is now in the private sector, said, “I think we need to open the doors a bit wider and be more effective in welcoming these investors in”. Of course, Camacho said much more than that, including, “We need to get our approval processes much faster. If people are proposing to build new power plants, by all means, let’s try to facilitate that and make sure it happens”.

But notice how a mall advertises and prepares the customer what to expect

Data from the National Statistics Office (NSO) show that, of the total 37.31 million employed workers in 2014, more than half, or 53.9 percent, are in the services sector. The agricul-ture sector accounts for 30 percent of the total employed workers; only 16 percent of the employed workers are in the industry sector.

The comment about the worker shortage in the industry sector is not surprising because domestic industries have been dormant for many years. One reason was the Western-dictated liber-alization policy, which opened up the Philippine market without establishing safety nets to protect local industries.

In other words, our industries lost in the global competition. Recent de-velopments, however, are helping re-vive domestic industries. A study by the ANZ Bank found that manufacturing companies were moving out of China and transferring to Southeast Asian countries, like the Philippines. And it estimated that foreign direct invest-ments in the Asean could reach $106 billion by 2025.

Other factors that are revitalizing domestic industries include the increase in the local consumers’ purchasing pow-er, which fuels the expansion of the do-mestic market; low interest rates, which make financing for industries viable; and the decline in oil prices.

These and external factors, like the increasing labor costs in China, are making domestic industries competi-tive. Data from the NSCB show that growth in the industry sector in 2014

was led by the manufacturing and con-struction subsectors at 8.1 percent and 8.5 percent, respectively.

I agree with the PCCI’s observation about the shortage of workers. I see it in the real-estate industry, which is my primary business, that is enjoying ro-bust growth.

Clearly, we have a shortage of accoun-tants, engineers and architects, among other professionals, as well as construc-tion workers. And this problem is aggra-vated by the competition of domestic industries with employers from other countries in hiring Filipino profession-als and skilled workers.

Yet, 2.7 million Filipino workers were unemployed in 2014, translat-ing to an unemployment rate of 6.8 percent. The NSO reported that, as of January 2015, the unemployment rate barely improved to 6.6 percent. A separate survey conducted by the So-cial Weather Stations (SWS) found that an estimated 9.0 million adults were unemployed during the first quarter of 2015, for an unemployment rate of 19.1 percent. It was below the 27-percent (estimated 12.4 million) adult jobless-ness rate in December 2014.

Whether it’s 2.7 million, or 9.0 mil-lion, the number is still too high, and it is ironic that the domestic industries are coping with a shortage of workers. 

To be continued

For comments, e-mail mbv.secretari-at@gmail.com  or visit www.mannyvil-lar.com.ph.

something the Philippine government is not doing properly at all. The adver-tisement reads “Up to 70-percent off.” But underneath in the small print is the phrase “On select items.” The cus-tomer knows that the department store is offering some good deals, but that there are limitations. However, there are no surprises.

We are constantly told that the Philip-pines is notoriously low in its ranking on ease of doing business. Companies have to go through 16 separate procedures to start a business in the Philippines, compared with three in Singapore and nine in Indonesia. As much as that has been said, the foreign investor knows what to expect.

But that is not even necessarily true. Those 16 separate procedures do not include the barangay clearances need-ed and the local fire department and building inspection for example. In one major Metro Manila city, a business in one of the high-rise buildings must get approval for the type of appliances they might put in the office. “Only 16 separate procedures, not including the permit for your microwave oven and coffee maker.”

The comparatively low wages in the Philippines, combined with a skilled and well-educated work force, is touted as the biggest advantage of bringing for-eign investors to the country. But the fact is that global investment does not flow to low-wage economies, but to high-productivity economies. The top 10 des-tinations for foreign direct investment (FDI) include only one lower-income

country—China, in fourth place. The rest are high-wage countries: the US, the UK, France, Belgium, the Netherlands, Germany and Spain. Even small and wealthy Switzerland gets three times as much FDI as India.

While all the conversation is about changing the Constitution, the dirty little secret that no one in the govern-ment wants to talk about is the way the government suddenly changed the rules for mineral exploration and mining.

Existing contracts were broken. The permit process was stopped in mid-stream. The national government did nothing to prevent a local government from passing rules that violated national law. That ad about 70 percent off? We changed our minds.

You know what the best part is in walking into an SM mall? It is not the greeting, the air conditioning, or the help-ful sales people. It is not even the prices.

It is the consistency and reliability. The customer knows what to expect and the department store knows what they are expected to deliver in product and service. And if, after that, you want to take your business to another store, there are countless opportunities else-where to spend your money. The same is true in the foreign investment world.

E-mail me at mangun@gmail.com. Visit my web site at www.mangunon-markets.com. Follow me on Twitter @mangunonmarkets. PSE stock-market information and technical analysis tools provided by the COL Financial Group Inc.

OUTSIDE THE BOXJohn Mangun

Tuesday, May 12, 2015

OpinionA7BusinessMirroropinion@businessmirror.com.ph

UK’s general elections

THERE are several remarkable things about the United Kingdom’s recent general elections both worth noting and emulating.

B D NBloomberg Views

ONE sector in India’s economy seems immune to worries about the country’s uncertain policy environment: e-commerce. Even India’s exuberant stock markets, which

enjoyed spectacular rises in the aftermath of Prime Minister Narendra Modi’s landslide victory last year, have spent the last two months self-correcting. The benchmark Sensex at the Bombay Stock Exchange has seen a 10-percent decline in value in the last 60 days as the reality of a still-sputtering economy and start-and-stop reform has registered with investors.

ABOUT TOWNErnesto M. Hilario

Preelection forecasts and exit polls were terribly off the mark predicting a hung parliament as neither the ruling Conservative Party (“Tories”) or the Labour Party could win a majority. The Tories won an outright majority, returning David Cameron to 10 Downing Street.

Neither did the polls account for a surge of nationalism that would

enable the Scottish National Party to take 56 of Scotland’s 59 constitu-encies—a few months after losing in the independence referendum. Nor did they foresee the Liberal Demo-crats (“Lib Dems”) suffering crushing defeat from voters punishing them for reneging on campaign pledges to oppose tuition and educational fee hikes.

It is a cautionary tale to those

who accept exits polls and surveys as error-proof.

UK political parties and their leaders exhibit a strong sense of ac-countability to their voters. None in the recent contest adopted an “I won, but was cheated” style that prolongs the tension and prevents a smooth transition between governments. In fact, the leaders of the three major opposition parties—Ed Milliband of Labour, Nick Clegg of the Lib Dems and Nigel Farage of the UK Inde-pendence Party—quit their leader-ship positions within hours of the announcement of the Tory sweep.

Competition was heated and sharp among the aspirants, particu-larly in social media. Their debates nonetheless were focused on issues, ideas and programs—not directed to the person ad hominem and pander-ing to the voters—with each thread of the argument backed up by evi-

dence and statistics. The major parties published its

respective manifestos—what it in-tends to do in case it gets into pow-er. Labour pledged to reintroduce a 50-percent top income-tax rate for earnings over £150,000 and ban “ze-ro-hour” contracts that are exploit-ative. The Tories promised to build 200,000 starter homes and open 500 more free schools, while pledging to ensure that minimum-wage earners will pay no income tax.

The manifestos may bear stark differences from each other, but they were unified under the theme of making Great Britain even greater, especially in the aftermath of the global economic slowdown. A national—not personal—purpose is strongly infused in party politics in the UK.

E-mail: angara.ed@gmail.com.

Edgardo J. AngaraB J T P Z

Inter Press Service

BONN—Climate change is one of the greatest risks to human societies, but also to biodiversity, often creating a “snowball effect” exacerbating existing pressures, such as

habitat fragmentation.

TRAVEL and tourism is a booming business, and the airline industry is likely to benefit from insatiable wanderlust in the years to come amid a growing economy.

Flag carrier posted hefty income in 2014

Beware India’s e-commerce bubble

Consequently, the conserva-tion community, including inter-governmental treaties, such as the African-Eurasian Waterbird Agreement (AEWA), and non-gov-ernmental organizations, such as BirdLife International, is strongly advocating genuine attempts to address its causes and mitigate its effects.

Alongside cutting energy de-mand and increasing energy ef-ficiency, developing renewable sources of energy is essential in order to reduce the amount of fos-sil fuels burned and the emission of greenhouse gases.

There is little doubt that the development and deployment of renewable energies are vital if we are to end our dependency on tra-ditional fuels.

However, appropriate planning, assessment and monitoring of re-newable infrastructure are neces-sary in order to prevent adverse ef-fects to wildlife. All the innovative technologies being developed—wind turbines, solar panels, tidal, wave and hydropower—can have distinct drawbacks as far as wild animals—and particularly migra-tory birds—are concerned, if not sited correctly.

One thing that conventional and renewable energies often have in common is the need to transfer power from the point of production to the consumers. Natural habitat is sacrificed so that power lines can be constructed.

The pylons and cables form a barrier to migration—and large birds are most vulnerable—perch-ing on the structures, their long wing span can often lead to short circuits; this is fatal to the electro-cuted bird but also inconvenient for the customer, whose electric-ity supply is interrupted. The birds that most commonly fall victim are from long-lived, slow-breed-ing species that cannot sustain these losses.

Power lines are not the only haz-ard—wind turbines take a toll, too. The Spanish Ornithological Society says that more than 18,000 wind turbines in Spain are causing sig-nificant mortality of raptors and bats, including threatened species.

It would be foolish for conser-vationists to oppose all forms of renewable energy just as it would be foolish to welcome any proposal to build a windfarm, barrage or solar plant unquestioningly. What needs to be done is to find the right balance.

The Parties to the Convention on the Conservation of Migratory Spe-cies of Wild Animals, under which the AEWA was concluded, adopted a resolution calling for appropri-ate Strategic Environment Assess-ments and Environmental Impact Assessments procedures to be put in place, which would mean apply-ing rigorous planning guidance.

It would involve following a simple sequence: first, develop-ments should be avoided in the most sensitive locations, e.g., bot-tlenecks on birds’ migration routes. Everywhere else, mitigation mea-sures should be taken and a last re-sort compensatory actions should be considered.

And some mitigation measures bring large gains at little cost—shutting off wind farms when migrating birds are passing has proven to have reduced the mor-tality rate of the Griffon Vulture by 50 percent in Spain—while lost electricity production was less than 1.0 percent.

The design and placement of the pylons are also very important—in forested landscapes, for example, it is best if the structures do not pro-trude above the canopy. Monitor-ing in France over the past 20 years has shown that attaching spirals to power lines at regular intervals to make them more visible can lead to a reduction in the fatalities as a result of collisions.

The next few decades will see a massive increase in demand for power in developing countries in Africa—and this will be matched by expansion of both renewable generation capacity and grid con-nections. The danger is that if the design and location are not right, further devastating losses to the continent’s birdlife will be inevitable.

We need to increase our knowl-edge, and to share it once it has been acquired. This will entail close cooperation between conservation-ists, on the one hand, and the power companies, on the other.

CMS and AEWA have produced the first version of a set of guide-lines on the appropriate deploy-ment of renewable-energy technol-ogy, and the BirdLife International network can provide the expertise on the ground to ensure that we can square this particular circle: Producing renewable energy to help combat climate change with-out inadvertently hammering an-other nail in the coffin of our end angered wildlife.

Take the case of PAL Holdings Inc., the parent company of flag-carrier Philippine Airlines, which recently reported total comprehensive in-come of P786.8 million for 2014. This reversed a three-year losing streak, and paves the way for sus-tained growth.

In a disclosure to the Securities and Exchange Commission, PAL Holdings said the surplus was con-sistent with internal projections, and marked a dramatic turnaround from the huge P9.12-billion loss in-curred in the last nine months (April to December) of 2013.

In 2013 PAL Holdings shifted its accounting period from a fiscal-year basis, which starts in April and ends in March, to a calendar-year standard. This resulted in a shorter reporting period of nine months for 2013.

The annual profit was PAL Hold-ings’s first since fiscal year 2010-2011, when it booked P3.1 billion.

The next three years then saw the company having to cope with indus-trial unrest at the airline; triple-digit fuel prices; major natural disasters in key international and domestic markets; and fierce competition. These resulted in combined losses of P20.56 billion from 2011 to 2013.

However, the 2014 results re-vealed exceptional performance by PAL Holdings on the core operating front. Operating revenue rose to P100.9 billion, as passenger carriage soared and yields improved, leading to an operating profit of P2.37 billion and reversing the operating loss of P5.51 billion in 2013.

Passenger operations was the main growth driver, with PAL ferry-ing 9.6 million passengers on 73,685 flights during the year, for an average load factor of 71.4 percent.

Revenue passenger kilometers (RPK), the industry’s most common measure of demand, topped 24.8 billion. Available seat kilometers, which measures capacity, reached 34.8 billion. As a result, passenger revenue skyrocketed to P81.75 bil-lion in 2014. Cargo contributed P7.84 billion in revenue, as 162 million ki-lograms (mkg) were lifted in 2014, outstripping the 94.3 mkg carried in 2013.

On the other side of the ledger, expenses, likewise, surged to P98.6 billion, as PAL added 19 aircraft, 11 of them wide-body jets, in 2014. Notwithstanding the easing of global oil prices starting June 2014, jet fuel remained PAL Holdings’s single biggest-expense item, with P38.8 billion.

The turnaround may be attrib-uted to the aircraft fleet  rational-ization in line with market growth, retirement of 16 aging wide-body aircraft in 2014, which reduced PAL’s fleet age from over 10 years to 3.6 years. The new fleet addressed major cost items—fuel and maintenance, which, together, historically amount-ed to 55 percent to 60 percent of costs; the upgrade of the Philippines from Category 2 in 2014 allowed the deployment of PAL’s B777-300ER fleet on key transpacific routes to the US and led to improved product and operational efficiencies; and con-tinued partnerships with Etihad in

the Middle East, ANA in Japan and Westjet in Canada and other airlines for codeshare relationships.

According to Jaime J. Bautista, president of both PAL Holdings and PAL: “Our encouraging performance in 2014 signals that PAL has now turned the corner. We need to con-solidate and build on these gains to strengthen the foundation for future growth, aware that we operate in a very dynamic environment. As al-ways, we remain focused on our goal of transforming PAL into the airline of choice in all markets it serves.”

PAL continues to expand its mar-ket with the introduction of New York this March and Jingjang in April. On the domestic front, PAL recently launched Tablas and new intradomestic routes linking Cebu and Cagayan de Oro, Davao, Butuan, Tacloban, Iloilo and Bacolod. New flights also link Iloilo and General Santos, as well as Zamboanga and Davao. The new routes were rees-tablished to bridge key points within and across various regions.

Philex Mining earns coveted certification IT pays to do your homework.

Philex Mining Corp. recently ob-tained its certification for Integrated Management System (IMS), an affir-mation of the company’s successful programs on environmental protec-tion and work safety.

“With this certification, we have emphasized our care for the environ-ment and the safety of our people,” the company’s CEO and president, Eulalio B. Austin Jr., said. “Envi-ronmental awareness and looking after the safety of workers are the trademarks of a responsible miner.”

The IMS certification, granted by TÜVRheinland, a technical-ser-vices provider with headquarters in Germany and is present in 65 countries and 36 business fields, covers Philex Mining’s environ-mental management system and safety management.

The IMS encompasses all com-pany processes and management

requirements on environmental quality and labor protection. This streamlined and interlinked ap-proach to management reduces costs when compared to a multitude of dif-ferent management systems pursued alongside each other in a company.

Noel Tan, head of IMS at Philex Mining’s Padcal mine, said the com-pany’s IMS certification consists of the International Organization for Standardization (ISO) 14001:2004 and the OHSAS 18001:2007. The safety management includes opera-tions in mining, milling and tailings storage facilities.

With this certification, Padcal mine is now compliant to Admin-istrative Order 2015-07, issued re-cently by the Department of Environ-ment and Natural Resources, man-dating large-scale mining companies to secure ISO 14001 certification.

According to the TÜVRheinland, ISO 14001:2004 is a “systematic approach” for the improvement of performance in environmental pro-tection, while OHSAS 18001:2007 is “a recognized standard for the inter-nal and external assessment of Oc-cupational Health & Safety [OH&S] Management Systems.”

Philex Mining, winner of a num-ber of environmental awards, sought the higher-level IMS certification for its operations in Benguet, after it fulfilled immediate remediation measures for the safety and integrity of Padcal mine’s Tailings Storage Fa-cility No. 3 (TSF3).

The gold-and-copper producer voluntarily suspended operations immediately when its TSF3, in Itogon town, discharged nontoxic water and sediment on August 1, 2012, close on the heels of unprecedented rains brought about by two successive ty-phoons. It first resumed production starting from March 8, 2013, based on a four-month temporary lifting order issued by the government and which was extended indefinitely af-terward. On August 28, 2014, Philex Mining received an order from gov-ernment regulators allowing it to resume normal operations.

Renewable energy: How to make it more bird-friendly

None of that’s dented the gold-rush mentality in Indian e-com-merce. According to a new report, in the last 15 months foreign hedge funds, asset managers and invest-ment firms have invested almost $4 billion in just 26 Indian technology and e-commerce start-ups. Can In-dia’s virtual economy sustain such

a rally? There’s plenty of reason to be optimistic, but an equal number of reasons to be cautious.

The most obvious attraction of the Indian market is its size and potential. India has 150 million active Internet users—less than America’s 250 million and China’s 550 million, but still one of the

largest such blocs in the world. A combination of demographics and technology should lead to an upsurge in these numbers in the next decade.

Two-thirds of India’s popula-tion is under 35—the demographic that makes up the largest share of the country’s Internet users. True, broadband penetration remains low and isn’t growing rapidly, espe-cially among the vast rural popu-lation. But the spread of cheap, Internet-enabled smartphones could help bypass the need for an extensive broadband network.

While greater connectivity is necessary for an e-commerce boom, though, it ’s hardly sufficient. Ultimately, growth in the sector depends on Indians acquiring a lot more purchasing power than they have now. At $1,500, India’s

per-capita income is less than a quarter that of China’s $6,800. At India’s current gross domestic product (GDP) growth trajectory of 7 percent to 8 percent per year, it’ll take much more than a decade to reach where China is today.

Some investors may see hope in the fact that India’s economy is pre-dicted to grow faster than China’s this year. But India’s latest GDP statistics are mired in confusion, and China was always bound to slow down after it reached middle-income status. Investors need to be cautious about such comparisons.

India’s regulatory environment for e-commerce remains uncertain. There’s no clarity on whether the government will allow a 100-per-cent foreign investment in the space (something that’s still not allowed in brick-and-mortar re-

tail). India’s tax administrators, notorious for their arbitrary ac-tions, haven’t yet developed a clear policy on e-commerce players, most of whom make losses; as valua-tions continue to soar, companies may face unwelcome scrutiny. Im-portantly, the same constraints which hobble growth of the real economy—such as world-class infrastructure—will undercut e-commerce, too. Terrible roads make deliveries difficult, while warehouse space can cost as much as in the developed world. Last month the United Nations released a survey that ranked India 83rd out of 130 countries in terms of its e-commerce environment, judged by factors such as the number of In-ternet users, availability of secure servers and credit-card usage.

So far, the e-commerce industry

in India is bleeding money. Between April 2013 and March 2014, the to-tal sales of Flipkart.com, Snapdeal.com and Amazon.co.in, the three largest e-tailers in India, amount-ed to $85 million. Their combined losses were $160 million. Unlike in China, India’s e-commerce in-dustry is highly fractured. The market leader Flipkart controls just 5-percent market share com-pared with Alibaba’s 80-percent market share in China. Not every firm that is receiving investment now will be viable in the medium run. Some consolidation will take place, especially if losses continue for a long period.

India may yet get its own Al-ibaba or Amazon, and those inves-tors who bet on the right horse will make money. For the rest, though, this bubble is likely to burst.

their overseas principals aggregat-ing $289 million.

Reinvestment of earnings in the first two months this year totaled $128 million from year ago of $189 or lower by 32.1 percent.

Net equity capital also declined by 22.4 percent from $264 million to $205 million.

Equity capital investments dur-ing the period came mostly from the US, Spain, Singapore, Japan and Germany. These were mainly channeled to manufacturing, elec-tricity, gas, steam and air condition-ing supply; financial and insurance; real estate; and transportation and storage activities.

FDI the past four year average more or less $2.2 billion and by it-self compare very poorly against FDI received by neghboring countries typically aggregating in the billions of dollars.

Thailand, for example, was a re-cipient of an estimated $13 billion worth of FDI in 2013, while Malaysia

received a little bit lower than that the same year. “I wouldn’t look too much into the blip given that FDI data tends to be “chunky” or discrete. For exam-ple, February 2014 numbers may have seen an inflow from abroad to invest in a certain company and thus the same investment would not be implemented in February this year. As such, we migh need to look at FDI data possibly in between semesters.We could still hope for positive flows of FDI althoughy I personally think it would be hard to top the 2014 performance,” Nicho-las Antonio Mapa, economist at the Bank of the Philippine Islands, said in reaction. The Philippines was a recipi-ent of FDI worth the equivalent of P95.19 billion in the last three months of 2014, sharply higher than FDI equal to only P18.31 billion a quarter earlier, based on data from the National Statistical Coordination Board.

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www.businessmirror.com.ph

2Tuesday, May 12, 2015

Luzon grid to have stablesupply this summer–DOE

PETILLA: “Way above the 647-

megawatt [MW] reserve,

and when I check the

outlook for forced

outages, it’s very low.”

ENERGY Secretary Carlos Jericho L. Petilla expects a stabilized power situation for the Luzon grid this

summer, with power plants expected to have less forced outages. “Way above the 647-megawatt [MW] reserve, and when I check the outlook for forced outages, it’s very low,” Petilla told reporters. He noted his only concern is when the Sual coal-fired power plant, the biggest power plant in Luzon, goes on forced outage. Sual serves as the basis for the contingency reserve at 647 MW. Petilla said the only power plant

that shut down so far is the 600-MW GNPower. But he said this is not be-ing considered in the outlooks due to the plant’s frequent outages. Petilla said he initially expected power plants with total capacity of 1,800 MW would go on forced outages. However, Petilla said the warn-ings of the Department of Energy (DOE) that it will monitor and even visit the plants that will breakdown had paid off. “We told the generators, ‘We will monitor, we will go to you if you breakdown,’” he said.

The DOE chief added: “The forced outages are low right now, probably because of the warning. But if I didn’t raise hell, do you see that the out-ages will be lower? If I didn’t raise an alarm, it won’t happen.”

Petilla also said the weather is playing a role in the stable power-supply situation, as typhoons en-tering the country will keep the temperature low. The Energy Regulatory Commis-sion (ERC), he added, also issued a resolution that mandates generation companies to submit a complete re-port upon their breakdown.

ERC Resolution 4 orders gen-eration companies to report to the agency initial details regarding their forced outages within three hours, and will be followed by a more de-tailed report within 48 hours.

The resolution also orders genera-tion companies to report upon its power plant’s return to operations.

Juzel L. Danganan, PNA

Ma Jun, chief economist with the research bureau of the PBOC, said the central bank has room to use other tools, such as required deposit reserve ratio, and other conventional policies. Authorities have pursued a multi-pronged easing approach this year, combining benchmark interest-

rate cuts with lower bank reserve ratios, liquidity injections to banks and efforts to bring down money-market rates. One area that has benefited is China’s stock market, with the Shanghai Composite Index soaring since early March, before a retreat last week. Bloomberg News

FDI inflows surged 17.9% in FebC A

This put total sales for the January-to-April period at 84,141 units, 21 per-cent ahead of the industry’s four-month pace last year. Lawyer Rommel Gutierrez, Campi president, said the strong market re-ception for passenger car (PC) models has been the big difference. The market

share of vehicles in the PC segment has risen to 40 percent, from 36 percent in 2014. PC sales increased by 35 percent to 33,382 units. “This continuing increase in pas-senger-car sales is an indication that the country has entered the motoriza-tion stage. This is also consistent with

economists’ projection that consumer-spending growth will remain strong, as per-capita income, hopefully, reaches $3,000 in 2015,” Gutierrez said. Sales of commercial vehicles, mean-while, increased 13 percent to 50,759 units in the four-month period. Light- commercial vehicle sales increased by 17

percent to 33,764; Asian utility vehicle sales went up by 3.2 percent to 14,590 units; and trucks sales grew 14 percent to 1,455 units. Toyota is still the market leader, with a share of 44.3 percent; followed by Mitsubishi, 19.2 percent; Ford Group, 8.2 percent; Isuzu, 7.6 per-cent; and Honda, 6.3 percent.

Auto sales up 18% in April. . . C A

China. . . C A