PIDS in the News Archived (November 2015)

MANILA, Philippines - Subsidies to government agencies and corporations plunged 75.4 percent to P729 million in September from P2.965 billion last year.

For the first three quarters, subsidies amounted to P55.8 billion, down 10.27 percent from P62.208 billion in the same period a year ago.

Subsidies are credit granted to GOCCs and GFIs to cover for their financing needs during the entire fiscal year. They form part of the national governments expenditures.

In turn, GOCCs and GFIs annually remit part of their operating proceeds to national coffers that go into government revenues.
In September, there were 14 GOCCs that received subsidies. Among the agencies and the amount they received were National Irrigation Administration (P271 million), Social Housing Finance Corp. (P188 million), Small Business Guarantee and Finance Corp. (P50 million), Philippine Childrens Medical Center (P43 million), Cultural Center of the Philippines (P34 million), Philippine Heart Center (P32 million), and International Trade Expositions and Missions (P26 million).

Also granted were the Philippine National Railways (P25 million), Philippine Institute for Development Studies (P20 million), Lung Center of the Philippines (P17 million), Philippine Television Network Inc. (P8 million), Philippine Center for Economic Development (P7 million), Southern Philippines Development Authority (P4 million) and Zamboanga City Special Economic Zone Authority (P4 million).

In his 2011 State of the Nation Address, President Aquino himself castigated GOCCs for underperforming while continuously receiving money from state coffers, particularly to fund huge bonuses to executives.

This led to the passage of RA 10149 or GOCC Governance Act of 2011, which established the Governance Commission on GOCCs as the primary overseer of GOCC and GFI operations.

However since 2010, subsidies have still consistently gone up, except in 2012 when the GOCC law was enacted.//



Author: Prinz P. Magtulis
Date: November 09, 2015
Source: Philippine Star

SUBSIDIES released to state-run companies went down in September as fewer government-owned and -controlled corporations (GOCCs) received additional funding support, data from the Bureau of the Treasury (BTr) showed.

Funds that went to GOCCs fell to P729 million for the month, which is barely a tenth of the P8.8 billion released in August.

Fourteen of 41 firms received subsidies in September, the biggest of which was given to the National Irrigation Administration (NIA) at P271 million, followed by the Social Housing Finance Corp. at P188 million.

Other GOCCs that received subsidies for the month were the Small Business Guarantee and Finance Corp. (P50 million), Philippine Childrens Medical Center (P43 million), the Cultural Center of the Philippines (P34 million), Philippine Heart Center (P32 million), the Center for International Trade Expositions and Missions (P26 million), the Philippine National Railways (P25 million), the Philippine Institute for Development Studies (P20 million), the Lung Center of the Philippines (P17 million), the state media Peoples Television Network, Inc. (P8 million), the Philippine Center for Economic Development (P7 million), the Southern Philippines Development Authority (P4 million), and the Zamboanga City Special Economic Zone Authority (P4 million).

The National Housing Authority (NHA) and the Power Sector Assets and Liabilities Management Corp., which received P4.41 billion and P3.79 billion in subsidies in August, did not get additional government funding in September.

As a result, total subsidies released from January to September reached P55.82 billion or 47% of the P118.62 billion programmed for the full year. The figure, however, is lower than the P62.21 billion released during the same period last year.
Year to date, the biggest subsidy allotments were given to the Philippine Health Insurance Corp. at P32.59 billion, the NHA at P4.41 billion, and to the National Food Authority at P4.25 billion.

Subsidies form part of public expenditures. For the first nine months, total state disbursements totaled P1.63 trillion, up by 12% from the P1.456 trillion recorded in same period in 2014 though still below the P1.906-trillion target for the period. This is against revenue collections of P1.60 trillion so far for 2015.

The governments overall budget deficit stood at P25.55 billion as of end-September, barely a tenth of the P283.69-billion cap set for the year or about 2% of the local economy.

With the latest tally, the government must collect P670.25 billion in revenues and spend P928.39 billion to meet the ceiling. --



Author: Melissa Luz T. Lopez
Date: November 08, 2015
Source: Business World

MANILA, Philippines - The Philippine Crop Insurance Corp. (PCIC) has allotted P732 million to pay out claims by farmers whose crops were damaged by Typhoon Lando.
PCIC president Jovy Bernabe said the allocation would provide for the claims of 110,000 farmers in Regions I to IV-B who are listed in the Registry System for Basic Sectors in Agriculture (RSBA), 13,428 of which are based in Nueva Ecija.
The RSBA is a list of farmers with small landholdings, some of them agrarian reform beneficiaries cultivating a land area of three hectares or less.
The indemnity would cover losses in rice, corn and high value crops.
A rapid assessment conducted by PCICs regional offices showed that 95,000 hectares of insured farms were damaged by the typhoon.
Bernabe said claims filed by registered farmers may be released within 20 days from filing.
Farmers may claim an indemnity of an average of P6,000 or more depending on the extent of damage and the stage of cropping.
A maximum of three hectares per farmer is covered by free insurance. On top of the insurance provided by the PCIC, farmers may also avail of seeds from the agriculture department for regions affected by the typhoon.
Bernabe said PCIC has a budget of P1.3 billion for this year to cover the insurance needs of 700,000 to one million small farmers, representing a portion of the 11 million farmers and farm workers listed in the RSBA.
The government crop insurance arm therefore, prioritizes the provision of indemnity to landed farmers.
For 2016, PCIC has a budget of P1.6 billion.
Citing a study conducted by state think tank Philippine Institute for Development Studies, Rodelia Pagaddu, manager of PCICs business development and marketing department said around P8 to P10 billion is needed to cover the insurance claims of all farmer workers listed in the RSBA.
Crop insurance has been identified as one of the key climate change-adaptation measures by the Department of Agriculture, which also exercises supervision over the PCIC.
An effective insurance program marked by quick indemnity payments allows the insured farmers to recover a portion of investments lost due to extreme weather disturbances, and immediately rehabilitate their farms.//

Author: Czeriza Valencia
Date: November 02, 2015
Source: Philippine Star

Labor rigidities are a first order problem, that is, they are a principal binding constraint to employment and output growth. By labor rigidities, I mean minimum wages that are unrelated to productivity and are inflexible downwards, and labor security rules that make it difficult to fire employees.
If a presidential candidate tells the voters that he or she will solve the lack of inclusive growth by investing more in infrastructure, he or she just wants to give a safe and popular answer but is being inaccurate.

Sure, improving infrastructure will slightly lower the cost of doing business -- the cost of employees being late and tired from commuting or delays in shipment from the ports -- but its wont do anything about attracting and keeping labor-intensive industries or incentivizing small and medium enterprises to hire more robustly. Its only by promoting labor-intensive industries can we make a significant dent in our unemployment rate, the highest in Southeast Asia.

For labor-intensive industries, labor cost can be as much as 90% of total cost. Our high power cost is not a deterrent because for this type of industries, power accounts for only about 3% to 5% of total cost.

With these labor rigidities, investors wont locate here, especially when there are options to set up shop in Vietnam or Indonesia, where labor costs are cheaper. While indeed English proficiency gives our workers an advantage, it isnt enough to offset costs associated with labor rigidities. China has succeeded in attracting a lot of foreign investments in manufacturing and achieving rapid industrialization without an English-speaking labor force because they had cheap labor due to flexible labor rules and a devalued currency.

Likewise, rigidities in other sectors of our economy -- for example, an employer cant directly import cheap rice from Vietnam to feed his workers -- make establishing labor-intensive industries here daunting.

So, what do we do? Buy the lie that higher infrastructure spending is the magic elixir for inclusive growth?

Obviously, it would be politically impossible to repeal the minimum wage law. The ideal solution would be to modernize the labor code, but short of that, what may be politically feasible?

Dr. Gerardo P. Sicat, the first socioeconomic planning secretary and National Economic and Development Authority director-general, suggests the establishment of labor ecozones, where minimum wages and labor security rules are suspended, to attract labor-intensive industries (the Secretary of Labor has the power to suspend minimum wages). These can be located in labor-surplus areas, for example, Region VIII, which had been devastated by Typhoon Yolanda, or in areas like Calauan, Laguna where informal settlers who have been resettled but have no jobs.

However, the government must build support infrastructures like ports and maybe even factory buildings where manufacturers can just move in with sewing machines or light machinery.

A further suggestion is for some form of targeted wage subsidy. If the government is spending for the Conditional Cash Transfer, the thinking goes, why not go further and subsidize employment, maybe even for a few years? In Singapore, they have no minimum wages but have some form of targeted subsidies to encourage employment.

Another suggestion is to pass the Apprenticeship bill, which would have more flexible rules for apprentices. However, the current apprenticeship law limits apprenticeship to just six months and only for technical industries. Theres a need to change the law for apprenticeship to cover all industries and to extend the period to at least two years. During their period of apprenticeship, apprentices can be paid lower than the legal minimum wage (the proposal is at 75%) and they wont have the same labor security protections as regular workers.

If passed, this is a win-win law. Apprentices will be paid while learning on the job. Six months is too short for learning. Two years should be a more reasonable period for apprentices to acquire skills, increase their productivity, and give employers enough time to decide whether to regularize them or not. At the very least, apprentices will build a resume.

Under the current law, employers lose a lot when they pay workers minimum wages and train them -- only to have them bolt aftwerwards for another company.

Another excellent proposal is the Job Start Act, sponsored by Davao City Congressman Karlo Alexei B. Nograles, chairman of the Labor Committee in the House.

Under the Jobstart program, candidates who are 18 to 24 years old and are currently unemployed or enrolled in school, who have less than one year of work experience and are high school graduates, will be given a three-month technical skills training and a P200 daily allowance. Those who have completed the internship can be employed by participating companies at 75% of the legal minimum wage.

Its not true that workers who are not being paid the legal minimum wage are being exploited. First a low-paying job is better than no job at all. Second, if wages are tied to productivity, theres greater likelihood that most members of a household will become employed. Their total household income would likely be greater than having just a single male being employed at the legal minimum wage. Third, once a worker gets employed, he can gain valuable skills on the job and increase his productivity. He can then have the option to move to another employer who will pay him a wage commensurate to his productivity, or he can even move to another country. On the other hand, if hes not employed at all, theres zero chance he will gain work-related job skills.

Also, let me quote the excellent study on Labor Policy Analysis for Job Expansion and Development by Drs. Paqueo, Orbeta, Lanzona, and Dulay of the Philippine Institute for Development Studies:

...minimum wages do have substantial negative impacts on household economic welfare. These are reflected in the income and poverty status of households. These are also indicated by the lower employment of individuals with low human capital (e.g. the young, the experienced, the less educated and women). Support for these findings is further strengthened by statistical results showing significant damaging effects of minimum wages on demand for workers by small-scale enterprises. The foregoing observations are perhaps only the tip of the iceberg.

Labor rigidities are a first order problem and theres no going around it. This binding constraint must be solved if we want inclusive growth.

Its understandable for a presidential candidate to play safe and be uncontroversial by saying he or she will increase infrastructure spending or reduce corruption to increase jobs and investments. But if that candidate really believes that and only that, then he or she doesnt understand what it takes to achieve inclusive growth.

Calixto V. Chikiamco is a board director of the Institute for Development and Econometric Analysis.

idea.introspectiv@gmail.com

www.idea.org.ph



Author: Calixto V. Chikiamco
Date: November 01, 2015
Source: Business World

FOR FARMERS and fisherfolk, waiting wont work if they are to benefit from an economy that has remained non-inclusive.
This was the message given by an Alyansa Agrikultura leader in a meeting with the Cabinets economic cluster last Oct. 16.
Government statistics showed the Department of Agriculture (DA) had increased its P30.1 billion budget in 2011 to P88.6 billion in 2015. However, agriculture growth did the reverse by declining from 2.6 percent in 2011 to 0.3 percent in the first half of 2015.
This averaged 1.6 percent during the period, less than half of the 4 percent growth target.
In contrast, the Department of Trade and Industry (DTI) budget grew from P3 billion to only P4 billion in the same period. But industry growth averaged 6.3 percent, more than three times the 1.6 percent agriculture growth.
Nonetheless, Agriculture Secretary Proceso Alcala should be commended for the sectors accomplishments in 2014.
Among others, the Philippine rice industry reached an all-time high national production of 18.97 million metric tons (MMT), exceeding the previous record by 528,406 MT. The Philippines also remains free from the foot-and-mouth disease and the avian influenza.
Despite these accomplishments, the agriculture sector is still in trouble.
Waiting for the next administration means foregoing potential improvements in the next eight months, especially if the DAs budget is spent unwisely.
If reforms are instituted now, the next administration can just hit the ground running by building on these reforms.
Reform areas
We must immediately address three key reform areas.
The first is DA governance. Despite a well-intentioned Secretary, the absence of a good management system is the main cause of the sad state of agriculture today.
Even if we have a Tuwid na Daan (straight path, if there is no clear daan or road map for agriculture, we will still not attain inclusive growth.
The DA has yet to submit sectoral road maps to the Philippine Institute of Development Studies (PIDS), the states think tank. It should now work with the private sector to finalize these road maps, so that both can work synergistically in the same direction.
The DA also has no program that comes close to DTIs rule requiring all units to use ISO 9000. Many have said the problem of the department is not vision, but implementation.
The second area is private sector participation.
Despite a law mandating the private sector in the public-private sector Agriculture Fisheries Council (AFC) to monitor budget implementation, it was discovered that DA officials at both national and local levels withheld critical budget information from them.
Thus, the DA budget was allegedly often misused. This could easily be stopped by a department order mandating officials to provide this information to the private sector and post this on a website for transparency purposes.
In addition, private sector participation should also be harnessed by maximizing the potential of Agriculture Trading Centers.
They can help convert primarily bagsakan establishments into full service centers offering price information, market matching arrangements, and production and credit assistance.
The third is the critical component of credit.
The DA earlier expressed concern over a 2014 Commission on Audit (COA) finding that only 10.7 percent of the P1 billion loan portfolio of the Agriculture Credit Policy Council (ACPC) reached the targeted small farmers and fisherfolk. DA should pay more attention to the Land Bank of the Philippines loan portfolio, which is more than 300 times the ACPC amount.
In its 2013 annual report, Landbank said only 11.4 percent of its P303.9 billion loan portfolio went to small farmers and fisherfolk. The rest went to other sectors, such as utilities (13.9 percent) and transportation and housing (13.8 percent).
If it would take a longer time to gradually veer away from its fiduciary responsibilities to depositors, Landbank should already take measures to target lending to a much larger percentage of small farmers and fisherfolk.
This is what successful agricultural banks do in our competitor countries, often providing subsidies instead of optimizing balance sheet performance.
Waiting further will simply not work if we are to achieve inclusive growth. Action, not misplaced patience, is needed now.//
(The author is chair of Agriwatch, former Secretary for Presidential Flagship Programs and Projects, and former Undersecretary for Agriculture, Trade and Industry. For inquiries and suggestions, e-mail agriwatch_phil@yahoo.com or telefax 8522112)

Author: Ernesto M. Ordoez
Date: November 02, 2015
Source: Philippine Daily Inquirer

MANILA, Philippines " The Philippines must institute policy reforms to improve financial education and literacy of small and medium enterprises (SMEs) in preparation for the Asean Economic integration.
Former president of the Philippine Institute for Development Studies (PIDS) Mario B. Lamberte and research associate Ammielou Q. Gaduena recommended the reduction of intermediate taxes or reserve ratios.
That would incentivize and enable the banking system to perform its financial intermediation function much better, they said in a report titled Enhancing Access to Financial Services through a More Competitive Financial System.
The authors said implementing policy reforms to encourage opening up to foreign players especially in the insurance and capital markets would facilitate further liberalization.
Supporting a stronger merger and consolidation policy would also help.
At the start of the second semester this year, RA 10641 was signed into law, allowing the full entry of foreign banks in the local banking industry. As of presstime, 10 foreign banks have either opened a full branch, are in the process of opening one, or have already been issued a license to operate.
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But the level of competition brought by the foreign banks remain in the wholesale banking operations compared to retail banking and development banking, since foreign banks initially catered to larger, higher-margin accounts that comprised wholesale banking.
Among the specific products and services highly affected were foreign exchange transactions, fund transfers, lending services, investment banking, and money market placements.
The effects of liberalization were also felt in the sourcing of funds, hiring and retaining of productive employees, and changes in information technology.
Thus the main focus of the policy reforms must be support for increasing the competitiveness of SMEs. SMEs make up 90 percent of the countrys business sector.
Meanwhile, the study examined the role and contribution of banking, insurance and capital markets to the economy. It also gauged the competitiveness of the countrys financial system compared with neighboring Asean countries.//

Author: Ted P. Torres
Date: November 16, 2015
Source: Philippine Star

ARE we doing our best to help save the planet? Not quite. Especially if you eat a lot of meat, poultry or consume dairy products, according to People for the Ethical Treatment of Animals (Peta).
Even environmentalists, the group says, need to do more by eating veggies more and less meat, if not no animal meat at all, to help fight climate change. Peta believes that, by becoming vegan, people can actually help save the planet.
Even former US Vice President Al Gore has turned vegan, says Jana Sevilla, a vegan and Peta Asia campaigner in the Philippines. Al Gore is at the forefront in the fight against climate change and its threats to humanity. While vegetarian eat vegetables for health reasons, a vegan do not eat meat, for ethical reasons, anchored on the conviction that animals are not for food.
But there is more to promoting animal rights and welfare in becoming vegan, Sevilla says. It is saving the planet. Citing a 2006 report of the Food and Agriculture office (FAO) of the United Nations (UN), Sevilla said animal factories that produce cattle, swine, chicken and egg, produce more carbon dioxide than plant-based food products.
She said the livestock industry consumes more water, cause land and water pollution more than farms dedicated to growing plant-based food, including rice, the staple food widely consumed by the worlds human population.
The report, titled Livestocks long shadow: Environmental issues and options, which assesses the full impact of the livestock sector on environmental problems states that the livestock sector emerges as one of the top or three most significant contributors to most serious environmental problems, at every scale from local to global.
The report also states that livestocks contribution to environmental problems is on a massive scale and its potential contribution to their solution is equally large, so significant that it needs to be addressed with urgency.
According to UN FAO news report in 2014, the largest source of greenhouse-gas (GHG) emissions within agriculture is enteric fermentation, when methane is produced in livestock during digestion and released via belches.
Enteric fermentation accounted for 39 percent of the sectors total GHG outputs. From 2001 to 2011, emissions through enteric fermentation increased by 11 percent.
From the same report, UN FAO said that 44 percent of agriculture-related GHG outputs occurred in Asia, followed by the Americas (25 percent), Africa (15 percent), Europe (12 percent) and Oceania (4 percent).
Igloo, reminder to Apec leaders
November 13, as world leaders arrived for the Asia-Pacific Economic Cooperation (Apec) Economic Leaders Meeting in Manila, Peta staged an installation showing a melting life-sized igloo in front of the Cultural Center of the Philippines (CCP) in Pasay City. CCP is near the Philippine International Convention Center, the venue of the Apec meeting.
In a statement explaining the creative event, Peta Asia Vice President for International Operations Jason Baker said the igloo would remind Apec economic leaders that helping the environment starts with food production and consumption.
No world summit tackling climate change can afford to ignore the environmental devastation caused by the meat industry, from carbon emissions to water depletion, Baker says.
Before the event, Peta wrote a letter to the Apec Secretariat urging the organizers to serve vegan meal to the participants. Peta is making a noise in time for the countrys hosting of the Apec meeting to advocate animal rights and welfare, and in time for the 21st Conference of Parties Leaders Meeting in Paris, France, in December.
Can vegan diet really help save the planet?
Peta believes that lifestyle change, starting with diet"for reasons of health, environment and animal rights or ethical considerations"is the best way to save the planet.
In the Philippines, a rice-eating nation, fish meat, as well as animal meat, such as beef, pork and chicken, and their by-products, such as egg and the dairy products, are almost always on the menu.
Per-capita consumption of animal meat in the country has increased from 24 kilograms in 2010 to 32 kg in 2014, according to a study of the Philippine Institute for Development Studies (PIDS).
The PIDS predicted that per capita consumption of meat would increase to 34 kg in 2016 on rising consumer spending and capacity.
Meanwhile, the Philippine Statistics Authority reported that the countrys poultry and livestock production continue to expand by an average growth of 4 percent, or a combined value of more than P100 billion in the last three years.
Unfortunately, according to Sevilla, the more meat Filipinos consume every day, the more it contributes to the problem that endangers the planet and all species living in it.
According to Peta, feeding massive amounts of grains and water to animals, and transporting, slaughtering, freezing them in cold storage waste a ton of energy.
It takes more than 10 times the amount of fossil fuel to produce 1 gram of animal protein as it does to produce 1 gram of plant protein.
To Peta, eating meat is like driving a whole fleet of SUVs [sport-utility vehicles] around the block every time you sit down to eat. Nancy Siy, a yoga teacher, said: The best way of solving a problem is by identifying the cause. Siy, who turned vegan in 2009 after learning how animals are slaughtered to produce meat that people eat everyday, said by consuming plant-based food instead, people can actually help reduce carbon emission, address pollution and save the poor animals from the cruel process.
Siy founded the support group Manila Vegan, which helps people turn to vegan diet, and adopt the principle that animals are not for food through social networks.
Do you eat monkeys? No, because animals are not food, she said. Cows, pigs, chicken and other livestocks, she said, are animals, too. By not eating animals, everybody can help to save the planet, she added.
Siy said that global meat consumption is slowly killing the planet. According to the UN, livestock is a major contributor to greenhouse gasses that is causing climate change.
The livestock, particularly cattle, is a major contributor to greenhouse gas, she added.
Even the animal manure and other waste produced by animal farms, she said, contribute not only to air pollution, but soil and water pollution, as well. Siy said that being a vegan is not at all that difficult, especially if one would consider the benefits to health, environment and the planet.
She added that there are vegan food and food products as there are vegetarian or nonmeat food for almost everyone.
There is even vegan ice cream. There are also restaurants that serve vegan food nowadays, she said. The Philippines has vowed to reduce its carbon emission by 70 percent as part of its conditional commitment to the global effort to limit temperature increase below 2 degrees Celsius under the Intended Nationally Determined Contribution it submitted to the United Nations Framework Convention on Climate Change Secretariat on October 31.
The reduction of carbon emissions, as part of the Philippine commitment, however, will come not from agriculture or the livestock sector, but from energy, transport, waste, forestry and industry sectors subject to the extent of financial resources, including technology development and transfer, and capacity building that will be made available to the Philippines.//


Author: Jonathan L. Mayuga,
Date: November 15, 2015
Source: Business Mirror

Postharvest facilities (PHFs) have a positive impact in addressing losses and improving the marketing system for rice and high-value crops, said a new study from state think tank Philippine Institute for Development Studies (PIDS).

The study by Nerlita Manalili, Kevin Yaptenco and Alessandro Manilay, authors and PIDS research consultants, assessed the impacts of rice processing centers (RPCs), flatbed dryers and threshers and food terminals.

But while the study found the PHFs as worthy of government investments, a regular and thorough review should still be carried out to determine their further impact.

The main objective of the RPCs is to increase farmers income through the production of good-quality milled rice and the reduction of postharvest losses.

The RPCs achieved these expectations. More benefits can be realized if capital for paddy procurement can be increased, according to the report of the authors sent to select reporters, including The Daily Tribune.

The study underscored the need to increase the operating capital to P40 million to P80 million to allow RPCs to scale up procurement.

To be able to accommodate the increased volume, additional cargo trucks of mixed sizes must be provided to each RPC for timely pickup of harvested paddy and delivery of milled rice.

However, the study stressed that the release of additional funds and inputs by the government should be subject to performance evaluation of each facility such as good quality of milled rice products, healthy financial standing of the RPC, and positive impact of the RPC on rice farmers.

Further, the study recommended further improvement in the design, fabrication and use of flatbed dryers nationwide.

It stressed that thorough evaluation of project beneficiaries and proper site selection should be conducted to maximize the use of dryers and recover public investment through reduced postharvest losses and improved product quality.

For existing food terminals, it pushed technical improvements such as better lighting and mechanized handling to help reduce
physical damage to fragile produce, labor requirements and workers injury.

To ensure maximum utilization of municipal food terminals, a survey of existing food terminals and wet markets is suggested during the planning stage of a new project.

Facilities established and maintained with scarce government funds and without properly trained personnel result from poor and shortsighted planning, the study further said.//

Author: Ed Velasco
Date: November 05, 2015
Source: The Daily Tribune

ADJUSTING income tax brackets to inflation as well as slashing rates, as proposed by a number of pending bills in Congress, were well-justified and would better prepare the country ahead of the Asean integration going in full swing by yearend, according to a study conducted by state-run think tank Philippine Institute for Development Studies (PIDS).
To make up for the foregone revenues from lower income taxes, PIDS is proposing to raise the rates of the value-added tax (VAT), the excise tax levied on oil products and the road users tax.
For its part, the Department of Finance (DOF) said that it was firm in its position that the country needed a comprehensive, not piecemeal, tax reform that would include making tax evasion a predicate crime to money laundering as well as easing the bank secrecy law for tax purposes.
Proposals to reform the personal income tax have gained prominence in recent months. To date, personal income tax reform is part and parcel of the platform of a number of the candidates in the 2016 presidential elections, noted Rosario G. Manasan in the discussion paper titled Comparative Assessment of Various Proposals to Amend the Personal Income Tax published this month.
Manasan said such proposals to cut income taxes or index rates appear to be well-justified from the perspective of the need to eliminate the bracket creep and easing the tax burden on Filipino personal income taxpayers relative to their Asean neighbors.
The study noted that in Asean, only Thailand and Vietnam have higher top marginal personal income tax rates than the Philippines 32 percent.
Based on PIDS computations of the personal income tax burden in the country, it was found out that the effective tax rates as well as the nominal peso tax liability for a broad range (but not the entire range) of taxable personal income levels are indeed higher when the Philippine rate schedule is applied compared to those when the rate schedules of the other Asean member-countries are used.
The study acknowledged that all those income tax reduction measures proposed by legislators would result in foregone revenues ranging from a low of 0.4 percent to a high of 1.8 percent of the gross domestic product (GDP).
PIDS noted that despite the creditable improvements during the last five years in terms of raising the shares to the economy of taxes and total revenues being collected by the government, they remained far from ideal.
Total national government revenues stood at 15.1 percent of GDP in 2014, more than 2 percentage points below its peak level of 17.5 percent in 1997. Similarly, despite the gains made in recent years, national government tax revenue is equal to 13.6 percent of GDP in 2014, still some distance away from its peak level of 15.3 percent in 1997, PIDS pointed out.
Also, despite the Philippines high statutory tax rates compared to its Asean neighbors, its tax effort ratio (i.e., tax revenues to GDP ratio) is lower than that of Vietnam, Thailand, Malaysia and Laos in 2013, it added.

As it is, the country still has unmet public expenditure needs that might not be funded if revenues drop, PIDS said. For instance, the need for more high quality infrastructure services to sustain the growth momentum and the need to improve access to better

quality basic social services given the governments mantra of inclusive growth and the thrusts of the newly minted Sustainable Development Goals (SDGs) necessarily expands the countrys financing requirements.
In this regard, fiscal prudence dictates that new revenue measures be found to compensate for the projected revenue loss that will arise as a result of the implementation of any one of the various proposals to restructure the personal income tax, PIDS said. //

Author: Ben O. de Vera
Date: November 09, 2015
Source: Philippine Daily Inquirer

Students, together with white and blue collar workers, are once again braving Metro Manila traffic as classes resume this month. For instance, vehicles move at just 16.3 to 19.4 kilometers per hour on average on EDSA, Metro Manilas main thoroughfare. And yes, vehicles on EDSA crawl painfully slower than a moving bicycle.

How much has traffic cost the country? A recent estimate from the Philippine Institute for Development Studies states that in EDSAs 12-kilometer Super Corridor alone, the marginal social cost due to congestion stood at P5.5 billion a year. That is roughly equivalent to P15 million a day.

Several modes of transportation operate along EDSA such as the Metro Rail Transit (MRT), buses, FX vans, jeepneys, and private vehicles. However, Metro Manilas existing road capacity is severely limited and cannot accommodate the huge and still growing urban population.

One factor that aggravates the congestion along EDSAs whole 24-kilometer stretch is the reckless and risky behavior of drivers. According to the Metro Manila Development Authority (MMDA), the number one traffic violation committed by drivers is Disregarding the Traffic Signs.

Similarly, Obstruction and Loading or Unloading in Unspecified Areas are among the top violations. For public utility vehicles (PUVs), this is not an issue of traffic illiteracy -- as it is an issue of a dysfunctional driver compensation scheme.

Overtaking maneuvers, beating a red light, and stopping multiple times every few meters to ferry every passenger (even when the green light is on!) -- these examples of misbehavior are symptoms of how a driver responds to a compensation scheme where compensation is tied to the number of passengers one gets.

In this environment, a PUV driver dangerously competes for passengers against fellow PUV drivers, to the extent of skirting and violating traffic rules and regulations. It is no wonder that accidents happen frequently.

In a consultation with bus operators initiated by the Department of Justice Office for Competition, Provincial Bus Operators Association Chair Alex Yague said that in the past, the number of bus operators was manageable. Drivers and conductors were paid a fixed income. The setup was beneficial for both drivers and passengers -- drivers were assured of a adequate rest and take-home pay, while passengers were able to manage their time as buses arrived at regular intervals. Further, the risk of accidents on the road was low.

Hence, a worthwhile advocacy is to secure the income of drivers and conductors by mandating a decent wage that operators will pay them. In 2012, the Department of Labor and Employment (DoLE) saw this as a pressing issue and subsequently released Department Order 118-12 to fix the wages of drivers. Since then a number of related bills have been filed in Congress.

After more than two years, however, no distinguishable change has happened in terms of the working hours (still 12 to 14 hours a day) and the take-home pay of drivers. There was no improvement either in reducing the traffic violations between 2012 and 2014, as recorded by the MMDA.

A recent econometric analysis, conducted by University of the Philippines -- Diliman students, Rebekka de Jesus and Ina Lingan, confirms such observation. They conclude that the DoLE Order may not have changed driver behavior.

How so? Because the new policy mirrors the old one, if gamed.

In the old system, a driver pays his operator a fixed daily boundary and gets to keep the rest for himself or his family. In the supposedly new system, a drivers salary has two components: (1) fixed income, and (2) a commission-based income. When the fixed income portion is lower than what a driver usually takes home in the old system, he is incentivized by the commission-based portion, where he earns extra for every additional passenger he gets above a certain quota. Even key regulators like the Land Transportation and Franchising Regulatory Board (LTFRB) Chair Winston Ginez agree that the current scheme is no different from the old one.

Regulatory agencies like the LTFRB should start reviewing the compensation scheme governing PUV drivers. They must adopt a wage structure for bus drivers and make incentives based on good driving behavior, not on the number of passengers picked up.

According to the information gathered by de Jesus and Lingan, less than one percent of operators submitted a Certificate of Compliance. This also suggests that enforcement of rules remains a serious problem.

Senator Miriam Defensor-Santiago has expressed concern over the behavior of drivers and conductors of PUVs. The legislative intervention she can pursue is to provide an adequate fixed wage to the drivers and abandon the boundary system in all its forms.

A decent wage will encourage drivers to be compliant with traffic rules as well as lead them to treat passengers with respect. If they are no longer bothered by meeting the boundary quota, they will likewise no longer resort to bad driving practices. Equally important, the drivers well-being is promoted under a wage system.

But then a wage system will result in less profits for PUV owners or operators. Thus, an additional intervention is to ensure a decent return for the PUV owners. This will require a rationalization and consolidation of the privately owned PUVs.

Madeiline Joy Aloria does research work for Action for Economic Reforms, particularly on topics relating to regulation and competition.//

Author: Madeiline Joy Aloria
Date: November 08, 2015
Source: Business World

First of two parts
The government sustained a number of flak while the Philippines and Japan were hammering out a free-trade agreement (FTA). Critics had feared the terms of the Japan-Philippines Economic Partnership Agreement (Jpepa) would be detrimental to the countrys interests.

Now on its seventh year of implementation, the Department of Trade and Industry (DTI) said the Jpepa has proven a boon for the Philippines. The DTI said the countrys lone FTA with Japan has lived up to its promise of expanding trade and investments.
In the first year of Jpepas implementation, Philippine exports decline mainly due to the 2008 global financial crisis. Data, however, showed a marked improvement in the countrys trade surplus with Japan.
The full year of implementation was in 2009. If you took the six-year average growth of trade with Japan from that time, and compare that to the same period before the PJEPA, you will see that the trade surplus grew by sixfold, thats one indicator. If our surplus before was $1 billion, now its $6 billion to $8 billion, Trade Assistant Secretary Ceferino S. Rodolfo told the BusinessMirror.
Data from the Philippine Statistics
Authority (PSA) showed that in the second year of implementation, Japan surpassed the United States as the Philippiness top trading partner. Japan has been able to maintain this despite the recovery of the US from the global financial crisis.
Tariff cuts
The Jpepa covered 5,968 tariff lines of Philippine imports. Tariffs on 66 percent, or 3,947 tariff lines, of imported Japanese goods were to be removed immediately, while 32 percent would be on a staggered tariff reduction schedule.
For Philippine exports, majority of the tariff lines for immediate tariff reduction covered
industrial goods, such as machines and mechanical appliances, electrical machinery and equipment, clothing and textiles, organic chemicals and pharmaceutical products.
Jpepa covered 7,476 tariff lines of Philippine exports, of which 80 percent, or 5,994 tariff lines, were for immediate tariff elimination. These products include electrical machinery and parts, road vehicles, telecommunication and sound-recording equipment. Philippine farm exports, most of which were marine products, were also subjected to immediate tariff elimination.
The government suffered a backlash from lobby groups in 2008 due to the imbalance of concessions in the Jpepa, as Japan was able to negotiate the exclusion of some 238 tariff lines from tariff elimination, while the Philippiness was only able to exclude rice and salt. Japan was seen as especially
protective of its agricultural products, with half of its agricultural products being deferred for tariff elimination.
Japan committed for the tariff elimination
of products from the Philippines, such as yellowfin tuna and skipjack on the fifth year, and for small bananas only on the tenth year. Excluded from the tariff elimination are cigarettes containing tobacco, rice and rice-related products.
The Philippines committed to eliminate tariffs for a number of products, such as lobster, shrimp, crab, cashew nut, almond, walnut, hazel nut, grape, apple and pear. Manila also agreed to reduce tariff, over the next 10 years, for the rest of agricultural products. For rice, all tariff lines have been excluded from any tariff elimination, reduction or renegotiation.
Despite the lopsided numbers in tariff exclusions, the Philippines was still able to secure more concessions when it comes to tariff
reductions than Japans other bilateral partners.
According to a policy note by the Philippine Institute for Development Studies (Pids), among six other Asean nations, namely, Singapore, Malaysia, Thailand, Indonesia, Brunei and Vietnam, the Philippines got the highest liberalization rate from Japan.
In terms of utilization, exporters use of the Jpepa has gradually risen since the ratification of the Jpepa in 2008, according to Bureau of Customs data cited in the Pids report. This was tracked using the issuances of certificates of origin from the port of Manila.
A different scenario, however, can be seen for approved foreign investments. According to the PSA, investments approved by the countrys major IPAs have been on an erratic trend, due in part to the instability of the global economy.
While it has always ranked as second in terms of investments, Japanese investments in the Philippines peaked at P71 billion in the first year of Jpepas implementation in 2009. This figure dropped to P58 billion in 2010 but recovered in 2011, when investment inflows from Japan reached P78 billion. To be continued

Author: Catherine Pillas
Date: November 09, 2015
Source: Philippine Daily Inquirer

Marikina City Rep. Romero Federico Quimbo is pushing for the declaration of large-scale smuggling of agricultural products as an act of economic sabotage punishable by hefty fines and up to two decades in jail.

Quimbo, chairman of the House of Representatives Ways and Means committee, filed House Bill 6259 in response to reports showing that agricultural smuggling has led to multibillion-peso revenue losses for the government and impoverishment of workers in the agricultural sector.

The measure, otherwise known as the proposed Anti-Agricultural Smuggling Act of 2015, expands the definition of economic sabotage to include agricultural smuggling of produce such as sugar, corn, pork, poultry, garlic, onion, carrots, fish, and cruciferous vegetables, in their raw state, or which have undergone the simple processes of preparation or preservation for the market, with a minimum amount of P1 million, or rice with a minimum amount of P10 million, as valued by the Bureau of Customs (BOC).

Under the bill, the penalty of life imprisonment and a fine of twice the fair value of the smuggled agricultural product and the aggregate amount of the taxes, duties and other charges avoided, will be imposed on any person involved in large-scale agricultural smuggling.

The penalty of 17 to 20 years of imprisonment, and a fine of twice the fair value of the smuggled agricultural products and the aggregate amount of taxes, duties and other charges avoided shall be imposed on the officers of dummy corporations and other entities who knowingly sell, lend, lease, assign, consent or allow the unauthorized use of their import permits for purposes of smuggling.

Meanwhile, a jail time ranging from 14 to 17 years and a fine equal to the fair value of the smuggled agricultural product and the aggregate amount of taxes, duties and other charges avoided shall be imposed on the registered owner and its lessee of boats, vessels, trucks, vans and other means of transportation used in the transport of smuggled agricultural products subject to economic sabotage. The same penalty awaits the owner and lessee of a warehouse or property, who knowingly stores the smuggled agricultural product.

The same penalty shall also be imposed on the registered owner, lessee, president or chief executive officer of the private port, fish port, fish landing sites, resorts, airports, who knowingly allow agricultural smuggling.

If the offender is a government official or employee, the penalty shall be the maximum as hereinabove prescribed and the offender shall suffer an additional penalty of perpetual disqualification from public office, to vote and to participate in any public election.

Citing a report by the Samahang Industriya ng Agrikultura (SINAG), Quimbo said that from 2013 to 2014, the government incurred a total of P64 billion foregone revenue due to the widespread smuggling of agricultural products. The amount, he said, represents a P32-billion loss per year, which is equivalent to the Department of Agriculture's budget for 2016 and excess funds for the rehabilitation of the agriculture sector.

A separate report by Philippine Institute for Development Studies senior research fellow Dr. Jose Ramon Albert noted that poverty statistics from 1985 to 2009 show most of those who are classified as poor have agriculture-related jobs.

While the average share of agricultural employment to the total labor force is one-third or 36 percent over the past two decades, Quimbo noted that agricultural workers receive the lowest average daily basic wage and salary compared to those in non-agriculture industries.

This is appalling considering the agriculture industry is a significant driver of our country towards food security. This condition is aggravated by the occurrence of agricultural smuggling in that it takes away what little income that workers in the agricultural sector may have, as they have to compete with the prices that the agricultural smugglers offer to the market, thereby hampering this sectors growth and sustainability, he said in the bill's explanatory note.

Quimbo said he is hopeful his bill will complement the passage of the proposed Customs Modernization and Tariff Act (CMTA) pending in Congress by providing for stiffer penalties for agricultural smuggling.

A counterpart bill to HB 6259 has been filed in the Senate by Sen. Joseph Victor Ejercito. "


Author: Xianne Arcangel
Date: November 22, 2015
Source: Gulf News.com

The tax on the sale of services or goods needs to rise by a percentage point for each P25-billion proposed reduction in income tax, according to the Philippine Institute for Development Studies (PIDS), a government-owned think tank.
PIDS senior research fellow Rosario G. Manasan emphasized this point in a study titled Comparative Assessment of Various Proposals to Amend the Personal Income Tax.
Manasan said augmenting government revenues is necessary, because of the financing needed to improve infrastructure and achieve the Sustainable Development Goals (SDGs).
The need for more high-quality infrastructure services to sustain the growth momentum and the need to improve access to better-quality basic social services given the governments mantra of inclusive growth and the thrusts of the newly minted SDGs necessarily expand the countrys financing requirements, Manasan said.
Manasan explained that since VAT is a consumption tax, it taxes even nonwage-income earners such as the self-employed or those that generate income through the practice of a profession.
Manasan estimated the effective personal income-tax rate on wage income was significantly higher at 5.3 percent, compared to the effective personal income-tax rate on self-employed and professionals at 1.5 percent using 2014 data.
Manasans data showed the effective tax rate of the self-employed and professionals have been consistent at 1.5 since 2012, whereas the effective tax rate for wage earners has been increasing to 4.9 percent in 2012, 5 percent in 2013, and 5.3 percent in 2014 from 4.7 percent in 2011.
This advantage is important, considering the large difference in the effective personal income-tax rate on wage vis nonwage income and the implied greater evasion in the nonwage income sector, Manasan said.
There are currently six proposals from both houses of Congress, as well as the private sector through the Tax Management Association of the Philippines (TMAP).
The income tax bills at the Senate are Senate Bill (SB) 716 by Sen. Ralph G. Recto; SB 1942 by Sen. Bam Aquino; and SB 2149 by Sen. Juan Edgardo M. Angara.
Manasan estimated that SB 716, or the Recto bill, should result in a revenue loss of P54 billion, or 0.4 percent of GDP in 2014.
[This is] roughly equal to the incremental revenues from the amendment of the excise tax on alcohol and tobacco products, Manasan said. The estimated revenue loss arising from the implementation of SB 1942, or the Aquino bill, total P71 billion or 0.6 percent of GDP in 2014.
Manasan said, however, that implementing SB 2149, or the Angara bill, should result in a small revenue gain worth P10.43 billion, or 0.08 percent of GDP during the first year of its implementation. This was because the bill imposes a higher effective tax on taxpayers whose taxable income fall within the P70,000 to P180,000 range.
Pursuing the Angara bill, meanwhile, should result in estimated revenue loss of P19.7 billion in the second year and P61.47 billion in the third year.
On the other hand, there are two such bills at the House of Representatives: House Bill (HB) 4829 by Rep. Romero S. Quimbo of Marikina City and HB 5401 by Rep. Neri Colmenares and Rep. Carlos Isagani Zarate of Bayan Muna.
The revenue loss under HB 4829, or the Quimbo bill, was estimated to equal P131 billion or a percent of GDP in 2014.
Implementing HB 5401, or the Colmenares-Zarate bill, should result in revenue loss of P232.12 billion, or 1.84 percent of GDP. The private sector proposal through the TMAP, meanwhile, should result in a revenue loss of P223 billion, or 1.76 percent of GDP in 2014.
The estimated revenue losses arising from the TMAP proposal and HB 5401 are, respectively, roughly equal to 83 percent and 86 percent of actual BIR [Bureau of Internal Revenue] collection from the personal income tax in 2014, Manasan said.
It is notable that under the TMAP proposal only taxpayers in the ninth and 10th decile will actually be subjected to the personal income tax, while under HB 5401 only taxpayers in the 10th decile will actually be subjected to the personal income tax, she added.
Apart from the VAT, Manasan said the proposal of the Department of Finance to amend the bank-secrecy law should help enable the BIR to catch tax cheats.
Another way to offset the projected revenue loss from proposals to amend the personal income tax is to increase the excise tax on petroleum products.
Other possibilities, Manasan said, include an increase in the road users tax or the motor vehicle user charge.
These two measures were also expected to have a positive impact on the environment through reduced pollution and congestion.//

Author: Cai Ordinario
Date: November 19, 2015
Source: Business Mirror

We all agree that Philippine agriculture is in poor shape. I trace this to lack of irrigation, lack of roads, insufficient research and development (R and D) spending, lack of productive seeds, excessive intrusion by middle men, antiquated machinery, (you dont dry palay on a national highway)"the list is endless.
One third of the Philippine populace depends on agriculture to survive, and survive is just about the best this sector can do. Among economic sectors, this has has the highest percentage of the poor. Also, farmers are among the countrys poorest, earning a meager income of P170 every day, which is about a third of the daily minimum wage in Metro Manila. And they account for a third of the countrys total workforce.
The Comprehensive Agrarian Reform Program (CARP) is a major contributor to this poverty. UP School of Economics professor and National Scientist Raul Fabella, in his discussion paper CARP: Time to Let Go, noted that CARP only created a new class of people: the landed poor.
Poverty incidence in CARP areas is 54 percent; its lower at 35 percent in non-CARP areas. Also, the non-tradability of CARP farms (a major weakness of the law) has destroyed the formal land market, prevented best use of farms, and affected the development of formal credit. (You cant borrow without tradable collateral.)
It always bothers me when politicians take an all or nothing approach to issues, and CARP is one of these all or nothing plunges. It sounded like a nice idea, alright: Every farmer should own a land to till. (Well, shouldnt every urban worker as well own one for his own house? But were digressing.)
Agriculture is a multifarious business, involving a wide range of crops that require different processes to produce. You dont apply one restrictive law to all. Rice is a crop that has to be manually done; small plots can be just as productive as large ones. Splitting vast tracts of land into small plots for rice production makes some sense.
But in some other crops like sugar, it makes no sense. Sugar requires mechanization, machinery and equipment to be produced efficiently and to be competitive in the market. It requires large mills with assured supply. But stable supply and, more importantly, consistent quality supply from several hundred farmers separately producing such supply from small plots just cant be assured.
Going back to rice, the National Food Authority (NFA) should have no role in the trade of this commodity. If there were an open market, the price of regular milled rice could be reduced by as much as P14 per kilogram. According to a Philippine Institute for Development Studies (PIDS) study, welfare analysis indicates that, in 2013, if quantitative restrictions were eliminated and rice imports were allowed to freely enter the country, rice imports would have increased tenfold, bringing down the retail price of rice to P19.80 per kilogram from P33.08 per kilogram.
PIDS economist Roehlano Briones blames the governments rice self-sufficiency program for the rising rice prices. you want the rice farmers domestically to be able to supply all of the rice requirements of the country. They can do it, but you have to pay them a much higher price than what is available in the world market.
Self-sufficiency is also a foolish goal, given that the country is behind in the development of, and support for, the rice industry. Irrigation has not been provided; construction of farm-to-market roads is slow.
One has to wonder why there is so much emphasis on rice production despite the fact that the Philippines has less comparative advantage in rice production compared to countries drained by the worlds large rivers: India, Burma, Thailand and Vietnam. . . . Add to that the 20 typhoons that hit the country every year (decimating crops). Rice production cost in the Philippines is higher than in Thailand, Vietnam and India, noted Rolando Dy, vice chair of AgriBusiness and Countryside Development Committee and the executive director of the Center for Food and AgriBusiness of the University of Asia and the Pacific.
If I may add: Who should we protect"an estimated three million rice farmers and their hangers-on (read: middlemen), or some 100 million Filipinos who eat rice every day?
Average rice yield in the Philippines is 3.9 tons per hectare, much lower than 5-6 tons or more in other rice-producing Asean countries (e.g., Indonesia and Vietnam), this according to the Food and Agriculture Organization.
Ive never understood this absurd drive for self-sufficiency. I dont grow rice for my household. Im in a business that earns far more, so I can buy all the rice I need. Well, the whole nation can do likewise: Engage rice farmers in the production of higher-earning crops, where the Philippines can compete successfully. We can buy the rice from other countries.
Theres a proposal to take the NFA out of rice trading altogether, and let the private sector do it instead, in an open market. But the bill to that effect is still pending and is unlikely to pass the present Congress. Yet thats whats needed to be done. Then smuggling would no longer be advantageous and cartels would die.
The NFA has incurred a staggering P170 billion in losses over the past 10 years. Remove the cause of that loss and the country would save enough to compensate for the revenues lost from lower taxes and tax rates on salaries that is now being proposed. And it will lead to much lower rice prices. Now thats something that would benefit us all far more than wasting money on inefficiently implemented programs protecting farmers. Then teach those farmers to grow crops of higher value.//

Author: Peter Wallace
Date: November 12, 2015
Source: Philippine Daily Inquirer

The Asia Pacific Economic Cooperation (APEC) summit meeting in Manila puts the country on the international map this week.
APEC as an organization. The APEC as an organization was established in 1989. It has 21 member countries.
APECs mission is to build a dynamic and harmonious Asia-Pacific community by championing free and open trade and investment, promoting and accelerating regional economic integration, encouraging economic and technical cooperation, enhancing human security, and facilitating a favorable and sustainable business environment.
It is backed up by active official support of academic and research centers that are strategically located across the region.
Among these are prominent economic centers and think-tanks located in the United States, in Japan, in Australia. Our own PIDS (Philippine Institute of Development Studies) is among these institutions.
Global networks for discussion and decision-making. The APEC is essentially a discussion group, a group making suggestions on what to do to advance international economic integration.
APEC, however, does not have direct enforcement mechanisms for their suggestions except to undertake studies. Instead, the member nations are involved in enforcement institutions they themselves support or are members of. These include those institutions they propose to establish.
Summit meetings of the leaders of APEC enhance the stakes for discussions to political levels. It is possible for summit leaders to shake up the emphasis on issues for future attention and discussion.
Will this happen in Manilas APEC Summit?
Action institutions within APEC are plentiful. The worlds most openly trading countries are members of APEC. The US, Japan, and China are the big three countries when measured in GDP and in volume of trade in goods and invisibles. Flows of payments and investments with all the member countries and each member with the others are rising as economies grow.
Among the APEC members, there are countries that are involved in activities through action groups and institutions they have created. These sub-groupings are separate and distinct from each other.
For instance, the Asean is a grouping of 11 countries (all members of APEC individually) that are also actively promoting their separate interests. As a group, Asean also undertakes separate dialogues of a bilateral nature with each of these countries and other countries such as Australia-New Zealand.
Other countries are also members of separate groupings and bilateral trade arrangements with other countries.
The United States has its own networks of free trade agreements (FTAs). It is a part of the NAFTA (North American Free Trade Agreement), along with Canada and Mexico as members. Moreover, it has separate bilateral free trade agreements with Australia, South Korea, and Singapore.
Most recently, the US and 11 other individual members of APEC, have signed an agreement to put in place the Trans-Pacific Partnership (TPP), which is a far larger trading group in the region (discussed further, below).
For their respective parts, China, Japan and South Korea have also been engaged in promoting their respective FTAs. (Japan and the Philippines have a bilateral FTA.)
China, for its part, is trying to set up a mega-trade regional trade agreement known as Regional Comprehensive Economic Partnership (RCEP) which is designed to rival the TPP.
What is APECs reason for being? APEC is a discussion group " a suggestions club " while TPP, Asean, or NAFTA are relevant examples of outcomes of discussion groups which are themselves action institutions. Some of these institutions were created even before APEC was organized, but others are a consequence of APEC.
TPP, specifically, is an action group " the result of a trade treaty involving a smaller subset of APEC countries. The nuances of particular aspects of this trade agreement were studied, analysed and debated among potential stakeholders that belong to the APEC.
In due time, a widening of acceptance of TPP would depend on actions the individual countries themselves would have to decide, unless a better arrangement or alternative action institution is created.
Thus, transformational creations of new institutions that are committed to action and enforcement of agreed rules have resulted from discussion groups.
The process is not necessarily quick and easy. It took so many decades of discussions, meetings and breakup group meetings for countries to realize that certain principles of trade relations to improve global trade could be agreed upon.
In fact, the creation of the WTO (World Trade Organization), which was founded in 1994, is one major result. And even in this case, not all of those that are members of the new organization agree on all the issues. As a result, there is much that needs to be done. There is room for new ways of advancing.
Past history is a reminder how difficult is the process. In the first instance, at the birth of the post-World War II international institutions under the United Nations, the International Trade Organization (ITO) failed because the US decided not to join. What came out in substitution was a weaker form, the General Agreement on Tariffs and Trade (GATT).
It would take decades of discussions and negotiations and a long line of untoward country experiences for the rules of international trade to reach the state in which we are now, with WTO in charge of the new rules.
The advance toward this route traces back to the Kennedy Round of multilateral tariff negotiations (1960s), then the Tokyo Round (1970s), and then the Uruguay Round (1980s) to closure when WTO was agreed upon and founded.
The progress in these rounds of negotiations was supported by many discussion groups in various corners of the world, that eventually formulated the solution.
Yet, as we find the world today, there are still many disagreements, many perceived inequities and disadvantages that need correction. Such standing issues are accompanied by barriers and regulations that stifle trade and progress. And many sectors of potential trade in goods and services still need to be clarified and agreed upon.
Philippine hopes and expectations from APEC. Philippine hosting of this years APEC summit highlights the policies we need to change to gain from an open international trading system.
This calls attention to the reforms we need to take to make domestic industries more open to trade and to competition.//
My email is: gpsicat@gmail.com. Visit this site for more information, feedback and commentary: http://econ.upd.edu.ph/gpsicat/

Author: Gerardo P. Sicat,
Date: November 18, 2015
Source: Philippine Star

MANILA, Philippines - Economic Planning Secretary Arsenio Balisacan said he is confident an environment to ensure the correct allocation of public funds would be in place by the end of the Aquino administration.
As we approach the end of the current administration, we are confident that we have put in place an enabling environment where the appreciation, conduct of evaluation, and subsequent use of evaluation findings in policy and investment decisions are fully embedded in government programs, projects, and processes, he said.
Impact evaluation is vital in identifying what programs or projects work and what do not.
Multilateral donors, such as the World Bank and the Asian Development Bank, use impact evaluation extensively to ensure correct utilization of grants and loans.
Balisacan said this helps policymakers ensure public and donor funds are used prudently, and that limited resources are directed towards more efficient development interventions.
He added the Supreme Court has even expressed interest to subject its Access to Justice by the Poor to impact evaluation. To me that is a very interesting development; for them to be willing to be subjected to the discipline of impact evaluation is very encouraging, Balisacan, who is also director general of the National Economic and Development Authority (NEDA), added.
In 2014, a P300-million budget was allotted to the Philippine Information and Development Studies (PIDS), a NEDA line agency, to conduct evaluation studies on key government programs and projects.
The budget is also intended for various government agencies and selected state universities and colleges for capacity-building programs on impact evaluation.
To date, the PIDS has already completed eight process evaluation studies and six impact evaluation training workshops for 231 technical staffs from various government agencies and selected state universities and colleges.
In addition, 17 ongoing process evaluation studies will be completed next month.
The Australian Government provided Aus$2.8 million worth of assistance through the International Initiative for Impact Evaluation (3IE) to evaluate three major development programs, namely the Special Program for the Employment of Students (SPES), the Sustainable Livelihood Program, and the Payapa at Masaganang Pamayanan (PAMANA-Peace and Development) Program.
The SPES, a project of the Department of Labor and Employment, is designed to link low-income youth aged 15-25 to formal work opportunities during schools semestral or summer breaks.
The impact evaluation study thus aims to determine how SPES affects the students school participation, as well as their income, work hours, and the duration of job search.
The study on the Sustainable Livelihood Program of the Department of Social Welfare and Development, meanwhile, is expected to determine whether and to what extent the livelihood and employment opportunities it provides to recipients of conditional cash transfers (Pantawid Pamilyang Pilipino Program) improve the conditions of the beneficiary families.//

Author: Cai Ordinario
Date: November 16, 2015
Source: Business Mirror

The establishment of the Asean Economic Community (AEC) is expected to increase the mobility of people and the volume of passengers across member-states, thus there is a need to set the long-term goal of achieving the equivalent of a Schengen visa among Asean nationals.

This is according to a book released by the Philippine Institute for Development Studies and the Philippine APEC Study Center Network titled, Building Inclusive Economies, Building A Better World: A Look at the APEC 2015 Priority Areas.

In a chapter of the book titled, People-to-People Tourism in APEC: Facilitating Cross-Border Entry and Exit, with Special Focus on Asean, authors Oscar Picazo, Soraya Patria Ututalum, and Nina Ashley Dela Cruz said that under the AEC, there is a need to expedite transfer of passengers to avoid congestion, minimize costs, and allow Asean citizens to do their tasks with as few obstacles as possible.

The paper discusses people-to-people (PTP) tourism, which involves the cross-border movement of an Asean citizen from one Asean country to another for any of the following reasons: educational, training, or related capacity-building purposes; governmental or non-governmental research and development (R and D) cooperation and related purposes; police, constabulary, military, security, or anticrime assignments; help in containing regional health epidemic outbreaks; medical tourism purposes; assistance in responses to a disaster or calamity and rebuilding of affected communities and institutions; assistance in managing common-border natural resources, such as parks; and for other valid reasons that Asean authorities will deem important in the future.

Speed is essential in many of the earlier-mentioned reasons for crossborder movement. This is especially true in the case of disaster response, security management and apprehension of criminals, and response to epidemic outbreaks, the paper said.

In other cases, time is just as important because of set appointments (academic calendar for students and trainees, medical appointments of medical tourists), it added.


The publication said that the establishment of the AEC by the end of the year is expected to result in flourishing trade as well as in greater governmental and non-governmental cooperation along various areas of common interest.

The success of the AEC 2015 does not rest primarily on economic integration but also on effective community building. With 10 member-states of myriad cultures and history, the thrust for unity in diversity through PTP connectivity is key, the book said.

These can be facilitated through extensive education, cultural exchanges, and a more seamless business transaction among Asean member-states, it added.

The publication pointed out that the Asean has a population of 600 million, a cumulative $2 trillion GDP, and excellent growth prospects.

It added that it is also considered a lucrative venue for tourism.

The paper however said that the Asean has yet to implement a common visa similar to the comprehensive application of the EUs Schengen visa.

It said that citizens of EU countries do not require a visa or work permit to cross EU borders, but citizens in ASEAN member states still need both documents.

There is no uniformity in visa-free standards and regulations. Visa travel days to ASEAN member-states also differ. For instance, a Filipino travelling to Viet Nam is allotted 21 days, while Thais, Laotians, Malaysians, Indonesians, and Singaporeans are provided 30 days, the publication said.

Moreover, ASEAN member-states have no standard reference and definition for the different types of visas. What is termed by one as short-stay visa may cover a tourist or business purpose (i.e., business meetings, conferences). Thus, there is still a need to further iron out the ASEAN member-states regulations and processes for a visa-free regime, it added.

The book said that adopting a visa regime equivalent to the Schengen visa, which is the epitome of free and borderless travel within a region, would require intensive discussions on several issues.

The paper said that there is a need to set out the rules on visas that will hold for the common area and setting up the required administrative procedures.

It will also require formulating the legal acts that set out the conditions for entry into the common area, estimating the costs involved in implementing the common rules on visa, including foregone visa-fee revenues, and spelling out cooperation among police and judicial bodies to ensure that problems involving security are minimized or dealt with properly if they occur.

Over the medium-term, the book said that there is a need to standardize visa requirements and regulations for non-Asean and APEC nationals, as well as for intra-Asean or intra-APEC PTP tourists.

For the short-term, the publication said that overall visa processing and facilitation should be improved, while focus should be given on facilitating travel involving local border traffic.//

Author: Angela Celis
Date: November 22, 2015
Source: Malaya

Only half of enterprises in the Philippines are aware of the free trade agreements (FTAs) they can benefit from and use of these FTAs is even lower.

Rafaelita Aldaba, assistant secretary of the Department of Trade and Industry (DTI), told a forum on global value chains (GVCs) yesterday initial results of a survey commissioned by the Philippine Statistics Authority show only 50 percent of the respondents are aware of the seven FTAs the Philippines signed up for and their utilization rate is a low 40 percent.

Aldaba said the survey is still ongoing and covers 1,000 manufacturing enterprises in the so-called growth centers that include Central Luzon, Metro Manila, Calabarzon, Iloilo, Cebu and Davao. About 800 of the questionnaires have so far been retrieved.

But Aldaba said the numbers show an improvement of the awareness level of enterprises of the FTAs and their benefits compared with 30 percent as shown by a study by the Philippine Institute for Development Studies done a couple of years back.

Aldaba said the low awareness rate is largely due to the lack of information and the low utilization is attributed to cost and stringent regulations such as rules of origin.

The Philippines has a bilateral FTA with Japan and as part of Asean, has FTAs with China, Japan, Korea, Australia, New Zealand and India.

Aldaba said the Philippines, however, cannot be considered a laggard in terms of utilization in the Asean trade in goods agreement as enterprises in Indonesia, Thailand and Vietnam are at about the same utilization rate.

The final results of the study will be out by next month.

Meanwhile, Aldaba said there is a need to increase the contribution of small and medium enterprises (SMEs) to the gross domestic product (GDP) from the current 35 percent to 40 percent under the SME Development Plan.

The same plan targets to increase the share to employment which now stands at 65 percent.

Aldaba said in other countries in the region, the share of SMEs to employment is as high as 75 percent. At present, SMEs share to the countrys total exports is only 20 percent.

In contrast, Indonesias SMEs share to employment was at a high of 97 percent and 40 percent of GDP but this sector accounts for 16 percent only of its total exports.

Vietnams SME sector also contributes 77 percent of total employment and 40 percent of GDP but accounts for 20 percent of the countrys exports. Malaysias SMEs account for 58 percent of total employment and 32 percent of GDP but only contribute 19 percent of the countrys total exports. In Bangladesh, its SMEs account for 40 percent of total employment and 23 percent of GDP but their share to exports is only 11.3 percent.

In her speech at the GVC forum at Dusit Hotel, Aldaba said micro, small and medium enterprises (MSMEs) share of GDP is only 31 percent and their contribution to total direct manufactured exports is merely 10 percent.

For us to achieve inclusive growth and benefit from rising globalization, it is important to create a space for MSMEs and focus on making them internationally competitive to integrate in GVCs, Aldaba said.

Zenaida Maglaya, undersecretary of DTI, said some SMEs in the Philippines are participating as suppliers of intermediate products used by direct exporters such as in the case of Yokohama in rubber, Kennemer in cacao or Moog in aerospace parts.

Participation in regional and global production networks will provide SMEs access not only to export markets, but also access to newer technologies. GVCs provide opportunities for SMEs to specialize in activities within an industry value chain in which they have expertise. Instead of competing throughout the value chain, SMEs can specialize in a task in the GVC in order to add more value to its production (and thereby derive greater benefits), Maglaya added.

Beyond 2016, Maglaya said the countrys manufacturing industry roadmap focuses on diversifying its production base through a cluster-based strategy.

The following are the focus of development: agro-industries particularly high value crops like rubber, coconut, coffee, cacao, fruits, vegetables and other resource based industries.

The Philippines is also promoting automotive, aerospace parts, electronics, chemicals and shipbuilding.

Our SMEs can serve as suppliers of outsourced parts or services that have increasingly grown in sectors such as automotive, machineries, electronics, garments and food, Maglaya said.//

Author: Irma Isip
Date: November 24, 2015
Source: Malaya

MANILA, Philippines - Independent government researchers have found the states medical infrastructure programs to be plagued with serious flaws and lack of strategic directions and gaps.
In a study, the Philippine Institute for Development Studies (PIDS) said the governments Health Facilities Enhancement Program (HFEP), targeted mostly for rural health facilities, will have to address various shortcomings to improve the programs management.
The HFEP is a program under the Department of Health.
The study surveyed 83 percent of 37 health facilities covered by the HFEP. These included the provinces of Tarlac, Quezon, Catanduanes, Capiz, Surigao del Sur, and Zamboanga del Norte, where 19 infirmaries and hospitals and 18 rural health units and birthing centers are located.
Researchers found the contaminated areas to include service delivery, commissioned contracting, funding for building facilities, coordination, and facility licensing.
Additionally, 14 percent of health facilities were found non-functional, while 24 percent were operating in a partial capacity. Still, less than half or 45 percent have proven to be in good condition.
The functionality problems varied per facility, PIDS said, pointing to problems ranging from difficulties with physical infrastructure to service shortcomings.
Physical infrastructure problems include lack of access to electricity, construction defects, delays in construction, dysfunctional equipment, and improper maintenance or failure to deliver certain pieces of medical equipment.
Services problems, meanwhile, covered unavailability of doctors, problems with accreditation, and lack of proficiency training for midwives.
The research team of Oscar F. Picazo, Ida Marie T. Pantig, and Nina Ashley O. de la Cruz identified the lack of national and regional health infrastructure plan as critical sources of these problems.
There was lack of proper information and prioritization when it comes to upgrading and construction of medical infrastructure. PIDS also said planning and coordination among agencies were missing.
Health facilities under the HFEP were funded and contracted individually, revealed the study, proving unwieldy, time consuming, management intensive and uneconomical.
The decision to employ small, incremental multiyear funding also contributed to further fragmentation and delay of construction, it added.
The project also encountered problems with licensing standards, affecting space and equipment requirements, quality of work, and facility staffing.
The authors recommended that commissioned contracting is preferable, whereby a group of projects is pooled together and contracted out as a lot or tranche to allow contractors to economize on planning and design, bulk procurement of inputs, construction, monitoring, and equipping.//

Author: Ted P. Torres
Date: November 30, 2015
Source: Philippine Star

To help policymakers ensure that public and donor funds are used prudently, and that limited resources are directed towards more efficient development interventions, the National Economic and Development Authority said the government will continue to conduct impact evaluation on its programs and projects.

In developing countries such as the Philippines, impact evaluation is vital in identifying what programs or projects work and what do not, NEDA director general Arsenio Balisacan said during his speech at the Impact Evaluation for Development Effectiveness knowledge sharing at the Asian Development Bank on November 20.

Last July, the government finalized the National Evaluation Policy Framework through a Joint Memorandum Circular between NEDA and the Department of Budget and Management. This aims to further improve resource allocation processes for various government projects and programs.

We want to be able to report to our stakeholders that the projects that we support achieve the intended outcomes, Balisacan said.

With greater accountability and transparency being institutionalized, we hope to continue the progress we have made over the last five to six years, he added.

In 2014, a P300-million budget was allotted to the Philippine Institute and Development Studies (PIDS) to conduct evaluation studies on key government programs and projects.

The budget is also intended for various government agencies and selected state universities and colleges for capacity-building programs on impact evaluation.

To date, PIDS already completed eight process evaluation studies and six impact evaluation training workshops for 231 technical staffs from various government agencies and selected state universities and colleges.

In addition, 17 ongoing process evaluation studies are scheduled to be completed next month.

The Australian government has also provided AUS$2.8 million worth of assistance through the International Initiative for Impact Evaluation to evaluate three major development programs " Special Program for the Employment of Students (SPES), Sustainable Livelihood Program and Payapa at MasaganangPamayanan (PAMANA-Peace and Development) Program.

SPES, a project of the Department of Labor and Employment, is designed to link low-income youth aged 15 to 25 to formal work opportunities during schoolsemestral or summer breaks.

The impact evaluation study thus aims to determine how SPES affects the students school participation, as well as their income, work hours and the duration of job search.

The study on the Sustainable Livelihood Program of the Department of Social Welfare and Development, meanwhile, is expected to determine whether and to what extent the livelihood and employment opportunities it provides to recipients of conditional cash transfers improve the conditions of the beneficiary families.

The impact on conflict-affected areas of the PAMANA Peace and Development program handled by the Office of the Presidential Advisor on the Peace Process will likewise be evaluated.

Balisacan noted the Supreme Court has expressed interest to subject its Access to Justice by the Poor to impact evaluation.

To me that is a very interesting development; for them to be willing to be subjected to the discipline of impact evaluation is very encouraging, Balisacan said.

As we approach the end of the current administration, we are confident that we have put in place an enabling environment where the appreciation, conduct of evaluation and subsequent use of evaluation findings in policy and investment decisions are fully embedded in government programs, projects and processes, he added.//

Author:
Date: November 25, 2015
Source: Malaya

SEN. Grace Poe last night said that Liberal Party standard bearer Manuel Roxas II could have done more when he served as secretary of the Department of Transportation and Interior and Local Government, adding the people deserve better.

Poe, the frontrunner in next years presidential race, issued the statement during a presidential forum organized by US business colleges Harvard University, Kellog, and Wharton at the Manila Polo Club.

She initially refused to criticize Roxas, saying the forum was not the proper forum. Pressed further, however, she said: More could have been done. The people deserve better.

During the forum, she also identified some of the non-partisan people from the academe and economic sector who have been helping her craft her economic policies.

Poe identified them as Ateneo School of government dean and former Education undersecretary Tony La Via, former National Economic Development Authority head Cielito Habito, director of Philippine Institute for Development Studies Romy Bernardo and national scientist Raulo Fabella.

She said if elected president, she would choose my cabinet wisely and according to merit alone. Friendship will not be a criterion. Upon appointing the best people for the job, I will hold them accountable.

To be fair, I am not denying that experience can be valuable. But I think there are other qualities that a leader should posses, she said, adding that while the Daang Matuwid program of President Aquino has accomplished so much, there is still so much to be done.

PATTERN OF MISREPRESENTATION

De La Salle Professor Antonio Contreras yesterday said Poe has shown a pattern of misrepresentation in her official documents, highlighted by what he said was her declaration of her period of residency in her certificate of candidacy (COC) for the May 13, 2013 elections that counts in the residency requirement for next years presidential polls.

Speaking during the oral arguments on three of the four disqualification cases filed against Poe before the Commission on Elections (Comelec), Contreras said Poes claim that she has been a resident of the Philippines for six years and six months when she ran for senator means she will be lacking in residency in her bid for the presidency next year.

The COC filed by Poe for the 2013 elections is one of the issues being used by Contreras, as well as other petitioners, in questioning whether Poe has met the 10-year residency requirement for the post of president.

Contreras noted that Poe and her American husband, Neil Llamanzares, claimed to be Filipinos when they purchased a condominium unit in San Juan in February 9, 2006 as shown in the Condominium Certificate of Title.

He also noted that the couple also said they were Filipinos when they acquired a property in Quezon City in June 1, 2006 as indicated in the Transfer Certificate of Title.

At that time, Poe was still an American citizen since she re-acquired her Philippine citizenship only on July 18, 2006.

Contreras said that since Poe claimed that she was a resident of the country for six years and six months before the May 2013 polls, she should therefore be a resident of the country for the 2016 elections for more than nine years only.

Contreras filed a petition for the cancellation of Poes COC last month. He said the point of reckoning should be July 18, 2006, or when Poe re-acquired her Philippine citizenship, thereby making her a resident of the Philippines for nine years, nine months and 22 days before the May 2016 polls.

In her COC for the 2016 elections, Poe said she will be a resident of the country for 10 years and 11 months by May 9, 2016.

I always say that if you place wrong information in a document, that is misinformation. Thats misleading...regardless if may malicious intent or not, this is deliberate, said Contreras.

This is somebody that we are going to elect as president. We should hold the one running for president at the highest bar. If in that simple TCT and CCT, you can tell something that is not true, then it goes into your character, said Contreras.

Poes lawyer, George Garcia, said it was a simple case of honest mistakes on the part of the senator.

That was an honest mistake. Talagang nagkamali. Sino ba naman hindi? Hindi naman siya lawyer. Siyempre ang nilagay ko kasi ang paniniwala ko Filipino ako, Garcia said, adding there was never any malicious intent on the part of Poe in claiming she was a Filipino when she was still an American citizen.

There was no malicious intent, deliberate at that, to commit a lie. Ang importante ay walang diretsahang pagsisinungaling. Ito po ay isang pagkakamali at lahat ng tao ay nagkakamali. Ang importante ay kahit magkamali ka, huwag ka lang magsinungaling, said Garcia.

The Comelec First Division grilled Garcia, Contreras and the petitioners, former University of the East-Law dean Amado Valdez and former senator Francisco Tatad regarding their positions on Poes citizenship and residency qualifications. "

Author: JP Lopez and Gerard Naval
Date: November 26, 2015
Source: Malaya

State-owned think tank Philippine Institute for Development Studies (PIDS) will be conducting impact-evaluation studies on an employment project and two other major government projects.
The National Economic and Development Authority said the evaluation studies will be funded by a AUS$2.8 million, or roughly P9.5 million, worth of assistance from the Australian government.
The evaluation will be done through the International Initiative for Impact Evaluation, which aims to evaluate three major development programs, namely, the Special Program for the Employment of Students (SPES), the Sustainable Livelihood Program and the Payapa at Masaganang Pamayanan (Pamana-Peace and Development Program).
In developing countries such as the Philippines, impact evaluation is vital in identifying what programs or projects work and what do not, Socioeconomic Planning Secretary Arsenio M. Balisacan said in a news statement.
It helps policy-makers ensure that public and donor funds are used prudently, and that limited resources are directed toward more efficient development interventions, he added.
The Department of Labor and Employment project SPES is designed to link low-income youth aged 15 to 25 to formal work opportunities during schools semestral or summer breaks.
The impact-evaluation study, thus, aims to determine how SPES affects the students school participation, as well as their income, work hours and the duration of job search.
The study on the Sustainable Livelihood Program of the Department of Social Welfare and Development, meanwhile, will determine the extent that livelihood and employment opportunities provided to recipients of conditional cash transfers helped beneficiary families. The impact on conflict-affected areas of the Pamana Peace and Development Program, handled by the Office of the Presidential Advisor on the Peace Process, will, likewise, be evaluated.
Apart from these projects, Balisacan said the Supreme Court has also expressed its interest to subject its project, titled Access to Justice by the Poor, to impact evaluation.
To me, that is a very interesting development; for them to be willing to be subjected to the discipline of impact evaluation is very encouraging, Balisacan added.
As we approach the end of the current administration, we are confident that we have put in place an enabling environment where the appreciation, conduct of evaluation and subsequent use of evaluation findings in policy and investment decisions are fully embedded in government programs, projects and processes, he added.
In 2014 a P300-million budget was allotted to the PIDS to conduct evaluation studies on key government programs and projects.
The budget is also intended for various government agencies and selected state universities and colleges for capacity-building programs on impact evaluation.
In July this year, the government finalized the National Evaluation Policy Framework (NEPF) through a Joint Memorandum Circular (JMC) between the Neda and the Department of Budget and Management. This aims to further improve resource allocation processes for various government projects and programs.

Author: Cai Ordinario
Date: November 24, 2015
Source: Business Mirror

THE participation of local small and medium enterprises (SME) in supply-chain trade is among the lowest in Asean, a situation that can be remedied through increased financial access, better infrastructure and reforms in the ease of doing business, according to the Asian Development Bank (ADB).
Dr. Ganeshan Wignaraja, advisor at the ADB Economic Research and Regional Cooperation, said the Philippine SMEs participation rate in value-chain trade is just at 20.1 percent.
This is based on the preliminary results of the survey done for Wignarajas study, titled Factors Affecting Entry into the Supply Chain Trade: An Analysis of Firms in Southeast Asia.
In Thailand, 29.5 percent of the SME base is present in the value-chain trade; in Malaysia, 46.2 percent; Vietnam, 21.4 percent; and India, 11.5 percent. Indonesias engagement rate is the lowest, as only 6.3 percent of SMEs in the country are able to enter the global value chain of larger firms.
Value-chain trade refers to activities that are part of a larger firms production network. The survey was done with a total sample of 5,900 firms across the five economies.
In terms of the size of enterprises, larger firms in the Philippines are able to penetrate the value-chain trade more, with 51.1 percent of all large companies taking part in the global value chain.
Access to credit
A key constraint affecting the participation rate of SMEs, Wignaraja said, is access to credit.
I think this is a particular problem in this country. The credit gap in Asia affects 9 million firms across the regionin the Philippines the interest rate is very highcredit is a problem. A policy implication for me is how do we involve the banking sector in financing firms to become more competitive? he said.
Credit gap is the difference between formal credit provided to SMEs and total estimated potential need for formal credit, Wignaraja said.
For the Philippines, the credit gap is estimated at $2 billion, or roughly $59,000 credit value per enterprise.
To respond to the gaps in the financial system, Wignaraja recommended the introduction of better credit rating and databases, expansion of partial credit guarantees, introduction of innovative schemes to expand collateral and scaling up of microfinance and have it linked to the financial system.
Other factors hindering better participation of SMEs are infrastructure and ease of doing business,
citing a World Bank-International Finance Corp. study.
The problem is, it takes 34 days and 16 procedures to set up a business according to the World Bank, and a second problem is that even if infrastructure spending is growing, from 2.1 percent of GDP in 2012, from around 1.4 percent in 2008, the real issue is to do well and have world class infrastructure, it has to be at least 3-percent to 3.5-percent GDP, recommended Wignaraja, citing that China spends at least 6 percent, while India has doubled its infrastructure spending.
Addressing these problems, Wignaraja said, is significant, as SMEs contribute 63 percent to total employment in the Philippines, and currently contribute around 35.7 percent of GDP.
FTA utilization
In other countries, Assistant Secretary for Industry Development and Trade Policy Rafaelita M. Aldaba said SMEs share in total employment is at 75 percent.
Aldaba said the final results of a nationwide survey polling the awareness and utilization of manufacturing micro, small and medium enterprise (MSME), numbering to around 1,000 firms, of the countrys various free-trade agreements (FTAs) will be released in the first quarter of 2016.
This covers NCR [National Capital Region], Calabarzon [Cavite, Laguna, Batangas, Rizal, Quezon], Central Luzon, Davao, Cebu and Iloilo. The preliminary result on awareness is around 50 percent, Aldaba said on the sidelines of the Board of Investmentss Global Value Chains Conference, held on Monday.
The trade official said that according to preliminary results, lack of information has been cited as the primary reason for the low awareness rating, as well as the complexity of the FTA regulations.
For the utilization, Aldaba cited a previous study of the Philippine Institute of Development Studies, which pegs the utilization rate at 30 percent.
The trade official said this rating is comparable to other Asean members, so the Philippines is not necessarily a laggard. Aldaba said according to the SME Development Plan of the government, they are aiming for MSME contribution to GDP to increase from around 35 percent to 40 percent from 2011 to 2016.
SME credit gap
The ADB said the Philippines still needs to improve the financial system to close the $2-billion credit gap for SMEs. The unmet credit could increase, depending on the robustness of SMEs. It [credit gap] could go higher, depending on where SMEs would be. SMEs have an important role in Asean integration and the Philippine growth to maintain the 6-percent plus GDP growth, he said.
The government has to improve, by privatizing government banks and further opening up the banking sector by allowing entry of more foreign banks so that we have more financing options. And then, scale up the microfinance. They must also adopt innovative scheme to improve collection, have better credit rating and guarantee system, he told the BusinessMirror.
He also stressed the need to foster stock- and bond-market development and ensure adequate macroprudential regulation and capacity. Banks and nonbanks must increase lending to SMEs. With the Asean integration, we will have more business opportunities that need financing, he said.//

Author: Catherine N. Pillas and Genivi Factao
Date: November 23, 2015
Source: Business Mirror

MANILA, Philippines - Economic Planning Secretary Arsenio Balisacan said he is confident an environment to ensure the correct allocation of public funds would be in place by the end of the Aquino administration.
As we approach the end of the current administration, we are confident that we have put in place an enabling environment where the appreciation, conduct of evaluation, and subsequent use of evaluation findings in policy and investment decisions are fully embedded in government programs, projects, and processes, he said.
Impact evaluation is vital in identifying what programs or projects work and what do not.
Multilateral donors, such as the World Bank and the Asian Development Bank, use impact evaluation extensively to ensure correct utilization of grants and loans.
Balisacan said this helps policymakers ensure public and donor funds are used prudently, and that limited resources are directed towards more efficient development interventions.
He added the Supreme Court has even expressed interest to subject its Access to Justice by the Poor to impact evaluation. To me that is a very interesting development; for them to be willing to be subjected to the discipline of impact evaluation is very encouraging, Balisacan, who is also director general of the National Economic and Development Authority (NEDA), added.
2014, a P300-million budget was allotted to the Philippine Information and Development Studies (PIDS), a NEDA line agency, to conduct evaluation studies on key government programs and projects.
The budget is also intended for various government agencies and selected state universities and colleges for capacity-building programs on impact evaluation.
To date, the PIDS has already completed eight process evaluation studies and six impact evaluation training workshops for 231 technical staffs from various government agencies and selected state universities and colleges.
In addition, 17 ongoing process evaluation studies will be completed next month.
The Australian Government provided Aus$2.8 million worth of assistance through the International Initiative for Impact Evaluation (3IE) to evaluate three major development programs, namely the Special Program for the Employment of Students (SPES), the Sustainable Livelihood Program, and the Payapa at Masaganang Pamayanan (PAMANA-Peace and Development) Program.
The SPES, a project of the Department of Labor and Employment, is designed to link low-income youth aged 15-25 to formal work opportunities during schools semestral or summer breaks.
The impact evaluation study thus aims to determine how SPES affects the students school participation, as well as their income, work hours, and the duration of job search.
The study on the Sustainable Livelihood Program of the Department of Social Welfare and Development, meanwhile, is expected to determine whether and to what extent the livelihood and employment opportunities it provides to recipients of conditional cash transfers (Pantawid Pamilyang Pilipino Program) improve the conditions of the beneficiary families.//

Author: Chino Leyco
Date: November 24, 2015
Source: Manila Bulletin

An encouraging and enduring image from last weeks Apec meetings in Manila was that of Filipino engineer Aisa Mijeno holding her own in a lively panel with US President Barack Obama and Alibaba founder Jack Ma, as they discussed SMEs (small and medium enterprises) and the private sectors role in mitigating climate change.
More than the motherhood statements parroted in many global forums, the discussion centered on green innovations and inventions that address realities on the ground.
Mijenos salt-powered lamp (called SALt, for Sustainable Alternative Lighting) made up a great takeaway from the Apec event: the real meaning of inclusive growth, that buzz phrase used so profligately during the meetings.
SALt shows how technology can be used to serve the needs of the poor so that they, too, will benefit from the Philippines touted economic growth. It addresses an urgent need for electric power in remote areas: Some 16 million families are off-grid, according to a 2013 study by the Philippine Institute for Development Studies.
Mijenos lamp uses saltwater"which can be easily sourced from the sea by coastal communities"making it a cheap, sustainable, clean and safe alternative to kerosene, the default fuel in marginalized areas. Essentially, the saltwater facilitates the disintegration of a piece of metal (called an anode) immersed in the solution. The disintegration of this anode produces electricity that can provide up to eight hours of light equivalent to that provided by seven candles. The lamp also has a USB port that allows users to charge their phones when the light is turned off.
Users can replenish the saltwater solution by dissolving two tablespoons of salt in a glass of water, but the anode needs to be replaced every six months. The lamp costs about $20, plus $3 every six months for a replacement anode. (Residents of a Kalinga village had to shell out P40 every two days for kerosene.)

With a more accessible light source, people in remote communities now have a chance to pursue other activities that the onset of darkness had made near-impossible: farm chores, tending of livestock, reading and studying, even just enjoying the night breeze without fear. They can become more active partners in the national economy and be able to share in the dividends of growth. With the yearly typhoons and power outages, salt lamps literally provide a lifeline.
SALt also shows that it is imperative to know a problem intimately in order to solve it. Mijeno, a former Greenpeace campaigner and faculty member of De La Salle-Lipa, stayed with the Butbut tribe in Buscalan, Kalinga, for some time, and learned that the villagers depended mainly on moonlight for evening chores and trekked six hours to Bontoc for their kerosene supply. Its an abiding lesson that government officials and functionaries must take to heart. (Let them immerse themselves in those MRT-LRT queues so theyd understand how urgent it is to solve the public transport problem with which ordinary wage-earners grapple daily.)
Described by Obama as an innovator, Mijeno is also a role model for women everywhere, one who embodies the promise of youth as a dynamic force. More than just skills, she imbues the male-dominated engineering field with heart, showing how knowledge can be harnessed for maximum good.
But Mijenos narrative also reveals the governments disheartening and passive stance despite its rhetoric on green initiatives. Even with her local and international awards, Mijeno could not find enough funding support to mass-produce her invention in order to make it more affordable to poor communities. In fact, she and brother Ralph had to crowdsource the funds needed to meet their goal of providing salt lamps to the Hanunuo Mangyan tribe of Bulalacao, Oriental Mindoro; the Barangay Gabi families of Carles, Iloilo; and the Buscalan tribe of Kalinga.
It was in fact Obamas staff who found Mijeno online and pushed her to center stage, where she met world-famous entrepreneur Jack Ma. The richest man in China promptly offered her a scholarship to an entrepreneur school in his country.
So wheres that vaunted government support for local SMEs? What are local officials doing to solve the energy problem in their communities? Why must it take outsiders"in the case of Mijeno in Kalinga, and Obama and Ma during the Apec"to find solutions to a domestic crisis? How long before they see the light?
Hopefully, Mijenos SALt would nudge the Aquino administration into demonstrating its commitment to inclusive growth, while finding a way to meet a most pressing need: clean and sustainable power supply.//

Author:
Date: November 22, 2015
Source: Philippine Daily Inquirer

Marikina City Rep. Romero Federico Quimbo is pushing for the declaration of large-scale smuggling of agricultural products as an act of economic sabotage punishable by hefty fines and up to two decades in jail.

Quimbo, chairman of the House of Representatives Ways and Means committee, filed House Bill 6259 in response to reports showing that agricultural smuggling has led to multibillion-peso revenue losses for the government and impoverishment of workers in the agricultural sector.

The measure, otherwise known as the proposed Anti-Agricultural Smuggling Act of 2015, expands the definition of economic sabotage to include agricultural smuggling of produce such as sugar, corn, pork, poultry, garlic, onion, carrots, fish, and cruciferous vegetables, in their raw state, or which have undergone the simple processes of preparation or preservation for the market, with a minimum amount of P1 million, or rice with a minimum amount of P10 million, as valued by the Bureau of Customs (BOC).

Under the bill, the penalty of life imprisonment and a fine of twice the fair value of the smuggled agricultural product and the aggregate amount of the taxes, duties and other charges avoided, will be imposed on any person involved in large-scale agricultural smuggling.

The penalty of 17 to 20 years of imprisonment, and a fine of twice the fair value of the smuggled agricultural products and the aggregate amount of taxes, duties and other charges avoided shall be imposed on the officers of dummy corporations and other entities who knowingly sell, lend, lease, assign, consent or allow the unauthorized use of their import permits for purposes of smuggling.

Meanwhile, a jail time ranging from 14 to 17 years and a fine equal to the fair value of the smuggled agricultural product and the aggregate amount of taxes, duties and other charges avoided shall be imposed on the registered owner and its lessee of boats, vessels, trucks, vans and other means of transportation used in the transport of smuggled agricultural products subject to economic sabotage. The same penalty awaits the owner and lessee of a warehouse or property, who knowingly stores the smuggled agricultural product.

The same penalty shall also be imposed on the registered owner, lessee, president or chief executive officer of the private port, fish port, fish landing sites, resorts, airports, who knowingly allow agricultural smuggling.

If the offender is a government official or employee, the penalty shall be the maximum as hereinabove prescribed and the offender shall suffer an additional penalty of perpetual disqualification from public office, to vote and to participate in any public election.

Citing a report by the Samahang Industriya ng Agrikultura (SINAG), Quimbo said that from 2013 to 2014, the government incurred a total of P64 billion foregone revenue due to the widespread smuggling of agricultural products. The amount, he said, represents a P32-billion loss per year, which is equivalent to the Department of Agriculture's budget for 2016 and excess funds for the rehabilitation of the agriculture sector.

A separate report by Philippine Institute for Development Studies senior research fellow Dr. Jose Ramon Albert noted that poverty statistics from 1985 to 2009 show most of those who are classified as poor have agriculture-related jobs.

While the average share of agricultural employment to the total labor force is one-third or 36 percent over the past two decades, Quimbo noted that agricultural workers receive the lowest average daily basic wage and salary compared to those in non-agriculture industries.

This is appalling considering the agriculture industry is a significant driver of our country towards food security. This condition is aggravated by the occurrence of agricultural smuggling in that it takes away what little income that workers in the agricultural sector may have, as they have to compete with the prices that the agricultural smugglers offer to the market, thereby hampering this sectors growth and sustainability, he said in the bill's explanatory note.

Quimbo said he is hopeful his bill will complement the passage of the proposed Customs Modernization and Tariff Act (CMTA) pending in Congress by providing for stiffer penalties for agricultural smuggling.

A counterpart bill to HB 6259 has been filed in the Senate by Sen. Joseph Victor Ejercito. "


Author: Xianne Arcangel
Date: November 22, 2015
Source: GMA News