BusinessMirror July 9, 2015

B R M

FOREIGN Secretary Albert F. del Rosario on Tuesday made an impassioned plea before an

arbitral tribunal in The Hague to rec-ognize the country’s West Philippine Sea (South China Sea) jurisdiction, “because of the importance of the case, not only to the region but to the entire world, and its impact on the application of the rule of law in maritime disputes.”

“We are here because we wish to clarify our maritime entitle-ments in the South China Sea, a question over which the Tribunal has jurisdiction.

“This is a matter that is most important not only to the Philip-pines, but also to all coastal states that border the South China Sea, and even to all the states parties to the Unclos [United Nations Con-vention on the Law of the Sea]. It is a dispute that goes to the very heart of the Unclos itself. Our very able counsel will have much more to say about this legal dispute over the interpretation of the conven-tion during the course of these oral hearings,” del Rosario said. The Philippines, he said, has five principal claims to the West Philippine Sea:

First, that China is not entitled

to exercise what it refers to as “historic rights” over the waters, seabed and subsoil beyond the limits of its entitlements under the Convention;

Second, that the so-called nine-dash line has no basis whatsoever under international law insofar as it purports to define the limits of China’s claim to historic rights; Third, that the various mari-time features relied upon by China as a basis upon which to assert its claims in the South China Sea are not islands that generate entitle-ment to an exclusive economic zone (EEZ) or continental shelf.

In his latest economic bulletin, Beltran said the 2-percent average inflation in the first six months of 2015—which is in the lower level of the government’s estimates for the year—is due to external events beyond the control of policy-

makers, such as the lower prices of oil in the world market.

“For the first semester of 2015, inflation averaged 2 percent, so as to approach the lower bound of the official target. This development,

www.businessmirror.com.ph n�Saturday 18, 2014 Vol. 10 No. 40 P. | | 7 DAYS A WEEKn�Thursday, July 9, 2015 Vol. 10 No. 273

A broader look at today’s businessBusinessMirrorBusinessMirrorTHREETIME

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PESO EXCHANGE RA TES n US 45.1410 n JAPAN 0.3683 n UK 69.8106 n HK 5.8207 n CHINA 7.2691 n SINGAPORE 33.3267 n AUSTRALIA 33.5122 n EU 49.7273 n SAUDI ARABIA 12.0360 Source: BSP (8 July 2015)

DOF: Hike gasoline excise tax nowBELTRAN SAYS RAISING LEVY ON GASOLINE TO HELP OFFSET REVENUE LOSSES FROM CHEAPER OIL

E.U. WANTS GREECE’SPROPOSAL BY FRIDAYGREECE has until the end of

this week to come up with an acceptable proposal for a

new government bailout. Its neigh-bors are prepared to let Athens go broke and flunk out of the euro- currency group if it fails, European leaders said on Tuesday. The stark warning came after back-to-back meetings in Brussels of senior European officials, who offered a glimmer of hope that the debt-stricken Greek govern-ment might yet avoid a disastrous default, but also expressed exas-peration over its unpredictable negotiating strategy. A credible Greek proposal of how it planned to cut costs and reform its economy in exchange for billions of dollars in emergency loans must be submitted no later

than Friday morning, and leaders from all 28 nations of the Euro-pean Union (EU) are to meet on Sunday to decide if it is viable, officials said. “We have only five days left to find the ultimate agreement,” EU President Donald Tusk declared. “Until now, I have avoided talking about deadlines. But tonight, I have to say loud and clear that the final deadline ends this week.” Time is running desperately short for Greece, whose govern-ment and financial system are both close to running out of cash. With-out a funding deal in the next few days, Greek banks will collapse and Athens will default on payments due, triggering an economic earth-quake in a nation whose economy is already in deep depression. TNS

PHL hoping UN body to serveas ‘great equalizer’ in sea row

EPAYMENTS CAMPAIGN Social entrepreneur and personal-style blogger Yuki Tansengco (center) and Bank of the Philippine Islands (BPI) Debit and Prepaid Payments Division Product Manager Alejandro N. Alejo (right) share their stories on bringing cash for payments instead of using the proprietary BPI debit cards at the launch of the lender’s Skip Campaign, which allows BPI debit cardholders to pay directly via point-of-sale terminals in stores without interest. Facilitating the event is BPI eCommerce Business Head Jan Montifalcon. See story on B2-1. ALYSA SALEN

INSIDE

SportsBusinessMirror

LONDON—Even as Serena Williams piled up aces and groundstroke winners from all angles, even as she stormed through seven games in a row

and 10 of the last 13 in yet another comeback, her Wimbledon quarterfinal against Victoria Azarenka never felt like a runaway.

That’s because Azarenka, a two-time major champion and former No. 1 in her own right, was playing spectacular tennis, too, nearly the equal of Williams in every facet.

Nearly.For when Williams finds her best game, she

becomes unbeatable. And for her past 26 Grand Slam matches she is, indeed, unbeaten. Erasing an early deficit at Centre Court, Williams got past Azarenka, 3-6, 6-2, 6-3, on Tuesday with the help of 17 aces and a remarkable ratio of 46 winners to 12 unforced errors.

“It’s been up and down, up and down, but somehow I’m still alive. I don’t know how,” said Williams, who twice was two points from losing to Britain’s Heather

title for a self-styled Serena Slam, which she already accomplished in 2002-2003. Pull that off, and Williams also will have the third leg of a calendar-year Grand Slam and go to the US Open with a chance to become the first player since Steffi Graf in 1988 to win all four major trophies in one season.

“I haven’t seen her play like this, honestly,” said Azarenka, who has lost 17 of 20 matches against Williams and all 10 meetings at majors, including after leading by a set and a break at the French Open in May.

In Thursday’s semifinals, No. 1 Williams faces No. 4 Maria Sharapova, who beat unseeded American CoCo Vandeweghe, 6-3, 6-7 (3), 6-2.

Williams is 17-2 against Sharapova, including 16 straight victories. But one of Sharapova’s wins came at Wimbledon, in the 2004 final, when at age 17 she

the matchup: “I look forward to it.”Here was the scouting report from Williams’ coach,

Patrick Mouratoglou: “If she plays like today, I don’t think anyone can compete.”

Pick an adjective for Williams-Azarenka. Intense. Riveting. Entertaining. Sublime. For two hours and four minutes on a windy, cloudy day, that’s what this was. Both hit the ball hard. Both covered the court from corner to corner.

“We put on a great show,” Azarenka said.The other semifinal is No. 13 Agnieszka Radwanska of

Poland against No. 20 Garbine Muguruza of Spain.The men’s quarterfinals are on Wednesday: Novak

Djokovic versus Marin Cilic; Roger Federer versus Gilles Simon; Andy Murray versus Vasek Pospisil; and Stan Wawrinka versus Richard Gasquet. Djokovic finished his

How often do you get a day starting with a deciding fifth set? Or a deciding fifth set that involves a top-seeded and thoroughly frustrated Novak Djokovic and a 6-foot-8 gunslinger from South Africa?

WHEN Serena Williams finds her best game, she becomes unbeatable. AP

6-7 (6), 6-7 (6), 6-1, 6-4, 7-5 fourth-round victory over Kevin Anderson on Tuesday; it was suspended because of darkness after four sets on Monday.

Radwanska, the 2012 runner-up, eliminated No. 21 Madison Keys of the United States, 7-6 (3), 3-6, 6-3. Muguruza reached her first major semifinal by defeating No. 15 Timea Bacsinszky of Switzerland, 7-5, 6-3.

Radwanska compiled 13 winners, 35 fewer than the big-hitting Keys. But on the flip side was this statistic: Radwanska made seven unforced errors, Keys 40.

Just as Keys pushed Radwanska, the 47th-ranked Vandeweghe gave Sharapova all she could handle, especially in the second set, building a 19-5 edge in winners. Soaking it all in during her first Grand Slam quarterfinal—it was Sharapova’s 23rd—Vandeweghe repeatedly waved her arms after

significant points, motioning to spectators to make more noise and be less, well, genteel.

“I relished it pretty well. I enjoyed my experience. I enjoyed the crowd out there,” said Vandeweghe, whose grandfather and uncle were NBA players and grandmother was a Miss America. “I didn’t enjoy the result too much.”

That’s because Sharapova, so passive in the second set, turned it on at the end, claiming the final three games.

Similarly, Williams was too good in the late going. From 2-all in the second set, Williams went about 45 minutes without dropping a game, taking that set and going ahead, 3-0, in the third. Azarenka wouldn’t concede, and even had a break point in the final game.

Williams erased that with an ace, one of a half-dozen in her final two service games.

“I mean,” the 33-year-old American said, “that’s my game on grass—just aces.”

Oh, but it’s so much more. AP

SportsSportsSportsBusinessMirrorSports

TALE OF SURVIVAL

ONDON—Even as Serena Williams piled up aces and groundstroke winners from all angles, even as she stormed through seven games in a row

and 10 of the last 13 in yet another comeback, her

Watson in the third round and is now 14-0 in three-setters and 37-1 overall in 2015. “So we’ll see what happens, but I’m just happy to still be here.”

She is closing in on a fourth consecutive major

stunned Williams for the first of her five Grand Slam titles.“Definitely, no secrets between each other’s

games,” Sharapova said.Williams, whose major trophy count is at 20, said of


TALE OF SURVIVAL

UP AND DOWN, UP AND DOWN...

SportsC1 | THURSDAY, JULY 9, [email protected]@businessmirror.com.phEditor: Jun Lomibao

NOVAK DJOKOVIC touchesthe grass after his grueling and nerve-racking match. AP

B B DLos Angeles Times

LONDON—It was Tuesday afternoon amid the grandeur of Wimbledon, and the best men’s tennis player in the world found himself in a fine kettle of fish. The No. 1 Court was packed for the

occasion. People knew this was special. It was high noon in London. Call it the Shootout at SW19.


Kevin Anderson had Djokovic teetering on Monday night, a set shy of advancing to the quarterfinals and with the prospect of a sleepless quarterfinals and with the prospect of a sleepless night that would bring visions of tennis balls darting left and right.

When darkness sent them home, Anderson had gotten his first serve in at an astonishing 77-percent rate and had won the point when he did so a more astonishing 87 percent. The ace count was equally eye-opening: Anderson had 32, Djokovic 10.

The South African had won the first two sets in tiebreakers—including the second set, when

Djokovic led in the tiebreaker, 4-0—and was smiling confidently.

To Djokovic’s credit, he did not fold. But then, when you are No. 1, you cannot even entertain that thought. The edge came off Anderson’s game a tad, Djokovic got some rhythm and momentum back, and the next two sets were his, 6-1, 6-4.

But Mother Nature got the final word. It was almost 9:30 p.m., and even in these northern reaches in the summer the sun does eventually go down. They already had played three hours and four minutes. That left Djokovic with a night of things to ponder, including all that had gone wrong. That’s a tough situation for a player with unfinished business.

He had scooted through the first three rounds, and that had to be healing after his disappointment in the last Grand Slam tournament, the French Open. There, he had been denied a chance to complete a Career Slam by a Swiss player not named Federer. Stan Wawrinka beat him in the final.

An entire night to think about more aces from Anderson was certainly not what Djokovic wanted.

He was facing the prospect of failing to get to a Grand Slam

quarterfinal for the first time in 25 majors, an incredible testimonial to his consistency. Anderson had a different sort of consistency going. He was trying to make it into a Grand Slam quarterfinal for the first time in 26 tries.

Weighing most heavily on Djokovic had to be that Wimbledon remains the only place where they still play out deciding sets, rather than settling them with tiebreakers. If Anderson didn’t falter on his serve, and Djokovic remained stubborn, they could be out there all day.

And the winner, having already forfeited his day of rest, would have to play big-serving, big-hitting US Open champion Marin Cilic on Wednesday. Djokovic, a Serb, needed five sets last year to get past Cilic, a Croatian, en route to a title.

And Djokovic was fully rested then.Djokovic and Anderson took the court

with a dark cloud hovering overhead. They flipped the coin and the rain

began. All around the cloud were blue skies and sunshine, so this wouldn’t be a long delay. But it was just long enough to get moisture on the grass to slicken the surface for big serves. Just what Djokovic didn’t need. When they returned, Djokovic

looked like a caged animal. He fidgeted and paced. Anderson sat on

his chair and made him wait. Anderson served first and held with three aces. Would this end before Friday? The first real danger came with Djokovic serving at 1-2. He hit a forehand long for 15-40. That’s two

break points that were, in this case, almost the same as match points.

But Anderson, whose ranking has gone to a career-best No. 14,

momentarily reverted to a No. 135 guy. He hit a ground stroke long and returned the next serve long. One of the best survivors in the game had survived. Now, even more animated, Djokovic clenched fists and lectured himself. After a winning shot, he turned toward his coaches and let out a sort of primal scream. Nearby was a ball girl, who looked mortified.

“I was yelling at myself,” Djokovic said later. “I will find her and apologize.”

Anderson started the 5-5 game with a 125-mph service winner. Then he ended a long rally by netting a forehand, a prelude to the collapse.

He double-faulted for 15-30, then double-faulted for 15-40. Bodies edged forward on stadium seats. This was not the same as Djokovic serving at 15-40 because it was Djokovic returning. Even against this South African tower of power, Djokovic with two shots at it was a Vegas wager.

It took only one.Anderson tried to yank Djokovic wide to his

right and did so, his serve at 121 mph. Djokovic lunged, like a cat pouncing on a mouse, and slapped the return at Anderson’s feet. Six-foot-8 does not bend down well.

For all intents, that was it. Djokovic, needing to serve for it, slipped behind, love-30. But he got it to 40-30 and got Anderson to mis-hit a passing shot well long.

Game, set, match. Three hours 47 minutes. A 6-7 (6), 6-7 (6), 6-1, 6-4, 7-5 tale of survival.

“It was one of the most difficult matches in my Wimbledon career,” Djokovic said later. “At times, I felt helpless.”

Thirty years ago to the day, Boris Becker, Djokovic’s coach and chief of sideline brainstorming, won the first of his three Wimbledon titles.

“He’ll have a glass of wine,” Djokovic said, “I’ll have a glass of water and we’ll celebrate.”

With Anderson finally in his rearview mirror, Djokovic can focus on being Sunday’s toast of the town.

SPORTS C1

TRAVEL WITH BABY

THE NORA NIGHT

TALE OF SURVIVAL

LIFE D1

SHOW D3

B D C

FINANCE Undersecretary and chief economist Gil S. Beltran has recommended that the

government increase excise taxes on gasoline now—possibly through an executive order (EO)—to help raise revenues, while oil prices have again gone down locally and in the international market.

Thursday, July 9, 2015

OpinionBusinessMirrorA2

Only ‘pragmatic compromise’ can save Greece

editorial

Euro finance ministers and officials preparing to meet Tuesday in Brussels must answer a tough question: How should the burden of restarting and resetting the Greek economy be shared?

As they strive to find what uS Treasury Secretary Jack Lew calls a “pragmatic compromise” on this im-portant burden-sharing issue, the officials are weighing two tricky considerations, compounding the chal-lenge of negotiations that are already under the shadow of past acrimony and broken promises on all sides.

The first component concerns the balance between emergency financing and draconian adjustments for Greece. Without a carefully crafted mix, an economy already devastated by shuttered banks and rising poverty will slide further into depression, worsening the human tragedy.

Naturally, the Greek government is urging its creditors to be much more generous, not only with immediate cash funding, but also by providing meaningful debt forgiveness that would help “crowd-in” private capital. The creditors would like Greece to act aggressively to carry out internal reforms. But they need to be careful: Too much pressure could force Greece to introduce the types of measures—such as issuing Ious to meet urgent priorities, including paying domestic bills and reopening the banks—that would make it even more difficult for the country to remain a member of the euro zone.

The second component concerns the dynamics among creditors. Given that Greece faces a significant problem of solvency—and not just a liquidity crunch—the bulk of the external funding should come from governments rather than monetary institutions, such as the European Central Bank and the International Monetary Fund (IMF). And this assistance needs to be quickly supplemented by government write-offs of a significant part of their debt claims on Greece.

Yet, despite meaningful reforms in recent years, the European system doesn’t allow the type and magnitude of rapid government financial response that is required to address Greek solvency. As a result, governments will be tempted to continuously place the burden on the monetary institutions, which have much greater operational flexibility and political autonomy. These institutions, however, increasingly resent this hardship, if only because Greece has received huge loans from them in the past and is already in payment arrears to the IMF.

These conditions can be met only through a “pragmatic compromise” involving a well-designed two-stage process. It must be underpinned by a quick restoration of mutual trust, the delivery of promised action and a credible verification mechanism. And any agreement must be sold to domestic constituen-cies that are even more skeptical than their leaders.

A workable solution would require all sides to agree to burden sharing that is deemed both fair and effective (the compromise). And the initial implementation would focus on rapidly deployable cash and adjustment bridging measures to pull the Greek economy out of its devastating economic and financial sudden stop (the pragmatic part), followed by more comprehensive policy and financing measures in-volving a much broader set of participants.

It is a tall order. And it would require the type of political vision and courage that Europe repeatedly has tried to master but has been unable to sustain in this crisis so far. Bloomberg editorial

It has been several weeks since I made a silly comparison of the stock market to, say, a hot-air balloon. So it is about time to do it again.

In any discussion of historical precedents for China’s ongoing battle with stock traders, Japan’s epic “price-keeping operations” deserve pride of place.

Third-quarter trauma

China tries Japan’s approach to a stock bubble

the brief daily commentary you read in the newspapers about Philip-pine Stock Exchange (PSE) trading, and too often from professional ana-lysts, is like a summary of a sporting contest from looking primarily at the score. then there has to be some sort of justification for the outcome like “the loser’s star player has had some problems all season.”

Certainly, the stock market does occasionally trade both to the upside and the downside in a manner when no explanation is really important. the island-nation of Micronesia has a football team that just got beat at the Pacific Games in Papua new Guinea by Vanuatu by a score of 46-0. What can you really say about that game?

Most of the time, though, the rea-sons for stock-price movements—even big movements—are much more subtle and varied. But what we hear are statements like “PSEi plunges after Greece referendum” and “Bears continue to dominate the market.”

Are these accurate appraisals of

PSE trading? no.the fact that stock prices dropped

after the Greek referendum may be true, but correlation does not imply causation. the PSE has been in a 13-week downtrend, 12 of those weeks before the Greek referendum. Dur-ing those three months—and until almost the last minute—a debt deal was expected to be reached. But the obvious implication of the headline is the market went down because of the Greek vote. We are told that foreign money is running away from the Philippines because of the turbu-lence in Europe.

Here’s a news flash: Foreign money has been leaving the PSE for months. I wrote about this when stock prices were at the 7,800 area reaching for 8,000. I said then that, historically, foreign funds flee the Philippines at the wrong time but that this time they might be accu-rate. Sure, I was optimistic that the momentum at 8,000 would carry us higher and I was wrong, as the mar-ket turned down the following week.

And I wrote on May 26th that “the PSE is going down” when the index was at 7,700.

One analyst said the reason for-eign money was pulling out was be-cause it was moving to Japan and China. Well, if that is the case, then expect the good times to roll soon on the PSE, as China is crashing and in total free fall. But compar-ing buying at the PSE and buying in China is like comparing mangoes and chickens.

Foreign money has left in part be-cause of complete uncertainty about the Philippine government’s role in the economy.

Conventional wisdom says that if there is buying, stock prices go higher, and that is why we get head-lines like “Bears continue to domi-nate market” when prices go down. It is not that simple any more than saying “clouds cause rain.” Yes, you need clouds for rain, but not white fluffy clouds. Even mean dark clouds will not necessarily cause rain if they blow through too fast.

the problem with share prices is not that there are too many “bears” selling, it is that the buying “bulls” are in hibernation. there is always going to be selling for reasons unre-lated to the market. Sellers liquidate to raise cash for a thousand reasons. But if buyers are thin, then prices go lower. Average daily volume on the exchange is down significantly in the last month.

the stock market is like a sailing ship. no matter how good the ship is,

the only two things that matter are the rudder that determines direction and the wind that gives propulsion. the “rudder” is like the dominance of buyers versus sellers. Exchange volume is the “wind” for the market. And the PSE sails are empty. Just like a sailing ship, if there is no wind the market drifts on to the rocky reef of lower prices.

now comes the thorny question of why buyers are on the sidelines. Greece? China? Fear for the future?

While we did have a price rally from about 7,300 to 7,700 three weeks ago, here it was an absence of sellers rather than overwhelming buying that pushed prices higher. At 7,700, strong selling did not push prices down; a lack of buying did.

I believe that this is all part of the “third-quarter trauma” that I keep talking about. Here in the Phil-ippines, no one is really sure about the direction we are moving to, so we drift lower. the up-then-down with a negative bias style move-ment in June may continue. Even-tually, a longer-term trend will be resolved. When we reach a bottom where buyers come in, it will have nothing to do with the headlines and you will know it.

E-mail me at [email protected]. Visit my web site at www.mangunon-markets.com. Follow me on Twitter @mangunonmarkets. PSE stock-mar-ket information and technical analysis tools provided by the COL Financial Group Inc.

OUTSIDE THE BOXJohn Mangun

BLOOMBERG VIEWWilliam Pesek

In the early 1990s, stock traders started getting spooked by bad debts from Japan’s 1980s bubble years. In response, tokyo marshaled one of history’s big-gest government-buying sprees to hold the nikkei stock market above 17,000. Untold billions of yen from national pen-sion funds and postal savings accounts were channeled through the Ministry of Finance into shares, and authorities also clamped down on short selling.

China, confronted today with plung-ing shares on the Beijing and Shanghai stock markets, has now organized an intervention that makes tokyo’s look downright lame. And that strategy will almost certainly come back to haunt Xi Jinping’s Communist Party, just as it did the Liberal Democratic Party (LDP) of Japan’s then-Prime Minister Kiichi Miyazawa.

So many of the forces behind Japan’s

last several lost decades of economic stagnation and deflation can be traced back to the moment Miyazawa’s govern-ment decided to treat only the symptoms of the country’s economic frailty, rather than its underlying causes. More than a decade would pass before the LDP admit-ted Japan’s economy was suffering from the many bad loans the government had encouraged and the bailouts of zombie companies it had organized.

But in many ways, tokyo never stopped confining its reform efforts to the symptoms of the country’s malaise. the country’s 15 prime ministers over the past two decades have avoided ad-dressing the country’s excess of regu-lation, rigid labor laws and high trade tariffs. And for all his talk of sweeping change, current Prime Minister Shinzo Abe has been no different. His revival plans, like those of his predecessors,

center on boosting asset prices. Abe’s nudging of the $1.1-trillion Govern-ment Pension Investment Fund to buy domestic stocks is a reprisal of the price-keeping operations of years past. And the yen’s 34-percent plunge since late 2012, encouraged by Abe’s government, has pumped up corporate profits and, in turn, the nikkei stock exchange.

Xi has followed Japan’s general plan, aiming to boost economic growth (and buy the support of his 1.3 billion people) via surging shares and a $20-trillion-plus credit explosion emanating from the shadow banking industry. In do-ing so, Xi has created an excess of too-big-to-fail enterprises—the category includes politically connected compa-nies, property, local government debt and now stocks.

At the same time, Xi has done little to recalibrate the economy. Exports and industrial production still dominate the Chinese economy, while the growth of small to medium-size enterprises has been underwhelming. And there’s little evidence that Beijing really intends on letting markets play a “decisive” role in the national economy: Since Mon-day, almost 750 listed companies have abruptly suspended trading to avoid further losses. “Official operations to support share prices run counter to the idea that Beijing needs a robust and deep stock market to help resolve

existing market distortions and to fa-cilitate its broader policy of economic liberalization,” says analyst Joyce Poon of GaveKal Dragonomics.

In some ways, Japan’s experience should allay global concerns about swooning Shanghai shares. Japan’s stock crash and slowdown “didn’t crush world growth,” Oxford economist Adam Slater says. Around 1990, Slater says, Japan was contributing about 1 percentage point to world trade growth, broadly similar to China’s recent annual contributions. the real fallout from China’s troubles would be regional. In 2014 exports to China generated more growth in Asia’s 10 most important economies than Ja-pan did in 1990—in aggregate about 9 percent of gross domestic product versus 4 percent. So a China slowdown would hurt, but it won’t necessarily be a Lehman Brothers moment.

Still, Xi must strengthen the funda-mentals of China’s national economy. the longer he delays weaning the econ-omy off excessive investment, the more Lehman-like the fallout will be. And even if a full-blown crisis isn’t in Beijing’s im-mediate future, a long, slow Japan-like decline might be. It’s one thing when that fate befalls a wealthy, developed nation with democratic institutions. It’s quite another when it happens to a giant emerging one minting more day traders than jobs.

HOM

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Continuing His power and poverty

The Lord himself will proclaim peace with justice, truth with kindness, his glory dwelling in our land (Psalm 85:9-10, 11-12, 13-14). Jesus sent out his disciples to participate in

his ministry with authority over unclean spirits and the power to heal the sick, expecting no benefit to themselves (Mark 6:7-13).

The Lord will give His benefitsThe verses of the psalm selected for the liturgy stress the confidence that as in the past God will again pour out his favor upon his people. They are not in despair even if in distress, be-cause they are confident and waiting for what God will be proclaiming, and that will be nothing less than peace that comes from the covenant with God. They are convinced that God will respond to their pleas since they are God’s covenant people who trust in him. Salvation is at hand for the faithful and loyal ones, those who treasure him and fear him; that is, God’s help is near to the righteous who keep to the covenant with God. And they believe that salvation is accompanied by prosperity, which manifests that God’s glory dwells in their land.

This salvation from God is char-acterized by his loving kindness (hesed) to his people and his faith-fulness to his promises. And to this pair of virtues corresponds the pair directly experienced by the people:

justice and peace embracing in their midst, that is, righteousness and wholeness or harmony resulting from the covenant with God. With justice coming down from heaven and truth springing from the earth, the entire creation experiences the saving embrace of God. For with salvation is a hoped for prosperity, life flourishing and the land yielding bounteous harvests. As in a trium-phal procession of divine glory in the land, justice leads and good fortune brings up the rear. This is what the people wait for in confidence.

He sent them outThe first missionary venture of the Twelve Apostles narrated by Mark contains explicit directives. They were given authority over the unclean spirits. Representing Jesus himself, they were to extend his mission of establishing the reign of God, and so expelling demons enslaving people and curing sicknesses tormenting them, as part of proclaiming his good news of salvation. They were

commissioned to share in Jesus’ min-istry with his own power; ultimately through them it was Jesus traveling from village to village. They must go out two by two, complementing each other as witnesses themselves to the teaching and the new way of life Jesus has inaugurated.

They preached repentance, as Je-sus did. There must be change from the old way to the new way of Jesus, from the former legalistic manner of relating with God to Jesus’ intimate fidelity to the Father’s will. The peo-ple must be led to believe in Jesus, entrusting themselves to his gospel and following him as the truth and the life they have been waiting for. The apostles’ proclamation must be the same as Jesus’ own: “The king-dom of God is at hand. Repent and believe in the gospel” (Mark 1:15). Their miraculous authority over de-mons and sicknesses were but mani-festations of God’s victorious power breaking the bonds of evil. Jesus had brought his Twelve Apostles into God’s saving work.

Take nothingBuT their ministry in the name of Jesus was not only a combination of words and wondrous deeds. They must in person witness to the new life in Jesus. For the apostles to teach others effectively on the new way of thinking and acting, they needed to personify it, literally “walking their talking.” The instructions of Jesus to them were both practical and sym-bolic. Sandals and walking stick would facilitate their task to spread the Good News from place to place, and not to

settle put in any one location. The one tunic they wore stressed the single-mindedness they should maintain to be truly men on a mission.

Anywhere they go, they must take nothing with them: no food, no sack, no money. They must become part of those who have nothing, those in need. Their lack of provisions put them in the same league with their teacher who, unlike birds of the sky with their nests, had nowhere to rest his head (Matthew 8:20). They must learn to rely on, and teach the people to have, the compassion for the poor characteristic of the new community in Jesus. The disciples must not behave like travelers look-ing for the best accommodations. Nor should they expect success ev-erywhere; there would be failure and rejection. They must not quarrel with those who refuse to welcome them and their message. They must learn to move on to the other people and places in need of the Good News.

Alálaong bagá, the followers of

Jesus have been told what to do in order to participate in his mission. They must practice what they preach: they must surrender themselves completely to the Lord and wait in confidence for his saving power. They must witness to “faithfulness springing out of the earth,” even as they become instruments of “justice looking down from heaven.”

Join me in meditating on the Word of God every Sunday, 5 to 6 a.m. on DWIZ 882, or by audio-streaming on www.dwiz882.com.

AlálAong BAgáMsgr. Sabino A. Vengco Jr.

The Saudis are cozying up to PutinBy Leonid Bershidsky

Bloomberg View

The uS narrative about Russia is that it’s a waning power run by an overly ambitious dictator that

is doomed to isolation and diminishing global influence. That’s not how an im-portant uS ally sees it, however, judging from the $10-billion deal a Saudi Arabian state investment fund has signed with the Russian direct investment agency.

The Public Investment Fund, which has big holdings in Saudi Arabia’s biggest nonoil companies (including 47 percent of the chemicals and steel conglomer-ate Saudi Basic Industries), is setting up a partnership with the Russian Direct Investment Fund. The state entity has $10 billion in capital that it can invest

in Russia alongside foreign partners. As part of the deal, the Saudis have agreed to invest $10 billion in Russian agricul-ture, health care, retail, transport and real estate. According to Kirill Dmitriev, the chief executive of the Russian Direct Investment Fund, seven projects have already been approved.

The deal follows a visit to the Saint Petersburg economic Forum by the son of King Salman, Mohammed bin Salman, who is defense minister and deputy crown prince. The prince invited Presi-dent Vladimir Putin to visit Saudi Arabia and conveyed to the king an invitation from Putin to visit Russia.

Russia and Saudi Arabia have rarely seen eye to eye. The Saudis are Rus-sia’s major competitors in the old busi-ness: Russia is now fighting for market

share in China. In the Middle eastern wars, the two countries are aligned with the opposing sides. Saudi Arabia has worked hard to destroy Bashar al-Assad’s regime in Syria, a Putin ally. The Saudis are enemies of Iran, and Russia has just agreed to revive a deal to supply S-300 missiles to the Tehran regime that had been scuppered by in-ternational sanctions. Saudi Arabia is the second-biggest buyer of weapons in the world—largely from the uS—but it has never bought from Russia, the second-biggest seller.

One reason for the warming of ties is that Saudi Arabia wants Russian help in building 16 nuclear power plants, and the prince signed a tentative agreement in Saint Petersburg. The Saudis probably were reluctant to approach the uS, which is trying to prevent a nuclear race in the

Middle east. The Moscow visit was an opportunity for Prince Mohammed to position himself as more flexible and open than other, traditionally pro-uS members of the Saudi royal family, such as Foreign Minister Adel Al-Jubeir and crown prince Mohammed bin Nayef, ac-cording to Bruce Riedel of the Brookings Institution. “The royal family is disil-lusioned with President Obama and his policies in the region,” he wrote. “Becom-ing the advocate of diversifying Saudi interests beyond the uS is a popular move for Prince Mohammed to make.”

A veiled warning to the uS was clearly among the goals of Price Mohammed’s Russian trip. Abdurahman Al-Rashed, general manager of Saudi-owned Al-Ara-biya television station, wrote in Asharq Al-Awsat, a newspaper with close ties to the Saudi establishment:

In my opinion, the most important feature of the Deputy Crown Prince’s visit was that it was not customary; it took place at a time when the uS and its european allies have decided to eco-nomically boycott Russia, sanctioning Moscow over events in ukraine. This time, the Saudi government took an un-usual step and decided to do the oppo-site: rekindle its relations with Moscow, grow business ties, and sign agreements and deals in vital fields such as gas and nuclear and military technologies. This is one of the rare times that Riyadh has taken an opposing line to Washington. But the reason is clear: the Saudis who supported the Western position to boy-cott Iran for 20 years have discovered that Washington betrayed them when it decided to collaborate with Tehran, without coming to an understanding

with its partners who had joined the initial boycott.

This feeling of betrayal apparently has led the Saudis to seek some balance, a second partner with an interest in containing Iran, and perhaps prevent a Russia-Iran alliance. Iran’s defense min-ister, hossein Dehghan, visited Moscow in April, and his discussions with his counterpart Sergei Shoigu apparently touched on broader military cooperation than just the S-300 missiles.

Putin probably is flattered by the attention he’s getting from the major Middle eastern players. Russia hasn’t been in such high demand in the region since the era of proxy wars between the uS and the Soviet union. Now, both Iran and Saudi Arabia are looking for a second center of gravity to counterbal-ance the uS.

Bucket list for the next president

IN order for the country to move forward and build from the concrete achievements that were accomplished by the current Aquino administration, the next leader of

our country must adopt specific programs that will solve our perennial problems. Such programs must be officially pronounced as solid commitments and bind the next president to a social contract that must be fully honored.

ThIS article is meant to supplement my previous article entitled “Certiorari Jurisdiction of the Court of Tax Appeals.” In the said article, I discussed the recent Supreme Court (SC)

decisions recognizing the jurisdiction of the Court of Tax Appeals (CTA), through its power of certiorari, to rule on the validity of a particular administrative rule or regulation. In this article, I will discuss in greater detail whether it is now the CTA, not the regular courts, which has jurisdiction over the validity of the issuances of the Bureau of Internal Revenue (BIR).

In a political system where rhe-torical propaganda and popular-ity virtually dictate the outcome of elections, the electorate must demand for specific development programs in lieu of the distinct party platforms that political par-ties in other democracies of the world adhere to and pursue. Let’s realistically accept that in the short term, our political parties have no clear fundamental differ-ences in terms of philosophies and framework of governance. Thus, we must instead just have a list of concerns and possible solutions that the next administration will hopefully address.

Constitutional changesThe economic provisions of our Constitution, at least, must be reviewed immediately when the next administration takes over the government. And when necessary, we must amend some of those pro-visions that influence and deter-mine the level of progress of our economy. Shall we now adjust the percentage of corporate ownership of foreign capital? Can land own-ership be opened to foreigners?

Flood controlALMOST all our cities and prov-inces have experienced the havoc caused by typhoons and relentless monsoon rains. Billions of pesos worth of properties were ruined and thousands of lives were lost due to the onslaught of nature. The trauma caused by natural di-sasters linger in the minds of our helpless citizens.

For example, what will the next leader do to manage the an-nual flooding of Marikina River? There must be a comprehensive plan to finally mitigate the effects of the regular inundation of this river, which affects many parts of Metro Manila.

Can we expect that laws will be passed to safeguard urban planning programs that will pro-hibit our people from residing in the so-called permanent danger zones? Will local governments be restricted from adjusting zonal plans without any sound basis? We have been notorious in forgetting the cruel lessons learned from ev-ery aftermath of natural disasters.

Maritime disastersThe next administration must commit to the policy of consistent and strict enforcement of the rules that intend to protect the public

riding sea vessels. We have al-ready seen enough senseless loss of life, when people drown in sea tragedies that could have been prevented had our law enforc-ers ensured strict compliance to safety regulations. Most recent of which is the MB Nirvana tragedy where the boat that capsized had a second deck, which should not have been allowed. Passenger overloading has been the norm for public maritime vessels servicing our archipelago.

Bangsamoro basic lawThe chance of the Bangsamoro basic law (BBL) being passed by Congress is reasonably high. I be-lieve that this will be done, but the said law will be revised in a more acceptable version. An imperfect BBL being signed into law is the better move, which can serve as the necessary first step to help end the long history of internal war in Mindanao. No winner will emerge in a war where Filipinos slaughter each other in an endless conflict or struggle. Truly, there are no real victors in any armed conflict.

however, our national candi-dates must openly reveal their plans to improve whatever BBL version will be approved by the present Congress.

West Philippine Sea disputeWe must fight for the sovereign-ty of our country, including the disputed islands within our ter-ritory in the West Philippine Sea. But what will the strategy be in protecting our territorial claims? Shall we just fully rely on the uS to defend us? Or shall we have a clear blueprint to build our mili-tary capabilities? how do we strengthen our rights and secure the rich natural resources believed to be abundant in these disputed areas.

The tasks for our next presi-dent are endless. The next leader’s prime responsibility to improve the lives of our people comes with the coveted mandate. People give their vote to the next president with the trust and confidence that their future will be in good hands. Thus, specific programs must be thoroughly discussed during the campaign period, which will serve as the candidate’s covenant with the people. This will help guar-antee that our next leader will deliver what has been promised to the people.

Jurisdiction over the validity of revenue issuances

DECISIon TIMEAriel nepomuceno

TAx lAw for BuSInESSAtty. Pierre Martin D. reyes

In the cases of Rodriguez v. Bla-quera, G.R. L-13941, September 30, 1960; CIR v. Leal, G.R. 113459, Novem-ber 18, 2002; and Asia International Auctioneers v. Parayno, G.R. 163445, December 18, 2007, the SC has consis-tently held that it is the CTA that has jurisdiction to review the rulings of the BIR. In these cases, the SC has said that the revenue issuances in question were actually rulings or opinions of the BIR implementing the Tax Code and such are appealable to the CTA, and not the regular courts. And then came British American To-bacco v. Camacho, G.R. 163583, August 20, 2008. In the said case, a petition for injunction was filed before the Regional Trial Court (RTC) directly attacking the constitutionality of a Tax Code provision and the validity of its implementing rules and regu-lations. It was argued that the same

should have been brought before the CTA. In resolving this issue, the SC ruled that the jurisdiction of the CTA does not include cases where the constitutionality of a law or rule is challenged. The determination of the constitutionality of a law or a rule or regulation issued by an administra-tive agency is within the jurisdiction of the regular courts, and not the CTA. Following this case, it has then been consistently argued that if the constitutionality or validity of a rule or regulation is interposed as an issue in questioning a revenue issuance, it is the regular courts that have juris-diction, and not the CTA. however, winds of change are forming in the recent decisions of the SC. In the case of City of Manila v. Hon. Grecia-Cuerdo, G.R. 175723, February 4, 2014, the SC has finally recognized the power of the CTA to

issue writs of certiorari to effectively exercise its appellate jurisdiction. And in the later case of Philippine American Life and General Insurance Company (Philamlife) v. The Secretary of Finance and BIR, G.R. 210987, No-vember 24, 2014, the SC ruled that the review of the rulings of the BIR is appealable to the CTA, and more important, the SC has unequivocally said that it is now within the power of the CTA, through its power of certiorari, to rule on the validity of a particular administrative rule or regulation so long as it is within its appellate jurisdiction. And in Banco de Oro et al. v. Republic, G.R. 198756, January 13, 2015 (the PeACe Bond case), the most recent in this line of cases, the SC has again explicitly said that the jurisdiction to review the rulings of the BIR pertains to the CTA, not the regular courts. With these recent decisions of the SC, clearly, jurisdiction over the va-lidity of revenue issuances now rests with the CTA. As the ponencia in Philamlife stresses, exercise by two judicial bodies, the Court of Appeals and the CTA, of jurisdiction over basically the same subject matter is precisely the split-jurisdiction situa-tion which is anathema to the orderly administration of justice. As the juris-prudence stands, the CTA, through its power of certiorari, may now rule on the validity of a rule or regulation so long as it is within its appellate juris-diction. And as affirmed by the SC in the recent PeACe Bond case, revenue issuances are decisions of the BIR in matters arising under the Tax Code and other laws administered by the

BIR and, as such, are within the ap-pellate jurisdiction of the CTA pursu-ant to Section 7(a)(1) of Republic Act (RA) 1125 (An Act creating the CTA), as amended by RA 9282. All told, it now appears that adverse revenue is-suances should be brought before the CTA and the CTA is not bereft of juris-diction even if the constitutionality or validity of the rule or regulation is at issue. These pronouncements of the SC, would inevitably lead to many big and looming questions. The biggest question is: what happens to those cases currently pending before the regular courts which were filed be-fore the change in paradigm? how about temporary restraining orders issued by the regular courts restraining the BIR to enforce rev-enue issuances? After all, it is a fun-damental aphorism in remedial law that a court’s jurisdiction over the subject matter can always be raised at any time.

The author is a junior associate of Du-Baladad and Associates Law Offices, a member-firm of World Tax Services Alliance. The article is for general information only and is not intended, nor should be construed, as a substitute for tax, legal or financial advice on any specific mat-ter. Applicability of this article to any actual or particular tax or legal issue should be supported, therefore, by a professional study or advice. If you have any comments or questions concerning the article, you may e-mail the author at [email protected] or call 403-2001 local 311.

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however, is due, in part, to external events beyond the control of policy-makers. The trend may be reversed in the near future,” the chief economist of the Department of Finance (DOF) said. “As such, the government should take advantage of the currently lower energy prices and adjust gasoline taxes before in-ternational oil prices resume their upward

trend,” he added. An upward increase in the excise taxes on gasoline is seen by the Bureau of Customs as a possible measure to increase revenue collection that has gone down due to lower prices of oil in the world market. The increase in excise taxes could be implemented through legislation by Congress. The faster route, however, is

through the issuance of an EO by the Of-fice of the President. The DOF official was particular on raising gasoline excise-tax rates only, ap-parently due to the sensitive nature of other petroleum products, such as diesel and kero-sene, which are used mainly by the masses. Aside from adjusting taxes to make sure gasoline prices are stable, Beltran also rec-

ommended that the government continue efforts to tame food prices, especially as the effects of the El Niño are being felt in many provinces. The previous two months saw inflation plummeting further, falling to 1.6 percent in May and 1.2 percent in June. As a result, the inflation rate during the second quarter slowed to 1.7 percent, much lower than the first quarter’s 2.4 percent and

the average increase in prices in the same quarter in 2014, at 4.4 percent. Beltran said there was a notable decelera-tion of price increases in the area of educa-tion, but he noted than an upward adjustment could be felt later in August, when many schools would have already implemented the hikes in tuition and other fees at the start of their academic years.

DOF: Hike gasoline excise tax now. . . Continued from A1

BusinessMirror Thursday, July 9, 2015 A7

News

“Rather, some are ‘rocks‘ within the mean-ing of Article 121, Paragraph 3; others are low-tide elevations; and still others are per-manently submerged.” Fourth, that China has breached the Conven-tion by interfering with the Philippines’s exercise of its sovereign rights and jurisdiction; and Fifth, that China has irreversibly damaged the regional marine environment, in breach of the Unclos, by its destruction of coral reefs in the South China Sea, including areas within the Philippines’s EEZ, by its destructive and hazard-ous fishing practices, and by its harvesting of endangered species. “The Philippines has long placed its faith in the rules and institutions that the inter-national community has created to regulate relations among states. We are proud to have been a founding member of the United Na-tions, and an active participant in that indis-pensable institution.” Del Rosario added that the UN’s “organs, coupled with the power of international law, serve as the great equalizer among states, al-lowing countries, such as my own, to stand on an equal footing with wealthier, more powerful states.” “It is these dispute-resolution provisions that allow the weak to challenge the power-

ful on an equal footing, confident in the con-viction that principles trump power; that law triumphs over force; and that right prevails over might.” The country’s foremost diplomat said the Unclos has rightly been called the “Constitution for the Oceans,” which counts among its most important achievements the establishment of clear rules regarding the peaceful use of the seas, freedom of navigation, protection of the maritime en-vironment “and, perhaps, most important, clearly defined limits on the maritime ar-eas in which states are entitled to exercise sovereign rights and jurisdiction.” “The Philippines has respected and imple-mented its rights and obligations under the convention in good faith,” del Rosario said. “This can be seen in the amendment of our national legislation to bring the Philippines’s maritime claims into compliance with the Convention, by converting our prior straight baselines into archipelagic baselines.” He said the Philippines took these important steps to seeking the Tribunal’s intervention, “be-cause we understand, and accept, that compli-ance with the rules of the convention is required of all states parties.” China is a signatory to the Unclos.

Del Rosario said that, for the Philippines, the maritime entitlements of coastal states—to a territorial sea, EEZ and continental shelf, and the rights and obligations of the states parties within these respective zones—are es-tablished, defined and limited by the express terms of the convention. China claims 80 percent of the entire South China Sea based on historic rights, defined by its nine-dash line. The Philippines wanted the Unclos to limit China’s claims, saying that they are excessive and unlawful. “Sadly, China disputes this, Mr. President, in both word and deed. It claims that it is entitled to exercise sovereign rights and jurisdiction, in-cluding the exclusive right to the resources of the sea and seabed, far beyond the limits established by the convention, based on so-called historic rights to these areas.” Del Rosario said the central element of the legal dispute between the parties is that China has asserted a claim of historic rights to vast areas of the sea and seabed that lie far beyond the limits of its EEZ and continental shelf. “In fact, China has done much more, Mr. Presi-dent, than to simply claim these alleged historic rights. It has acted forcefully to assert them, by

exploiting the living and nonliving resources in the areas beyond the Unclos limits, while forc-ibly preventing other coastal states, including the Philippines, from exploiting the resources in the same areas—even though the areas lie well within 200 miles of the Philippines’s coast and, in many cases, hundreds of miles beyond any EEZ or continental shelf that China could plausibly claim under the convention.” Del Rosario then made the appeal to show that the Unclos has jurisdiction over the issue. For the second day of the oral arguments, Phil-ippine lawyers explained how the country’s case did not fall under the specific Unclos exemptions, which would preclude the Tribunal from hearing the case. The Philippine legal team is expected to summarize the country’s case and reply to ques-tions to be raised by the Tribunal before the oral arguments conclude on July 13. The high-powered Philippine team for the Unclos arbitration case is currently being heard by an arbitral tribunal in The Hague after it has begun presenting the arguments for the Philippine position, with emphasis on the Tribunal’s proper jurisdiction to hear and decide the case. The first to speak for the Philippines on the first day of the oral arguments was Solicitor General

Florin Hilbay, who introduced the case and pre-sented the order of speakers for the Philippines. Following del Rosario was the chief counsel for the Philippines, Paul Reichler of the US-based Foley Hoag law firm, who presented the justifica-tion for the Tribunal’s jurisdiction over the Philip-pine claims under the Unclos. He was followed by other foreign legal experts, who explained how the Philippine claims did not raise questions of sovereignty over land or raise questions of mari-time delimitation. Issues of sovereignty and maritime delimi-tation are beyond the scope of the Tribunal’s jurisdiction to hear the current case, but do not form part of the Philippine claims. China refused to take part in the proceedings. Last Monday Ambassador Zhao Jianhua in-vited the Philippines to return to bilateral talks “without precondition.” “I think the best is to sit down bilaterally to talk. Our door for bilateral consultation and ne-gotiation is still open and will be open forever,” he said. However, DFA Spokesman Charles Jose said the country had tried several times before to sit down with China. But the talks failed to proceed because right at the start of every talks, China would say that it has “indisputable sovereignty over the contested area.”

PHL hoping UN body to serve as ‘great equalizer’ in sea row. . . Continued from A1

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2ndFront PageBusinessMirror

www.businessmirror.com.phThursday, July 9, 2015

PHL banks to meetnew capital hurdle

APEC URGED TO PROPSOCIAL ENTERPRISES

Executive ready to face probeon spending

By Butch Fernandez

The executive branch is ready to appear before the Senate Finance Committee and explain the un-

derspending that has been blamed for the lower-than-projected growth in gross domestic product (GDP). Secretary edwin Lacierda assured that Cabinet officials sitting in the Development Budget Coordination Committee (DBCC) are willing to face lawmakers to allay concerns aired ear-lier over government underspend-ing when Congress convenes public hearings on the proposed P3-trillion national budget that President Aquino is set to submit for legislative approval after he delivers his State of the Nation Address (Sona) next month. Finance panel chief Sen. Francis escu-dero had aired a plan to seek an explana-tion from Palace officials on the reported underspending before it endorses the P3-trillion budget bill they expect on Mr. Aquino to submit to Congress soon after his Sona on July 27. “The DBCC members will appear before the Senate Finance Committee and, when asked, will explain,” Lacierda told the BusinessMirror. According to escudero, senators are interested to hear an explanation from the executive on why it underspent Congress-approved appropriations that resulted in the government missing its growth targets. he lamented that while lawmakers worked to fast-track approval of the annual budget to enable the govern-ment to implement various projects and programs, executive officials were not quick enough to implement them.

By Bianca Cuaresma

LocaL lenders considered “too big to fail” in the eyes of regulators should have no trouble meeting the more stringent capital requirements of so-

called domestic systemically important banks (D-SIB), the global credit watcher Fitch Ratings said.

On Wednesday the London-headquartered watchdog said most large and midsized banks in the Philippines have core equity Tier 1 (CET1) ratios “comfortably above Basel 3 minimums, with the largest banks’ CET1 ratios falling be-tween 12 percent and 14 percent as of end-2014. CET1-rated lenders own the highest quality capital recognized by regulators. This developed in the wake of a Bangko Sen-tral ng Pilipinas (BSP) announcement on July 6 requiring particular D-SIBs to hold additional capacity to absorb potential losses of 1.5 per-cent or 2.5 percent of risk-weighted assets de-pending on such factors as size, market reliance and complexity. The higher capital requirements will be phased in over two years beginning in Janu-ary 2017, to be fully in place by January 2019, with minimum CET1 ratios of 10 percent to 11 percent for D-SIBs. The additional capital buffer is in line with other Asian jurisdictions, such as Hong Kong and Singapore. But unlike its next-door regu-lators, the BSP will neither publicly disclose their identities as D-SIBs nor the additional loss-absorption buckets each will be required to observe. As part of its framework, the BSP will

update the list of D-SIBs annually and notify the relevant banks separately. “Fitch believes that a handful of the larg-est banks [including BDO Unibank, Bank of the Philippine Islands and Metropolitan Bank and Trust Co.] are likely to incur a 2.5-percent additional loss-absorption requirement, while other large lenders should fall into the 1.5-per-cent bucket,” the credit watcher said. Fitch also said they expect banks with a capital shortfall to take action and com-ply with the requirements under a given phase-in period. “The BSP has also established a higher 3.5- percent capital-charge bucket—no banks fall into this category at present—to disincentivize banks from becoming even more systemically impor-tant. Fitch believes that banks will control asset growth so as to avoid falling into the 3.5-percent bucket, Fitch said. Overall, Fitch said the banking system has capital that is “relatively robust.” “Fitch expects profitability to come under pressure as core capital increases. This will add to profitability pressures caused by intensified competition from new foreign entrants,” the credit watcher said.

By Cai U. Ordinario

The Asia-Pacific economic Cooperation (Apec) must support social enterprises (Ses) to boost the growth of small and

medium enterprises (SMe) and job generation in the region, according to the Philippine Institute of Development Studies (PIDS). In a policy note, titled “Social enterprises and employment: Mainstreaming SMes and employment Creation” authored by PIDS con-sultant and Ateneo Center for economic Re-search and Development Director Leonardo A. Lanzona Jr., the PIDS said Ses are small- and medium-sized commercial businesses that pro-vide valuable social service to customers and sustainable jobs and training for up to about 200 people. “The Apec can then help support Ses by link-ing them to GVCs [global value chains]. To do this, Apec countries can work together in providing the necessary global public goods that can help address poverty directly,” Lanzona said. Lanzona said one of the reasons Ses cannot take advantage of GVCs is poverty. Small busi-nesses, he said, are vulnerable to disasters and the lack of funds to finance innovations that can affect their growth and development. Lanzona said the Apec can help address this by providing technical know-how and infrastruc-ture, including disaster-relief and mitigation measures that can move them out of poverty and eventually increase the incomes and pro-ductivity of Ses and boost the SMe sector. The study added that by helping Ses, the Apec can help increase employment of business enter-prises, including those in the Philippines where the majority of businesses are SMes. By strengthening Ses, Lanzona said, the Apec

can make them a valuable part of the global value chain. he said a GVC is only as strong as its weakest link, so if all of its parts are equally strong, the potential for growth and job gen-eration will be great. “While Ses can be developed as a valuable part of this value chain, they can also be a weak-ness because of the poverty constraints they face. In the weakest-link case, strong incentives exist for parties to cooperate and provide for the common defense, resulting in little incentive,” Lanzona explained. The study stated that as of 2010, SMes ac-counted for 99.6 percent of businesses in the Philippines. There were 774,664 establishments, and only 3,023 were large enterprises. SMes are composed of microenterprises (one to nine employees) and small enterprises (10-99 employees). Microenterprises comprised 91.6 percent (709,899) of the total number of SMes, while SMes accounted for 8 percent (61,979) and 0.4 percent (2,786), respectively. In terms of employment generation, SMes provided a total of 3.53 million jobs in 2010, or 62.3 percent of the total jobs generated by all types of business establishments. Large enterprises generated 2,136,362 jobs. Among SMes, microenterprises created 1,729,100 (30.5 percent) jobs, while SMes gen-erated 1,417,672 (25 percent) and 386,163 (6.8 percent) jobs, respectively. SMe employment by industry generally fol-lowed the same structure as the number of es-tablishments per industry—with SMes engaged in the wholesale and retail trade generating 1,237,917 jobs in 2010, followed by 617,634 jobs in manufacturing, and 479,668 jobs in hotels and restaurants. With Elisse Leonne Perez & Janine Marie D. Soliman

BusinessMirror July 9, 2015

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