Businessmirror september 16, 2015

BusinessMirror

three-time rotary club of manila journalism awardee 2006, 2010, 2012

U.N. Media Award 2008

www.businessmirror.com.ph

A broader look at today’s business

Thursday 18, 2014 Vol. 1016, No.2015 40 Wednesday, September Vol. 10 No. 342

P25.00 nationwide | 7 sections 32 pages | 7 days a week

nn

JFC still not withdrawing proposal to cut tax rates

F

INSIDE

oreign business groups are not withdrawing their petition for tax reforms, particularly the lowering of individual and corporate income-tax (CIT) rates, despite the repeated pronouncements from Malacañang that the administration is against the proposal.

a.l.i. project in cavite BusinessMirror E1 | Wednesday, September 16, 2015 • Editor: Tet Andolong

VERMOSA master plan

VERMOSA Green strip

VERMOSA Retail Center

ALI launches colossal project in Cavite

T

B R R R

OPNOTCH developer Ayala Land Inc.’s (ALI) mammoth projects in the past have proven to be catalysts in development. A prime and classic example is Makati City; a former grazing land during the older times that became one of the premier business districts in the country.

Right now, ALI is ready to replicate its winning formula in Vermosa, a 700-hectare integrated, mixeduse development that is ready to seize the opportunities of growth in the South.

Anna Maria Margarita Dy, vice president and strategic head of landbank management of ALI, said the company is confident that Vermosa will be a success, as the southern

part of the metropolis is poised for growth because of the presence of economic zones in the nearby areas, plus the development of infrastructure projects such as the Cavite-Laguna (Calax) Expressway.

Dy said Vermosa will have 124 hectares for its future central business district. She said Vermosa’s central business district will have various business and commercial

VERMOSA Clubhouse

establishments, hotels, shopping, entertainment, dining, as well as medium-to high-density residential developments. It will also have space for educational institutions.

At full development, Dy said Vermosa will have over 3 million builtup area with 30,000 residents and about half-a-million workers.

Dy said Vermosa is a development project geared for the next generation emphasizing sustainability through a pedestrian-focused environment and allotment of 165 hectares, or 24 percent, of the entire development to parks and gardens.

Featuring a 14-kilometer greenway, Dy said Vermosa will have a landscaped promenade stretching north

to south of the project that would encourage people to walk, run and explore their neighborhood or take a bike to work. To reduce the carbon footprint, the masterplan ensures that neighborhood retail centers are accessible within a 10-minute walk or bike ride from any residential development within the project.

She said Vermosa is going to be highly accessible as it is a major beneficiary of the newly opened Muntinlupa-Cavite Expressway (MCX), the government’s first public-private partnership project bagged by the Ayala conglomerate.

MCX Tollway connects the Daang Hari Road to the South Luzon Expressway and shortens the travel

time to Cavite by 30 percent—making Vermosa 55 minutes from Makati during peak hours. Soon, Manila will also be a few minutes away via the upcoming Calax.

Just like other Ayala Land estates, Dy said Vermosa epitomizes the mark of a true sustainable community just like its predecessors Makati commercial business district, Bonifacio Global City and Nuvali.

Dy added that the P70-billion project is the first mixed-use development that will focus on the Filipinos’ increasing active and healthy lifestyle. Its special feature, the Vermosa Sports and Lifestyle Complex (VSLC), highlights the goal of building a suburban community

that integrates a healthy and active lifestyle with everyday living.

Furthermore, Dy said the first of its kind VSLC sports-science laboratory will primarily cater to the growing triathlon market and related sports, such as marathon, swimming and cycling.

It will have an Olympic-size pool, 400-meter track and field, and the most advanced and complete sportsscience laboratory in the country.

VSLC will also have a motocross track and the first purpose-built mountain-bike skills track in the Philippines.

The sports-science lab, targeted to be opened in the fourth quarter of 2016, will also offer facilities to athletes and fitness enthusiasts to raise the bar of their performance using a scientific and technology-based approach. Completing its health and lifestyle amenities is a 10,000-square-meter sportsthemed retail that will feature various athletic and sport shops, as well as an array of healthy dining options.

This megadevelopment is set for completion in the next 12 to 15 years.

Prices of the properties will range from P3 million to P12 million.

“We have a winner in our hands,” Dy concluded.

ITH the availability of office spaces in Metro Manila nearing a saturation point and with office-space rental continuing its upward trend, research firm CBRE Philippines is touting Clark in Pampanga to be the next emerging business-process outsourcing (BPO) hub in the country.

According to Rick Santos, CBRE Philippines CEO, chairman and founder, “Foreign appetite for investment in the Philippines continues to be vibrant as more foreign firms are eager to have their slice of the cake.”

“We have a lot of momentum in the market now. Not only are we seeing over 6 million square feet a year of takeup, we’re also seeing a lot of opportunities in terms of marketing the Philippines across all sectors in the run-up to the Apec [Asia-Pacific Economic Cooperation] that the country is hosting. Also, we see the devaluation of the Chinese renminbi as a big win for the Philippine BPO sector. Obviously, the

weaker peso definitely helps the growth of call centers, shared services and KPO [knowledge-process outsourcing].”

All these positive developments complement the continued success of the country’s real-estate market that the firm is seeing. And coming on the radar screen is Clark.

“Clark is a gold mine for investors. We see a vote of confidence on Clark as an option out of Manila as it, together with Cebu, comes on the radar screen. And with congestion on Edsa, we see a rise in new central business districts (CBDs). The rapid urbanization, overseas Filipino remittances and the growing BPO sector are the main drivers for the Philippine real-estate sector,” Santos added.

Developer-driven CBDs in Clark, Cebu, Davao and Iloilo are also creating new demand for better location and appropriated zoned office districts as BPO companies, such as Convergys, Accenture and Teletech, continue to reach out to provincial areas.

Morgan McGilvray, director for Corpo-

rate Real Estate at CBRE Philippines, noted that as BPO companies locate in Metro Manila and Cebu—these companies also have multiple offices in both Metro Manila and Cebu, usually in the business park, but we are actually seeing some different locators up in areas like Clark.

“Startek, Tata, Australian companies such as AusPhil Solutions, Clark Digital Valley—these are names that aren’t as familiar in Metro Manila but these guys have been located and doing quite well for years now [in Clark]. That’s why we’re encouraged by Clark and the fact that there is a BPO industry up there,” McGilvray said.

“Historically, if companies were looking to go outside of Metro Manila and to the provinces and to Cebu, they were sometimes limited in terms of the quality of the buildings that they could move into and sometimes they are apprehensive about doing so. We’re now seeing developers, like Megaworld and Ayala, who are putting up new BPO-style buildings of the highest quality to reassure tenants

that they can move out to the provinces and get the kind of building quality that they need to feel confident with starting or start operations there. That’s the new development in the market that we’re encouraged by because it should drive demand out to the provinces, outside of Metro Manila,” he added.

Development pipeline for Cebu and Clark

property

THERE is an expected 1.3 million direct employment by BPOs in 2016, which will lead to about $25 million of revenues from the BPO sector.

According to CBRE, there are about 500,000 full-time employees in the BPO in the National Capital Region. Their study suggests that there is even more absorptive capacity in the provinces.

So as Metro Manila continues to grow, there will also be growth in the provinces and plenty of bandwidth to do so. In fact, full-time employment in—the Central Luzon/Northern Luzon hub—which includes Metro Clark and Metro Subic—is seen

CBRE Philippines Chairman and CEO Rick Santos (from left), CBRE Director for Corporate Real Estate Morgan McGilvray, Head of Global Research and Consultancy Group Jan Custodio, and Manager for the Investment Properties and Capital Markets team Kash Salvador.

at 38,882, with an absorptive capacity of 133,000 and a theoretical capacity of 461,529.

In terms of gross leasable area (in square meters), Metro Manila is still the biggest office market in the Philippines by far with about 3 million sq m of Grade A and prime estate. Cebu is a little shy of a million sq m and Clark is on its way with about half a million sq m.

Clark, because it is a bit smaller, commands about P400 to P500 per sq m, so the bandwidth is not that wide because there

aren’t as many buildings to diversify the rent. But as we look at Cebu, companies are now seeing some cost-efficient buildings that can be at P300 per sq m.

“We’re actually seeing the development of prime-quality buildings in Cebu for the first time and that will actually push rent or companies who want to be in the nicest buildings in Cebu. So we might see rent in the P800 per sq m range,” McGilvray said. The office lease rates in Clark still post a lower rate with P456.74 per sq m.

E1

apple tv steals show D

Please share

EAR Lord, help us understand the true meaning of poverty and its consequences. Poverty is prevalent when there is no sharing of resources.

In our modern world, may the group of “haves” share to the people of the “have nots.” Amen.

GEORGE CHOWRIMOOTOO AND LOUIE M. LACSON Word&Life Publications • teacherlouie1965@yahoo.com

Editor: Gerard S. Ramos • lifestylebusinessmirror@gmail.com

Life BusinessMirror

By Lorenz S. Marasigan

T

D1

New iPhones, iPad unveiled, but Apple TV steals the show APPLE CEO Tim Cook introduces the company’s newest products during a media event at the Bill Graham Civic Auditorium in San Francisco on September 9. TNS

S

B P M San Jose Mercury News

AN FRANCISCO—Apple’s new $99 Pencil will bring out the inner Van Gogh in every iPad user. Its newly empowered Apple Watch can monitor a baby’s heartbeat and send it to the doctor. And Siri is moving into the living room.

In a two-hour extravaganza, Apple last week unveiled a veritable bounty of new and at times mindboggling products, including two new iPhones and a new larger iPad Pro, that should keep every fanboy busy for months.

And grabbing top billing amid a chorus line of shimmering new designs and powerful technologies was the souped-up and Siri-controlled Apple TV, which CEO Tim Cook unveiled with a rousing setup reminiscent of the stagecraft of the guy whose job he took, Apple cofounder Steve Jobs.

C  D

life

close to national elections, especially the value-added tax [VAT], which, at 12 percent, is the highest of the Asean-6,” the JFC pointed out.

But the group opposed the Bureau of Internal Revenue’s (BIR) position that the restructuring of taxes should be a “tit for tat” for the amendments to the bank-secrecy law that Internal Revenue Commissioner Kim JacintoHenares is pushing. Slashing the rates, particularly on CIT, JFC said, is in accordance with what competing Asean neighbors are doing.

Continued on A8

PHL-UAE air agreement to benefit Filipino consumers, but poses threat to local airlines

8 COMMON WORRIES THAT AREN’T WORTH STRESSING ABOUT »D4

Wednesday, September 16, 2015

The Joint Foreign Chambers (JFC), in a position paper, said the country needs to adjust its tax rates to be competitive in an integrated Asean setting. The JFC, however, agrees with policy-makers that any rate cut in individual income tax and CIT should be packaged with compensating revenue measures, like an increase in consumption tax.

“The JFC also advocates raising consumption taxes in parallel with reducing income taxes. However, we recognize that raising taxes can be unpopular and difficult to achieve

special report

CLARK AS THE NEXT EMERGING BPO HUB W B I Q

By Catherine N. Pillas

d1

SUPERMAN! It is difficult to give proper perspective to the achievements of 28-year-old Novak Djokovic. When he took the court, he was not only facing a tennis legend in Roger Federer and his record 17 major titles, but he was taking on one of the most popular players in the history of the game. Story on C1. AP

Conclusion

RUTH be told: Competing with Middle Eastern carriers, ultimately, is a losing battle for local airlines; but no matter how stark the situation might look, there remains a tinge of hope for the underdogs.

But this speck of light will require airlines to double their efforts and expand their tents. This might even require them to fly to so-called uncharted territories.

Since Gulf carriers generally operate under the hub-and-spoke system, the only way Filipino airlines could compete is to use the entitlements given to them by the recently signed air-services agreement with the United Arab Emirates (UAE).

“Aside from requiring UAE carriers operating such additional flights to Manila are bound to also operate separately to Clark or Cebu within one year from signing of the memorandum, we got on a unilateral basis additional fifth freedom traffic rights to the United Continued on A2

PHL PUSHING GENDER GOAL IN NEW ASEAN TOURISM PLAN TOURISM Secretary Ramon R. Jimenez Jr. said the Asean integration by end-2015 would mean a “tightening or streamlining of standards.”

By Ma. Stella F. Arnaldo

Special to the BusinessMirror

T

HE Philippines is spearheading the preparation of a new strategic plan for tourism in the Association of Southeast Asian Nations (Asean), and is bent on including gender parity and inclusive growth as regional objectives.

This developed as the Department of Tourism (DOT) believes the integration of the Asean into one economic community will help boost gender equality across the region by standardizing hiring and promotion guidelines, especially in the tourism sector.

The Philippines is the acknowledged leader in the region in terms of gender equality, with a number of female chief executives and other managerial positions filled up by women. The country ranked ninth among 142 countries in the Gender Gap Index of 2014 by the World Economic Forum.

In an interview with reporters on the sidelines of the recent Asean Gender and Development (GAD) Forum on Tourism at the Diamond Hotel Manila, Tourism Secretary Ramon R. Jimenez Jr. said the Asean integration by end-2015 would mean a “tightening or streamlining of standards. For Filipino women especially, they have played a significant role in upgrading those standards…. Gender equality, when you get to the bottom of it, is just about standards; meaning having precise and nonsubjective reasons to choose one person over the other.

When you standardize, you don’t rely on one’s personal bias.”

See “Gender goal,” A2

PESO exchange rates n US 46.7710

n japan 0.3893 n UK 72.1443 n HK 6.0350 n CHINA 7.3448 n singapore 33.2558 n australia 33.4079 n EU 52.9494 n SAUDI arabia 12.4749 Source: BSP (15 September 2015)

A2 Wednesday, September 16, 2015

BMReports BusinessMirror

PHL-UAE air agreement to benefit Filipino consumers, but poses threat to local airlines Continued from A1

Kingdom, the United States and Saudi Arabia,” Civil Aeronautics Board Executive Director Carmelo L. Arcilla said.

The fifth freedom allows local carriers, like Philippine Airlines (PAL) and Cebu Pacific, to fly from Manila to UAE and onward to any country, including the UK, the US and Saudia Arabia. This will improve Philippine connectivity and also the commercial viability of routes to the UAE. But these so-called consolations are mere consolations, if local carriers are not able to effectively use them.

“There is the consolation of allowing the Philippine carriers fifth freedom traffic rights beyond Dubai and Abu Dhabi, but the meager resources of the local airlines will prevent them from operating to so many more points beyond Dubai and Abu Dhabi,” said Avelino L. Zapanta, an aviation expert.

Zapanta explained this will prove to be another challenge in the histories of the two carriers, as they will have to shell out large sums of money to expand their operations through larger planes and extended routes.

“They must be willing to face the challenge of using the fifth freedom traffic rights afforded them in the new air-services agreement. That will take much resources and guts to do. If they would not be willing to compete, then they just have to content themselves with their share of overseas Filipino workers [OFWs] destined to the UAE and none of those going beyond,” he said.

Cebu Pacific Long Haul Division General Manager Alex B. Reyes said his camp is mulling over the prospect but

noted that its main market remains the 800,000-strong OFWs in the Middle East.

“The effect of the recent UAE air talks is that the new agreement now allows Cebu Pacific to fly from the UAE to any point in the Middle East or Europe. This effectively means we can provide the same valuefor-money services for passengers who are originating from the UAE and flying onward to Europe,” he said.

“Should we deem it commercially viable, we could stop over in Dubai, and then fly onward to London. The previous agreement had blocked us from doing so,” Reyes added.

Flawed agreement The flag carrier, which has been operating direct flights to the US and London, stood its ground, with its president criticizing the compromise agreement the local air panel entered into.

“Economically, the excess capacity will hurt Philippine tourism. If a year from now we and other airlines are forced to slow down our route expansion or curtail some of the direct flights linking the nation to Europe, North America or the Middle East, that will dampen tourist flows to the Philippines,” PAL President and COO Jaime J. Bautista said.

The agreement, he added, somehow betrayed the local carriers’ position in maintaining good business environment in the long run.

“The UAE agreement is flawed, because it sacrifices long-term strategic growth for short-term political gains.

It’s now up to us, the Philippine carriers, to make up by summoning the best of the Filipino fighting spirit to

the competitive battle ahead,” he said.

Moved away from protectionism The problem now here is that the government has moved away from a policy of protectionism and embraced the pocket open-skies strategy. It has also subscribed to the single-aviation market in the Association of Southeast Asian Nations (Asean).

“Government has moved away from protectionism, thus, its promulgation of pocket open-skies policy and subscribing to the Asean single-aviation market. It is against the law to provide the airlines subsidies and guarantees for which the US and its airlines have been assailing the UAE and its airlines of doing. The public would be critical of protectionism. They want more capacity, even if it’s the foreign airlines offering these,” Zapanta said.

Arcilla noted that the government is more keen on developing a more liberal policy on air services to keep pace with demands of globalization.

“The policy pronouncement of President Aquino is to develop an adequate aviation network that has sufficient connectivity necessary for economic development anchored by foreign and local airlines,” he said.

Arcilla added that the government is trying to balance the scales among many parties involved—local and foreign carriers, and the consumers.

“The goal is to develop a vibrant aviation network. We need to balance the interests, and I think we struck a balance between the two forces because we got minimal increase, and more compromises,”

Arcilla said, referring to the promotion of developmental routes—such as Cebu and Davao—in the agreement with the UAE.

Passengers are the big winners Despite putting local airlines in financial peril, the government was successful in stirring up the competition in the Middle Eastern market. This means that passengers will get more choices when it comes to air travel, lowering airfare prices in the process.

“This battle all works out well for the consumer, because the increased capacity for the UAE airlines is good for them; not to mention the ability to book to any of the airlines’ 150 or so destinations beyond their UAE home bases,” Zapanta said.

Arcilla agreed, saying that this will stimulate air travel from outside the Philippines. Hence, tourism revenues may increase, especially since the Middle Eastern market is a high-yield sector that the government has been keeping an eye on for a long time.

“The new services mean new destinations. For example, Cebu can be connected to Europe via Dubai. This will help us achieve our targets,” he said.

“Competition will bring down airlineticket prices, and the consumers stand to benefit from it.”

So, for Rolando R. Zamora, an engineer who is based in Dubai, going home to the Philippines will now be easier than ever. He plans to come home in March next year in time for his daughter’s wedding.

“I’m excited to see my daughter walk down the isle,” he said. “I can now give her a better gift, now that I get to save more from airline-ticket prices.”

Gender goal. . .

news@businessmirror.com.ph

Continued from A1

He noted that the “biggest hurdle” in achieving gender equality “lies in the people’s attitudes, outmoded notions of who is more appropriate and not, i.e., ‘women are weaker than men….’ The continuing hurdles continue to be on the cultural and emotional habits of people, and that changes from society to society.”

Jimenez said the Asean region, as a whole, still has a long way to go in achieving gender equality, but for the Philippines,“we are in a very good place.”

The GAD forum was participated in by representatives from Asean membernations who talked about the best practices in improving women’s leadership in their respective countries, as well as tools and strategies to achieve a more gender-responsive tourism industry.

The integration of the Asean into one economic community will allow workers and executives in tourism industry of the Philippines to be hired by neighboring countries based on a set of standardized criteria acceptable to all member-nations. Similarly, it will also be easy for tourism and travel firms in the Philippines to hire staff from other Asean nations, based on the same standards.

For his part, Tourism Assistant Secretary Rolando Canizal said the Philippines is leading the way in preparing the Asean tourism plan. “One of the projects in terms of addressing directions toward inclusive growth and competitiveness is making sure that gender [equality] becomes an important [goal] of the Asean.”

He said this would cover the basics, like “understanding more where women are situated in Asean tourism and, second, how women are being more empowered and given opportunities in job creation, assuming greater responsibilities, and becoming more involved in the decision-making process.”

The new Asean tourism plan for 2016 to 2025 is scheduled to be completed and presented by January 2016, “in time for the

Philippines’s hosting of the Asean tourism forum. The new strategic plan for Asean will be launched next year during the ministerial meeting,” Canizal added.

During the forum, Aileen Clemente, president of Rajah Travel Corp., offered a few strategies to achieve a more gender-responsive tourism industry.

To address gender-based occupational segregation, she said, the education and training of women in nontraditional areas should be increased, and codes of practice that include guidelines on equal opportunity programs can be formulated by the organization.

She also suggests the promotion of “community-based tourism initiatives to empower the vulnerable sectors.”

To overcome disadvantages of gaining entry into the work force because of low levels of education, she advised “lowering standards for entry and then provide on-thejob training to compensate.” Clemente also advocated reviewing advertising and marketing campaigns and tools “regarding the use of stereotypical images and aim at portraying the diversity of workers in a realistic manner.”

Clemente noted that in her own company, 75 percent of employees are female, 22 percent are male and 3 percent are LGBT (lesbians, gays, bisexuals, transgenders).

She stressed that there was“no difference in pay” among her male, female, LGBT employees for the particular positions they occupy, i.e., a male travel agent will receive the same salary as a female or LGBT travel agent.

Jimenez said gender equality “has been worked on for a long time socially and culturally in the Philippines and, therefore, the way toward equality has been easier for [our country]. It will have its challenges in different countries. I don’t pretend to know what all those challenges are. [But] in some societies, they have a much longer way to go in seeing women as equals. Therefore, they will have to go through a different pathway as we have gone through.”

news@businessmirror.com.ph

The Nation BusinessMirror

Editor: Dionisio L. Pelayo • Wednesday, September 16, 2015 A3

Church-based groups seek to educate voters

C

By Rene Acosta

HURCH-BASED groups are asking voters this early to be discerning in choosing the country’s next crop of leaders in next year’s elections, saying that they would come out with a “guide” that would enlighten and educate the voters on the qualities of the country’s next leaders.

The call was issued on Monday during the launching of the nonpartisan and apolitical Pilipino Movement for Transformational Leadership (PMTL), a Roman Catholic and evangelical faith-based group that claims membership of more than 20 million.

The group refused to endorse any candidate although lawyer Alex Lacson, who was among those who attended the group’s launching in San Juan, said they would come up with “list of qualities” that the Filipino voters should look for in any candidate in next year’s elections. puno “They should vote wisely,” Lacson said of the Filipinos, who would be choosing President Aquino’s successor, 12 senators, members of the House of Representatives and even local officials eight months from now.

The PMTL said that among the qualities that Filipinos should be looking for in aspiring national leaders are honesty, competence and humility.

Also present during the event was retired Chief Justice Rey-

Malacañang tight-lipped on Mamasapano updates

By Butch Fernandez

M

ALACAÑANG remained mum on Tuesday on updates in the January 25 Mamasapano Massacre inquiry while insisting there is no gag order restricting disclosure of further details on recent Palace claims about an “alternative truth” that the police mission’s highvalue terrorist target known as Marwan was shot by his bodyguards and not by the 44 Special Action Force (SAF) commandos who were killed in an ambush by Moro rebels as they leave Marwan’s hideout.

Fielding questions at a Palace briefing on Tuesday, Communications Secretary Herminio B. Coloma Jr. also sidestepped queries on reports that among the corpses retrieved from the massacre site included an unidentified “blue-eyed Caucasian” whose identity has yet to be ascertained and whether he was killed on the side of the SAF commandos or the Moro rebels.

Asked about it, Coloma opted to cite President Aquino’s latest statement on the carnage.

“In his interview yesterday [Monday], the President emphasized that it is important for the truth to be known so that the lessons from what happened in Mamasapano may serve as a guide for future action and decision-making,” Coloma said, adding, “Finding the truth is a pathway toward attaining the ends of justice.”

He gave the same answer when asked if the Palace would heed the call of the SAF commandos who survived the massacre to recognize the heroism of the 44 policemen amid the so-called alternative version that the President himself mentioned in an interview in Iloilo the other day.

Palace officials, however, did not respond when asked earlier if the government will move to rectify what Sen. Ralph Recto described as a “posthumous insult” heaped on the slain SAF 44 by the “alternative truth” claiming Marwan was killed by his aides and not by the SAF commandos who raided the terrorist’s hideout in Mamasapano, Maguindanao.

On Monday Coloma explained that Mr. Aquino is not keen on delving into such details.

“Ayon sa Pangulo, mas mainam na huwag nang tukuyin pa ang mga detalye dahil sa paggawa nito ay maaaring maantala ang paghahanap sa katotohanan. [The President prefers not to dwell on specific details as this may hamper the efforts in ferreting out the truth.] Wala akong tuwirang impormasyon tungkol diyan sa partikular na punto na inilahad ngayon lang,” Coloma said reporters at Tuesday’s briefing.

Meanwhile, a party-list congressman said the emergence of a new video footage purporting to show the US agent killed during the execution of Oplan Exodus in Mamasapano will worsen the already-shattered credbility of President Aquino.

Oplan Exodus is the SAF operation to get Zulkifli bin Hir, alias Marwan, a Malaysian terrorist given sanctuary by local Moro rebels.

Once confirmed to be genuine, the video will destroy the claim of Malacañang that the US government had no participation in the planning, funding and execution of the ill-starred operation, in which 44 SAF commandos were killed without any help from the military stationed not even 3 kilometers away.

In the video, members of the Moro Islamic Liberation Front were recorded as conversing with each other about “buddy,” a Caucasian fatality that they later called “S2,” the standard term for an intelligence officer.

Party-list Rep. Terry Ridon of Kabataan noted that Mr. Aquino and Foreign Secretary Albert F. del Rosario claimed that Oplan Exodus was an all-Filipino operation, with the latter issuing a statement about the matter after conversing with officials of the US State Department in Washington.

After the Mamasapano fiasco, the US abandoned its facility in Zamboanga City and shipped its soldiers home. With Marvyn Benaning

nato Puno, convener of Bagong Sistema, Bagong Pag-asa, a group advocating for national change by way of amending the Constitution, which it views as the biggest stumbling block to progress, peace and stability.

In July last year Puno’s group held the summit of leaders, whose purpose was to “secure the country’s future,” by way of a federal form of government.

As part of its effort to guide the voters in choos-

ing highly qualified candidates, the PMTL will help Filipinos, especially its voting members, vet candidates through a “People’s Primary,” that will screen the qualifications of politicians.

Through the primary, any member of the faithbased group can nominate any candidate with qualities that augurs with Christ’s teachings.

The list of nominees will be screened by the PMTL by looking into the qualifications of the candidates.

The group would later come up with its list of most worthy candidates in its “People’s Choice,” from which the Filipinos can choose their next President, Vice President and senators.

The PTML said in a statement that its “ultimate goal is to establish God’s reign in our country by electing into office God-centered and competent servant leaders who are committed to the empowerment of the Filipino people.”

Economy

A4 Wednesday, September 16, 2015 • Editors: Vittorio V. Vitug and Max V. de Leon

DBM ramps up social protection spending, disbursements rose 70% increase to P36.6B

T

he Department of Budget and Management (DBM) on Tuesday said that government spending on social protection, such as the Conditional Cash Transfer (CCT) and calamity funds, hit record increase of 70 percent to P36.6 billion in July this year compared to spending on the same period in 2014.

In its latest d isbursement report, the DBM said Maintenance Expenditures increased

by P15.1 billion to P36.6 billion to provide more funds for social protection, education and health-care programs.

Budget Secretary Florencio B. Abad said that increase in spending in social-development agencies supports the continuing expansion of our economy.

“We can also make sure that the poorest Filipinos get the education, aid and health-care services that are urgently due them,” Abad said in a news statement.

Based on July spending, the largest disbursements under the Maintenance Expenditures are intended for the poverty-alleviation program under the CCT of the Department of Social Welfare and Development.

T he i nc re a se i n s p e nd i ng for Maintenance Expenditures also seek to support Emergency Shelter Assistance for calamity victims.

The increase in Maintenance Expenditures was also due to increase in spending for locally funded projects under the Department of the Interior and Local Government.

Most of t he loc a l- f u nded projects are focused on poverty reduction, which have been released on time through the Bottom Up Budgeting, one of the catch-up measures to bolster spending by agencies and departments.

These programs include priority projects of local government units that cover programs on peace-building, reconstruction and development projects in wartorn areas.

“We are optimistic that public spending will continue its upward trajectory in the succeeding months.

As budget reforms gain further traction—and as our agencies find appropriate means to optimize their budgets—we can, likewise, bring the real and lasting benefits of good governance to our citizenry,” Abad said. Estrella Torres

news@businessmirror.com.ph

Mining investments fell short by 76% in 2014–COMP head

C

hamber of Mines of the Philippines (COMP) President Benjamin Philip Romualdez on Tuesday took a jab at President Aquino’s mining policy anew, which he blamed for the “declining trend” in mining investment.

Romualdez, in his opening speech at the Mining Philippines 2015 Conference and Exhibition at the Solaire Resort and Casino, said that mining investments in 2014 only reached $693 million, which is 76-percent short of the government’s own original projection of $3 billion.

He attributed the decline in min-

ing investments to President Aquino’s Executive Order 79, which stops the signing of new mineral agreements until a new mining revenuesharing scheme has been put in place.

According to Romualdez, the Philippines is lagging behind its Asean peers in terms of foreign direct investments.

“Had the big-ticket [mining] projects in the pipeline pushed through, we would have obtained almost $20 billion in investments, and thousands of people would have been employed, with more businesses established to meet the needs of these new mines,” he said.

The last five years, he added, have not been encouraging for the country’s mining industry.

While he said that mining companies continue to operate business as usual, he noted that there were no significant development, except for Nickel Asia’s second high-pressure acid-leach project.

Romualdez noted that, while mining permit issuances are on hold, the government is mulling over a raise in mining taxes by as much as 71 percent, the highest

among Asean countries. COMP members have been complaining on the proposed tax measure crafted by the Mining Industry Coordinating Council.

“On the global scene, with Europe still struggling to recover from the debt crisis and China’s economic slowdown affecting demand for commodities, the prices of copper, gold and nickel have been steadily going down in the last two years. There are forecasts that prices will rise in 2019 but we only hope this will come soonest,” Romualdez said.

“The election of new leaders next year should give us some optimism,” he added.

“We hope to have a more pragmatic vision and plan for the mining industry and a doable action plan.”

Jonathan L. Mayuga

TEAM WORK

Philippine Charity Sweepstakes Office (PCSO) Vice Chairman and General Manager Jose Ferdinand Rojas II (center), and Directors Bem Noel (from left), Betty Nantes, Francisco Joaquin III and Mabel Mamba join hands after providing additional assistance to areas in Eastern Visayas devastated by Supertyphoon Yolanda. They handed over 48 brandnew PCSO ambulances for the provinces of Biliran, Eastern Samar, Northern Samar, Samar, Leyte and Southern Leyte, as well as P6.7 million in financial assistance to 148 barangays in the area, in a ceremony held at the RTR Plaza in Tacloban City on September 11. JOSEPH MUEGO

ADB exec says 3% to 5% of GDP must be spent on devt projects to meet SDGs

By Cai U. Ordinario

I

BusinessMirror

N order to meet the Sustainable Development Goals (SDGs), countries, including the Philippines, must allocate 3 percent to 5 percent of their gross domestic product (GDP) to finance development projects.

Asian Development Bank (ADB) Independent Evaluation Director General Vinod Thomas, at the sidelines of the Think Sustainable, Act Responsible event on Tuesday, said financing is critical in meeting the SDGs. “We need to allocate 3 percent to 5 percent of the GDP, we need to allocate resources because this is [for] the interest of the people,” Thomas told the BusinessMirror.

The SDGs, composed of 17 goals and 169 targets, will be adopted by countries next week at the United Nations General Assembly in New York. The goals, which will replace the Millennium Development Goals (MDGs), as the world's development agenda for the next 15 years.

Thomas said, however, said the better use of these funds are also necessary. He said that having sufficient financial resources is key, but if these resources are not used well, investing will not lead to the desired development results.

He added that meeting the SDGs by 2030 will also require changes in policy that favor renewable-energy sources. Thomas said there is a need to move away from fossil fuel-based production to sustainable production through policy changes and/or agreements.

“We also know that having the money out there is not enough. The experience of using funds, even what’s available is not very good, adequate projects, implementation, accessibility [must be improved],” Thomas said.

In many ways, meeting the SDGs and making sustainability true for the country and the world, is like overcoming disasters. It will require great effort on the part of institutions, particularly the government.

Institut Teknologi Bandung School of Business and Management Advisory Board Chairman Kuntoro Mangkusubroto, who also led the rehabilitation and reconstruction efforts in Aceh, Indonesia, said leadership has a lot to do with it.

“Leadership is really important. Leadership of the President of the Republic, that is number one.

Without his support, things would collapse along the way,” Mangkusubroto said.

The ADB said that 2015 is a momentous year for global development initiatives. It is the target date for the MDGs and will see the launch of the SDGs. In November to December this year the world may see an international climate deal at the 21st Conference of the Parties for Climate Change.

These are the reasons the ADB’s Independent Evaluation host the two-day event which focused on exploring sustainability from the macroeconomic and fiscal sustainability, environment and climate change, institution and governance and project or investment sustainability aspects.

briefs u.s. lady envoy leads apec delegation for women empowerment Ambassador-at-Large for Global Women’s Issues Catherine Russell will travel to Manila, from September 14 to 18, to lead the US delegation to Asia-Pacific Economic Cooperation (Apec) meetings on women and the economy.

The US Embassy in Manila said that while in the Philippines, Russell will launch several US-led initiatives that will empower women to play larger roles in the Apec economies. The initiatives will focus on entrepreneurship, health and sharing best practices between economies.

In addition to leading the delegation, Russell will also meet with government officials, members of Filipino civil society, and young women to discuss gender equality in the Philippines and the Apec economies more broadly.

Three years ago, the Department of State released the US Department of State Implementation Plan of the National Action Plan on Women, Peace and Security.

The plan provides guidance for how the department, both in Washington and at US embassies and consulates, can advance efforts under the US National Action Plan on Women, Peace and Security (NAP).

The NAP, which was issued in December 2011 together with Executive Order 13595, seeks to ensure that women participate equally in preventing conflict and building peace in countries threatened and affected by war, violence and insecurity. Recto Mercene

100,000+ metro commuters patronized pasig river ferry system

More than 100,000 commuters have already opted to use the ferry system as an alternative mode of transportation amid the heavy traffic besetting the streets and thoroughfares of Metro Manila, the Metropolitan Manila Development Authority (MMDA) said on Tuesday.

PHL, China trade value rises amid territorial dispute

By Funny Pearl A. Gajunera Philippines News Agency

D

AVAO CITY—The Department of Foreign Affairs (DFA) has noted an increase in bilateral trade total value between the Philippines and China by 17 percent in 2014, despite the dispute of the two countries on the West Philippine Sea. In an interview with the media, Foreign Assistant Secretary Charles Jose said that the bilateral trade of the two countries was not affected, even after the Philippines filed a case before the International Arbitral Court over the territorial dispute.

He emphasized that it indicates that the issue on the West Philippine Sea is not the sum total of the relationship of the Philippines and China.

Jose added that the business trade of Philippines and China was not affected, since President Aquino and Republic of China President Hu Jintao already had an understanding during the former’s state visit to China in 2011 that the economic trade of the two countries should not be affected with the South China Sea issue. “’Nung nag state visit si President Aquino sa China nung September 2011, nagkaroon sila ng understanding with then-Chinese President Hu Jintao na sinabi nila na ’wag nating hayaan na maapektohan ng usaping South China Sea ang other areas of our cooperation with China [During the state visit of President Aquino in China in September 2011, they had an understanding with then-Chinese president Hu Jintao that they should not let the South China issue affect other areas of cooperation with China],” Jose said.

He also said that the Philippine government is willing to isolate and extract the South China Sea issue and deal with it separately, and, at the same time, promote and strengthen the other areas of coordination with China.

“With more than 17-percent increase of the bilateral trade, we can say that we have succeeded to isolate the West Philippine Sea issue,” Jose said.

He added that the Philippines has more investments to China compared to the investments of China to the Philippines.

MMDA Chairman Francis N. Tolentino said data showed that the total ridership of the ferry system has reached 121, 839 as of August 26.

Tolentino also announced that a new commuter boat for its Pasig River Ferry System will be inaugurated on Wednesday to further improve the ferry service.

“All in all, we now have a total of 11 operational ferries in our fleet. These will service passengers along Pasig River, which stretches from Pinagbuhatan in Pasig City up to Plaza Mexico in Manila. I am optimistic that this will further boost commuter patronage,” Tolentino said.

The new fiberglass ferry has a maximum capacity of 45 passengers, including crew, and can travel up to 12 knots.

At present, the ferry service has 11 stations which include Pinagbuhatan and San Joaquin in Pasig City; Guadalupe and Valenzuela in Makati City; Hulo in Mandaluyong City; Polytechnic University of the Philippines Santa Mesa, Santa Ana, Lambingan, Lawton, Escolta and Plaza Mexico all in Manila. It is open from 6 a.m. to 6 p.m. daily from Mondays to Sundays. Claudeth Mocon-Ciriaco

dti to traders: practice phl quality challenge for economic integration The Department of Trade and Industry (DTI) urged local businesses to adopt the Philippine Quality Challenge (PQC) in order to prepare for the forthcoming economic integration.

DTI Undersecretary Ponciano C. Manalo Jr., during the Philippine Quality Award on Tuesday, said local businesses aiming for organizational excellence will help them to compete in the global market as the world is now moving toward various forms of economic integration.

PQC, a self-assessment performance excellence framework, eyes Philippine businesses in all sizes to pursuit organization improvement and performance excellence.

“With the Asean Economic Community coming into full force at the end of the year, competition will continue to get tough as companies across the region are gearing up, getting ready to sail on the sea of opportunities promised by a future of borderless trade and the free exchange of information, goods and services,” Manalo said. PNA

Economy BusinessMirror

news@businessmirror.com.ph

Wednesday, September 16, 2015 A5

ERC issues draft rules on controversial CSP

DOTC invites four foreign firms to bid for P4.3-B MRT 3 maintenance contract

T

T

By Lenie Lectura

HE Energ y Regulator y Commission (ERC) has issued the first draft rules on the controversial Competitive Selection Process (CSP), a policy that mandates all distribution utilities (DUs) to bid out their power requirements.

Industry stakeholders await the issuance of implementing guidelines (IG) of the Department of Energy (DOE) Circular 2015-06-0008, mandating all DUs to undergo CSP in securing power supply agreements (PSA).

Basically the policy states that a third-party, which will be appointed by the ERC and the DOE, will conduct the bidding.

The ERC has 120 days, or until October 27, to issue the final IRR. Without the IRR, the DOE circular could not be enforced.

ERC Chairman Jose Vicente Salazar said on Tuesday that public consultations will still be conducted prior to the release of the final rules.

“We are planning to conduct the consultations middle to the third week of October. We are still targeting to meet the October 27 deadline. Our intention is to have a decision by that time, so either we go on with the CSP or set that aside,” the ERC official said.

Under the draft IG, the ERC said the third party shall compose a team of foreign and/or national experts with vast experience in open and competitive bidding as lead auction design advisor and auction manager in at least five separate successful auctions for power-supply contracts of electric utilities, preferably in other countries that have implemented auctions, such as Chile and Brazil.

T he third part y must be equipped with comprehensive knowledge of the legal and regulatory framework for the Philippines electric-power industry.

Every November 30 of each year, the DOE and ERC shall select a third party for the following year’s auction. A request for proposals (RP) to all interested parties to qualify as the third party will be issued no later than September 1 of each year.

“The DOE and ERC shall endeavor to select, in consultation with the NEA [National Electrification Administration], the third party based on the parameters and weightings of qualifications to be detailed in the RP by November 30,” the ERC said.

Basically the tasks of the third party are to develop the CSP design for the power-supply agreements (PSAs), develop bidders' qualification criteria, draft and propose the CSP rules, develop and propose the PSA template, and manage the conduct of the CSP up to the award and execution of the PSAs. For the DUs, they are required to secure their PSAs in advance of their requirements under longterm contracts. For example the DU must secure their PSA three to five years ahead if their contact is valid for at least 15 years. However, the DUs may continue to contract, also through annual CSP, for the short term to address their load growth variations.

They will submit to the third party their projected annual peak demands and energy requirements for the next 20 years.

Likewise they are required to submit their five-year historical demand and energy consumption, and the previous year’s hourly load duration curve.

The DUs will be grouped, “which would yield the most efficient and cost-effective results in terms of allocation of all existing and new generation capacities, and ensure least cost-supply to the DUs.” It is the responsibility of the third party to “come up with the

various DU groupings and contracts to be auctioned. In so doing, and based on justifiable reasons, it may propose to have a DU grouping consisting of only one DU.” Salazar said the framework that will be utilized will still be discussed during the public consultations. “We have to consider the position of all concerned parties. We want to come up with a decision that is acceptable to all the parties and at the same time achieve the objective of the DOE circular,” he said.

The Manila Electric Co. (Meralco), a DU that sources majority of its power requirements through bilateral contracts, is against the mandatory implementation of CSP. “Our view is it doesn’t promote the best interest of consumers.

It’s a nice concept, an attractive concept, but do it on a voluntary basis,” Meralco President Oscar Reyes earlier commented.

Meralco officials said the CSP scheme is unfair because only the DUs are mandated to comply but not the generation companies (gencos). “What if the participating gencos are flippers or those that are not serious? How can the DUs, such as us, get the best rate for our consumers in such cases,” they lamented.

When asked if Meralco would volunteer to adopt the CSP, Reyes said the most appropriate model for Meralco would be “a mix of bilateral, voluntary CSP and WESM [Wholesale Electricity Spot Market].”

Reyes pointed out that different utilities have different requirements. "Will the template for CSP fit everyone? Are we sure that all gencos that will participate are serious? We are only mindful of what”s best for the consumers,” he said.

Aboitiz Power Corp. President Antonio Moraza also raised concern on the proposed mandatory implementation of the CSP. “Maybe there are certain features that we’re not too crazy about. The third party. We don’t think that one size fits all is the solution. Each DU has its own issues…give them freedom. Just make sure the process happens and then give them the freedom to make their own decisions,” he said when sought for comment.

SMC Global Power Chairman Ramon Ang, in a separate interview, supports the CSP. “We will bid and supply power to everybody. That will be good for the consumers, I think.”

AC Energy Holdings Inc. of the Ayala group, on the other hand, is in favor of the CSP. “We are obviously in favor and we don’t see that any different from what is already happening in the PPP [Public-Private Partnership] as long as it is run properly,” said AC Energy Holdings Inc. President John Eric Francia.

Francia said the next crucial part is the drafting of IRR. “The devil is in the details. A lot of details and variables need to be thoroughly studied so the intent and the spirit of the circular is addressed properly.”

He said that power producers, such as AC Energy, should not be mandated to also participate in the CSP. “According to the DOE circular, it’s not mandatory for the gencos.

So, we can sell to contestable customers or at the WESM,” he said.

Former DOE Secretary Carlos Jericho L. Petilla, who signed the DOE circular, said he expected industry stakeholders to oppose this all the way to the courts. “For me, this is just common sense.

Why is it good and why is it not good? I am quite sure that the DOE will take into consideration any opposition they have but the main reason we will have CSP is transparency,” Petilla had said.

By Jovee Marie N. dela Cruz

he Department of Transportation and Communications (DOTC) has invited four foreign companies to participate in the bidding for the maintenance contract of the Metro Rail Transit Line 3 (MRT 3).

MRT 3 General Manager Roman Buenafe, during the budget deliberations of the DOTC at the House of Representatives, said the DOTC has invited the Hamburg Metro of Germany, Singapore MRT (SMRT) and Busan Rail and Korail of South Korea to participate in the bidding of P4.3-billion three-year maintenance contract of the MRT 3.

According to Buenafe, all three foreign companies have local partners for the bidding of contract except SMRT. Transportation Secretary Joseph Emilio A. Abaya said that by naming these foreign companies “is proof that there is nothing secret about the bidding for the MRT 3’s maintenance contract.”

“The bidding is not confidential.

Local franchisors see 15% to 20% revenue increase

By Catherine N. Pillas

T

he Association of Filipino Franchisers Inc. (AFFI) is targeting a 15percent to 20-percent increase in revenues to P112 billion for 2016 on the back of the retailsector boom.

AFFI chairman Armando O. Bartolome expressed optimism in breaching the P100-billion revenue mark in 2016 as construction of retail spaces are ongoing not just in Metro Manila, but also in outying provinces.

“In Zamboanga, for example, they are opening a KCC Mall which is huge, and the same [pace of construction] is being done in Iloilo. It goes to show that the entrepreneurial spirit is alive.

That’s why for next year we are targeting another 15 percent, and that’s just a conservative estimate,” Bartolome said at a news conference on Tuesday.

AFFI has 165 members to date, with store count of 31,239 as of 2015. Last year outlet count is at 16,093.

In terms of employment Filipino franchisors of AFFI have employed 96,000 in 2014 and reached 197,000 this year.

“The Philippines is really booming. From a P54-billion contribution in 2014, to date, we have reached P94 billion.

We attained this with only 165 members,” Bartolome said.

The AFFI chairman credits the more than 40-percent growth in 2013 and 2014 to the wave of overseas Filipino workers coming home and going into franchising, as well as more young graduates opting to be entrepreneurs rather than be company employees.

AFFI will be staging the 14th Franchise and Business Expo: Empowering Entrepreneurs at the World Trade Center in Metro Manila, from October 2 to 4. Some 300 exhibitors are expected to showcase their concepts at the expo. AFFI expects around 15,000 visitors to flock to the two-day franchising event.

ABAYA: “All contracts in the DOTC are aboveboard, regular. We maintain clear that its awarding of contract to an ally is also part of the imagination.”

Maybe there was someone misquoted or there was a wrong interpretation of the procurement law, but there’s nothing secret about this,” he said, reacting to reports of an alleged secret bidding for the MRT 3 contract.

Abaya, who is the acting president of the ruling Liberal Party, also denied allegations that his agency will

award the MRT 3 contract to a member of the ruling political party “All contracts in DOTC are aboveboard, regular. We maintain clear that its awarding of contract to an ally is also part of the imagination,” he said.

Penalty payment

Meanwhile, in the same hearing, Abaya also denied that the DOTC is planning to give “penalty payment” of P7.5 billion to the consortium of Ayala Land Inc. and Metro Pacific Investments Corp. for unfulfilled obligations under a concession agreement for the Light Rail Transit Line 1 (LRT 1) Cavite Extension project.

Earlier Bagong Alyansang Makabayan (Bayan), citing the unsigned letter of Abaya to Budget Secretary Florencio B. Abad, said the government will have to compensate the consortium of Ayala Land Inc. and Metro Pacific Investments Corp.

The P7.5-billion planned “penalty payment” supposedly includes P5.41 billion for the alleged failure of the government to comply with obligations relating to the operation and maintenance of the existing LRT 1 system and P106.67 million for failure to increase the minimum fare.

In the said letter dated on August 7, Abaya told Abad that the DOTC will likely fail to meet certain obligations under the concession agreement.

But according to Abaya he did not sign the letter, saying that the DOTC will have to pay the unfulfilled commitments which shall be sourced from the 2015 P30-billion Risk Management Program Fund.

Abaya, however, admitted the failure of the government to fulfill its obligation to provide 100 Light Rail Vehicles (LRVs) to the LRT consortium.

Under the concession agreement, the Light R ail Transit Authority (LRTA) has to turnover 100 operational LRVs to the consortium which assumed the operation of the LRT 1. The LRTA said it only handed over 78 operational LRVs. Earlier President Aquino has confirmed that private concessionaires of the project are demanding P7.5 billion in compensation from the government.

Abaya, however, said President Aquino has not been briefed on the daily updates on the LRT 1 extension project because he has been preoccupied in managing other affairs.

A6 Wednesday, September 16, 2015

Opinion BusinessMirror

editorial

Technology change in banana export industry

W

E have been told time and again about the challenge of globalization, integration, freetrade areas, etc. The narrative tends to emphasize benefits from the arrangement, and that is as it should be, to encourage us to embark on the road of accelerated development. But there are costs as well, which can be daunting if one is not prepared for them.

One such cost is now apparently emerging in the export markets for bananas. Our banana export industry is feeling threatened by the emergence of Vietnam as an export competitor. This can result in the loss of our dominant position in export markets for bananas.

Philippine banana exporters, as reported, are seeking help from trade and agriculture officials to negotiate for preferential or zero tariffs for bananas in importing countries. Stephen Antig, executive director of the Filipino Banana Growers and Exporters Association (FBGEA), is quoted as saying that local banana exporters fear that they will lose their markets if the government is not more aggressive in negotiating for reduced tariffs in the countries where we export our bananas.

For years past the Philippines was the dominant supplier of bananas to Japan, South Korea and New Zealand. But Vietnam, Indonesia, Mozambique and Costa Rica have been slowly penetrating those markets.

Philippine banana exporters should realize, however, that under the equal treatment rules of the World Trade Organization, countries granting preferential tariffs to Philippine bananas will be obliged to grant the same preference to other countries that export bananas. So while it is right for the Philippine government to negotiate for lower or zero tariffs for Philippine banana exports, such will not be helpful to the improvement of the position of Philippine bananas vis-à-vis their competitors.

As the FBGEA knows, Vietnam is industrializing its banana industry, scrapping some of its traditional banana-cultivation techniques, turning some of its rice farms into banana plantations, and growing what the global markets demand. The Philippine banana export industry must do something to help itself if it is to remain a viable exporter, much less continue as a dominant player in export markets. Specifically, it must investigate the industry’s productivity position, which is the key to competitiveness, whether globally or locally.

As FBGEA experts are suggesting, the industry must make investments in processing and postharvest preservation. This should result in the improvement in the quality of the finished product and a reduction of per-unit cost.

It is known in the export industry that the demand for bananas worldwide has continued to outstrip supply, resulting in lucrative incomes for exporters.

From this viewpoint alone, not mentioning the need to meet the challenge of competitors, our banana exporters should have every reason to adopt improved technology in processing and preservation.

Exports are a vital component of our national strategy for economic growth, and banana exports represent a critical part of that strategy. We hope the industry continues to contribute to the growth and expansion of our national economy even as it takes advantage of the profit opportunities currently available in banana export markets.

SSS at 58: Boosting benefits Susie G. Bugante

All About Social Security

W

orkers derive a sense of empowerment from being able to provide for their personal, as well as their loved ones’ basic needs, and even the simple pleasures and luxuries that life has to offer. But when unforeseen contingencies strike, it can make them feel helpless and distressed at their mounting bills and financial obligations, especially when these events impair their ability to earn a living.

The Social Security System’s (SSS) tagline—“Buti na lang may SSS”— draws inspiration from the relief and assurance that members and beneficiaries experience upon receiving their benefits during times of financial contingencies, such as sickness, maternity, disability, old age or retirement and death.

SSS members can avail themselves of benefits under the Social Security (SS) program, which is the standard benefit package extended to all SSS members, and the Employees’ Compensation (EC) program, which provides additional benefits for regular employees with work-related sicknesses, injuries, disabilities and death.

To cite an example, an SSS member who suffers from a loss of eyesight as a direct effect of his regular employment in a factory can be entitled to benefits under both the SS and EC programs for the same health condition. The EC program is administered by the SSS for the private sector and by the Government Service Insurance System (GSIS) for the public sector.

Within the past five years, the present SSS management actively pursued and successfully implemented a series of benefit enhancements under both the SS and EC programs.

It started with a proposal from the SSS to the Employees Compensation

Commission (ECC) to double the P10,000 EC funeral benefit to P20,000. At the same time, the SSS also advocated for the increase in EC pensions by 10 percent across-theboard (ATB) for permanent partial disability, permanent total disability and death.

The ECC endorsed the SSS proposals to Malacañang, which then approved the two EC increases for implementation effective September 1, 2013. The EC pension increase covers over 17,000 EC pensioners as of August 31, 2013, while claimants for EC funeral benefits with the workers’ death dated September 1, 2013 onward are entitled to the higher P20,000 burial grant.

Apart from the EC increases, the SSS also sought to enhance its level of benefits under the SS program. As a result of the SSS’s consistent campaign to improve its actuarial health through strong contribution collections and investment earnings that were complemented by its prudent management of expenses, the agency was able to implement a 5-percent ATB increase in SS pensions effective June 1, 2014. The SS pension increase covers the 1.9 million active SS pensioners for retirement, disability and death as of May 31, 2014.

In 2015, the year of its 58th

Australia can’t afford complacency William Pesek

T

BLOOMBERG VIEW

he first time I met Malcolm Turnbull, Australia’s new leader, all he could talk about was Japan. It was June 2002 and the Goldman Sachs banker-turned-politician couldn’t comprehend how a smart, democratic government could simply stand by as an enervating malaise strangled the economy.

When I asked him whether something similar could happen in Australia, Turnbull stared out his Sydney office window. “There are real risks for Australia in globalization and we could be a loser in the future just as we have been a winner to date,” he said.

Those risks are more than obvious now. Unlike Japan, Australia isn’t suffering from deflation and demographic blight. But its leaders, too, are guilty of not moving fast enough to adjust to a changing economic reality. Over the last two years, neither then-Prime Minister Tony Abbott nor Treasurer Joe Hockey implemented the structural reforms needed to increase incomes and boost competitiveness.

Rather than invest in education, training and infrastructure and tweak taxes to empower small

businesses, Abbott’s team protected mining billionaires (by scrapping carbon-tax policies). His government championed fiscal austerity even as the economy experienced its weakest run of growth since the 1991 recession. Business leaders complained, rightly, about a lack of resolve to overhaul an outdated labor market. As a historic property bubble from Sydney to Perth massively outpaced wage growth, Hockey told voters they were imagining the problem.

In fact, it’s the government that’s appeared blind to the competitive pressures of globalization.

For years, China’s voracious appetite for iron ore, coal, copper and other commodities fueled growth and filled Canberra’s coffers. That dampened the urgency for Abbott

or his predecessors to diversify growth engines away from the mining industry, leading to a two-speed economy and widening inequality.

There’s plenty of blame to go around, but Abbott’s Liberals deserve much of it thanks to Prime Minister John Howard’s failure to diversify the economy during his 1997-2007 term. Howard’s stint followed those of reformists Bob Hawke (1983-1991) and Paul Keating (1991-1996). Governments during the Hawke-Keating era lowered trade tariffs, opened the financial industry, floated the Australian dollar and built a compulsory, national pension system. And then Howard coasted, riding China’s coattails and leaving economic management to the central bank.

Howard’s successors, the Labor Party’s Kevin Rudd and Julia Gillard, should’ve done more to rebalance the economy. But their fight to impose taxes on excessive mining profits, share Australia’s wealth and put a price on carbon emissions was the right one. By contrast, Abbott allowed even Beijing to grab the mantle of leadership on climate change away from Canberra.

Australians need Turnbull to lead on reform, not relax. The new government must be less ideological about attaining budget surpluses and more attuned to how Australia risks

anniversary, the SSS revealed the enhancement of the SS funeral benefit, making the amount of its burial grants more reflective of the members’ number of contributions and average monthly salary credit (AMSC). Simply put, the beneficiary of an SSS member who has paid contributions for more months, as well as at higher reported income levels, as represented by the AMSC, would be entitled to a bigger SS funeral benefit. From a fixed amount of P20,000 under the previous SSS policy, the SS funeral benefit now ranges from P20,000 up to P40,000 for deaths dated August 1, 2015 onward.

Finding means to boost the benefits of members is a continuing activity of the SSS. The SSS is proud of its 58 years of service as a steady shoulder of support for the Filipino worker in the face of financial contingencies.

For more information about the SSS and its programs, call its 24-hour call center at (632) 920-6446 to 55, Monday to Friday, or send an e-mail to member_relations@sss.gov.ph.

Susie G. Bugante is the vice president for public affairs and special events of the SSS. Send comments about this column to susiebugante.bmirror@ gmail.com.

getting left behind by globalization.

It must invest more in human capital to increase productivity and in physical hardware—better roads, ports, power grids and telecommunications systems. Turnbull needs to create new jobs to mitigate the hollowing out of industries, including manufacturing.

He also must overhaul an antiquated tax system to encourage Australia’s best and brightest to create a homegrown Apple or Google. The good news is that, as far back as 2002, Turnbull was mulling this very problem. At the time, he said Australia’s tax system was “totally uncompetitive,” driving would-be entrepreneurs to Silicon Valley and Singapore.

“These risks are real, because the playing field is, by force of geography, tilted against us,” Turnbull told me. “The allure of Bondi Beach isn’t enough to make us competitively attractive to the talent we need to attract and retain.”

For 15 years now, Turnbull has been touted as a future Australian prime minister—the Sydney Morning Herald didn’t dub him the “raging Turnbull” for nothing. Now he finally has his chance to rage against the Canberra smugness that’s holding back one of the world’s great economies. I’m convinced he knows what needs to be done.

Opinion BusinessMirror

opinion@businessmirror.com.ph

Wednesday, September 16, 2015

Documentary-stamp taxes A United States of Europe? Good luck on insurance policies

By Mark Gilbert Bloomberg View

Atty. Dennis B. Funa

INSURANCE FORUM Part 2

D

OCUMENTARY-stamp taxes (DST) is a one-time tax.

However, it was ruled in Commissioner of Internal Revenue v Lincoln Philippines Life Insurance Company (now Jardine-CMA Life Insurance Company), et al., [2002] that where the policy had an “automatic increase clause,” the insurance company is liable for any deficiency DST corresponding to the amount of automatic increase of the sum assured on the policy.

The automatic increase clause provided for an automatic increase in the amount of life-insurance coverage upon attainment of a certain age by the insured without the need of issuing a new policy. This clause “already formed part and parcel of the insurance contract, hence, there was no need for an execution of a separate agreement for the increase in the coverage that took effect in 1984 when the assured reached a certain age.” Since the DST is based on “the amount fixed in the policy”, then “the amount fixed in the policy is the figure written on its face and whatever increases will take effect in the future by reason of the automatic increase clause embodied in the policy without need of another contract.” Thus, “the amount insured by the policy at the time of its issuance necessarily included the additional sum covered by the automatic increase clause because it was already determinable at the time the transaction was entered into and formed part of the policy.”

DST is also collectible upon renewals of life-insurance policies. In Commissioner of Internal Revenue v. Manila Bankers’ Life Insurance Corp. (2011), the increases in the coverage of the life-insurance policies were brought about by the premium payments made subsequent to the issuance of the policies (without the issuance of new policies) under the “guaranteed continuity clause” in the Money Plus Plan. The guaranteed continuity clause provided for: “The continuity of the policy within the allowed time; the nonchange in premiums for the duration of the 20-year policy term; and the option to continue such policy after the 20-year period.” The Supreme Court observed that: “Any increase in the sum assured, as a result of the clause, had to survive a new agreement between the respondent and the insured. The increase in the life-insurance coverage was only corollary to the new premium rate imposed based upon the insured’s age at the time the continuity clause was availed of. It was not automatic, was never guaranteed and was certainly neither definite nor determinable at the time the policy was issued.”

What the guaranteed continuity clause was actually offering was the option to renew the policy, after the expiration of its original term. The acceptance of this offer would give rise to the renewal of the original policy. This renewal of life-insurance policy makes the insurance company liable for deficiency DST under Section 183. Section 183, as amended

by Republic Act 10001, covers lifeinsurance policies being “renewed.”

When it comes to group lifeinsurance policies, additional premiums earned will also trigger the payment of additional DST. As ruled in the Manila Bankers’ Life case: “Whenever a master policy admits of another member, another life is insured and covered. This means that the respondent, by approving the addition of another member to its existing master policy, is once more exercising its privilege to conduct the business of insurance, because it is yet again insuring a life. It does not matter that it did not issue another policy to effect this change, the fact remains that insurance on another life is made and the relationship of insurer and insured is created

“The amount insured by the policy at the time of its issuance necessarily included the additional sum covered by the automatic increase clause because it was already determinable at the time the transaction was entered into and formed part of the policy.” between the respondent and the additional member of that master policy. In the respondent’s case, its group insurance plan is embodied in a contract which includes not only the master policy, but all documents subsequently attached to the master policy. Among these documents are the Enrollment Cards accomplished by the employees when they applied for membership in the group insurance plan. The Enrollment Card of a new employee, once registered in the Schedule of Benefits and attached to the master policy, becomes evidence of such employee’s membership in the group insurance plan, and his right to receive the benefits therein.

Every time the respondent registers and attaches an Enrollment Card to an existing master policy, it exercises its privilege to conduct its business of insurance and this is patently subject to documentary stamp tax as insurance made upon a life under Section 183.”

The payment of DST is governed

by Section 200 of the National Internal Revenue Code. Under Section 200 (d), the DST “may be paid either through purchase and actual affixture; or by imprinting the stamps through a documentary stamp metering machine.” In Commissioner of Internal Revenue v. Fireman’s Fund Insurance Co. et al. (1987), the “documentary tax is deemed paid by: a) the purchase of documentary stamps; b) affixture of documentary stamps to the document or instrument taxed or to such other paper as may be indicated by law or regulations; and c) cancellation of the stamps as required by law.” As further explained in the Fireman’s Fund case, “the purchase of the stamps is the form of payment made; the affixture thereof on the document or instrument taxed is to insure that the corresponding tax has been paid for such document, while the cancellation of the stamps is to obviate the possibility that said stamps will be reused for similar documents for similar purposes.”

Where the manner of affixing the stamps as prescribed by law was not followed, such that the stamps were affixed on the monthly statement of business and a register of documentary stamps and not on the individual insurance policies, the insurance company cannot be held liable for the payment of the same tax for the same documents. While the insurance policies with the corresponding documentary stamps affixed are the best evidence to prove payment of the said DST, this does not preclude the admissibility of other proofs to establish payment of the DST (Commissioner of Internal Revenue v. Fireman’s Fund Insurance Co. et al.).

Dennis B. Funa is currently the Deputy Insurance Commissioner for Legal Services of the Insurance Commission.

E-mail: dennisfuna@yahoo.com

O

tmar Issing, one of the original draftsmen of European Monetary Union (EMU) and the first chief economist of the European Central Bank, is worried that the current guardians of the project are trying to push it too far, too fast. He’s right; and if the panjandrums aren’t careful, they risk trying to build a United States of Europe without the backing of the 338 million people who share the euro as their currency, never mind the other 162 million who are merely members of the European Union (EU).

Here’s what Issing told the Ambrosetti Forum, held September 4 to 6 in Cernobbio, Italy: Pol it ica l union ca nnot be obtained in the EU by the back door.

It is a violation of the principle of no taxation without representation, and represents a wrong and dangerous approach.

Issing was reacting to efforts by European Commission (EC) President Jean-Claude Juncker to accelerate what the founding fathers of the common currency called “evercloser union.” In a June paper known as the “Five Presidents Report” (because the authors run the EC, the Euro Summit, the Eurogroup, the European Central Bank and the European Parliament), Juncker and his fellow apparatchiks spelled out their appetite for a European superstate. The document’s breathless enthusiasm for gathering as much power as possible within an EMU center with yet more institutions (all presumably in need of presidents of their own) feels less and less appropriate as Europe’s faltering economy and

worsening refugee crisis conspire to undermine faith in the project in its current limited form, never mind in a greatly expanded format.

While about 40 percent of Europeans say they trust the EU, it also makes them feel powerless. Asked in May in a EC survey whether “my voice counts in the EU,” 50 percent said they totally disagreed with the statement, compared with 42 percent who agreed, while the balance registered as don’t knows. Two years ago, the gap was even more pronounced, with just 28 percent regarding themselves as heard while 67 percent declared themselves voiceless. (Note that none of the questions in the survey asked whether deeper integration was viewed as desirable by the respondents.)

Some of the integration tasks the EC has set up for itself during the next two years make complete sense, and are even overdue. A full cross-border banking union is sensible, as is the accompanying plan for a Europe-wide deposit insurance system. The proposed capital

markets union to give companies greater access to bond and equity finance across the continent is also a good thing. And a proper single market in energy and digital assets is fully in accord with what most individuals in the trade bloc would expect their leaders to be pursuing.

Other ambitions, though, go too far.

The report describes a fiscal union on taxation which would “require more joint decision-making on fiscal policy.” That would be followed by a political union to deliver what it calls “democratic accountability, legitimacy and institutional strengthening.”

Those moves would “inevitably involve sharing more sovereignty over time,” the report says. The currency union would “need to shift from a system of rules and guidelines for national economic policy-making to a system of further sovereignty sharing within common institutions.

This would require member-states to accept more joint decision-making on elements of their respective national budgets and economic policies.” The call to establish a European Treasury, meanwhile, sounds like a dead end, given Germany’s implacable opposition to the idea that nations might band together to raise funds by selling common bonds.

Taking tax and spending decisions away from national governments risks further alienating voters who, in the May 2014 elections to the European Parliament, showed a marked enthusiasm for backing Euroskeptics. With the current refugee crisis prompting Germany to

A7

reinstate border controls this week, breaking the taboo that claimed freedom of movement and porous borders within the bloc as an inalienable right, the immigration concerns that came to the fore in that election will only worsen. The festering economic problems of Greece will be back in the headlines once that nation’s September 20 elections are concluded; and the election of a Labor Party leader in Britain who’s less than enthusiastic about the EU makes predicting the outcome of the forthcoming UK referendum on whether to quit the bloc that much harder.

Earlier this month, Polish President Andrzej Duda cited the potential “loss of sovereignty” as a reason not to join the euro. Speaking at an economic forum in Krynica, Duda said he “can’t accept” an EU where countries with more “economic advantage” get to dictate to smaller, weaker nations.

The good citizens of Europe are unlikely to cheer at the thought of their taxes being set by bodies other than their national parliaments, and not just because taxes are almost universally disliked. It’s far from clear that the denizens of the euro region —a political construct designed first and foremost to stop what the poet Siegfried Sassoon described as the “biologic urge to readjust the map of Europe” through war—are hankering to transfer yet more sovereignty to Brussels and Strasbourg.

Juncker and his colleagues need to stop forcing the issue—or risk splintering a union that’s already stressed to breaking point.

Pardoning of prisoners another empty gesture from an unchanged Cuba

O

N Saturday Pope Francis arrives in Cuba. Last Friday, Cuba announced it’s pardoning 3,522 prisoners. Cause and effect in action—and that’s about all this gesture from the Cuban government likely means.

No need to speculate on whether this is a real sign that after 56 years the Castro regime is finally easing its grip on 11 million Cubans—as is the desired result following the US announcement in December of thawing diplomatic ties with the island. That’s just not how dictatorships work.

It’s well known that Cuba empties and fills its jails according to what’s politically expedient—and makes it look like a benevolent government to the outside world, especially just before the international spotlight shines on the island.

Those set to be pardoned are men and women, young and old or infirm who are first-time offenders who

committed nonviolent crimes. But none of the regime’s thousands of political prisoners are among them. We hope the pope has something to say about that. After all, recent figures show arrests and detentions on the island continue unabated.

It’s not the first time Cuba has made a show of releasing prisoners—a favorite bargaining tool of the Castro brothers.

In 1978 Fidel Castro released almost 3,800 political prisoners in a deal with President Jimmy Carter’s administration. Before that, of course, there was a deal brokered for the release of the Cubans captured during the failed Bay of Pigs invasion. Cuba got $10 million in medical supplies.

And twice before, in advance of papal visits, the Cuban government has released prisoners, all for show before filling the jails again after the pope’s plane went wheels up.

In 1998 Fidel Castro released 300

prisoners ahead of Pope John Paul II’s visit. And in 2011 Raúl Castro released nearly 3,100 ahead of Pope Benedict XVI’s visit. A month after the US announced it would reestablish diplomatic ties with the island, Cuba, as a show of good will, released 53 dissidents. Many of the prisoners, it turned out, had nearly served their sentences or been released months earlier. In other words, it was an empty gesture.

But those who know the machinations of the Cuban government think the latest prisoner-release announcement was moved up to distract the international press. On Thursday Castro’s partner in repression, Venezuela, handed renowned democracy leader, Leopoldo Lopez, a 13-year prison sentence—an outrage for a political dissident guilty of no real crime, just that of opposing President Nicolas Maduro’s regime.

International headlines on Friday should have been about Lopez’s

sentencing. Instead, they trumpeted how nice Cuba is to be releasing prisoners. Well-played.

What Cuba really wants is economic growth. The regime wants to open its doors to US business, investment and tourism as China and Vietnam have done. What it doesn’t want is its citizens speaking out against the government.

But it’s incumbent upon the US to make clear that Cuba can’t have the former without eliminating its restrictions on the latter; without freeing its political prisoners, incarcerated on trumped-up charges and tried in kangaroo courts.

US diplomacy hinges on the belief that normalizing diplomatic ties and trade with nations like Cuba will change everything. But that has yet to be seen.

Cuba must to do more than these fake gestures of prisoner releases and offer up real, and permanent, humanrights reform. TNS

2nd Front Page BusinessMirror

A8 Wednesday, September 16, 2015

www.businessmirror.com.ph

DOTC sets ₧29.9-B infra budget for 2016

T

By Jovee Marie N. dela Cruz

he government is allocating P29.9 billion for the modernization and rehabilitation of airports, seaports and railways next year, said Sherielysse ReyesBonifacio, assistant secretary for Planning of the Department of Transportation and Communications (DOTC).

Of the proposed P29.9-billion infrastructure budget of the DOTC, P9.041 billion (P6.7 billion locally funded and P2.3 billion foreign-assisted) is for aviation; P7.96 billion (P3.4 billion locally funded and P4.5 billion foreign-assisted) for railways; P1.2 billion (locally funded)

for ports, lighthouses and harbors; P1.79 billion (P455 million locally funded and P1.3 billion foreignassisted) for roads and bridges; and P9.93 billion (P9.1 billion locally funded and P800 million foreign-assisted) for other governance projects. “ The DOTC has considered

several factors in selecting airports for funding in 2016’s locally funded budget proposal, such as commercial flight operations; request from airlines; recommendation from air planning; and CAAP [Civil Aviation Authority of the Philippines] for safety, security, capacity and accessibility improvements,” Bonifacio told lawmakers during deliberations for the agency’s budget at the House of Representatives.

Bonifacio also said the DOTC is supporting the Department of Tourism’s 10-million touristarrival target by modernizing the international gateways and other tourism airports.

She said the airports that will be modernized next are the Ninoy Aquino International Airport, P25 million; Laoag International

Airport, P13.5 million; Basco Airport, P33.2 million; Clark International Airport New Terminal Building, P2 billion; San Vicente Airport, P34 million; Taytay Airport, P8.8 million; Camarines Sur Airport, P1 billion; Zamboanga International Airport, P160 million; Butuan Airport, P2 million; Dipolog Airport, P25 million; Bagabag Airport, P11 million; Bicol International Airport, P747 million; and regional airports under public-private partnership, P4.8 billion.

Bonifacio added that the DOTC is also set to expand three secondary airports, namely, Siquijor Airport, with P40 million budget; Cotobato Airport, P51 million; and Ozamis Airport, P20 million.

The key secondary airports that will undergo rehabilitation are the

JFC still not withdrawing proposal to cut tax rates. . .

This will increase the country’s competitiveness in attracting foreign direct investments.

The CIT in the Philippines is currently at 30 percent, while Indonesia and Malaysia both impose a 25-percent CIT. Vietnam, on the other hand, imposes 22 percent; Thailand, 20 percent; and Singapore, 17 percent.

Vietnam, Thailand and Malaysia have enacted their own tax-restructuring laws in the last five years.

The Philippines’s personal income tax, meanwhile, is among the highest in the region. The country’s personal

income tax is at 32 percent, lower than Thailand’s and Vietnam’s 35 percent. Indonesia imposes a personal income tax of 30 percent; Malaysia, 26 percent; and Singapore, 20 percent. To offset revenue losses from the lowering of personal and CIT rates, the JFC said there should be an increase in consumption tax, including the excise tax on petrol.

Henares earlier said that certain provisions in the bank-secrecy law should be lifted first to help the BIR ramp up revenue collection, before the bill to lower income-tax

rates can be approved.

But the JFC said amending the bank-secrecy law should not be a precondition to passing the rate cuts on income taxes, even if the chamber supports the measure’s goal of improving transparency.

The business sector’s sentiment came at the heels of President Aquino’s resistance to mounting calls for tax-rate cuts, warning that the move would aggravate the country’s budget deficit and imperil its credit standing.

Mr. Aquino also supported Finance Secretary Cesar

ViracAirport, with P32-million budget; Sanga-sanga airport, P577 million; Roxas Airport, P95 million; and Antique Airport, P10 million.

In the same budget hearing, Party-list Rep. Rodel Batocabe of Ako Bicol asked Transportation Secretary Joseph Emilio A. Abaya to explain the delayed bidding process for the Bicol International Airport.

“This project began in 2009, and was promised its completion by 2016 before the end of the Aquino administration. Seven years later, and the airport isn’t even halfway done. At the rate these delays keep happening, it won’t be finished on time,” Batocabe said.

Batocabe cited the Government Procurement Reform Act, which provides for the awarding of projects within 144 calendar

days from date of publication of the “Invitation to Bid.” A close examination of the DOTC biddings revealed that it took 275 days to award the Bicol International Airport Development Project in 2013. Meanwhile, the bidding for Package 2A of the Bicol Airport Development Project is already 101 days delayed after the DOTC disqualified three complying bidders in August, the lawmaker said.

Abaya said that the DOTC is only following the procurement law, and “by following that law strictly, we are actually protecting the people.”

Bonifacio also said there are 37 seaports that will undergo rehabilitation and construction next year. The DOTC presented a proposed budget of P45 billion for 2016, lower than its 2015 allocation of P54.5 billion.

Continued from A1

V. Purisma’s opposition to calls for the increase in VAT in exchange for lowering personal income tax.

The Chief Executive warned that a chain reaction—in the form of hikes in transport fares and utility charges— will ensue with the raising of VAT. He also considered the move as “regressive.”

Sen. Francis G. Escudero, in his authored bill amending the National Internal Revenue Code, aims to adjust existing net taxable income levels from 32 percent to 25 percent, as well as nominal tax rates, by adopting adjustments

in individual income-tax rates to reflect the erosion of purchasing power caused by inflation.

A separate bill to adjust net taxable-income brackets is being pushed by Senate Ways and Means Committee Chairman Juan Edgardo M. Angara.

The House of Representatives’ version of the reform measure seeks to simplify the tiering scheme and the tax rate for compensation-income earners, self-employed, professionals and corporations. The measure also seeks to index the income-tax rate to inflation.