TCR Volume 2 Issue No 26 by The CenSEI Report

Strategic Analysis and Research by the

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CENTER FOR STRATEGY, ENTERPRISE & INTELLIGENCE

T H E

With Ramon at the helm, I now have the luxury of devoting more time to my personal endeavors, though I will continue to oversee and participate in the unending commitments of SMC ~ San Miguel Corp. chairman Eduardo Cojuangco Jr. after announcing his sale of an 11% SMC stake to its president Ramon Ang

Report Volume 2 - Number 26 • July 2-8, 2012

I accepted [the share purchase option] for the following reasons: the San Miguel vision set during my term is far from being achieved [and] a continuing commitment to him, the company's stakeholders and the employees to see through the realization of this vision ~ San Miguel Corp. president Ramon Ang on the ₧37-billion share deal

BUSINESS

4 Medical Insurance for All

NATION

14 PCOS: Making Sure Our Votes Count

WORLD

24 China’s Quest for Techno-Supremacy

TECHNOLOGY

32 Search Engines That Don’t Spy on You

Universal health insurance is one goal of national development. But what’s the cost and who are the winners and losers? • When PhilHealth foots the bill: What the state will pay if you get sick • Capital punishment: Private insurers balk at putting up more equity

With Comelec reheating the automated election dish served in 2010, here's the first part of a two-article report on what nasty bits may spoil the PCOS stew, and what good measures are needed to save the system • Buy one, take one: The High Court clears Comelec’s purchase of the 2010 system

In the next phase of its economic rise, China moves from the factory to the lab. Here are the targets of Beijing’s technological ambitions • Driven by brains: Asia is building knowledge-based economies, which run on intelligence, innovation, and creativity

If you’re worried about search engines gathering marketing data on you, here are the alternatives that safeguard your privacy • Browsing with privacy: How to keep e-snoops at bay • Right on target: Niche websites that zero in on tiny worlds

POINT & CLICK

HEALTH/LIFESTYLE

38 Stem Cell Therapy: To Be Young Again

Juan Ponce Enrile, Joseph Estrada and other senior stalwarts swear by stem cell therapy. Is it the fountain of youth? • For Kobe Bryant too: Why some professional athletes are lining up for regenerative treatment • To stem or not to stem: Where the research is legal and where it’s not • Stem cell primer: What you should know if you want to try it • The next step: Stemming from old cells

CONTENTS

BUSINESS

NATION WORLD TECHNOLOGY

You can access online research via the Internet by clicking phrases in blue

HEALTH/LIFESTYLE

Center for Strategy, Enterprise & Intelligence provides expertise in strategy and management, enterprise development, intelligence, Internet and media. For subscriptions, research, and advisory services, please e-mail report@censeisolutions.com or call/fax +63-2-5311182. Links to online material on public websites are current as of the week prior to the publication date, but might be removed without warning. Publishers of linked content should e-mail us or contact us by fax if they do not wish their websites to be linked to our material in the future.

Taking Less Bytes Than We Can Spew If the text typeface seems a bit smaller than usual this week, it is. To comply with email restrictions on the size of file attachments, we are trying out fonts that would deliver much the same amount of information, but in fewer pages and megabytes. In that way, email servers would transmit and receive The CenSEI Report without too many glitches. Most servers and bulk emailers prefer a maximum of three megabytes for all attachments. Thatâ&#x20AC;&#x2122;s a lot if the publication were all text, but graphs, tables and images quickly bloat the attachments close to or beyond 3 MB. So please bear with us as we adjust text, images and pages to maximize information delivery while limiting file size. Needless to say, the smaller fonts should not pose a problem for electronic readers, which can enlarge pages to the readerâ&#x20AC;&#x2122;s preferred text size. As for those who print The CenSEI Report to read in a folder and mark up for assistants to download linked material, they can enlarge the printout clicking the Page Setup button at the lower-left corner of the Adobe Print window, and setting the scale above 100%. The articles may also be a bit shorter, not only to cut down on pages and file size, but also to accommodate a number of readers who find the reports a bit too long. The preference for shorter stories is understandable: people may not have plenty of time to read, and many are used to the tight articles in newspapers and magazines, where paper and printing costs tend to limit the number of pages and the length of stories. But one thing we cannot compromise is the comprehensiveness of our articles, so that when The CenSEI Report covers a topic, we provide more salient material on it, including the wealth of online research and data, image and insight, than one can find even in leading news publications and websites. If we must shorten cited information from references, we will still link you to it, so you can get the full study, video, statistics, map or graphic. One other unabridged element in each Report article is the strategic insights and enterprising recommendations we strive to deliver on every issue and development we analyze and research. This week they include facing the challenge of a technologically resurgent China, safeguarding privacy when searching online, harnessing stem cell therapy for healthier, longer life, and how to make automated elections and national health insurance really work for the Filipino people. The CenSEI Report â&#x20AC;&#x201D; more concise, still precise, and always incisive.

BUSINESS

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Making Universal Health Care for Filipinos a Reality

It needs big money, better clinics and lots more By Victoria Fritz

STRATEGY POINTS The government aims to implement universal health care with 100% coverage by 2016 Many obstacles remain, in terms of identification of the true poor and increased enrollment for other groups, medical worker migration and weak regulation Universal coverage is seen as the way to reduce out-of-pocket health expenditures, with taxes from “sin products” proposed as the source of funding for universal coverage

CONTENTS BUSINESS NATION WORLD TECHNOLOGY HEALTH/LIFESTYLE

Making universal health care for Filipinos a reality

he government is embarking on an ambitious universal health care program, also known as Kalusugan Pangkalahatan, whose aim is 100% coverage by the year 2016. Its three strategic thrusts are:

health care services. The Senate has yet to approve its version of this measure, Senate Bill 2849, co-sponsored by Senators Pia Cayetano and Loren Legarda. Funding for this expansive project will be provided by added revenues generated by the revised “Sin Tax Law.” According to Budget Secretary Florencio Abad, this bill is expected to raise ₧60.7 Billion in its first year of implementation, which will be used “primarily for the expansion of health care coverage for all indigents and informal sectors under the National Health Insurance Program and the rehabilitation and development of regional health units and district, provincial and regional hospitals.” However, the Bureau of Internal Revenue sees a more conservative figure coming from the said bill, and expects to generate only ₧33 Billion in added collection every year.

1. Expanded enrollment in the national health insurance program to give financial protection to the poor. According to DOH figures in 2010, only 53% of the entire population was covered by the program. However, their official documents did not elaborate on how this will be achieved. 2. Improved access to quality hospital and health care acilities through upgrading government hospitals 3. Attainment of health-related Millennium Development Goals (MDG) such as reducing maternal and child mortality, and the number of TB, malaria and HIV/ AIDS cases and non-communicable diseases. While the Philippines remains on target for its MDGs, it is lagging behind in reducing maternal mortality. As of the latest 2011 figures, maternal mortality stood at 221 per 100,000 live births, a deterioration from the ratio of 162 per 100,000 live births in 2009. The MDG target is 52 per 100,000 live births.

The revised version of the “Sin Tax Law” was passed in Congress in early June. It is still awaiting passage at the Senate. With the conflicting numbers that is expected to bankroll universal health care, it is imperative to define the salient points of this program.

In early June, the House of Representatives approved House Bill 6048, which is intended to amend Republic Act 7875, or the National Health Insurance Act of 1995, to ensure all Filipinos have access to basic

The

Health Secretary Enrique Ona defines it as “the highest possible quality of health care that is accessible, efficient, equitably distributed, adequately funded and fairly financed while appropriately used by an informed and empowered public.” Echoing Secretary Abad, he lists the three pillar resources as: health human resources, health facilities, and health financing, with the aim of giving access to health care to the poorest sector.

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6 In the Prince Mahidol Award Conference he physicians. For medical conditions, attended in Bangkok in January this year, 30% of the amount goes to professional the focus was universal health coverage, fees. For surgical procedures, the doctor with an emphasis on financing matters. receives 40%. Improvements to this system Participants agreed that were being discussed in the as many as 100 million June board meetings people worldwide of PhilHealth. As many as are driven below the poverty line due to direct The No Balance Billing is 100 people payments for health care. worldwide are applicable for the most The vital components common medical and surgical driven below would be progressive conditions. Under this policy, the poverty line and sustainable funding no other fees can be charged due to direct sources, comprehensive beyond the packaged rates. benefit package, and In Congress, the House payments for primary health care recently passed the â&#x20AC;&#x153;PINOY health care approach. Health Insurance Actâ&#x20AC;? which aims to provide Some concrete measures comprehensive and universal already being implemented are the Case health care services to all Filipinos. Rate Scheme/No Balance Billing, and the House Bill 6048 amends Republic Act 7875, Conditional Cash Transfer. In the Case Rate or the National Health Insurance Act of Scheme, the Philippine Health Insurance 1995, to extend insurance coverage to 100% Corporation, or PhilHealth, reimburses of the population. health care providers a predetermined Implementation of universal health care fixed rate for each treated case. The program covers 11 common medical In the present setup, PhilHealth provides cases: dengue, pneumonia, essential subsidies for inpatient cases, with their site hypertension, cerebral infarction, featuring a table of rate ceilings/maximum cerebrovascular accident, acute allowances. At the moment, outpatient gastroenteritis, asthma, typhoid fever and coverage is limited to day surgeries, new-born care. Among the 12 surgical dialysis and cancer treatment procedures cases are: radiotherapy, haemodialysis, such as chemotherapy and radiotherapy. maternity care, normal spontaneous Requirement for eligibility is premium delivery, caesarean section, appendectomy, payment for three months, within six cholecystectomy, dilatation and curettage, months prior to confinement. thyroidectomy, herniorrhaphy, mastectomy, hysterectomy and cataract surgery. This In one phase of the universal health care was created to avoid unnecessary tests and program, the DOH, through PhilHealth, procedures being done by hospitals merely released the Implementing Guidelines for to raise income. the universal health care Primary Care Benefit I (PCB1) package for Transition The amount is inclusive of hospital Period 2012-2013. The objectives are: charges and professional fees by attending

CONTENTS BUSINESS NATION WORLD TECHNOLOGY HEALTH/LIFESTYLE

Making universal health care for Filipinos a reality

1. Expand the number of services included in the Primary Health Care benefits for PhilHealth members; this entails the addition of primary preventive services (such as consultations, examinations, even lifestyle change counseling) diagnostic examinations, and drugs and medicines for certain conditions 2. Increase the utilization rate for services included in the Primary Health Care benefits for PhilHealth members;

and medicines account for about 50% of total out-of-pocket expenses, this will greatly reduce the individualâ&#x20AC;&#x2122;s health care burden. Those covered include members under the Sponsored Program (private firm employees whose employers pay their premium), Organized Groups (groups in the non-formal sector who are registered with an authorized government regulatory body and OFWS, and their qualified dependents. The PCB providers will be government health facilities.

3. Enhance incentives for PCB providers to promote healthy behaviour, prevent diseases and/ or associated complications, and facilitate appropriate referral, and;

Implementation challenges and obstacles

4. Ensure complete and timely reporting, of health data for monitoring and performance assessment and evaluation purposes. Expanding services. In terms of the depth of coverage, there is a current bias toward in-patient services. The implementing guidelines mentioned above for the 2012-2013 transition phase makes a marked expansion of services offered to include outpatient consultation, examination and diagnosis for certain diseases, plus coverage for medicines required as such. All these were not previously included in the PhilHealth benefits. Given that drugs

The

Expanding coverage. One express aim of DOH is to expand coverage. According to a preliminary study by Rosario Maranan for the Philippine Institute for Development Studies, published in November 2011, there is some difficulty in identifying poor families to be added to the Sponsored Program. The selection and enrollment in the Sponsored Program are initiated by the local government units and subject to political patronage. So it is important to have accurate targeting, and only families identified as poor under the National Household Targeting System for Poverty Reduction (NHTS-PR) should be included. Looking at the 2003 and 2008 National Demographic and Health Survey (page 118), Maranan noted that in both years the major reasons for not getting medical

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treatment was a lack of financial protection from costs.

system. There are some disparities in the way PhilHealth and the NSO defines formal employment. Beyond measurement differences however, the real problem lies in the non-compliance of employers, especially small enterprises. The proposed solution is to get third-party data from other government agencies like the SSS to enlarge the list of employees. Also, PhilHealth can ask LGUs to require proof of PhilHealth contributions as a pre-requisite to issuing business permits.

So this still points to the first goal of DOH in implementing universal health care: expansion of coverage. Membership in PhilHealth has consistently grown in recent years. Maranan bases her figures on PhilHealth data, and noted that PhilHealth beneficiaries (principals and dependents) as a ratio of total population went up from 59% in 2007 to 79% in 2010. Details can be seen in the table below: Unique problems in each group. In aiming for 100% coverage, there are unique problems to each group of members. For the employed sector, the rate is surprisingly low, given the mandatory nature of the

In contrast, the bloated figures (154% for 2010) for the sponsored indigents program hint at a flawed targeting system. The increase in number for this group can be attributed in part to renewed ties with local chief executives and private organizations and big corporations providing counterpart

MAJOR REASONS FOR NOT ACCESSING HEALTH CARE

Weather index quintile

Knowing Getting Getting where permission money to go for to go for for treattreatment treatment ment

2008 NDHS Lowest

16.1

Second

10.1

Middle

8.3

Fourth

5.2

Highest

2003 NHDS

65.4

59.7

48.4

5.2

Total

74.0

38.2

Problem in accessing health care

Distance to health facility

Having to take transport

57.8

56.1

34.4

26.4

17.2

12.9

31.5

25.7

17.3

12.8

Not wanting to go alone

31.8

22.1

19.5

16.5

13.8

Concern no female provider available

29.6

22.2

16.7

12.9

10.1

8.4

55.1

27.4

26.5

19.8

17.3

Concern no provider available

54.0

46.1

36.1

32.9

23.4

36.8

Concern no drugs available

At least one problem acessing healthcare

71.0

92.3

59.1

85.5

46.6

78.6

30.0

57.2

40.2

47.2

69.0

74.6

Lowest

27.4

22.0

87.1

59.1

57.1

44.0

31.5

93.5

Middle

13.6

8.4

73.0

22.2

20.3

25.2

18.0

80.8

17.2

59.7

Second

19.2

12.7

80.1

33.8

32.5

28.8

20.9

Fourth

10.7

7.5

62.9

18.7

17.4

25.5

18.5

Total

14.9

10.7

67.4

27.2

25.6

28.1

20.5

Highest

8.6

6.8

45.6

13.6

12.0

22.0

87.1

73.6

77.1

Source: â&#x20AC;&#x153;Expanding Social Health Insurance Coverage: New Issues and Challenges,â&#x20AC;? Rosario Maranan, Philippine Institute for Development Studies, November 2011, page 6.

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Making universal health care for Filipinos a reality

PHILHEALTH MEMBERSHIP AND BENEFICIARIES COVERAGE, 2007-2010 No. of members (in millions) Government employees Private employees Sponsored indigents OWP

1.9 7.9 6.0 2.3

Individually paying members Non-paying members Total

3.7 0.5 22.4

Government employees Private employees Sponsored indigents OWP Individually paying members Non-paying members Total

1.9 7.0 5.4 2.1 3.3 0.5 20.2

Government employees Private employees Sponsored indigents OWP Individually paying members Non-paying members Total

1.9 6.4 3.3 1.8 2.7 0.4 16.5

Government employees

1.8

Private employees Sponsored indigents OWP Individually paying members Non-paying members Total

% dist’n 2010 8.7 35.0 26.9 10.4

16.7 2.2 100.0 2009 9.4 34.7 26.7 10.4 16.5 2.3 100.0 2008

11.3 38.8 19.8 11.2 16.5 2.4 100.0 2007 10.9

7.0 2.7 1.6 2.9 0.3 16.4

42.8 16.6 9.7 18.0 2.1 100.0

Coverage rate as % of eligible members

No. of beneficiaries* (in millions)

% dist’n

64.5 54.0 154.1b

6.6 22.6 22.1 6.9

9.4 32.3 31.6 9.9

32.9c

10.9 0.9 70.0

15.6 1.2 100.0

6.4 20.2 19.7 6.2 9.7 0.8 63.0

9.2 29.6 31.7 10.7 17.8 0.9 100.0

37.1d

6.3 18.4 11.9 5.4 7.9 0.7 50.6

11.3 33.8 24.0 11.7 18.2 1.0 100.0

67.8

6.0

11.5

44.1d 66.3 50.7 139.6b 29.6c 40.9d 67.3 47.7 85.4b 24.8c

55.1 72.7b 24.7c 39.5d

20.1 10.0 4.7 8.6 0.6 50.0

38.6 21.2 10.7 17.2 0.9 100.0

a/ beneficiaries refer to principal members and dependents b/ as % of poor households c/ combined OFW and individually paying members d/ refers to contributory program only and estimated relative to total number employed Source: “Expanding Social Health Insurance Coverage: New Issues and Challenges,” Rosario Maranan, Philippine Institute for Development Studies, November 2011, page 12.

contribution for indigent families. Still there is an error in the measurement, as 23 of 44 provinces have enrolled beneficiaries in excess of the actual number of poor households. The over-enrollment is estimated to account for “57% to 64% of the actual number of poor households” in those

The

provinces. Even more critical, only 21% or the households considered poor under the NHTS-PR are covered under the Sponsored Program as of 2010. This poor targeting results from lack of a foolproof mechanism at the ground level.

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10 According to Maranan, “interviews with some barangay officials indicate that the selection process is ad hoc,” which makes it susceptible to becoming highly politicized, i.e., subject to patronage politics. For individually paying persons, the government launched a program wherein small organized groups are given a discount on premium contributions if they enroll at least 70% of eligible members, with the discount increasing as enrollment increases. Success has been limited so far, and there is a need to develop a strategy to more effectively reach these small groups and the unorganized formal sector.

the Philippines reported that by 2005, 800 hospitals in certain provinces in the Visayas and Mindanao have partially closed. The paper also noted weak health regulation, along with weak enforcement of Republic Act 8344, which prohibits the demand of deposits or advance payments in exchange for the confinement or treatment of patients in clinics or hospitals in certain cases.

Financing universal health care Everyone in the know regarding health care is aware that Philippine spending on health care is less than 5% of its GDP (the standard set by WHO). According

Exodus of health-care workers. According to a paper by the Medical Action Group (MAG), entitled Key features of current “Challenges in Attaining PhilHealth system Universal Health Care in the Philippines,” As summarized in the Maranan study published by the another obstacle facing Philippine Institute for Development Studies, the following are the health care system is key features of the current PhilHealth system (page 7). the exodus of workers. In 2009, POEA reported Five groups of beneficiaries: that 13,014 nurses 1. Employed sector, or those employed in the private went to work abroad. and government sector Meanwhile, many 2. Overseas workers doctors are shifting 3. Individually paying members, such as businessmen, to nursing for a better actors, writers, and other self-employed professionals chance to work abroad. 4. Sponsored, or the poor/indigent As mentioned in the 5. Non-paying, including retirees and pensioners study, according to Premium contributions for the above-mentioned former DOH Secretary groups, respectively, are: Dr. Jaime Galvez-Tan, 1. 2.5% of employed sector members, with a doctors are shifting maximum monthly salary base of ₧ 30,000. to nursing at a rate of 2. ₧900 a year flat rate about 1,200 a year. Due 3. ₧1,200-2,400 a year to this lack of doctors 4. ₧1,200 to be paid by the government and nurses, the Private 5. None Hospitals Association of

CONTENTS BUSINESS NATION WORLD TECHNOLOGY HEALTH/LIFESTYLE

Making universal health care for Filipinos a reality

to the MAG paper, at 3.8% of GDP for 2009, our health budget compares miserably with those of our next-door neighbors, such as Vietnam (6.6%) and Malaysia (4.3%).

by our district health system and would also include hospitalization costs in tertiary hospitals”, such as our regional medical centers and private hospitals. If tax collection improved from its present 14% of GDP to 17% of GDP, this 3% difference would amount to about ₧300 Billion, just about enough to fund it.

During a media-briefing forum last May 10, Dr. Ramon Paterno of the National Institutes of Health at the University of the Philippines presented his study, “How do we finance universal health care?” The study sought to determine the price of universal health care, and the feasibility of funding it. Dr. Paterno posited that if reforms were introduced to rationalize health spending, the cost would be about ₧350 billion a year. This would provide an “essential health package to be delivered

In his presentation, Paterno indicated that, “If we want to protect our people from health expenditures that pushes them into poverty, we have to reduce out-ofpocket expenditure from 57% in 2008 to 20% by 2015. This means government’s share, both national and local, must increase to about 45-55% of our country’s total health expenditure.”

Benefits for principals and their dependents as follows: • In-patient care in accredited hospitals (including room and board, drugs and medicines, professional fees, laboratories and operating room) for confinements of not less than 24 hours; • Out-patient care (including day surgeries, dialysis and cancer treatment procedures such as chemotherapy and radiotherapy) in accredited hospitals and free-standing clinics; • Normal spontaneous deliveries up to the fourth one in accredited hospitals and birthing homes, maternity and lying-in clinics for a fixed case-payment of ₧6,500 (inclusive of ₧1,500 for pre-natal care); • Newborn care package (including eye prophylaxis, umbilical cord care, Vitamin K, thermal care, administration of BCG vaccine and resuscitation of the new born, first dose of Hepatitis B immunization, and new born screening) from duly accredited hospitals and non-hospital facilities such as lying-in

The

clinics, midwife-managed clinics, birthing homes, rural health units, ambulatory surgical clinics and other analogous health facilities for a maximum coverage of ₧1,000; • TB treatment of new cases of pulmonary and extra-pulmonary tuberculosis in children and adults through the Directly Observed Treatment Shortcourse or DOTS (including diagnostic work-up, consultation services and anti-TB drugs required in an outpatient setup) in accredited TB-DOTS centers with a fixed case-payment of ₧4,000; • SARS and Avian Influenza package (including professional fees, hospital charges) for a coverage of ₧50,000 per case for non-health worker members and their dependents and ₧100,000 per case for forefront and high risk health care workers, and; • Influenza A (H1N1) package (including room and board, drugs and medicines, X-ray, laboratory and others, operating room, and professional fees) for a coverage of up to ₧75,000 for non-health worker members and ₧150,000 for health worker members.

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Making universal health care for Filipinos a reality

He recommended that the premiums of the nonprofessional segment be subsidized by taxes, a view echoed by Senator Edgardo Angara. According to the MAG study, budget support for public hospitals like the Tondo Medical Center, East Avenue Medical Center, and others, has been decreasing. In effect, out of pocket payments have been increasing. The resources will be needed for truly reaching 100% of the population with adequate financial protection, an expanded list of services, and improved facilities. This discussion naturally leads to a look at the revised Sin Tax Law, mentioned at the start. According to PhilHealth president Dr. Eduardo Banzon, the health budget for 2012 has been increased to almost ₧44 billion, up from 2011’s ₧33 billion. Depending on which government agency is making the estimate (BIR’s ₧33-billion figure versus the Budget Department’s P60billion tab), revenues from the revised sin tax can significantly increase the budget for health care, although if we go by the proposal of Dr. Paterno, we still have a long way to go.

Challenges facing private insurance Way back in 2006, the Department of Finance ordered a gradual increase in capitalization for non-life insurance companies. DOF Department Order 27-06 stipulated stipulated an increase in paid-up capital of the insurers to ₧50 million by end-2006, ₧75 million by end-2007, ₧100 million by end-2008, ₧125 million by end-₧2009, ₧175 million by end-2010, and P250 million by end-2011. In January, the Philippine Insurers and Reinsurers Association (PIRA) lodged a protest, more than five years after the order was finalized. PIRA is an umbrella organization of more than 80 small and medium insurance companies. They said the increased capitalization requirement was discriminatory against them. However, the Philippines has lower capital requirements than even neighboring countries in Southeast Asia, according to DOF Secretary Cesar Purisima. In Malaysia, the capital requirement is $33 million. Singapore’s is $20 million, while Indonesia’s is $12 million and Thailand’s is $6.44 million. The Philippines’, at ₧175 million, is only $4.6 million. Beyond the comparison, raising the capital requirement is essential to bringing greater stability to that insurance market, and safeguard it against possible shocks, Secretary Purisima said as he defended Order 27-2006. Companies who cannot raise the required capital have been encouraged to merge. More recently in May, the Insurance Commission (IC), which regulates the industry, told local media that the increase in capital requirement from the present ₧175 million to ₧1 billion by 2016 could be deferred. The Philippine Life Insurance Association (PLIA) said that this ruling could close more than half of the 84 nonlife insurance firms. As to how long this ruling will be deferred, the IC has not made a categorical decision.

CONTENTS BUSINESS NATION WORLD TECHNOLOGY HEALTH/LIFESTYLE

NEWS ON THE NET Business

Korean bank vows extra $630 M in infrastructure loans Korea Export-Import Bank (Eximbank) looks to disburse $630 million in loans to fund the government’s infrastructure buildup under the publicprivate partnership (PPP) program. The amount is a commitment on top of the $1.7 billion pledged by the state-owned agency late April this year. According to Park Tae-ik, Korea Eximbank chief representative, their wish for PPP involvement could come in the form of official development assistance (ODA) loans for publicsector entities that want a piece of the action, or in the form of financing for privately held entities under South Korea’s Economic Development Cooperation Fund (EDCF). Park said South Korea is keen to support projects and programs in renewableenergy and natural-resources development. He added that support under an EDCF window typically costs only 0.15% a year for a 40-year loan, which includes a 10-year grace period. Park said South Korea plans to pour an additional $1.2 billion into EDCF this year. Meanwhile, the Philippines received a $350-million loan (₧14.87 billion) from the Asian Development Bank. The loan was approved to help the Philippines improve its business climate through a mix of policy reforms and programs to promote competitiveness and develop labor skills among out-of-school youth. ADB said in a statement that the loan will finance the so-called Increasing Competitiveness for Inclusive Growth Program. ADB said it would work with the Department of Labor and Employment to design a youth job search program, called MyFirstJob, which will be piloted in 2013. ADB

said MyFirstJob is one of several initiatives that will be used to make the labor market more inclusive. Others include the tourism industryled skills development program and a new tourism quality assurance and accreditation system, which will improve skills and competitiveness in the tourism industry.

SE Asian banks wellpositioned – Moody’s Banks in Southeast Asia have improved credit fundamentals, making them better-placed than Western peers to grow amid currently challenging global economic conditions, Moody’s Investor Service said in a statement Thursday last week. Jean-Francois Tremblay, Moody’s associate managing director, said that the stable credit quality of Asian banks throughout the global financial crisis has resulted in a comparative improvement of Asian banks and their Western peers. “In contrast to Western banks that have experienced significant credit quality challenges since the outset of the global financial crisis, Asian banks are only moderately leveraged, largely deposit-funded and generally conservative in their lending,” he noted. Moody’s said it has a stable outlook for large banks in Singapore, Indonesia, Malaysia, Thailand, the Philippines and Sri Lanka, but a negative outlook for those in Vietnam and India. A stable outlook means banks in countries concerned have “sufficient buffers” in case of “a worse-than-expected economic scenario.” According to a Philippine Daily Inquirer report, the statement of Moody’s appears to reinforce the claims of Philippine regulators, who said banks in the country have very

The

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limited exposure to the debt woes in Europe. The Bangko Sentral ng Pilipinas earlier said that its latest stress test revealed that only 1.1% of assets of banks in the country are invested in euro-denominated assets. .

Fresh AMLA changes required by October To avoid being blacklisted by the Financial Action Task Force, additional amendments to the Anti-Money Laundering Act have to be passed by October. The FATF strongly encouraged the Philippines to pass the remaining AMLA amendments before the FATF plenary in October, according to the statement of AMLC Executive Director Vincent Aquino issued June 22. Aquino was referring to Senate Bill 3123 that expands the list of covered institutions, provides a broader definition of money laundering and increases the number of predicate crimes to include bribery, malversation of public funds, human trafficking, tax evasion and environmental offenses. The Philippines narrowly missed getting blacklisted after Republic Acts (RA) 10167 and 10168, which amended the AMLA and criminalized terrorist financing, respectively, were signed into law by President Aquino just before the FATF met in Rome last week. The FATF earlier this year downgraded the Philippines to its "dark grey" list, warning of a possible blacklisting if it failed to amend the AMLA law and pass a measure against terrorist financing. During the FATF meeting in Rome last week, the Philippines was upgraded to the "grey" list. Blacklisted countries are subject to sanctions that are expected to delay remittances and lead to higher transaction costs.

• July 2-8, 2012

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Making Every Filipino Vote Count With PCOS machines back in harness, Comelec and the citizenry must join hands to ensure the people’s will wins

With the Supreme Court decision allowing the Commission on Elections to buy all 82,200 Precinct Count Optical Scan (PCOS) machines used in the 2010 elections, the effort to safeguard election integrity shifts to both the Comelec and the citizenry, including election workers of political groups, joining hands to institute and implement iron-clad mechanisms against computerized fraud.

By Ricardo Saludo

STRATEGY POINTS

In this two-part article, The CenSEI Report reviews the technology, procedures and 2010 performance of the PCOS automated election system (AES), then expounds on recommended measures to help safeguard the integrity of elections using the voting, counting and canvassing technology and process. This first part will focus on how well or not so well PCOS-AES did in 2010.

In reusing the PCOS automated election system, top priority is addressing its weaknesses and failings laid bare in the 2010 polls Safeguards and procedures were sidestepped in last elections. Without them, it would be better to go back to manual counting Election software manipulation happens even in advanced nations. Unless it can be stopped, automated polls are not secure

Smartmatic’s Cesar Flores shows PCOS features to Senators Koko Pimentel and Juan Ponce Enrile YouTube

Right from the start, the election automation project was fraught with problems. It began two decades ago when then Comelec Chairman Christian Monsod made it part of his election modernization program, as an ABS-CBN timeline recounts. In 1994 the Commission was ready to bid out an automation project, but Congress failed to pass a law mandating AES. RA 8436 was passed in December 1997, for national elections the following year, but the 1998 voting and counting were again manual (see The Long Road to Election Automation graphic on page 16).

In her first State of the Nation Address in 2001, Gloria Arroyo declared election

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automation a top priority of her on use of the AES in the 2010 elections, administration and released ₧2 billion for and 80% the next day. Local candidates the project. It was covered in Chapter 13 of were proclaimed in 24 hours, and senators the 2004-2010 Medium-Term Philippine within a week, the CAC added. Losers in Development Plan. Comelec contracted the presidential and vice-presidential races Mega Pacific Consortium to undertake AES conceded even before the official count in in 2004, but the Supreme Court voided the Congress began. Plainly, it was night and ₧1-billion deal for violating procurement day vis-a-vis manual polls. As for problems, laws and rules. RA 9369 was passed in the CAC said they “were not severe enough 2007 for the 2010 polls, and ₧11.3 billion to allow interested parties to manipulate was allocated by Congress, the election results.” bringing the total provided by the Arroyo government Speed of counting Where PCOS went to $15 billion. was the yardstick wrong. The Center for of ‘success,' so that People Empowerment in Automated national Governance has a markedly many people elections finally became different view. CenPEG overlooked what recounted in its “Incident reality in May 2010, under the system procured by was happening Reports on the May 10, Comelec from Smartmatic2010 Automated Elections” on the ground TIM Corporation, a eight major deficiencies: ~ Center for People joint venture between PCOS malfunctions and Empowerment Smartmatic, a Londonbreakdowns, defective for Governance headquartered, Latin memory cards (containing American-run information operating programs), technology company, and Makati-based, transmission snafus and connectivity Filipino-owned Total Information problems, below-specification thermal Management. The public so used to paper, missing or misused ultraviolet waiting days or weeks of canvassing were scanners, and old-fashioned voter astounded when results were speedily disenfranchisement, long queues, vote canvassed and widely accepted. Municipal, buying and other irregularities. provincial, and regional tallies got to the Comelec data server within hours of The result of CenPEG’s Project 3030 with polls closing. the European Union, the report wondered: “Is ‘success’ measurable only by how “By midnight on Election Day, 60% of ‘fast’ election results are — which itself results had been transmitted,” recounted is disputable? ... Speed thus became the the Comelec Advisory Council in its report yardstick of ‘success’ to the extent that

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16 many people overlooked what really happened on the ground.” Indeed, the very speed of results transmission raised questions: “Until now, Comelec cannot explain convincingly how and why election results reached national canvassing servers so fast — starting even an hour before the official closure of voting — when the automated election system at the precinct level was hounded by technical breakdowns and irregularities.” In fact, argued CenPEG, minimum technical and legal safeguards were set aside, raising serious questions about the integrity of results. Among these failings were “the absence of an independent source code review, inadequate voter education and poll watch training, poor estimation of the country's infrastructures to support a modern election technology, absence of voters' verifiability, delays in preparation and tendency to short-cut requirements, delayed or last-hour issuance of Comelec general instructions, and inadequate mock elections and field tests.” PCOS defenders would note that some leaders of CenPEG, like former Philippine Computer Society head Augusto Lagman, who subsequently served as Comelec commissioner until recently, had lobbied for the rival Open Election System.

THE LON

Co GMA

June-October 1993 Under Chairman Christian Monsod’s 1992 modernization program, the Commission on Elections obtained advice from international consultants and viewed possible technologies abroad, to shortlist election automation options January-December 1994 Anticipating the passage of a poll automation law, Comelec made preparations for automation, including bidding for equipment, but no legislation was passed June 7, 1995 President Fidel Ramos signs RA 8046 authorizing pilottesting of automation in the first Autonomous Region in Muslim Mindanao elections in 1996 June 11, 1996 Voter’s Registration Act of 1996 mandated a computerized and updated voters lists September 9, 1996 Automated ARMM elections were declared successful. In October-December, the equipment was demonstrated nationwide December 22, 1997 Election Modernization Act (RA 8436) enacted, authorizing the Commission on Elections to use an automated election system (AES) in the May 1998 polls November-December 2000 Comelec conducted bidding for Automated Counting and Consolidation of Results Systems (Accors) project, but the bidding failed July 23, 2001 In her first State of the Nation Address, President Gloria Arroyo released ₧2 billion for election automation

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G ROAD TO ELECTION AUTOMATION

ompiled from timelines by ABS-CBN and 7 on Mega Pacific deal and 2010 elections

October 29, 2002 Comelec set modernization of 2004 elections in Resolution No. 02-170 January and February 2003 President Arroyo released a total of ₧3 billion for 2004 election automation April 15, 2003 Comelec awarded ₧1-billion 2004 automation contract to Mega Pacific Consortium August 5, 2003 After Comelec denied petitions against Mega Pacific deal, the Information Technology Foundation of the Philippines petitions the Supreme Court to void the contract January 13, 2004 The Supreme Court voided the Mega Pacific contract, citing “clear violation of law and ... reckless disregard of [Comelec’s] own bidding rules and procedure.” The High Court also instructed the Ombudsman to investigate the deal. June 30, 2006 After repeated prodding by the Supreme Court, Ombudsman Merceditas Gutierrez recommended charges over the Mega Pacific deal against members of the Comelec bidding committee that handled it, and referred Commissioner Resurreccion Borra to Congress for possible impeachment September 27, 2006 Ombudsman Gutierrez absolves all respondents in Mega Pacific controversy for “lack of probable cause,” prompting nine senators to petition the High Court the next month to annul the Ombudsman’s ruling and cite her in contempt

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January 23, 2007 Congress enacts Election Automation Law of 2007 (RA 9369) mandating the automation of the 2010 elections August 11, 2008 AES was pilot-tested in the Autonomous Region in Muslim Mindanao, with positive assessments from ARMM voters and the Comelec Advisory Council March 24, 2009 RA 9295 allocated ₧11.3 billion for election automation June 10, 2009 After disqualifying seven bidders, reconsidering four, and testing equipment, Comelec awarded the AES deal to Smartmatic-TIM, which put in the lowest bid of ₧7.2 billion May 2010 After testing glitches were addressed with new computer memory cards, the Precinct Count Optical Scan (PCOS) machines are used in the May 2010 national elections, with widespread acceptance by the electorate and foreign observers. There were claims of false transmission of results by a cheating syndicate with hidden machines, but the Congress report on the 2010 polls declared “there was no failure of elections,” while urging that “all the loopholes in the PCOS and the automated election process should be firmly plugged by either the current provider or by another more assiduous supplier.”

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PCOS voting and counting, outlined by former Comelec Commissioner Augusto Lagman

OES would retain manual voting and counting, but use computers to encode and transmit precinct results via Internet and cellphone to canvassing centers and the Comelec, while posting scanned election returns online. With more than 80,000 encoders plus hundreds of thousands of ERs online, OES proponents argued, massive fraud would be hard to commit and even harder to conceal under the far less costly P4-billion system. And there would be less dependence on complex, failure-prone software and hardware. But Comelec chose the PCOS system, which uses optical mark readers (OMR) to count votes indicated with shadings in multiple choice ballots. What risks to address. Other entities with no rival system to advocate have

also assessed PCOS risks. Pacific Strategy & Assessments, a security, crisis management and business consultancy, produced a risk assessment of the system in April 2010. PSA cited lack of testing, unclear storage facilities, undisclosed source code needed to verify programming, power shortages and transmission glitches, and some unclear or doubtful arrangements for digital keys, machine transport, ballot printing, staff training, and voter lists (see pages 3-7 in PSA report). Not to mention hackers and jammers. San Beda law professor Farrahmila A. Mala and Centro Escolar professor Rafael D. Pangilinan of the Social Arts & Humanities Department made a detailed study of legal, technical and operational aspects of the AES. The report, published in Lumina, the journal of Bicolâ&#x20AC;&#x2122;s Holy Name University,

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in March last year, looked closely at how the system and its countless procedures and safeguards complied with provisions of the 2007 election automation law, as well as upright voting and canvassing standards. Contingency and failure measures were also explained, as well as the crucial random manual audits in five precincts per district needed to check if the system worked. The Consortium on Electoral Reforms, under election advocate Ramon Casiple of the Institute for Political and Electoral Reforms, undertook its own monitoring and assessment program, Bantay Eleksyon 2010, with assistance from the EU, U.S. Agency for International Development (USAID), the U.N. Democracy Fund, and the International Foundation for Electoral Systems. CER’s final report, “Successful Automated Election System Leads to an Essentially Fair and Free 2010 Philippine Elections,” provided a comprehensive analysis and reporting of PCOS as designed and in action, plus the historical, legislative, political and procurement aspects of AES and the 2010 elections. The CER report detailed problems in various areas:

failure of elections in certain areas, some ballot rejection, absence of secrecy folders, the use of different kinds of thermal paper and ballots, a citizens’ watchdog report of 7,500 PCOS machines failing to transmit results (almost one-tenth of the total), and nearly 800 incidents involving the

PCOS machine components, as presented in UP College of Law-CenPEG 2009 report

From Tanggulang Demokrasya presentation on alleged PCOS fraud in 2010 elections

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20 counting devices, including 457 monitored by Bantay Eleksyon. Perhaps the most significant and widespread failing, however, were the delays and defective procedures in the random manual audits to check PCOS performance and counting accuracy. Computerized cheating conspiracy? Strict implementation of PCOS safeguards and standards is needed to block possible computerized cheating conspiracies,

Programmer Clinton Curtis testifying on Ohio computer poll fixing YouTube

The Comelec-Smartmatic buy-one-take-one deal By Atty. John Carlo Gil M. Sadian

Back in 2004, the Supreme Court voided the Mega Pacific contract to automate the May 2004 elections. This year, objectors led by Davao Archbishop Fernando Capalla again hailed the Commission on Elections to the High Court over its decision to buy the 82,200 Precinct Count Optical Scan (PCOS) vote counting machines. But this time, the Comelec got its way. Last year Comelec asked Congress for ₧10.4 billion so it could get a new automated election system (AES) for the 2013 elections. But it got ₧7.96 billion. That sum, according to the Comelec, ruled out the possibility of acquiring or leasing a new AES from a new provider. So on March 30, 2012, the Comelec entered into a contract with Smartmatic-TIM for the purchase of the PCOS machines and all related systems used in the 2010 elections for ₧1.83 billion, after the ₧7.2 billion rental paid in 2010 was deducted from the purchase price. Four separate petitions were filed before the Supreme Court seeking to nullify the Comelec’s exercise of the option to purchase (OTP) the machines. Reasons: 1) the option period provided for in the AES contract between the Comelec and Smartmatic-TIM had already lapsed and, thus, could no longer be extended, such extension being prohibited by the contract

2) the extension of the option period and the exercise of the option without competitive public bidding contravene the provisions of RA 9184 3) despite the palpable infirmities and defects of the PCOS machines, the Comelec purchased the same in contravention of the standards laid down in RA 9369. The Court dismissed the petitions. On the first issue (OTP already lapsed), the Court held that “While the contract indeed specifically required the Comelec to notify Smartmatic-TIM of its OTP the subject goods until December 31, 2010, a reading of the other provisions of the AES contract would show that the parties are given the right to amend the contract which may include the period within which to exercise the option. There is, likewise, no prohibition on the extension of the period, provided that the contract is still effective.” On the second issue (lack of public bidding), Justice Abad’s concurring opinion is enlightening: “Petitioners are of course also right that COMELEC’s purchase could not as a rule be made without the benefit of a public bidding where other parties can make offers to supply COMELEC with the equipment and systems that it needs for the 2013 elections. But R.A. 9184,

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U.S. election fraud expose book author Mark Crispin Miller YouTube

which happen even in advanced countries like the U.S. (see Mark Miller and Clinton Curtis videos). In the 2010 polls, a selfproclaimed whistleblower nicknamed Koala Bear for his mask, alleged in TV interviews a widespread conspiracy using PCOS machines in a hidden location (see whistleblower video). That focused suspicion on 60 PCOS machines found in Antipolo, which Comelec then brought to the Senate for investigation.

the Government Procurement Act, allows certain exceptions to such requirement. It provides that the procuring government agency may, in order to promote economy and efficiency, resort to any of the alternative methods of procurement, including negotiated procurement, provided the procuring agency ensures the most advantageous price for the government.” Justice Peralta, in the Decision itself, believed that dispensing with public bidding is proper considering that the new lease contract with Smartmatic is “more advantageous to the Comelec, because the ₧7,191,484,739.48 rentals paid for the lease of goods and purchase of services under the AES contract was considered part of the purchase price. For the Comelec to own the subject goods, it was required to pay only ₧2,130,635,048.15. If the Comelec did not exercise the option, the rentals already paid would just be one of the government expenses for the past election and would be of no use to future elections.”

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Justice Peralta added that “Assuming that the exercise of the option is nullified, the Comelec would again conduct another public bidding for the AES for the 2013 elections with its available budget of ₧7 billion. Considering that the said amount is the available fund for the whole election process, the amount for the purchase or lease of new AES will definitely be less than ₧7 billion. Moreover, it is possible that Smartmatic-TIM would again participate in the public bidding and could win at a possibly higher price. The Comelec might end up acquiring the same PCOS machines but now at a higher price.” Regarding the last issue (infirmities and defects of the PCOS), the Court gave weight to the Comelec and Smartmatic’s agreement that “the latter would undertake fixes and enhancements to the hardware and software to make sure that the subject goods are in working condition to ensure a free, honest, and credible elections.” Let’s hope they do.

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Making every vote count

Equally pointed are the allegations of But the House committee admonished: Tanggulang Demokrasya, a civil society “Before the next automated election, group founded a year after the May 2010 all the loopholes in the PCOS and the elections. TanDem groups a diverse crop automated election process should be of public-interest entities including the firmly plugged by either the current Kapatiran Party. It believes there was provider or by another more assiduous massive computerized fraud in 2010, supplier. If not, a reversion to manual perpetrated by deliberately disabling digital elections with heightened vigilance by signatures organizations needed like PPCRV to verify [Parish transmitted Pastoral election Council for results. Once Responsible that signature Voting] and requirement NAMFREL was waived, [National there was Movement no way for for Free canvassing Elections] servers to would Self-styled whistleblower, nicknamed ‘Koala Bear’ by media, claiming 2010 fraud YouTube screen out any probably bogus results yield more being sent in. Last July, TanDem called for a credible and accurate results.” probe of the alleged anomalies, to no avail. In other words, Locsin’s report said without In the weeks after the May 2010 polls, the proper PCOS integrity mechanisms and House of Representatives Committee on procedures, manual voting with citizens’ Suffrage and Electoral Reforms, chaired pollwatch would be better than automated by then Congressman Teodoro Locsin Jr., elections. What those safeguards and other investigated the claim of electronic fraud and measures should be, including what voters PCOS manipulation. Locsin’s Chairman’s should do to guard the people’s sovereign Report stressed that despite AES problems, will, shall be the subject of a future report by “there was no failure of elections.” longtime Namfrel stalwart Zandro Rapadas.

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NEWS ON THE NET Self-rated poverty down — SWS The latest survey by the Social Weather Stations revealed that fewer Filipino families consider themselves poor and “food-poor” in the past three months. It showed that 51% of the respondents, representing about 10.3 million households, rated themselves poor, a decrease by four points from 55%, or around 11.1 million families, in March. Also, 39% of Filipinos, about 7.9 million families, said they are food-poor, lower by six points from 45%, or 9.1 million, previously. According to SWS, the self-rated poverty, or the monthly budgets that poor households need for home expenses in order not to consider themselves poor, remained down despite higher inflation.

DOLE: 3 million Filipino children engaged in ‘hazardous labor’ The National Statistics Office released the result of its October 2011 Survey on Children, where it was revealed that about three million children in the Philippines, aged 5 to 17, are exposed to dangerous working environments. As indicated in the study, there are 5.492 million working children in the Philippines, with 3.028 million, or 55.1% of the total, considered child laborers. Child labor is highest in Central Luzon and the Bicol region, with hazardous work largely found in farms. According to the International Labor Organization, working children are those aged from 5 to 17 years old, who worked at least one hour in the

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past 12 months, while child labor is defined as children working under conditions that may harm their health, safety or morals, such as risk of abuse, long working hours, and exposure to sharp tools or poisonous chemicals.

sentiments regarding Pimentel’s decision, saying that he feels sad about what happened, even as he claims he did nothing wrong, and that he and Pimentel were both victims of electoral fraud.

Senator Jose “Jinggoy” Estrada, chairman of the Senate committee on labor, employment and human resources, urgently called on the Philippine National Police and the Department of Labor and Employment to immediately act on this issue by immediately shutting down businesses engaging in child labor and those not complying with the existing labor regulations. Republic Act 9231 prohibits employment of children below 15 years old, but it also lists circumstances under which a child may be employed.

Senators defend govt’s $1-billion pledge to IMF

Pimentel leaves UNA 2013 senatorial slate Senator Aquilino “Koko” Pimentel III has announced his decision to leave the United Nationalist Alliance (UNA), the coalition formed by former President Joseph Estrada and Vice President Jejomar Binay. Pimentel maintained that he will remain as a member of Partido ng Demokratikong Pilipino (PDPLaban) and that he is open to be adopted by other parties, coalitions or even associations. Pimentel made the decision after he failed to persuade the UNA elders to remove Juan Miguel Zubiri from its senatorial slate for next year’s midterm elections. He admits that without the endorsement of the heads of UNA, his chances of winning in the 2013 polls are slim. Meanwhile, Zubiri expressed his

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Following criticism from the public sector, senators defended the Aquino administration's pledge of a $1-billion loan to the International Monetary Fund (IMF) to aid European countries affected by the region's current financial crisis. The senators were one in saying that there was nothing wrong with the move done by the government since the pledged amount would come from the nation's reserves and not from the treasury. Senator Franklin Drilon also pointed out that concurrence of Congress was not needed in the action by executive branch, as the Bangko Sentral ng Pilipinas was already empowered by Congress to receive and grant loans to foreign institutions by virtue of the law creating the BSP or Republic Act 7653. The Philippines made the pledge last week to aid countries suffering from economic crises across the globe. The Philippines is included in the IMF creditor list and has been a participant in the IMF’s Financial Transactions Plan (FTP) since 2010, which enabled the country to be admitted to the IMF's New Arrangements to Borrow facility. With the country’s participation in these arrangements, the lending of $1 billion is regarded as the country’s show of support for other IMF member nations.

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China’s Next Frontier: Technology and Innovation

The country’s policymakers are looking to new growth models as it advances to the next stage of economic development By Marishka Noelle M. Cabrera

STRATEGY POINTS China is seeking help from the West for the country to develop its own technology infrastructure Knowledge creation through technological progress and innovation is a long-term driver of growth With China’s ascent as a global power, the country is looking to boost key areas that will allow its industry to transcend imitation and move into innovation. In a news report from San Jose Mercury News published in the Business Mirror, China is seeking help from the West to develop its own Silicon Valley—an area in San Francisco Bay, California, that is home to many of the world’s largest tech companies. Government and company delegations are said to frequent the area to “wheel and deal with Silicon Valley tech firms” and to look for potential “commercial and research partnerships, as well as companies to invest in.”

Although it has been a global leader in the manufacturing industry, China has long been regarded as a “land of me-too companies,” with “startups that copy ideas hatched in the West.” Now, however, the government is moving to change that by investing in tech parks that support indigenous innovation. “Leaders of this nation of 1.3 billion believe it is critical to create a knowledgebased economy if the country is to expand its influence on the global stage and even challenge the United States,” the report notes. No less than Chinese President Hu Jintao believes that “home-grown” innovation is

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the key to fueling economic growth, along with advances in science and technology. In a report from China Central Television, the Chinese leader spoke before esteemed members of two of the country’s top think tanks – the Chinese Academy of Science and the Chinese Academy of Engineering – and called on them to “focus on solutions to major global challenges” and figure out “ways to free up development bottlenecks” as the country undergoes modernization.

China at an economic crossroads. While China’s economic growth has been one of the most impressive in the region, experts believe it has come to a point where its traditional sources of growth have become unsustainable, thus pushing the government

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to shift the country’s development pattern. Several studies have posited this kind of outcome, including Eurasia Group’s “China’s Great Rebalancing Act,” which says “[China’s leaders] are committed to rebalancing the country’s economy because their capitalintensive, export-oriented approach is delivering diminishing returns and threatens to become a major political vulnerability for the government.” Maladies plaguing the Chinese economy include: overdependence on exports and fixed-asset investment, the widening gap between ordinary citizens and the government and business elite, regional disparities in living standards and average incomes, and inefficient energy use.

Quoted in the San Jose Mercury News article is Dr. Ta-lin Hsu, founder and chairman of H&Q Asia Pacific, a private equity firm based in Palo Alto, California. He says, “It is my belief, and that of many people, that if China can have indigenous innovation, be an innovative society, then there is a future for it to be a very strong power.”

As such, China 2030, a Feb. 2012 report prepared by the World Bank and China's Development Research Center of the State Council, outlines reform priorities that the government should implement, which includes accelerating the pace of innovation and creating an open-innovation system, especially if China wants to be a global innovative powerhouse by 2020.

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26 Based on China’s 12th Five-Year Plan covering 2011-2015 —a blueprint of the overall objectives and five-year goals related to social and economic growth and industrial planning —the government will be giving priority to key areas such as

on basic scientific research projects, and the country constructed 130 national engineering research centers and 119 national engineering laboratories.”

Nevertheless, much has yet to be done in the field of scientific research in China, based on “When the Chinese can no longer make easy a March article in Nature. money imitating, they will start innovating.” The article says that despite producing 10% of the world’s - John Quelch, Harvard Business School published scientific articles, second only to the United States, China's research quality health care, energy, and technology. In the still falls short because of modest spending plan, as presented by communications and in basic research. public-affairs consultancy group APCO Worldwide, the Chinese economy is placing From imitation to innovation. It greater emphasis on stimulating domestic has long been a criticism against China’s consumption and striving for more industries that they can imitate but not inclusive growth. innovate. However, China’s capacity to innovate cannot be underestimated, Planners determined the seven Strategic Harvard Business School professor Emerging Industries that will serve as the John Quelch says in a November 2011 backbone of the economy in the decades Harvard Business Review article. From ahead. These industries are: biotechnology, a strong history of innovation to a highly new energy, high-end equipment competitive society and parents putting a manufacturing, energy conservation and premium on education, the country is on its environment protection, clean-energy way to challenging tech giants like the U.S. vehicles, new materials, and nextAs Quelch puts it, “When the Chinese can generation information technology (cloud no longer make easy money imitating, they computing, as well as the development of will start innovating.” digital and virtual technologies). A May 2011 paper from the East-West Research spending increases. In Center discusses China’s evolving 2012, China’s spending in research and innovative capabilities, such as huge development (R&D) rose 21.9% yearinvestments in in R&D infrastructure, on-year to 861 billion yuan (U.S.$139.7 expansion of higher education and billion), a news report in China.org reveals. universities as centers of basic and applied According to the National Bureau of research, and the country’s booming patent Statistics (NBS), R&D spending accounted market (the paper reports that Chinese for 1.83% of the country’s GDP in 2011. invention application patents grew at Moreover, last year’s NBS report notes an average 28.4% per year from 2003 to that the country “spent 39.6 billion yuan 2007). Another indication of the country’s

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innovation drive is China’s lead in scientific and technology publications, with strengths in materials science, analytical chemistry, rice genomics, and stem-cell biology. Though still in its initial stages, the Chinese knowledge market shows much promise. Here’s a look at some areas where Chinese innovation is catching up fast. Defense. Following the increase in defense spending by the Chinese government in 2011, one could expect the country’s military capabilities to strengthen in the coming years. For one, a report from Business Insider reveals a “breakthrough” in China’s Baicheng Weapon Test Center with the development of lethal “smart” ammunition. The “Terminal Sensing Ammunition” is said to be “especially deadly to troops in tanks armored personnel carriers, where it times its detonation to go off just outside the hatch for maximum effect.”

astronaut entering the space orbiter, Tiangong 1, for the first time. “China's space plans are ambitious, incremental and extensive,” says professor of national security affairs at the Naval War College Joan Johnson-Freese in her CNN article. She explains that while China is indeed advancing in the field of space exploration, it will not overtake the U.S. anytime soon. Technology parks. China’s closest equivalent to Silicon Valley is Zhongguancun. An article from TechCrunch says some of the elements that make this area west of Beijing conducive for tech companies are its proximity to leading learning institutions like Peking University and Tsinghua University, as well as other technical universities, and government involvement, as in contracts, subsidized office space, or financing from a government-affiliated research organization.

The article also cited reports from the PLA Daily, a publication of China’s military, the People’s Liberation Army, that there has been progress in technology that can “sense” a target and then deploy a “destructive projectile to break through armor” and followed by “a cluster of subprojectiles to wipe out whatever the armor was protecting.” Space exploration. With the launching of Shenzhou 9 spacecraft A Chinese astronaut enters the Tiangong 1 for the first time. Video from Dragon in Space carrying two men and China’s first female astronaut in June, China has made significant strides in the field of space A report from Xinhuanet says China’s exploration. The website Dragon in Space Cabinet has approved in 2011 a chronicles the country’s space program. A development plan called the Zhongguancun CCTV-13 video in the site shows a Chinese National Innovation Demonstration

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28 Zone (2011-2020) that aims to make Zhongguancun “one of the world’s most famous technology hubs.” “ I think in the next 20 years Zhongguancun will have the three top technology industry clusters in the world and will form a grouping of the world's top technology entrepreneurs," Yang Jianhua, deputy director of the administrative committee of Zhongguancun Science Park, says in the report.

Computing. Known for its low-cost labor, China has become a major producer of computers and consumer electronics. However, according to a December 2011 article in the New York Times, experts believe that“[China’s] booming economy and growing technological infrastructure may thrust it to the forefront of the next generation of computing.” Also mentioned are some indications of China’s technological capabilities, such as Tianhe-1A, a supercomputer released in late 2010, which briefly became the world’s fastest before a Japanese machine surpassed it; and the Sunway Bluelight

MPP, which is now among the 20 fastest computers in the world. China’s software industry is also rapidly expanding, based on a report of the Joint Research Centre of the European Commission on the ICT landscape in Brazil, India, and China. In 2008, the top three software firms were Huawei, ZTE, and Digital China, with revenues from software of € 5.43 billion, € 2.52 billion, and € 1.08 billion, respectively. Tech companies. In Fast Company’s top 10 most innovative companies in China, tech companies rule the list. These companies are molding China’s markets: Telecom provider Huawei; PC maker and China’s first global brand Lenovo; e-commerce firm Alibaba; energy provider Suntech Power; Renren, a.k.a. “The Facebook of China”; automobile company BYD, which created the world’s purely electric bus, and; investment company Innovation Works, which helped many tech startups. In Bloomberg Businessweek’s 50 Hot Tech Growth Companies in 2010, Chinese firms have taken two spots in the top five of the bestperforming technology companies globally. Tencent Holdings, whose services include social networks, instant messaging, web portals, e-commerce, and multiplayer online games, was at number one, while Baidu, a popular search engine company, took third. Tech giant Apple came in second.

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China's next frontier: Technology and innovation

Asia is shifting to knowledge-based economies “[K]nowledge established through innovation and technological progress is the long-term driver of economic growth,” according to a March 2011 paper by Debnath Sajit Chandra of Kyushu University and Kenji Yokoyama of Ritsumeikan University on knowledge-based economic growth in East Asia. Analyzing data from Japan, Malaysia, China, and newly industrialized East Asian economies (Korea, Taiwan, Hong Kong, and Singapore), the study further posits good governance greatly affects the flow of knowledge between scientific research and technological applications. “In East Asia, good governance played an important role in attracting FDI [foreign direct investment], which helped developing the knowledge-based economic infrastructures to create knowledge-based economy,” the paper explains. China, the authors say, is still a long way behind the other East Asian countries in terms of creating knowledge-based economy. A September 2007 Asian Development Bank paper discussed good practices of select Asian countries, such as China, India, Malaysia, Singapore, Thailand, and South Korea. It underscored the importance of knowledge in the development of countries, and that since the introduction of knowledge-based economies by the Organisation for Economic Co-operation and Development, the idea has become “one worthwhile pursuing.” At the same time, the paper acknowledges that it is still “yet to be a proven successor to the industrial economy.” “[N]ational economies are becoming more knowledge-based—economies where productivity and growth have become more dependent on knowledge,” the paper noted. However, global trends like the entry into the “knowledge era” are “largely unplanned.” In fact, entities—nations, organizations, and individuals— were “knowingly or unknowingly” thrust into it. The paper acknowledged that “(T)he past 10 years have seen a wide variety of visions, ambitions, concepts, strategies, policies and initiatives aimed at introducing and advancing” knowledge-based economies … However, most people involved—both academicians as well as practitioners—would today still characterize the KBE as a largely theoretical concept for economic growth and wealth creation.” This state of affairs is attributed to “the absence of a common – globally understood and accepted – framework for the KBE and a set of measurable models and indicators for successful performance.” Alongside the positive effects of worldwide growth and wealth creation, the paper observed that many economists were also pointing out the potential downsides of knowledge-based economy, i.e., substantial investments in education and innovation might not generate sufficient economic returns or competitive advantage. “Leapfrogging” could occur when developing economies recognize that “most commercially viable knowledge is of such a nature that it can be 'bought' everywhere in the world at low costs, from (highly) educated people, possessing a strong work morale and a flexible attitude.” From there, the paper observed that “knowledge can eventually become a means of mass production – similar to manual labor in the industrial economy – once web-based information and communication technologies have reached worldwide penetration levels.” It also pointed out that while this was still far from becoming current-day reality, some countries – Finland, Republic of Korea, Singapore, New Zealand, Taipei (Republic of China) – were making rapid progress to become knowledge-based, while others – People's Republic of China, India, and Malaysia – had started initiatives to become knowledge-based.

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China's next frontier: Technology and innovation

Innovation in China is a wake-up call for America. Innovation is an inevitable step in China’s quest for economic superiority; and while the country has a long way to go, it still leaves the West worried. Technology and development expert Adam Segal of the Council on Foreign Relations, in his June 2011 testimony before the U.S.-China Economic and Security Review Commission, says that while the impact of current policies on China’s capabilities is uncertain, the U.S. “must continue to confront China on indigenous innovation.”

For China and the rest of Asia, developing research and technological infrastructure becomes imperative so as to raise competitiveness. In addition, global trends have pushed Asian economies to scour for new sources of growth. In terms of policy changes, a paper from the Asia Business Council suggests upgrading science and engineering talent, nurturing learning organizations, targeting government policies toward promising areas for innovation, and improving access to finance for new ventures, among others.

“China’s progress in innovation should be seen as a wake-up call for America,” cautions the East-West Center paper. It calls on the U.S. to mobilize the forces of both government and private enterprise in order to upgrade its innovation system and stay competitive.

“Asian economies need to continue evolving, in order to attain long-term competitive advantage that generates increasing economic value, provides growth for industries, and raises incomes and living standards for their populations,” the paper notes.

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EU to recapitalize banks directly After all-night bargaining during the European Union summit in Brussels, European leaders agreed to funnel money directly to troubled banks, as well as to the idea of a tighter union in the long-term. It was suggested that Germany has softened its stance on its insistence on enforcing tough reforms on struggling euro zone economies in exchange for bailout money. German Chancellor Angela Merkel said she was “very satisfied that we took good decisions on growth.” European Council President Herman Van Rompuy called the decision a "breakthrough,” and said leaders of the 17-nation euro zone also agreed to a joint banking supervisory body, while leaders of the full 27-nation European Union agreed to a general long-term plan for a tighter budgetary and political union. Facing rising borrowing costs, the agreement is a victory for Italy and Spain, who argued that they have done much to clean up their economies. The agreement meant that countries could apply for bailouts, but without the stringent conditions that accompanied previous bailouts. Earlier, Spain made a formal request for financial aid from fellow euro zone countries amid a worsening banking crisis that threatened to endanger the future of the euro zone. The financial aid package was estimated at 100 billion euros ($125 billion).

U.S. Supreme Court upholds 'Obamacare'

Egypt’s new president to take oath before court Egypt’s President-elect Mohamed Mursi will take his oath of office in front of the Supreme Constitutional Court amid discussions that the Muslim Brotherhood had wanted him sworn in before parliament, in line with past practice. The armybacked court, however, dissolved the Islamist-backed lower house earlier this month. He is the first freely elected civilian president of Egypt, yet the military intends to keep its hands firmly on the real levers of power. An army council member revealed that Field Marshal Hussein Tantawi, who served as ousted leader Hosni Mubarak’s defense minister for two decades, will continue in his post in Mursi’s new cabinet. Mursi, who vowed to uphold the values of the revolution that overthrew president Hosni Mubarak, is the first Islamist head of state in the Arab world’s most populous nation. One of the leaders of the powerful Muslim Brotherhood, Mursi promised that his leadership would be inclusive, and courted secular and Christian voters.

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Dubbed “the final hurdle” in President Barack Obama’s signature piece of legislation, the United States Supreme Court has upheld the mandate that individuals who can afford to buy insurance must do so—the key tenet of the Patient Protection and Affordable Care Act. In the 5-4 decision led by conservative Chief Justice John Roberts, who supported the constitutionality of the law, the court ruled that Congress could not mandate individuals to buy insurance but could apply a penalty tax to those who do not. The four justices who opposed said the law should be struck down entirely.The act, signed by Obama two years ago, aims to insure an additional 32 million people and prevent refusal of coverage because of medical history. Republican Mitt Romney, the former Massachusetts governor and Obama’s opponent in this year’s presidential elections, has opposed “Obamacare,” referring to the plan as a “bad law” and “bad policy.” Romney promised to repeal and replace the health-care act once he is elected. He also said that a replacement plan must ensure that every American has affordable access to healthcare, adding that “Obamacare does not do that.”

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A New Breed of Search Engines: Non-invasive Alternatives to Google By Tanya L. Mariano

STRATEGY POINTS As Googleâ&#x20AC;&#x2122;s search function becomes more personalized and more intrusive, users are turning to lesser-known search engines that offer better privacy protection TCR presents four searchengine alternatives to Google that wonâ&#x20AC;&#x2122;t spy on you

ince the beginning of 2012, search giant Google has been trying to create a much more personalized and social user experience across their products by tweaking and adding features that will let them know more about you and your contacts.

In January, it introduced Search, plus Your World, a search feature that yields links to things shared by friends, based on activity on other Google services like Gmail and Google+. In March, its new privacy policy took effect, giving Google the ability to track user behavior across its many products, including Gmail, YouTube, and Google+. Surveys show, however, that the public is not exactly enthusiastic about these

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changes. A March 2012 Pew Internet survey of 2,253 American adults reveals that 65% disapprove of search engines collecting user information as it may limit search results in the future, and 73% feel their privacy is being invaded when search engines keep track of their search history to personalize results.

likewise point to a growing disenchantment with Google’s new features. According to a Technology Review article, “At about the same time as these controversial changes were implemented, usage of two search startup companies, Blekko and DuckDuckGo, started to climb rapidly, and the two haven’t looked back since.”

A survey by Ask Your Target Market also uncovered majority opposition to Google’s personalized search results and most respondents to the poll by USC Dornsife and the Los Angeles Times also expressed privacy concerns over the collection of personal information by Internet companies.

Although Google, Yahoo!, and Bing are still the most popular search engines, as ranked by eBizMBA, with Google also holding the title for the most popular website overall based on Alexa rankings, it seems people have begun to look elsewhere.

Growing disenchantment with Google’s new features? That significant growth was posted by less intrusive search engines around the same time Google was tinkering with their search offering may

If you don’t want to be stuck in an information bubble because of personalized search, and if you think access to online information should not come at the cost of privacy, then read on. Here are four search engines that take pride in knowing almost nothing about you or your friends.

How to search safely without using special search engines Aside from using search engines that protect privacy, other ways to stay off the grid while staying online include: 1. Enable private browsing – Most browsers (Mozilla Firefox, Safari, Internet Explorer, and Chrome) all offer a private browsing option. These typically disable the recording of browsing history and delete newly installed cookies when the browser is closed. This option, however, does not ensure the protection of your IP address. 2. Use a virtual private network (VPN) – VPN services, such as those provided by StrongVPN, WiTopia, and PrivateVPN, shield your IP address by routing your data through a proxy server. They also encrypt incoming and outgoing data so that it looks like gibberish to someone who might be monitoring your Web activities. Another good tool is Tor, a free, download-able program that helps protect user anonymity. 3. Use browser add-ons – Do Not Track Plus and Ghostery identify tracking companies and block them, at your option, from monitoring your online activities. Both are available as free downloads and are compatible with popular browsers. You might find, however, that blocking certain trackers could prevent you from accessing certain content, so if your browsing experience is being affected, be prepared to do a little trial-and-error now and then.

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34 DuckDuckGo. What started out in 2008 as a side project of Pennsylvaniabased Gabriel Weinberg has grown into a company of four full-time employees with $3 million in investment funding received last year (according to Technology Review) – obviously nowhere near Google’s magnitude, but this small search engine is so gutsy it went head-to-head against the tech behemoth, even coming out with a billboard that boldly declared, “Google tracks you. We don’t.” Based on their own traffic logs, there was a significant rise in the number of direct queries from January to April 2012.

It is this claim of offering better privacy protection that is central to DuckDuckGo’s appeal, and something that also caught the attention of Time Magazine in 2011 when the search engine made it to the publication’s list of the 50 Best Websites of that year.

According to their privacy policy, unlike other search engines, DuckDuckGo does not store information on a user’s IP address, user agent, and search history, and does not “leak” searches, which means when you land on a website by clicking on a search result link, it does not inform that website of the search term you used that led you to them.

For instance, according to its privacy policy, it deletes IP addresses after 48 hours, while Google does so after nine months, according to the FAQ section of Google’s privacy policy page. Blekko also offers a SuperPrivacy option that prevents it from keeping any usage information and sending search string information to external sites, disables the display of ads, and uses a secure wireless network (HTTPS, short for Hypertext Transfer Protocol Secure) as a default setting.

An illustrated explanation of their privacy policy can be found here.

Blekko. While Blekko’s strength lies in producing “high quality, relevant, spam free search results” by enlisting the help of human editors to “curate” links, it also has better than average privacy protection.

While efforts are made to minimize the user data collected, it does warn that their vendors “may keep your IP Address, user agent string and isolated search strings from you for longer, but they are instructed to keep this data secure.”

In terms of privacy, DuckDuckGo wins out, but Blekko isn’t too far behind.

For more information on the technology behind Blekko, CTO Greg Lindahl explains it in detail in this guest post on High Scalability,

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Looking for something specific? Niche search engines search by file type, source, or date, and there are even some that simply give you a straight answer instead of sending you multiple links where your search words have appeared. Perhaps the best-known specialized search engine is Wolfram Alpha. As a “computational knowledge engine,” it uses its vast repository of human-curated content and algorithms to generate direct answers, rather than crawling the Web for information. For instance, typing in “Marie Curie” yields the following result: A sample results page from “computational knowledge engine” Wolfram Alpha

If you’re searching for up to date information on a topic, Now Relevant can help you find related content generated in the past 14 days. Social Mention scours social media networks, while Technorati is known as the first blog search engine. a blog devoted to “building bigger, faster, more reliable websites.” Ixquick. Another one that puts a premium on user privacy is Ixquick, a meta-search engine (it sends the search request to a number of popular search engines and aggregates the results) based in New York and The Netherlands, and which claims to be “the world’s most private search engine.” Ixquick has actually been around since 1998, according to their official website, but only committed to privacy protection in 2006, after an audit of the company’s

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liabilities uncovered a huge pile of personal user data accumulated over the years, which upon examination “began to look more of a privacy liability than a business asset.” This prompted the company to purge its database, and in 2009 stopped collecting IP addresses completely. Ixquick also offers an option to use a proxy when visiting third-party sites, which means these websites are not sent any personally identifiable information but instead only see Ixquick’s IP address. From their view, the request

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came from Ixquick and not from you. A company press release also announced that, beginning October 2011, all searches would be encrypted by default. Ixquick’s zero data collection rule is reflected in their privacy policy. The privately owned Dutch company that runs Ixquick, Surfboard Holding BV, also operates Startpage, a search engine that utilizes Google search results and uses the same privacy protection as Ixquick. Gibiru. Gibiru is based on Google’s search algorithm modified to limit information collected about your browsing behavior, “thus removing behavioral search result filtering and censoring so that you get natural untargeted search results,” it proclaims on its website. As with the aforementioned search engines, Gibiru also does not use your cookie data and IP address. Based on information available on their official website, Gibiru seems to be a reaction to what they regard as the collusion between the U.S. government, major publishers, and search engines to “chill Internet discourse” by tracking user behavior and imposing Internet censorship, citing an alleged crackdown by the National Security Agency on online “alternative news” sources, such as Wikileaks, that publish content on U.S. government

operations in Iraq, Iran, and Afghanistan, political scandals, and even unidentified flying objects and astrophysics. Davids to Google’s Goliath? Compared to Google’s reach – half the world’s Internet population visited the page in the past three months, according to Alexa – these less popular search engines corner a very tiny fraction of the market. Overtaking the top three search engines in terms of popularity is highly unlikely in the near future, but, as privacy concerns and dissatisfaction with personalized search grow, there is a big opportunity for growth available to these small players. In the Technology Review report, DuckDuckGo’s Gabriel Weinberg says he believes new search engines can fragment the market even just a little bit, and recalls how Microsoft’s browser, Internet Explorer, lost its dominance. “It’s the same as happened with Web browsers. People realized that there was very little choice, and then it fragmented again,” says Weinberg. Whether any of these alternative search engines will knock Google, Yahoo!, or Bing off the top spots remains to be seen, but for now, it’s at least good to know that there are other options that offer quality search results without scrimping on privacy protection.

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Minority Report-like computer interface arrives December 2012 Startup Leap Motion will be shipping their $70 revolutionary computer interface device by December 2012 or January 2013. The company is already accepting pre-orders and is also giving away free kits to qualified developers. Called “Leap,” the device is roughly the size of an iPod and plugs into a USB port. The sensor detects hand gestures and creates an 8 cubic feet 3D interaction space. It can distinguish hand movements down to 1/100th of a millimeter and is 200 times more accurate than similar touch-free technologies available on the market. Watch this video from Leap Motion to see Leap in action.

Leap is an iPod sized USB plug-in device that allows for accurate, touchfree computer interaction YouTube

Leap is ideal for artists, engineers, gamers, surgeons, and anyone who wants touch-free interaction with computers that run on Windows 7/8 or Mac OS X. A similar product is Microsoft’s Kinect, the motion sensing gaming console which has also proven to be useful in helping diagnose Autism in children, rehabilitating

stroke and other brain injury patients, aiding doctors in MRI and CAT scan navigation, something Microsoft likes to call “The Kinect Effect.” While Kinect has found use beyond its original purpose, tech experts are betting on Leap to win over Microsoft’s device.

For those unwilling to pay for such a service, a free app called Wickr was recently launched in the Apple App Store. Like Silent Circle, Wickr also provides military-grade encryption, plus an option to control the duration of message validity and who can read it.

Google Glasses to Encrypt your iPhone hit the market in two years communications with iOS app Silent Google’s wearable computer, which features Internet and Bluetooth Circle connectivity, a built-in camera, An iOS app called Silent Circle that aims to protect your calls, texts, emails, and other mobile communications will be released late this year. Created by Phil Zimmerman, the man behind the digital encryption software released in 1991 called PGP (short for “pretty good privacy”), Silent Circle brings encryption technology within reach of regular consumers and will retail for $20. Unlike PGP, which requires a bit of technical proficiency to use, those who want secure smartphone communications need only download the app. Aside from Zimmerman, the Silent Circle team is also composed of security experts Mike Janke, Vic Hyder, and Jon Callas. Zimmerman says he expects the app to be especially valuable to business people and human rights workings traveling to countries like China or Iran that have been known to perform surveillance via wiretapping, reports Technology Review.

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a microphone, and speakers, is expected to be available in two years, estimates Google co-founder Sergey Brin. At the recently concluded Google I/O Conference held in San Francisco, Brin gave a product update and even unveiled an “Explorer” edition of the device, which developers interested in participating in the product’s evolution can purchase for $1,500, to be shipped by early 2013. Brin’s presentation took product demonstration to the next level by including a live video stream of skydivers wearing the glasses, jumping off a plane to land on the roof of the convention center (video below).

Skydivers wearing Google glasses jump of a plane as part of Google co-founder Sergey Brin’s presentation at the company’s I/O Conference last June 27, 2012 in San Francisco

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Stem Cell Therapy: The Emerging Frontier in Medicine

By Joanne Angela B. Marzan

STRATEGY POINTS Stem cell therapy is gaining popularity as both a regenerative and a curative treatment The controversy over the use of embryonic stem cell research is starting to wane, as scientists look to adult stem cells to help cure diseases The next wave in adult stem cell research appears to be in re-engineering adult stem cells to behave like embryonic stem cells

those who regularly followed the political drama that was the impeachment trial of Chief Justice Renato Corona, one thing that defined the proceeding was the brilliance, wit and unflagging stamina of its Presiding Officer, Senate President Juan Ponce Enrile. During the 44-day trial, the 88-year old Enrile stayed sharp, alert, and awake, and even outlasted and outsmarted the younger members of the impeachment court. For many, Enrileâ&#x20AC;&#x2122;s endurance throughout the long and arduous trial made the Senate President the poster boy for senior citizens. In a May 30 interview in the ANC program Headstart, Enrile disclosed his secret of his seemingly never-ending energy. It wasnâ&#x20AC;&#x2122;t any of the energy drinks available in the market. It was stem cell therapy.

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“It (stem cell) gave me a little bit more energy but as far as restoring the quality of my organs like my eyesight, hearing, heart, lungs, kidney and so forth, I could not say because I still have a problem with my vision,” Enrile told program host Karen Davila.

Stem cell therapies for sports injuries According to the June 29 article on www.metromd.net, many professional athletes, such as American football quarterback Payton Manning have already undergone stem cell therapies. “Manning used his body’s own Mesenchymal Stem Cells to help heal a very traumatic injury to his neck,” according to the authors of the article, Dr. Alex Martin and Devin Stone.

In a May 13 Philippine Daily Inquirer article, former President Joseph Ejercito Estrada, now 75 years old, admitted to having undergone stem cell therapy in Frankfurt, Germany. When asked about the effects of stem cell therapy on him, the stem cells for which came from an unborn sheep, Estrada said that his sleeping problems might be over. “I used to have insomnia. I can’t sleep. Before it was only three hours. Now I sleep better—six to seven hours. So far, that’s it,” the former President said.

According to the article, basketball superstar Kobe Bryant, baseball pitcher Bartolo Colon, American football players Hines Ward and Jarvis Green have also undergone stem cell therapies to cure their ailments. It is because of these successful procedures that Dr. Martin and Stone have dubbed stem cell therapy as the “new security” of professional athletes. “Clearly, stem cells are the newest sector in professional athlete care. Instead of an athlete having to end their career like Bo Jackson, athletes now have another alternative to regenerate their damaged areas. Stem cells allow athletes to not only save their damaged body parts but also their careers,” said the authors.

Estrada added that the German stem cell clinic informed him that the full effects of the therapy would be felt after three months, some of which are: improvement of skin tone and complexion, reduction of wrinkles, and stabilized mental power. The former Chief Executive said that his German clinic claimed that famous pop artist Madonna and Hollywood actress Sharon Stone were some of their many clients. According to the rumor mill, Madonna, singer Courtney Love and actress-author Suzanne Somers have all undergone stem cell facelifts, which these famous personalities have neither admitted nor denied. Massive attention in scientific community. Ever since its accidental discovery by Toronto scientists Drs. James Till and Ernest McCulloch while working at

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According to an article posted on www.lakernation. com, Bryant went to Germany in 2011 to undergo a PRP (platelet-rich plasma) procedure to his right knee. Orthopedic surgeon Dr. Bal Raj explained the procedure done on Bryant. “After filtering your own blood, you take cells out and the plasma out and you have platelets remaining. The advantage of these platelets is that they are highly concentrated, about 10x the concentration of what is in your normal blood. They can be injected directly into damaged areas and [the platelets] catalyze the growth of normal and new tissue. Blood platelets contain what we call potent globe factors which are necessary to begin tissue repair and regenerate at our injury site,” Dr. Raj said.

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40 the Ontario Cancer Institute in 1960, stem cells have received massive attention from every Tom, Dick and Harry in the scientific community. In a 2012 interview with Maclean’s, Dr. Till talked about the “eureka moment” that led to the discovery of stem cells. “The eureka moment was actually when Dr. McCulloch saw the bumps on the spleens of irradiated mice. While those bumps were stem cells, they were bumps of a variety of cells, and when he looked at them in the microscope, he saw in some of the bumps all three kinds of progenitors of mature blood-forming cells. He went, ‘Hmmm. Ha. That’s interesting!’” Dr. Till added that what was most challenging was proving that the bumps on the spleen were actually new stem cells produced from older stem cells. He said that in their experience, it took 14 days before they saw “new colonies forming cells” thus proving that the stem cells “self-renewed.” According to the International Society for Stem Cell Research (ISSCR), in its publication, Stem Cell Facts, stem cells have two unique characteristics that set them apart from all other cells: 1.) “the ability to self-renew, dividing in a way that makes copies of themselves, and 2.) the ability to differentiate, giving rise to the mature types of cells.” These

properties of stem cells made many scientists believe that many incurable diseases of man may have finally found a cure. A Wikipedia page on stem cells discusses their potential use in treating different diseases, as depicted in the illustration below. Embryonic vs. adult stem cells. Scientists have devoted their time and energy into finding ways to harvest and propagate stem cells, which come in two forms: the unadulterated form, or the embryonic stem cell, and the used or mature form, or the adult stem cell. Of the two stem cell brothers, the embryonic stem cell received more interest. The discovery of how to isolate human embryonic stem cell by James Thomson of the University of Wisconsin-Madison in 1998 led to a universal awareness of -- and subsequent outcry over -- the use of human embryos for stem cell research.

Stem cell might be able to provide answers to many of man's woes, as seen in an illustration on a Wikipedia page on stem cells

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But according to the Stem Cell Information website of the United States’ National Institute of Health (NIH), human embryonic stem cells are from embryos “that develop from eggs that have been fertilized in vitro (within glass) -- in an in vitro fertilization clinic -- and then donated for research purposes with informed consent of the donors.” NIH stresses that these embryos do not come from eggs that have been fertilized in a woman’s body. The promise of embryonic stem cells, according to NIH, is that they can be“directed to differentiate into specific cell types,” which may result in a “renewable source of replacement cells and tissues to treat diseases including Alzheimer's diseases, spinal cord injury, stroke, burns, heart disease, diabetes, osteoarthritis, and rheumatoid arthritis.”

A video presentation from the website www.exploratorium.edu illustrates just how much promise embryonic stem cells have.

The promise of human embryonic stem cells, as explained by stem-cell researcher Bruce Conklin in a video uploaded to www.exploratorium.edu

Human Development Continum

Single-cell Embryo

3-day Embryo

4 week Embryo

5-7 day Embryo

Embryonic Stem (ES) cells Totipotent

6 week Embryo

Embryonic Germ (ES) cells Pluripotent

Infant

Fetal Tissue Stem cells Pluripotent or Multipotent

Adult

Teratocarcinoma (germ cell tumor) “Adult” Stem cells Pluripotent or Multipotent

Cord Blood Stem cells Placental Stem cells Pluripotent or Multipotent

Embryonal Carcinoma (EC) cells Pluripotent

Source: Testimony of David H. Prentice, Ph. D., before U.S. Senate Commerce Subcommittee on Science, Technology, and Space, Sept. 29, 2004, posted on www.stemcellresearch.org

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42 The perceived huge potential of human embryonic stem cells has remained just promises, however, due to the controversy over human embryonic stem cells.

'Embryonic stem cells are hard to control and hard to grow in a reliable way' - Dr. Patrick Dixon

In fact, physician, author, and business consultant Dr. Patrick Dixon, in a 2004 article on www.globalchange. com, has this to say about embryonic stem cells: “Embryonic stem cells are hard to control and hard to grow in a reliable way. They have ‘minds’ of their own, and embryonic stem cells are often unstable, producing unexpected results as they divide, or even cancerous growths.”

the perspective of those who are not in favor of embryonic stem cell research.

“Opponents of embryonic stem cell research compare the destruction of an embryo to an abortion.They believe that the embryo constitutes life because it has the potential to fully develop into a human being. Those against embryonic stem cell use believe that is it immoral and unethical to destroy one life to save another,” said the article. By discarding the embryo, human life is said to be “de-valued,” and becomes a precedent for further scientific procedures that would also “de-value life.”

Discarded human embryos. The main criticism against the use of human embryonic stem cells, however, is ethical, as it is seen as disregarding the value of life.

The Catholic Church weighs in. In the 2008 Instruction Dignitas Personae on Certain Bioethical Questions by the Vatican’s Congregation for the Doctrine of Faith, the use of human embryonic stem cell for research has been condemned in the strongest of terms.

According to the 2000 discussion paper, Stem Cell Therapy: The Ethical Issues, published by the Nuffield Council on Bioethics, “the debate about the moral status of the human embryo has focused on the question of whether the embryo should be treated as a person, or, at least, a potential person.”

“The use of embryonic stem cells or differentiated cells derived from them – even when these are provided by other researchers through the destruction of embryos or when such cells are commercially available – presents serious problems from the standpoint of cooperation in evil and scandal,” said the Catholic document.

A March 22 article on the website www.explorestemcells.co.uk discussed

In addition, the document also quoted Blessed John Paul II in his Encyclical

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Letter Evangelium vitae as saying: “The use of human embryos or fetuses as an object of experimentation constitutes a crime against their dignity as human beings who have a right to the same respect owed to a child once born, just as to every person."

of Nuffield Council of Bioethics, supporters of human embryonic stem cell research argued that since the embryo was donated, the removal and cultivation of cells does not disrespect the embryo. Furthermore, they consider this as akin to tissue donation.

On the other hand, based on the aforementioned discussion paper

“A donated embryo has been created with a view to implantation in the uterus. Once

Is embryonic stem cell research allowed in your country? The University of Minnesota’s virtual biomedical and bioscience community website has prepared a world map that shows which countries have a permissive, flexible, or restrictive policy on embryonic stem cell research.

Legend: Dark brown = permissive, indicating various embryonic stem cell derivation techniques including somatic cell nuclear transfer (SCNT), also called research or therapeutic cloning.

Brown = flexible, indicating derivations from fertility clinic donations only, excluding SCNT, and often under certain restrictions. Yellow = restrictive or no established policy. Restrictive policies include outright prohibition of human embryo research; allowing research on imported embryonic stem cell lines only; and permitting research on a limited number of previously established stem cell lines.

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44 it is not implanted, it no longer has a future and, in the normal course of events, it will be allowed to perish or be donated for research,” the Nuffield Council on Bioethics discussion paper stated. In a 2008 paper by the Stanford Encyclopedia of Philosophy entitled, Ethics of Stem Cell Research, some studies have in fact expressed view that early human embryo is not a human being. “According to one view, the cells that comprise the early embryo are a bundle of homogeneous cells that exist in the same membrane but do not form a human organism because the cells do not

function in a coordinated way to regulate and preserve a single life (Smith &Brogaard 2003, McMahan 2002). While each of the cells is alive, they only become parts of a human organism when there is substantial cell differentiation and coordination, which occurs around day-16 after fertilization,” the paper explained. From this perspective, it would appear that the 5-day embryo used to collect human embryonic stem cells is not considered a human being yet. Adult stem cell – the ‘repair cell.’ Unlike its controversial embryonic stem

Interested in stem cell therapy? Here’s what you need to know The International Society for Stem Cell Research (ISSCR) has prepared a Patient’s Handbook on Stem Cell Therapies to educate anyone who is considering this type of treatment. According to the ISSCR handbook, the following are the things you should be wary about when considering stem cell therapy: 1. Claims based on patient testimonials. Only carefully evaluated clinical research can provide proof of the success of the treatment. 2. Multiple diseases treated with the same cells. Unless the diseases are related, different treatments should be administered to patients. A doctor who is a specialist of the disease should also be the one to treat you. 3. The source of the cells or how the treatment will be done is not clearly documented. There should be a treatment consent form, and a “protocol” outlining the treatment in detail to the medical practitioner. 4. Claims that there is no risk. There will always be risks, and you should be informed about them. To remind us of the risks involved in stem cell therapies, a May 8 report in The Telegraph said that the largest stem cell clinic located in Dusseldorf, Germany, X-Cell Center, was shut down due to the death of an 18-month-old baby after he was injected with stem cells in the brain and suffered internal bleeding. This procedure was also done to a 10-year old boy from Azerbaijan three months earlier. That boy almost died. “The doctor who carried out the operation remains under criminal investigation,” the article reported. 5. High cost of treatment or hidden costs. To be included in a clinical trial, you don’t usually have to pay. Your expenses would include travel (if the treatment would be done outside your own country), food, accommodation, and other personal expenses. You should also be aware of emergency medical care facilities if something goes wrong.

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Stem cell therapy: The emerging frontier in medicine

Dr. Max Gomez talks about the future of adult stem cells

cell brother, the harvesting of adult stem cells is widely accepted and has been proven to be useful in curing many diseases known to man. “While embryonic stem cells are, in effect, the blank slate upon which all of the tissues, organs and structure of the human body is drawn, the adult stem cell has a different, though related, overall function. It is a repair cell. Sitting quiescently in bone marrow, tooth enamel, adipose (fat) tissues and other places in the body, these cells “wake up” upon receiving signals related to injury— inflammation,” according to the 2012 Adult Stem Cell Fact Sheet by Robin R. Young, prepared for the 7th Annual Stem Cell Summit in New York in February. In the book, Our Stem Cells: The Mystery of Life and Healing, His Holiness Pope Benedict XVI asked for“increased support and awareness for advancements in adult stem cell research in order to alleviate human suffering.” In November 2011, the Vatican hosted the Adult Stem Cell Conference and invited renowned scientists

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working on adult stem cells to educate recognized leaders about this scientific breakthrough. At the Vatican conference, Dr. Max Gomez of the Stem for Life Foundation shed light on questions about adult stem cells in the video above. A paper, Adult Stem Cell Breakthroughs, Treatments and Cures by Life Issues Institute, Inc., lists successful and documented use of adult stem cells that improved the lives of many patients. Some of these are: • 23 patients were able to see again after adult limbal stem cell transplants • 14 out of 18 leukemia patients have been cured after adding stem cells from umbilical cord blood to their treatment • Patients with Crohn’s Disease, a type of inflammatory bowel disease, are said to be cured after being treated with stem cells from their own blood

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46 • Majority of patients who suffered from heart attack or injury in the U.S., Germany, Brazil and France who have been treated with their own stem cells experienced heart regeneration Across on the facing page is an illustration of strategies that can be used to repair heart muscles using adult stem cells, from the stem cell information page on the NIH website. According to Robin Young’s fact sheet, the common practice of physicians in the

United States has been to harvest stem cells from one part of the body where they are abundant and “re-implant them at the site of injury—where they are most needed but are in short supply.” But, according to Young, the trend now is to target stem cells for “concentration, re-implanting and expansion before re-implanting.” “One problem with autologous (the donor and recipient are the same person) use of adult stem cells is that the quantity continued on p. 48

The next step in autologous stem cell treatment In 2006, Shinya Yamanaka of Kyoto University discovered the next step in autologous stem cell treatment: induced pluripotent stem cells (iPS cells).

successfully generated an organ of the pancreatic islet that produces insulin and an organ of the human liver using iPS cells.

According to the abovementioned Stem Cell Facts by the ISSCR, iPS cells are adult cells that are “engineered, or ‘reprogrammed,’ to become pluripotent and behave like an embryonic stem cell.” This means that iPS cells, as seen in the figure below, can become any type of cell you want it to be.

Speaking during the International Society for Stem Cell Research held in Yokohama, Japan, University of Tokyo professor of molecular and cell biology Atsushi Miyajima confirmed that he and his coworkers were able to transform human iPS cells into cells of the pancreatic islet and create a threedimensional structure from them. The scientists also announced that like the human pancreatic islet, the artifice comprised of a mixture of two types of cells that generate insulin and glucagon hormones. This breakthrough, though still in its early stages, could eventually be used for the treatment of diabetes mellitus.

“One of the major advantages of iPS cells, and one of the reasons that researchers are very interested in studying them, is that they are a very good way to make pluripotent stem cell lines that are specific to a disease or even to an individual patient,” explained the ISSCR publication. In addition, “The development of patient-specific stem cells is also very attractive for cell therapy, as these cell lines are from the patient themselves and may minimize some of the serious complications of rejection and immunosuppression that can occur following transplants from unrelated donors.” A June 15 article in the Japanese newspaper Asahi Shimbun revealed that Japanese scientists have

For his part, Yokohama City University professor of regenerative medicine Hideki Taniguchi and colleagues were able to convert human iPS cells into cells that are “precursors to becoming liver cells.” According to the article, the scientists are optimistic that they would soon be able to generate an artificial liver and to “find applications in regenerative medicine for children with innate liver disorder.”

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Stem cell therapy: The emerging frontier in medicine

How to fix a broken heart with adult stem cells, according to the U.S. National Institutes of Health

The transformation of an adult stem cell to an iPS cell that can divide into any kind of cell in the body is shown in this illustration posted on amypatel.com, a blog site of Amy S. Patel, a biomedical engineering graduate from the University of California, Irvine

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Stem cell therapy: The emerging frontier in medicine

of cells is only as good as the patient’s supply. Older patients with fewer stem cells will not likely have enough to overcome, say, osteoporosis when a bone fractures, or a tear in cartilage or a dead spot on the heart muscle, etc. In those cases, one strategy is to put the patient’s small number of stem cells into a culture media and allow them to expand. This is the next logical step in the development of modern autologous stem cell treatment,” Young explained.

cord itself contains stem cells, and so does the placenta. So, why are we looking at embryonic? There’s just no need,” argued Dr. Holland in a November 10 interview with the National Catholic Register. He also believes that embryonic stem cells are dangerous and pins its hopes on adult stem cells.

Adult stem cells are the future. For renowned clinical scientist Dr. Peter Hollands, there is no need to harvest embryonic stem cells, as he talked about harvesting adult stem cells, called cordblood stem cells, from babies.

“Embryonic stem cells are actually quite difficult to make. There are great worries about tumor formation on transplantation,” Dr. Hollands explained. “Adult stem cells have never shown tumor formation on transplantation. So we’ve got all these objections and, to me, as a stem-cell scientist, adult stem cells are the future.”

“(W) hen a baby is born, we just put a little needle into the cord, and the blood drains out. That blood contains stem cells, the

And with that, we can breathe a sigh of relief for it seems that science and religion may have found common ground.

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NEWS ON THE NET Health/Lifestyle

Pneumonia, diarrhea are top killers of kids, says UN report Pneumonia and diarrhea are among the leading causes of the world’s childhood deaths, based on a United Nations Children’s Fund (UNICEF) report released in June. In the study “Pneumonia and Diarrhea: Tackling the Deadliest Diseases for the World's Poorest Children,” UNICEF said these two diseases account for 29% of deaths among children under age 5 worldwide – over two million lives lost each year. Based on the report, more than two million child deaths could be averted by 2015 if national coverage of interventions were raised to the level of the richest 20% in the highest mortality countries. Key interventions include vaccinating against the major causes of pneumonia and diarrhea, encouraging breastfeeding, improving access to clean water and sanitation, offering antibiotics for pneumonia, and rehydration solutions for diarrhea, according to the UNICEF study. Citing figures from the World Health Organization, Lulu Bravo, a professor at the UP–College of Medicine, told reporters earlier this year that the Philippines ranks tenth highest among countries in terms of childhood pneumonia cases, with three million, GMA News online reported.

minute traces of alcohol because of the ingredients used, but he said: “the Pepsi Cola recipe does not contain alcohol.”

Study shows Coke and Pepsi contain alcohol Leading soft drinks including top brands Coca-Cola and Pepsi Cola contain small amounts of alcohol, a research published in Europe revealed. Out of 19 different kinds of cola tested by Paris-based National Institute of Consumption, 10 of the samples including Coke Zero, Pepsi Cola, CocaCola and Coca-Cola Classic light are found to contain trace as low as 10mg in every liter or around 0.001% alcohol. Both companies suggested that natural fruit can ferment and produce minute traces of alcohol, but Pepsi denied that some of their soft drinks contained alcohol. Michel Pepin, scientific director for Coca-Cola France, said: “It is possible that traces of alcohol come from the process of making Coca Cola according to its secret recipe.”Likewise, Coca-Cola said on its website: “governments and religious organizations have recognized that such minute levels are considered acceptable in nonalcoholic foods and beverages.” For Pepsi’s part, a spokesman acknowledged that some soft drinks can contain

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Heavy tea drinkers more likely to have prostate cancer A research study in United Kingdom found that men who drink at least seven cups of tea a day are 50% more likely to develop prostate cancer compared to male non-tea drinkers. The study "Tea Consumption and the Risk of Overall and Grade Specific Prostate Cancer: A Large Prospective Cohort Study of Scottish Men," by researchers at Glasgow University in Scotland, which looked at data from more than 6,000 men, found 6.4% of those who consumed at least seven cups of tea a day contracted prostate cancer compared to 4.6% of those who drank three cups at most.The researchers concluded that men could slightly lower their risk of developing prostate cancer if they reduced their consumption by one cup per day. However, the tea industry rejected the findings, citing previous studies that found no link between black tea and prostate cancer. The Tea Advisory Panel, a UK-based health information body promoting the benefits of black tea,said the research was flawed and the higher incidence of prostate cancer could be attributed to other factors, such as smoking, stress or diet.

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