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  1. #311
    #TaxReformNow: The 97.5% must back Angara, Quimbo

    By: Oscar Franklin Tan

    @inquirerdotnet

    Philippine Daily Inquirer

    01:30 AM September 21st, 2015

    SINGAPORE—Lowering income tax rates will not benefit us, President Aquino pronounced last Sept. 14. This curt dismissal is short-sighted, unstatesmanlike and implies a refusal to discuss the more difficult issues that underlie #TaxReformNow. If a religious group that makes up 2.5 percent of our population can readily occupy Edsa to air its grievances, it is about time we the 97.5 percent demanded #TaxReformNow.

    Mr. Aquino’s dismissal is a slap on the faces of Sen. Sonny Angara and Rep. Miro Quimbo, who put #TaxReformNow on the national agenda as chairs of the Senate and the House of Representatives’ committees on ways and means. Indeed, the “presidentiables”—Vice President Jejomar Binay, Sen. Grace Poe and Davao Mayor Rodrigo Duterte—have all voiced support for it.

    Angara’s infographic campaigns frame how simple yet compelling #TaxReformNow is. We have the second highest maximum income tax rate in Southeast Asia at 32 percent. Thailand and Vietnam impose 35 percent, while Singapore, Cambodia and Burma (Myanmar) impose 20 percent.

    However, #TaxReformNow examines the income brackets that determine one’s tax rate, not just the maximum rate. In the Philippines, one hits 32 percent at P500,000, which is any middle-class employee who has been promoted a few times. The P500,000 threshold was set in 1997, when the tax code was enacted. As Angara and Quimbo argue, P500,000 might buy a new house then, but it cannot even buy a new car today. In contrast, Thailand, despite its higher maximum rate, taxes a P500,000 income at only 10 percent, and Singapore, 2 percent. The Philippines taxes a P250,000 income at 25 percent, Thailand still 10 percent, and Singapore exempts this.

    We must reform “bracket creep.” Middle-class employees are taxed at the same rate as billionaires, who effectively pay lower taxes because they earn from dividends instead of salaries. At the very least, brackets must be pegged to inflation instead of permanently latched to the 1997 economy.

    Mr. Aquino’s simplistic response was that lowering income tax rates will lower government revenue, and one would have to increase other taxes such as value-added taxes. To rebut this, first, Angara and Quimbo do not argue in a vacuum. We are treated less equitably compared to our Southeast Asian neighbors. To borrow the Bureau of Internal Revenue’s favorite example, a public school teacher earning a mere P16,500 a month would already be in the high 25-percent bracket, yet taxed at 10 percent in Thailand and exempt in Singapore.

    Ignoring #TaxReformNow will leave us less competitive as Southeast Asia integrates. A Philippine professional would happily work in Cambodia to earn more simply by paying lower taxes. An overseas Filipino worker in Singapore must think long and hard before coming home. Not only would his income be slashed by two-thirds, an OFW professional earning at least P1.4 million a year there would move from 7 percent to 32 percent—a 357-percent increase!

    Second, the numbers in the tax rates and brackets do not tell the whole story. Eighty-five percent of BIR collection from individual taxpayers come from salaried employees, whose taxes are readily withheld from employers’ payrolls. The remaining 15 percent represent self-employed, business-owner and professional taxpayers whose incomes are not as transparent and claim various deductions. Budget Secretary Butch Abad noted that this 15 percent collectively underpays income taxes by almost P400 billion a year. On the other hand, Prof. Stella Quimbo, the pro bono consultant Miro could not afford to pay if she charged, has found that 73 percent of salaried employees are minimum-wage earners and tax-exempt. She computed that the BIR’s collection from salaried employees is really paid by only 16 percent of these 22 million employees, which in turn represents 85 percent of taxes from individual taxpayers.

    Third, given how starkly inequitable our system is to middle-class employees, it is imperative to broadly reform budgeting and tax collection. Nonsalaried individuals must be encouraged to share the tax burden beyond the BIR’s antagonistic shame campaigns. Angara’s infographics argue that we lose P230 billion a year from agricultural-product smuggling, P30 billion from oil smuggling and P12 billion from tobacco smuggling. Angara further argues that P800 billion of the 2014 national budget was not spent as planned, so there is room for tax reform. Finally, there are blatant anomalies in tax implementation, and my recent column decrying the blatantly illegal customs duties on books (“Why no one trusts customs,” 8/31/15) elicited no response.

    Ultimately, lowering tax rates will let our consumers spend more, and the government will recoup some of the short-term loss in revenue through consumption taxes such as VAT without necessarily raising them. Increased economic activity will hopefully lead to long-term increases in tax revenue.

    #TaxReformNow presents an incredibly simple issue that greatly affects broad segments of citizens. Further, Angara and Quimbo are among our most credentialed young reformists, being The Outstanding Young Men awardees and star University of the Philippines law graduates (Angara holds a Harvard Law degree to boot). Nevertheless, #TaxReformNow is dismissed by a president who drops everything to call a marathon Cabinet meeting to address the protest of the 2.5 percent.

    If the 97.5 percent political minority want fresh, concrete, intelligent reforms championed by lawmakers with spectacular credentials, then they must immediately push their congressmen to back Angara and Quimbo. If not, we should not complain the next time the 2.5 percent block Edsa and the national agenda is dictated by narrower interests and traditional politicians.

    * * *

  2. #312
    #TaxReformNow: The 97.5% must back Angara, Quimbo

    By: Oscar Franklin Tan

    @inquirerdotnet

    Philippine Daily Inquirer

    01:30 AM September 21st, 2015

    SINGAPORE—Lowering income tax rates will not benefit us, President Aquino pronounced last Sept. 14. This curt dismissal is short-sighted, unstatesmanlike and implies a refusal to discuss the more difficult issues that underlie #TaxReformNow. If a religious group that makes up 2.5 percent of our population can readily occupy Edsa to air its grievances, it is about time we the 97.5 percent demanded #TaxReformNow.

    Mr. Aquino’s dismissal is a slap on the faces of Sen. Sonny Angara and Rep. Miro Quimbo, who put #TaxReformNow on the national agenda as chairs of the Senate and the House of Representatives’ committees on ways and means. Indeed, the “presidentiables”—Vice President Jejomar Binay, Sen. Grace Poe and Davao Mayor Rodrigo Duterte—have all voiced support for it.

    Angara’s infographic campaigns frame how simple yet compelling #TaxReformNow is. We have the second highest maximum income tax rate in Southeast Asia at 32 percent. Thailand and Vietnam impose 35 percent, while Singapore, Cambodia and Burma (Myanmar) impose 20 percent.

    However, #TaxReformNow examines the income brackets that determine one’s tax rate, not just the maximum rate. In the Philippines, one hits 32 percent at P500,000, which is any middle-class employee who has been promoted a few times. The P500,000 threshold was set in 1997, when the tax code was enacted. As Angara and Quimbo argue, P500,000 might buy a new house then, but it cannot even buy a new car today. In contrast, Thailand, despite its higher maximum rate, taxes a P500,000 income at only 10 percent, and Singapore, 2 percent. The Philippines taxes a P250,000 income at 25 percent, Thailand still 10 percent, and Singapore exempts this.

    We must reform “bracket creep.” Middle-class employees are taxed at the same rate as billionaires, who effectively pay lower taxes because they earn from dividends instead of salaries. At the very least, brackets must be pegged to inflation instead of permanently latched to the 1997 economy.

    Mr. Aquino’s simplistic response was that lowering income tax rates will lower government revenue, and one would have to increase other taxes such as value-added taxes. To rebut this, first, Angara and Quimbo do not argue in a vacuum. We are treated less equitably compared to our Southeast Asian neighbors. To borrow the Bureau of Internal Revenue’s favorite example, a public school teacher earning a mere P16,500 a month would already be in the high 25-percent bracket, yet taxed at 10 percent in Thailand and exempt in Singapore.

    Ignoring #TaxReformNow will leave us less competitive as Southeast Asia integrates. A Philippine professional would happily work in Cambodia to earn more simply by paying lower taxes. An overseas Filipino worker in Singapore must think long and hard before coming home. Not only would his income be slashed by two-thirds, an OFW professional earning at least P1.4 million a year there would move from 7 percent to 32 percent—a 357-percent increase!

    Second, the numbers in the tax rates and brackets do not tell the whole story. Eighty-five percent of BIR collection from individual taxpayers come from salaried employees, whose taxes are readily withheld from employers’ payrolls. The remaining 15 percent represent self-employed, business-owner and professional taxpayers whose incomes are not as transparent and claim various deductions. Budget Secretary Butch Abad noted that this 15 percent collectively underpays income taxes by almost P400 billion a year. On the other hand, Prof. Stella Quimbo, the pro bono consultant Miro could not afford to pay if she charged, has found that 73 percent of salaried employees are minimum-wage earners and tax-exempt. She computed that the BIR’s collection from salaried employees is really paid by only 16 percent of these 22 million employees, which in turn represents 85 percent of taxes from individual taxpayers.

    Third, given how starkly inequitable our system is to middle-class employees, it is imperative to broadly reform budgeting and tax collection. Nonsalaried individuals must be encouraged to share the tax burden beyond the BIR’s antagonistic shame campaigns. Angara’s infographics argue that we lose P230 billion a year from agricultural-product smuggling, P30 billion from oil smuggling and P12 billion from tobacco smuggling. Angara further argues that P800 billion of the 2014 national budget was not spent as planned, so there is room for tax reform. Finally, there are blatant anomalies in tax implementation, and my recent column decrying the blatantly illegal customs duties on books (“Why no one trusts customs,” 8/31/15) elicited no response.

    Ultimately, lowering tax rates will let our consumers spend more, and the government will recoup some of the short-term loss in revenue through consumption taxes such as VAT without necessarily raising them. Increased economic activity will hopefully lead to long-term increases in tax revenue.

    #TaxReformNow presents an incredibly simple issue that greatly affects broad segments of citizens. Further, Angara and Quimbo are among our most credentialed young reformists, being The Outstanding Young Men awardees and star University of the Philippines law graduates (Angara holds a Harvard Law degree to boot). Nevertheless, #TaxReformNow is dismissed by a president who drops everything to call a marathon Cabinet meeting to address the protest of the 2.5 percent.

    If the 97.5 percent political minority want fresh, concrete, intelligent reforms championed by lawmakers with spectacular credentials, then they must immediately push their congressmen to back Angara and Quimbo. If not, we should not complain the next time the 2.5 percent block Edsa and the national agenda is dictated by narrower interests and traditional politicians.

    * * *

  3. #313
    Strengths and weaknesses

    By: Cielito F. Habito

    @inquirerdotnet

    Philippine Daily Inquirer

    12:31 AM January 12th, 2016

    WHILE THE full-year economic growth data won’t be in till later this month, we can say with certainty that the economy fared better in 2015 than in the year before. I had characterized the disappointing showing in 2014 as another self-inflicted slowdown, due primarily to slower government spending. We already saw it happen in 2011, when government efforts to curb corruption in public spending induced a similar drag on the economy, slowing gross domestic product (GDP) growth down to only 3.9 percent from the previous year’s 7.3.

    Like it did in 2012, government in the past year made a deliberate albeit more cautious effort to speed up spending anew, this time without testing legal limits on its spending authority that the controversial Disbursement Acceleration Program (DAP) did. Not surprisingly, the 2015 push was not as potent as the DAP-propelled one in 2012. While last year’s accelerated government spending nudged growth up to 6 percent from the previous year’s 5.3 percent, the DAP had managed to kick up 2012-2013 growth beyond 7 percent, from a meager 3.9 percent in 2011.

    But we all know that growth isn’t everything, and GDP certainly shouldn’t be our main measure of success in the economy. Based on the other critical yardsticks of prices and jobs, there are clear signs that the quality of our economic growth is improving. Prices have in fact never been more stable for as long as I can remember, and both unemployment and underemployment rates are likewise at record lows and declining. Annual inflation averaged 1.4 percent last year, dipping to as low as 0.4 percent in October. To show how low that is, I distinctly recall how in the mid-1990s, 7 percent was already a fighting target for inflation then, having come from 19 percent in 1991. And for the first time in our modern history, the official unemployment figure has breached 6 percent, down to only 5.7 percent as of last October. Underemployment—wherein workers have a job but are not earning enough—remains high at 17.6 percent, but it has nonetheless gone down from around 19-20 percent where it hovered for many years.

    I believe it safe to say, then, that based on my PiTiK test that looks at presyo (prices), trabaho (jobs) and kita (incomes), the Philippine economy has never been as strong over the past three decades. Still, I would be the first to point out that we haven’t accomplished nearly enough, because as everyone laments, the benefits of this have yet to be felt by all Filipinos. Closer examination of our economic data tells us where we haven’t been doing as well, and where there remains much work to do.

    Closer examination of inflation data reveals that price increases have lately been lopsided against the poor. This is because prices of food alone have gone up by almost twice as much (2.6 percent) as the overall inflation rate (1.4 percent)—and for the poor, food takes up the bulk (around two-thirds) of the household budget. This tells us that price increases in our country are hitting the poor more than they hit the rich. All this goes back to our performance in agriculture, which remains to be the most problematic sector of our economy. While weather has had a lot to do with it, over the long term, much blame lies in the way we have managed our agricultural sector.

    One can see it in the jobs data even more starkly. According to the latest Labor Force Survey, the economy managed to create only 183,000 net additional jobs in 2015 (total new jobs created minus total jobs lost). This was not because the economy was generally slow; we already showed above that GDP growth has in fact been relatively strong as a whole. In fact, 758,000 net new jobs were created in the industry and services sectors (179,000 and 579,000, respectively) last year—but all this was largely negated by the net loss of 575,000 jobs in agriculture. Sadly, it is these jobs that are most needed by our poor, 70 percent of whom live in the rural areas where farming is the prominent source of livelihood.

    We see the same problem in the growth data. The overall economy grew 5.6 percent as of the first three quarters of 2015, but agriculture had no part in that growth, hardly growing at 0.4 percent. Given PiTiK outcomes in the sector on all three counts of prices, jobs and incomes, it’s no stretch to say that the poor have been the biggest casualties of our failures in agriculture.

    Meanwhile, manufacturing, along with construction, has propelled growth in the industry sector. Driving manufacturing growth are publishing and printing; wood, bamboo, cane and rattan products; non-electrical equipment; chemical products; and transport equipment. Our growth surge in manufacturing seems to belie the common lament that costly power makes us uncompetitive in the sector. According to studies, the share of power in total manufacturing costs ranges from 1-50 percent, with the average being only 4.7 percent in the Philippines. Indeed, power costs have not stopped us from becoming the fourth largest shipbuilding nation in the world in the past decade, in an industry where power for welding is critical. Labor productivity, which data show to have risen steadily in our manufacturing sector, has been a major asset drawing in manufacturing investments. What more, once we are able to bring power costs down to more regionally competitive levels, and outdated investment restrictions in our laws are finally eased.

    The industrialization we missed in the 1980s and 1990s could well be on its way. But we need a solid and diversified agriculture on which to build it. The next administration’s homework thus ought to be clear.

    * * *

  4. #314
    From Business Mirror online - - -

    PHL: The country they love to hate

    by John Mangun - January 7, 2015 13 3092

    OUTSIDE THE BOX

    THE Philippines is an unusual country with an unusual history.

    Located in Asia, the Philippines was “Westernized” long before our neighbors. The United States strongly supported Cuban revolutionaries in their struggle to gain independence from Spain while killing Filipinos who desired the same independence.

    But it is not just the Americans who have a history of strange relations with the Philippines. When the Spaniards reached the island of Luzon in 1571, they found Japanese colonies and settlements in Manila and in other parts of the island. In the early 20th century, the area around Davao City was called Ko Nippon Koku, or “Little Japan” in Japanese. Yet, the Japanese showed incredible cruelty when they might have otherwise been accepted by many as liberators during World War II.

    But the most unusual thing about the Philippines, in the minds of many commentators, is that the country has been able to thrive and succeed at all.

    Last week I wrote in this column: “In the last few years, no matter what the result from the global economic coin toss, it has been, ‘Heads, PHL wins; Tails, PHL still wins.’” Many responses were that it was foolish on my part to be “bullish” or optimistic about the future of this economy. “Look at how badly the Philippines ranks in doing business compared to the rest of the world” one e-mail stated. True, the Philippines gets a lot of bad press. But, interestingly, no one ever talks about the high profitability of Filipino companies.

    Most negative analysis about the Philippine economy is based on comparisons with other nations. What I find is that many local Filipino economic bashers are really ignorant of the other nations they compare the Philippines to. The foreign commentators, on the other hand, are ignorant about the way the Philippines functions, and their comparisons are faulty also.

    We have been hearing about a “bubble” in Philippine property for years, how prices are going up too high and too fast. I challenge you to find one article or opinion that does not cite rents and sales prices in either Bonifacio Global City or the Central Business District of Makati. That is usually the data used by the foreigners.

    Where is the data for Bacolod City or Cagayan de Oro City to support an overbuilding or too high prices bubble? Even in the National Capital Region, the vast majority of housing was built decade ago and as personal wealth grows, so too has the need for modern housing.

    One Filipino commentator has been harping on the fact that there is a bubble in shopping malls. He bases some of his analysis on the US, which has seen literally hundreds of these malls fail and close.

    Henry Sy went from the “Dumbest man in the Philippines” when he built SM City North Edsa in 1985 to the “Richest Man in the Philippines” with his company’s 50 malls. How can you compare the Philippines with the US? For example, the Philippines has a young and growing population. The US is growing older. The US has virtually run out of cheap, underutilized land, which made the 1960’s mall boom viable.

    The new SM City BF Parañaque replaced a bunch of wooden buildings housing auto repair shops, carinderia and junk shops that sat on Sucat Road (Dr. A. Santos Avenue) for decades. That mall is not the sign of a bubble; it is a sign of progress in a growing economy.

    If Filipinos had listened to all the detractors during the last 25 years, the Pacific Star Building in Makati City would still be the tallest in the nation and much of the metropolitan areas of the nation would be empty, unproductive space.

    We shouldn’t listen to the detractors. Believe your own eyes about the overall positive economic situation. Maybe a line from the recent movie The Interview sums it up best: “They hate us because they ain’t us.”

  5. #315
    Should we privatize social security?

    By: Cielito F. Habito

    @inquirerdotnet

    Philippine Daily Inquirer

    12:09 AM January 26th, 2016

    Those running the Social Security System aren’t quite off the hook, even as President Aquino’s veto of the proposed law to raise SSS retiree pensions by P2,000 was justified based on long-term considerations. There has to be something wrong when the agency can only collect little more than a third of potential contributions; when the Commission on Audit calls its management to task for keeping P18 billion in assets idle in 2014, foregoing nearly P200 million in potential earnings; when the same COA orders the return of nearly P72 million in unauthorized management bonuses to the government and… the list goes on.

    Is the SSS yet another example of something the private sector could do better? Should social security be privatized, as has become an appealing idea among free market advocates, who point to Chile’s 34-year experience with privatized social security as a model? Let’s examine the pros and cons.

    One must first understand the fundamental difference between the traditional “pay as you go” system and the privatized one. In the former, contributions by today’s workers and employers fund the benefits paid out in the form of pensions of retirees, along with salary loans and sickness, disability and death benefits for members. When today’s workers retire, their pensions will in turn come from contributions paid by future workers. As such, there is no direct relationship between what a worker pays into the system and what he/she gets out of it. But benefits, subject to certain conditions, are guaranteed to all eligible members. Thus, government-administered social security is also called a “defined benefit” system.

    The privatized approach, in contrast, is a “defined contribution” system, where the worker keeps ownership of the money he/she pays, which accumulates in a personal saving/investment account managed by a private investment manager. The benefits are directly tied to contributions. The more one puts in, the more benefits one can get, which are determined by the earnings of the savings fund the worker accumulates over the years through his/her contributions (actually, deposits).

    Adherents of the privatized scheme point to much higher rates of return workers’ savings could have earned in private capital markets, compared to those historically earned in government-handled social security funds. In the United States, it is pointed out that investments in private capital markets earned an 11.5-percent average return on investments in past decades, whereas retirees as of 2014 effectively earned only 2.7- to 3.9-percent return on their contributions. Furthermore, the privatized scheme could boost economic growth due to the reduced tax burden and higher personal savings and investment generated. Since Chile privatized its pension system in 1981, retirement savings accounts have generated an estimated equivalent of 50 percent of the country’s gross domestic product, and annual GDP growth doubled to more than 7 percent.

    Fifteen years hence, Jose Piñera, the Chilean labor and social security secretary who introduced the scheme, made this assessment: “The Chilean worker is an owner, a capitalist. There is no more powerful way to stabilize a free-market economy and to get the support of the workers than to link them directly to the benefits of the market system. When Chile grows at 7 percent or when the stock market doubles… workers benefit directly, not only through high wages, not only through more employment, but through additional capital in their individual pension accounts.”

    It’s not all that rosy, however. Workers can lose their money if the markets collapse. Moreover, privatization will not make the problem of an imminently bankrupt SSS go away. The fiscal burden on the government will in fact get worse if contributions are henceforth channeled into individual retirement accounts, rather than add to the SSS trust fund. The funding source for current and future benefits will shrink, forcing taxpayers to shoulder the huge burden under the transition that will take a generation to complete—and it turns out, even beyond.

    In 2006, Nobel laureate Paul Krugman observed: “…the Chilean system… has yet to deliver on its promise to reduce government spending. More than 20 years (later), the government is still pouring in money…. Privatization would have condemned many retirees to dire poverty, and the government stepped back in to save them.” Even market advocate Sebastian Piñera, brother of the scheme’s sponsor, who ran and lost against current President Michelle Bachelet, lamented that “half of Chileans have no pension coverage, and of those who do, 40 percent are going to find it hard to reach the minimum level.”

    Meanwhile, a New York Times report noted: “… Chile’s pension funds, whose number has shrunk to 6 from more than 20 as competition has diminished, recorded an average annual profitability of more than 50 percent during a recent five-year period. Other studies, including one by the World Bank, indicate that pension funds retain between a quarter and a third of workers’ contributions in the form of commissions, insurance and other administrative fees.” Privatization skeptics don’t relish the prospect of further enriching finance industry players who understandably are among the strongest advocates of the scheme—all at the expense of common workers.

    Is privatized social security for us? There are compelling arguments on both sides of the question, well beyond what space allows me to expound here, and the issue certainly calls for national debate. But privatize or not, those running the SSS have a lot of shaping up to do under the system we have now.

    * * *
    FRIENDS LANG KAMI

  6. #316
    Here's why raising the retirement age for Social Security is a terrible idea

    Michael Hiltzik

    (The Los Angeles Times)

    As part of its effort to keep the public apprised of the facts underlying policy prescriptions, the Center on Budget and Policy Priorities has issued a new primer deconstructing one of the oft-heard ideas to improve Social Security's finances: raise the retirement age.

    The brief by CBPP senior policy analyst Kathleen Romig makes clear that this change would be a stealth benefit cut for lower-income workers, wrecking Social Security's progressive benefit structure.

    Superficially, this "fix" seems painless, at least in the form it's generally offered by proponents. The age can be raised gradually and the near-retired (say those now 55 or older) can be exempted. The argument is that older Americans are healthier than ever and working longer, so raising the retirement age may not merely be justifiable, but essential to protect this all-important retirement program.

    Plus, there's a precedent. The 1983 bipartisan Social Security reforms raised the normal retirement age, at which full benefits can be collected, from its traditional 65 to 66 for those born in 1943 to 1954, and 67 for those born in 1960 or later.

    On the campaign trail, a higher retirement age has been endorsed in one form or another by Jeb Bush, Chris Christie, Marco Rubio, Ben Carson and Ted Cruz, all Republicans. One notable holdout is Donald Trump. Neither of the leading Democratic candidates, Hillary Clinton or Bernie Sanders, favors the idea.

    But the proposal has all the flaws of a blunderbuss approach to an issue that cries out for painstaking care. The basic problem with raising the retirement age for Americans is that all Americans are not alike. The differences in life expectancy are closely tied to economic status, education and race.

    Indeed, the divergence in longevity between America's richest and poorest workers is widening. "Richer people live longer — and the gap is growing," Romig observes. "Higher-earning men can expect to outlive lower-earning men by more than five years." This gap was almost nonexistent as recently as the late 1970s.

    To put it another way, as did a study released last year by the National Academy of Sciences, among men born in 1930 who reached the age of 50, those in the top 20% of household income had a 45% chance of living to 85, while those in the lowest 20% had only a 27% chance. Thirty years later — that is, for men born in 1960 and therefore turning 56 this year — the chances of living to 85 after reaching 50 had risen to 66% for those in the top 20% of income, while for those at the bottom, the probability had barely budged.

    More disturbingly, the life expectancy of some Americans, especially women in the bottom 40% of household income, have been noticeably shrinking. The National Academy of Sciences found that women in that economic group born in 1930 who reached the age of 50 had a roughly 44% chance of living to 85; those born 30 years later had only a 35% chance. For women at the top of the household income scale, however, the chance of living to 85 rose from 60% to 77%.

    The implications of this trend for Social Security are inescapable. Through its benefit structure, which provides lower-income workers with a higher benefit proportional to their earnings than it gives higher-income workers, Social Security redistributes wealth from rich to poor. That's fairly well understood. What's less well understood is that it also redistributes from those who die young to those who die older, since the latter collect benefits for a longer period.

    The authors of the National Academy study, who included such retirement sages as Peter Orszag and William Gale, pointed out that Americans have tended not to see the latter inequity as unfair because it's "not predictable" — some people will live long, others will die young, "but mostly we do not know which people are which."

    But that's changing. The developing trend gives us a better idea of which people are which — and those reaping the benefits are those who already are heavily advantaged in our society. The trend in life expectancy, the authors assert, could "undo much of the redistribution embedded in the benefits formula" that gives lower-income workers a better stipend in retirement.

    This implication is simply ignored by those who declare that raising the retirement age is a simply fix for Social Security. It's just the opposite — it's an erosion of the program that works exactly counter to the goals it should be serving.
    FRIENDS LANG KAMI

  7. #317
    EU summons PHL envoy over Duterte's ?unacceptable? remarks

    Published March 28, 2017 1:24am

    Updated March 28, 2017 1:57pm

    By MICHAELA DEL CALLAR

    The European Union on Monday summoned the Philippines' envoy in Brussels to explain the "unacceptable" statements made by President Rodrigo Duterte, among which was a threat to hang EU officials who opposed his efforts to restore the death penalty.

    "This afternoon, the European External Action Service asked the Charg? d'Affaires of the Philippines, Mr. Alan Deniega, to come to the EEAS this afternoon for a meeting with Deputy Secretary General, Jean-Christophe Belliard, as we wanted to receive an explanation for the recent, unacceptable comments of President Duterte," EU spokesperson Maja Kocijancic said in a statement.

    The EU action indicates growing intolerance by the 28-member bloc of the Philippine President's expletive-laden verbal attacks.

    Duterte had severely criticized the EU for raising concerns over his deadly campaign against illegal drugs and his call to re-impose the death penalty.

    "I will just be happy to hang you. If I have the preference, I'll hang all of you," Duterte had said last Friday in an arrival statement after his visit to Myanmar and Thailand.

    "You are putting us down. You are exerting pressure in every country with the death penalty."

    The Philippine leader also lambasted the EU for suggesting "a health-based solution" to the country's problem with illegal drugs.

    Duterte claimed the EU wanted the Philippine government to build clinics where drug users could still get access to and be given a dose of illegal substances - an allegation denied by the European bloc.

    "At no time has the EU Delegation suggested, discussed, proposed or considered the use of any substitution drugs when treating addiction to methamphetamine (shabu), or any other drug addiction in the Philippines," the EU said in a separate statement.

    Presidential spokesperson Ernesto Abella, meanwhile, said in a news briefing that Duterte's remarks about hanging EU officials should be taken literally.

    "I?m sure by this time we understand, it?s more than being literal. Basically, he speaks of an attitude of emphasizing that we should be left alone to be able to do our part," Abella said.

    He insisted that the Philippines and EU enjoy an "excellent" relationship. ? with Trisha Macas/DVM/ALG, GMA News
    FRIENDS LANG KAMI

  8. #318
    Dark clouds over the economy

    By: Cielito F. Habito - @inquirerdotnet

    Philippine Daily Inquirer / 12:30 AM April 07, 2017

    When I give economic briefings I use color coding in my PowerPoint slides, conditioned by my being a faculty member at the Ateneo de Manila University: Good news comes in blue, and bad news comes in (ahem) green. (Before the hoots from alumni of archrival De La Salle University get louder, I quickly clarify that while I now wear a blue shirt, my underwear is maroon - the color of my true alma mater, the University of the Philippines.) In the past two years or so it has been all blue bullets in my slides, summarizing my usual ?PiTiK? test of presyo (prices), trabaho (jobs), and kita (incomes), reflecting good news on all three key measures. The inflation rate has been low, the unemployment rate has been declining, and growth in our gross domestic product (GDP) has been brisk - the fastest in Southeast Asia and among the fastest worldwide, in fact.

    But it looks like I will have to recolor my slides for upcoming briefings. Is the economy heading south? To the casual observer, it would seem so. Based on my "PiTiK" test, the latest numbers appear to be heading in the wrong direction. The latest report on inflation has the overall price level rising by 3.4 percent - the steepest increase seen in the last 28 months - and continuing the steady speed-up seen in recent months. Data from the latest quarterly labor force survey taken last January show the unemployment rate rising again to 6.6 percent, reversing successive improvement in the past three years, having already dipped below 5 percent last year. GDP growth, while still fast by regional standards, has actually slowed down over the last four quarters.
    Beyond "PiTiK," the much-watched peso-dollar exchange rate has also risen beyond P50 to the dollar. There is also the disturbing news that the Philippines? current account - the balance of current foreign exchange inflows net of current outflows - has turned negative for the first time since 2002. This is because our exports (representing foreign exchange inflows) barely grew last year (0.6 percent), while imports (which lead to outflows), which are mostly inputs, rose by 16.6 percent. Meanwhile, remittances by overseas Filipino workers had generally slowed from around 7 percent annual growth in recent years (it had reached double-digit growth in the past decade), to only 5 percent last year. Deployment of OFWs has also slowed down from around 6 percent annual growth 10 years ago, to less than 1 percent in 2015 - the latest data available.

    Why are prices rising faster? The increases are generally attributed to rising oil and food prices. The first is beyond our control; the latter is. Economic Planning Secretary Ernesto Pernia notes that inflation in rice and meat have accelerated, and eyes importation constraints imposed by the government as likely culprits. I have long pointed out the folly of unduly shielding our domestic markets at the expense of the consuming public, when there are better ways to assist our domestic producers without wide collateral damage. The rising joblessness could be an alarm signal of a slowing economy, as jobs are closely tied to production. What bothers me about the uptick in unemployment is that it has come even when the labor force participation rate went down to 60.7 percent from last year?s 63.6 percent; that is, there were actually less who actively looked for work. We won?t know actual first-quarter GDP growth until late May, but jobs data suggest that the growth momentum of recent years may be at risk, and we had better watch things closely.

    To the weak of heart, these trends signal worse times ahead. Is the oft-cited Philippine economic success story of the last six years unraveling, yet again? Those of us who remember the economic dynamism we witnessed in the 1990s, only to hit another bust in succeeding years, may be getting a sense of d?j? vu, of having been here before. While what?s happening outside the Philippines clearly affects us?and things haven?t exactly been upbeat out there lately?we have demonstrated resilience to outside shocks before. Thus, I?m not too worried yet. But if we ourselves insist on doing the wrong things and cause our own problems, then indeed we must worry.
    FRIENDS LANG KAMI

  9. #319
    Keeping a promise to end telco duopoly

    From 2000 to 2016, PLDT, Globe invested a combined P850B in capital expenses and rewarded shareholders with P535B in cash dividends

    By: Miguel R. Camus - @inquirerdotnet Philippine Daily Inquirer / 05:10 AM January 29, 2018

    (First of a series)

    Even before he was elected the country's 16th President, Rodrigo Duterte revealed during his campaign precisely how he would dismantle the telecommunications duopoly of PLDT Inc. and Globe Telecom.

    From his curse-laden rallies to sedate town hall forums, the then Davao mayor never failed to criticize the two operators for their poor service quality. At a March 2016 rally in Tacloban, he called on PLDT and Globe to spend what money they could to prevent his victory, far from certain at the time, or he would open up their industry to more competition from American and Chinese firms.

    It was this fearless, populist style of speaking out against the wealthy and powerful that earned him votes from Filipinos weary of the perceived status quo. He won the presidency by a landslide just two months later.

    Mr. Duterte holds on to his overwhelming popularity to this day, even as campaign pledges have been a hit and miss.

    The promise for a telco sector shakeup, however, might be a bull's-eye.

    On Nov. 20, 2017, Malacañang announced that it offered the third telco slot to China, whose ties with the Philippines had warmed considerably under Mr. Duterte. Soon after, state-run China Telecom, that country's third-biggest mobile player, emerged as the prospective investor.

    This set into motion a series of events poised to reshape the local telecommunications scene and end the duopoly that has been in existence since 2011.

    Third player expert

    In examining the conditions that led to this situation, Inquirer Business started with the person leading the charge. From his relatively spartan office in Quezon City, Eliseo Rio Jr., acting secretary of the Department of Information and Communications Technology (DICT), is busy overseeing the process for selecting a third telco player.

    Rio was the commissioner of the National Telecommunications Commission in the early 2000s. It was during his tenure that Sun Cellular’s operator Digital Telecommunications Philippines - eventually bought out by PLDT - was given authority to provide mobile cellular services. In other words, Rio was at the helm of breaking up the duopoly of PLDT/Smart Communications and Globe for the first time.

    "I allowed it despite the objections of Globe and Smart," Rio, a former general with the Armed Forces of the Philippines, said in an interview.

    The terms of reference for a third player are now being drafted and will be out by Feb. 19, 2018. The government is targeting to select a new telco challenger, which will be awarded all currently available radio frequencies, by the first half of year.

    "This is my last hurrah," Rio said.

    He pointed out that more competition is needed in the Philippines. He also insisted that the telco operators, in an effort to maximize earnings, had been remiss in their investments to upgrade service quality.

    Underspending allegations remain contentious and are disputed by PLDT and Globe. Third-party experts also blame the prevailing government policy, which left all investment decisions in the hands of the operators.

    Telco industry supporters argued this was the mark of the private sector's resilience in an environment with minimal government support. Critics call it a cautionary tale of surrendering too much power to private interests.

    The last significant effort to invest in public telco infrastructure, the National Broadband Network during the Arroyo administration, was scrapped in 2007 under a storm of corruption allegations.

    Incredible profits

    High entry barriers, like securing a congressional franchise, apart from decades-old regulations, protect telco industry incumbents. And then there is the high cost.

    Data compiled by the Inquirer from annual reports starting 2000 through 2016 showed that PLDT, partly owned by Hong Kong's First Pacific Group, invested more than P470 billion in capital expenses while Globe, part of Ayala Corp., had spent about P380 billion. (Spending remains high until 2018 as telcos allocate more funds to upgrade their mobile and fixed-line networks).

    The duopoly has extracted immense profits as well. During this same period, PLDT has rewarded shareholders with more than P380 billion in cash dividends while Globe has paid about P135 billion.

    Their foreign strategic partners - Singapore Telecommunications (Singtel) for Globe and Japan's NTT Group for PLDT - are likely pleased with their returns.

    Even with declining yields, PLDT posted an Ebitda margin of 39 percent as of end-2016, better than the 31.9 percent of NTT DoCoMo, which competes with three other firms in Japan. Ebitda or earnings before interest, tax, depreciation and amortization is a measure of a company's profitability.

    Globe posted an Ebitda margin of 42 percent for the same period, better than the 29.6 percent for Singtel, which also has three competitors in its home market.

    In the mid-2000s, domestic industry Ebidta margins were above 60 percent.

    Poor internet

    The public balks at these profit figures when compared to service quality versus costs.

    Research firms BDRC Continental and cable.co.uk compiled data on broadband pricing as of October 2017. Across 199 jurisdictions, the Philippines stood at No. 90 with an average monthly broadband expense of $53.45. Rates here were a third cheaper than Indonesia but more expensive than Singapore by 34 percent and double the rates in Thailand.

    A second report compiled by cable.co.uk in 2017 said the Philippines was also behind most regional neighbors in terms of internet speed. Based on its data, film buffs in the Philippines, with an average speed of 3.7 Mbps, need to wait about 4.5 hours to download a high-definition movie, 50 percent longer than Vietnam's and four and a half times longer than Thailand's. In Singapore - which had the fastest speed in the study - that same movie would take about 18.5 minutes to download.

    China, which is President Duterte's preferred telco partner, fared poorly in this test, taken over 12 months through May 2017. With an average download speed of 1.55 Mbps, it would take close to 11 hours to download the same film.

    Crowd-sourced surveys like OpenSignal, meanwhile, showed big improvements here in terms of mobile internet speed, reflecting heavy investments made by the telcos in this area.

    Big opportunity

    There are similarities in the conditions surrounding the entry of a third player in 2018 versus Sun Cellular's debut in 2003.

    Sun Cellular entered when text messaging, then the hot service, was a well-established money machine for PLDT and Globe.

    It launched when mobile phone penetration was below 30 percent, leaving a large enough market for a new competitor to tap.

    Sun Cellular immediately disrupted the industry by offering unlimited promos and bucket rates, scooping up new customers and prompting Globe and PLDT to follow suit in 2015.

    Internet services for video streaming, instant messaging and social media are the "killer applications" of this age and demand continues to surge.

    Just like text messaging in the early 2000s, the business prospects for high-speed mobile internet are clear and have yet to reach its saturation point. The latest Ericsson Mobility Report noted that penetration for LTE or 4G services in the Philippines would still be around 40 percent in 2018.

    Another vast, untapped market is fixed-line broadband and the looming shift to 5G technology.

    To be continued
    FRIENDS LANG KAMI

  10. #320
    Gov't paves way for entry of 3rd telco player

    By: Miguel R. Camus - @inquirerdotnet Philippine Daily Inquirer / 05:03 AM January 30, 2018

    (Conclusion)

    In a packed hotel ballroom in Quezon City last Jan. 24, DICT officials told industry stakeholders that a third player would be barred from selling out to the duopoly.

    "What we don't like is after we award frequencies, in a few years, the third player will just be bought out by Globe and Smart," DICT acting secretary Eliseo Rio Jr. said.

    After all, a new telco challenger will compete against powerful incumbents, which have been consolidating the industry since the late '90s.

    By the year 2000, PLDT had acquired Smart and Pilipino Telephone Corp. while Globe merged with Isla Communications Co. as part of their respective mobile strategies. Sun Cellular itself was bought by PLDT in 2011 amid the price war it started and as a new heavy investment cycle was ongoing for 3G technology.

    Around this time, more Filipinos were accessing the internet through mobile handsets and smartphone prices were dropping fast. This, in turn, cut into the telcos' legacy services such as long-distance calls and traditional text messaging.

    3rd player advantage

    Consolidation continued and by 2015, Globe had acquired Bayan Telecommunications Inc. The following year, PLDT and Globe joined forces to buy out conglomerate San Miguel Corp.'s telco assets and gained control of its underlying radio frequencies, including a big slice of LTE spectrum.

    The country's antitrust body sought to review the SMC transaction but the effort was blocked in the Court of Appeals.

    The situation today is vastly different with the government ready to provide its support to give a third player a fighting chance.

    Multiple avenues are being pursued to cut capital and operating costs for a third player, and to speed up the permitting process for telco infrastructure.

    The DICT also wants to come up with a potentially controversial policy to reallocate scarce radio frequencies, most of which are held by PLDT and Globe.

    Moreover, new technologies like 5G are seen to play a bigger role once standards are finalized next year.

    Facebook partnership

    Facebook launched a submarine cable project called Pacific Light Cable Network that will connect Los Angeles and Hong Kong to serve its massive data requirements.

    But it wanted to avoid the Luzon Strait, the body of water between Taiwan and the Philippines, which has a history of undersea cable damage due to earthquakes and typhoons. That concern led to the conceptualization of the Luzon Bypass Infrastructure, to be built and operated by the Philippine government.

    The bypass facility will have two landing stations on either side of Luzon in Baler, Aurora, and in Poro Point in San Fernando, La Union. Facebook's submarine cable will link to both landing stations and data transmissions will travel 250 kilometers over land in Luzon.

    In exchange for using its facility, which will open toward the end of 2019, the Philippine government will get 2 terabits per second (Tbps) of international bandwidth "free of charge." That's about 170 standard-definition movies or over 50,000 songs every second.

    The DICT hopes to use this bandwidth to support its free Wi-Fi program, and provide inexpensive internet to small service providers and even a third player.

    This will help a new challenger close the network gap against PLDT and Globe, which have built and control their own international gateways.

    Infrastructure fast-track

    The government will release by February its first-ever common tower policy to address the shortage of cell sites.

    Under the plan, third-party tower operators will finance and build "independent" facilities and then lease these to PLDT, Globe and a third player.

    This will free up expenses for a telco challenger, since the DICT estimated that the Philippines needs another 50,000 cell sites, valued at around $5 billion. PLDT and Globe control almost 20,000 cell sites in the country today.

    Moreover, DICT's Rio said President Duterte would issue an executive order paving the way for the approval of telco infrastructure permits within a week instead of the prevailing average of eight months.

    It would also solve right-of-way issues as operators seek to lay down more fiber lines for homes and businesses.

    Regulatory reforms

    The state-run National Transmission Corp. is also being eyed to support a nationwide telco backbone for a third player to utilize.

    Mary Grace Mirandilla-Santos, lead convenor of advocacy group Better Broadband Alliance, said these policies would help a third player get off the ground, but it was regulatory reforms that would sustain more competition.

    She cited the need to amend the 80-year-old Public Service Act and the two decades-old Public Telecommunications Policy Act.

    She also called for an open access scheme. This would allow smaller players without a congressional franchise to build and operate physical assets within a telecommunications network while leaving the telco operators to handle direct services to the customer.

    Moreover, it would spur activity in remote areas currently unserved or underserved by the incumbents or even a third player, she said.

    "The only way new competitors can survive is if you put in policy and regulatory reforms," Santos said in an interview. "We have to change these laws to have a framework that is relevant to the internet age."

    Duterte effect

    Telco operators around the world have taken notice since the Philippines's call to China. DICT's Rio said there was also interest coming from Japanese and Taiwanese operators.

    Philippine Telegraph and Telephone Corp., which is vying for the third player slot, is negotiating with several foreign groups, including South Korea’s LG Uplus, company chair Salvador Zamora II said in November last year.

    Within industry circles, there is talk of Filipino businessmen with deep pockets quietly organizing themselves into consortiums to attract foreign telco partners. Given limitations set by the 1987 Constitution, a foreign partner can only own up to 40 percent of a telecommunications provider.

    The duopoly is also gearing for battle.

    PLDT is setting aside more than P50 billion in capital spending, said to be a "historic" amount, while Globe is allocating about P42 billion for 2018.

    Even under threat of competition, there is a silver lining, said Gil Genio, Globe’s head of strategy, technology and information.

    "I get asked: Are you threatened by a third player? Because things will be easier for them now," Genio said, referring to the government's readiness to address right-of-way and permitting issues. "Sure, it's easier for a third player but there's a benefit for us, too."

    Jocelyn, who runs a stall alongside several identical outlets in the busy Greenhills Shopping Center in Metro Manila, is a small but essential part of the telco industry's distribution network.

    She is looking forward to another day of strong sales with her shop displaying the latest smartphones armed with more powerful selfie cameras.

    An active consumer of social media, she is less excited about the prospect of a third telco player entering.

    "I'll believe it when it happens," she said.
    FRIENDS LANG KAMI


 
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