Friday, March 9, 2018

Will you still need me? Will you still feed me? When I’m 104?

 Published in the ECCP Business Review, 2011

TO BE TREATED with dignity as they approach the sunset of their lives, and passing away in the company of persons they love are yearnings universal among retirees.

Having these wishes granted is quite another thing, however. It demands the cooperation of the young, some of whom might consider the task of caring for retirees a form of involuntary servitude. Thankfully, this variant of social Darwinism isn’t the norm in the Philippines where tradition demands elders be respected and cared for.

These opposing viewpoints, however, present the opportunity for a more compassionate but business-driven approach to managed retiree care. This enlightened model creates an advantageous outcome for the retiree; the persons or businesses directly involved in sustaining him; his home country and the Philippines.

The 1st Philippine Retirement and Healthcare Summit held April 12 at the Dusit Thani Hotel rekindled the determination among stakeholders to push the Philippines as the preferred international retirement destination. Input from the summit will result in the drawing-up of a high-level roadmap leading to a comprehensive retirement program.

Critical to this roadmap’s success, however, is a tectonic shift in the process of managing retirement programs. In this new paradigm, stakeholders will veer away from a business model where “Silver Aristocrats” are treated by some as gold mines to be exploited and instead adopt an approach that treats retirees with dignity.

The 10 speakers at the summit talked about the international retirement market; the importance of retirement villages; healthcare services and the regulatory environment affecting the retirement industry.

The summit was organized by the Retirement and Healthcare Coalition, Inc. (RHC), an organization consisting of the European Chamber of Commerce of the Philippines; the American Chamber of Commerce of the Philippines; the Korean Chamber of Commerce Philippines and the Japanese Chamber of Commerce and Industry of the Philippines.

Summit partners were the Philippine Retirement Authority (PRA) and Philippine Retirement, Inc. (PRI). PRA is a government owned and controlled corporation whose job is to attract foreign nationals and former Filipino citizens into investing, residing and retiring here.

PRI is a non-stock and non-profit company that unites under one organization all registered operators of retirement facilities, leisure and resort destinations, condominium and housing developers, hospitals, health insurance providers and other retirement service providers nationwide.

These chambers of commerce represent the major markets targeted by the Philippines’ international retirement industry. RHC aims to promote and win recognition of the Philippines’ value as a retirement haven, and as a center of excellence for medical and managed care services for retirees worldwide.

RHC: committed to seniors care
RHC is promoting the Long Stay Visitor program as a successful market entry strategy to gain credibility and trust in the Philippines. It offers services along the line of community development, lifestyle and healthcare.

Caring for retirees, most of whom are seniors in their 60s, no longer consists of consigning retirees to the tender mercies of uncaring (and probably abusive) staffs at “nursing homes.” What the RHC wants are fully integrated retirement villages responsive to the unique needs and wants of retirees and staffed by carefully trained, English-speaking Filipinos.

There is as yet no existing fully integrated retirement village in the Philippines as envisioned by the RHC, whose long-term commitment is to take care of foreign seniors.

But the model retirement village already exists: Lotuswell Resort at the small Thai city of Hua Hin, 180 km from the capital Bangkok.

The philosophy underpinning the success of Lotuswell is that seniors remain fun-loving persons who want to enjoy life in retirement. This positive force is strengthened by the homogenous nature of Lotuswell’s residents: mostly German-speaking pensioners, early retirees, couples and single persons from a similar age group.

These residents, mostly pensioners, thrive in a masterfully planned community that provides the amenities of a five star hotel; readily available medical treatment and recreational facilities specifically geared towards seniors.

Lotuswell is a retiree residential haven with spacious apartments and bungalows. There are no mansions or chalets within the 64,000 square meter complex.

Creating the ideal retirement village
ECCP Executive Vice-President Henry Schumacher told the audience of 500 persons that RHC had benchmarked a model project in Dumaguete City, capital of Negros Oriental, against Lotuswell. The result was a pleasant surprise.

“We discovered the Philippines can be competitive,” Schumacher noted.

RHC has begun the process of creating consortia to build its fully integrated retirement village ala Lotuswell and has begun investment promotion for this groundbreaking project.

RHC is looking at five promising sites for its retirement village: Dumaguete; Clark/Subic; Cebu; Tagaytay/Nasugbu and Metro Manila.

Schumacher noted that ageing populations in Europe, North America and North Asia want to improve or maintain their standard of living. Governments in these regions are faced with the twisted dilemma of exporting the old and importing the youth to remain economically viable societies.

This odd state of affairs benefits the Philippines since the country can afford to import the old from other countries while continuing to exporting its youth.

He noted that the financial crisis of 2008-2009 significantly eroded pensions and social benefits in the richer countries and dramatically drove up healthcare costs for retirees.

“There is an opportunity for the Philippines to get these retirees here but we have to get the product (retirement villages) right.”

“If we attract retirees, we have the obligation to look after them,” Schumacher said.

“It’s not a question of how much we charge them in the beginning. We should be able to keep them happy, keep them healthy and fulfill the promise of the Philippines as a retirement destination.”

He emphasized that RHC is committed to taking care of the international patient.

Schumacher identified community, lifestyle and healthcare as the three crucial pull factors that, if addressed correctly, should succeed in drawing tourists, long stay visitors, second homeowners and retirees to the Philippines,

When I’m 104
Tony Bridge, Executive Director & Chairman of BurnsBridge Sweett of Australia, described seniors as “the new teenagers” because of their lengthened life expectancies.

In Australia, for example, seniors lived to 82 years old on average in 2008 compared to 63 years old in 1928. Close to 40 percent of Japan’s population will be over 65 years old by 2050.

The same graying trend applies to the Philippines. Only four percent of the Philippines’ population were seniors 65 years old or older. This figure will more than triple to 13 percent by 2050.

This oncoming flood of gray, Bridge said, will warrant changing the title to that popular 1963 song by The Beatles from “When I’m 64” to “When I’m 104.” In effect, 104 is the new paradigm for old age.

Bridge said the Philippines has many of the key ingredients to successfully attract local and international retirees, which are taken to mean the “baby boomers” born from 1946 to 1964. Among these pluses are quality healthcare, good infrastructure, service culture and a low cost of living.

Crucial for the Philippines’ success as an international retirement destination, however, is developing a retirement and aged care model appropriate to its values and culture, while providing lifestyle attractions.

“Success is based on selecting the appropriate target market and business model based on market opportunity . . . so investments in understanding the market profile are critical,” he pointed out during his talk about market trends, drivers and outlook.

His proposed possible model for the Philippines would see the country advertise itself as “A center of excellence for baby boomer retirees.”

The integrated retirement business model created to support this claim would offer integrated retirement communities; a variety of independent retirement accommodations; acute care; community care; lifestyle interests; security and education, among others.

BurnsBridge Sweett is an independent consultancy providing property advisory and planning services; strategic advice and project management.

The Colonial model
Now is the right time for the Philippines to build retirement facilities and promote them to international markets, said Renee Fritschi, Managing Director of RPF–Hospitality Consulting in Bangkok.

The huge potential and growing demand for these facilities and the lower cost of living are huge advantages in the Philippines’ favor. Fritschi spoke about retirement village models for tomorrow’s customer.

“It is recommended to develop a multilingual community. This will be more demanding from an operational point of view, but will create advantages in regard to sales and market shifts.”

He noted that since a multilingual retirement villages will attract middle and upper income groups and retired senior military personnel, top quality design, construction and service are of high priority.

Fritschi presented what he described as a “Colonial Retirement Village” model for this ideal managed care community. The Colonial will be an integrated village with apartments in condominium-type buildings and in individual low-rise houses.

Infrastructure consisting of restaurants, a health center, common facilities, sport facilities, recreational facilities and a laundry, among others will support the needs of residents. 

“Service will be the key to success. Hence, professional resort management will be employed to create a social environment and assistance for the residents whenever needed,” Fritschi said.

He envisions the Colonial as having some 120 condos and bungalows only available for lease to retirees for 30 years. The minimum age to enter a lease agreement is 50 years old.

Fritschi’s company, RPF–Hospitality, is involved in hospitality consulting for hotels, resorts, restaurants, convention centers, spas and real estate firms.

The Indian experience
Atma Sharan, Vice-President for Ashiana Marketing Ltd in New Delhi, India, said that Indian retirement housing is part of much larger projects such as residential villages. All retirement housing is privately owned. Most are located in southern India with its more literate and richer population

Ashiana pioneered the retirement resort concept in India and in 2007 opened the country’s first retirement resort called Utsav in the town of Bhiwadi in Rajasthan province. In his presentation, “Turn Grey into Gold,” Sharan talked about the challenges facing retirement villages in India.

“The immediate growth potential is large since at present, facilities for senior living with healthcare are practically non-existent,” Sharan said.

What exists are “Old People Homes” set up and managed by government or charitable and non-profit organizations.  Healthcare for the elderly is not available as an integral service in these homes.

“There is no concept of assisted living in India,” he noted.

One reason for the difficulty in marketing retirement villages or the concept of assisted living is the perception among Indians that a retirement village is a piece of real estate and not a service provided for the benefit of senior citizens.

Because of this endemic market perception, his company is compelled to market Utsav as a real estate project. This perception limits the market for integrated retirement villages to the rich who have an idea and the means to avail of assisted living services.

“We are still confused,” Sharan admitted. “What business is it (retirement villages)? Realty? Healthcare? Hospitality?”

Despite these constraints, eight firms are building retirement housing in India. There are retirement homes in the cities of New Delhi, Pune, Bengaluru, Jaipur, Chennai and Coimbatore. This expansion, however, is being driven by a real estate growth potential and its attractive return on investment.

Actives in retirement
“What Comes After Active Retirement?” was the question posed by Dr. Mary Jean Guno, MD, Managing Director of HHC Home Health Care.

The answer is assisted living. Dr. Guno said senior citizens can move from active retirement into assisted living in retirement communities with recreational opportunities. There, they can utilize technology to prevent social isolation; take life enhancement programs and maintain functional independence through means such as exercise and environmental modification.

These communities can be active senior adult communities; continuing care retirement communities and long-term care locations such as the family home; an assisted living facility or a nursing home. Her company provides an assisted living facility.

“Assisted living (means a senior is) able to do activities of daily living alone,” she said.

Encouraging seniors to use technology is also an effective method of keeping them active. This means texting on mobile phones; making phone calls and using the Internet and its applications such as chatting, Facebook and Skype.

Technology can also help provide prompt healthcare. Telecare or telemedicine brings expert medical advice to the patient via Internet video or phone lines.

“Technology, if deployed in the right way, as a supplement to and an enabler of direct contact, can help older people maintain and develop social support networks,” Dr. Guno said.

And, of course, exercise and fitness programs are a must for a senior in assisted living. He can join life enhancement programs; pursue his own interests; join a fitness program or focus on spirituality.

Telemedicine: a lifesaver
But no matter how active a senior remains, age and its drawbacks such a more fragile physical condition will eventually catch up to the senior.

In his talk on “Ensuring Quality in Healthcare through Advances on Telemedicine,” Steven Normandin, President of AMD Global Telemedicine, Inc., said telemedicine is ideally suited for both developed and developing countries with remote communities to address many emerging healthcare problems.

Telemedicine’s current definition has been expanded to include the distribution of information and utilization of technology for the delivery of healthcare. It gives medical experts from a remote location immediate access to a patient in order to assess, diagnosis, monitor and treat him.

Video is an important method of delivering telemedicine to locations such as retirement communities, assisted care facilities and nursing homes.

“With the use of telemedicine equipment, physicians and healthcare providers can be electronically brought to the facility, often eliminating the need to transport the patient off site from the retirement community or nursing home for care,” according to Normandin.

“This lessens the risk of a fall or injury to the patient during transportation, and, avoids the expense of the transport.”

For seniors, telemedicine allows the delivery of medical care at a remote location and helps improve the quality and access to care in remote areas.

Normandin predicts that in five to 10 years from now, telemedicine will be an important way of providing healthcare to the general population since it saves money and provides quality healthcare. The aging population is also one of the key reasons for the coming boom in telemedicine. Worldwide, there is expected to be over one billion senior citizens by 2030.

Insurance portability
John Casey, President & CEO, Blue Cross Insurance, Inc., pointed out that no foreign retiree is going to come to the Philippines without healthcare insurance, hence the need for portability.

“Portability of healthcare can mean a number of things,” he said “but in essence it’s the right of continuity of a right to medical treatment and care.”

For a retiree, portability generally involves the continuity of medical treatment across national borders and the continuity of existing healthcare benefits across differing national or social healthcare systems.

The European Union’s EDPM is a good example of portable insurance with wide application. It has the highest standards of portability across borders of EU member states and is a mix of public, social and private healthcare funding methods.

In many aspects, it remains superior to the American HIPAA, which is valid only within the USA and can only be transferred from one company to another. Medicare is also not portable beyond the USA, which is bad news for the eight million Americans overseas.

EDPM and HIPAA are not portable to the Philippines so a potential retiree is faced with substantial out of pocket expenses. That’s because host countries in general aren’t enthusiastic about providing cover due to its huge cost and threats of fraud.

A solution is to form what Casey calls a “mutual benefit association for retirees” to be funded by the retirees themselves. Claims will be paid out of the pool of funds generated by the association. The association will also provide full in-patient cover (including pre-existing conditions) with sufficient but limited benefits.

In lieu of this unusual solution, retirees can take the usual route and opt to buy insurance from Philippine companies instead.

Casey described portability as a “very, very complex issue” that should be done on a bilateral basis piece-by-piece.

“The Philippines has many bilateral social security agreements for pension portability but not healthcare,” Casey said.

Welcome the Age of Ageing
According to PRA President Veredigno Atienza, the “Age of Ageing” and the “New Economic Normal” consisting of debt, deficits and deflation that are upon us should help entice retirees to the Philippines.

With 70 percent of the Philippines’ population below 40 years old, the pressure to cope with an ageing population is absent. Instead, the country’s youthful population becomes a major asset in boosting the retirement industry, he said.

A further boost is being provided by two bills that will update Executive Order No. 1037 issued in 1985 that created the Philippine Retirement Park System.

Rounding off the summit was an enlightening talk on the legal framework in the Philippines by two representatives from the law firm of Follosco Morallos & Herce.

Partner Froilyn Pagayatan and Associate Cielito May Velasquez covered a broad range of legal issues on the topic of immigration procedures and their related legal framework including common types of visas, the Dual Citizenship Law, the Special Investor Resident Visa and the Tourism Act of 2009.

New developments on the legal front include the proposal for a Medical Visa to promote medical tourism; a proposed bill called the Philippine Immigration Act of 2010 and a proposed special long stay visa.

The different open fora were moderated by Prof. Maria Cherry Lyn-Rodolfo from the University of Asia and the Pacific.

Thursday, November 30, 2017

UST High School Class 1970 medical missionaries: The First Medical Missions

WITH AN EFFORT, Cesar Salvador picked up the bottle of paracetamol with his good hand and gave it to the anxious mother whose daughter was resting her jaw on the long table crammed with donated medicine.

Beside him, other volunteers clad in red shirts belonging to the graduating Class 1970 of the University of Santo Tomas High School were busy dispensing medicine to patients who had earlier consulted with doctors also belonging to Class 1970. At one corner of the multi-purpose hall of Barangay Macamot in Binangonan, Rizal, Thomasian and other dentists were busy extracting bad teeth as typhoon rains swept through the barangay.

Salvador had again chosen to volunteer his services in another medical mission despite being partly paralyzed by serious stroke a decade before.  He noted, however, that he still had the use of one good arm and one good hand.

“It makes me feel useful,” Salvador said of his commitment to the medical missions organized by his high school graduating class. “It makes me feel good to know I can help in my own small way.”

Cesar Salvador and his classmates dispense medicine

A few feet from Salvador, two Thomasian ladies were bringing refreshments to “kabatchie,” (a fellow graduate) Sixto Esquivias III, resting on a wheelchair. Esquivias had had a stroke a few months earlier but despite his partial paralysis, volunteered to attend the Binangonan mission. He had taken part in other medical missions before his stroke.

“He wanted to be here to show us moral support,” said Thelma Castillo, one of the key persons responsible for organizing the Batch 1970 medical missions. “We are very touched by his courage.”

The USTHS 70 medical missionaries after their successful mission at Roxas District, Quezon City

16 volunteer medical missions
The Thomasian’s free medical and dental clinic at Binangonan was their fourteenth since 2008. This one on July 19, 2012 benefited over 500 persons, most of them disadvantaged. It was the Thomasian’s third medical and dental mission to this town at the foothills of the Sierra Madre mountain range with a population of some 7,000 persons.

Dr. Jimmy Barron, the acknowledged leader of the medical missions, noted that most of their patients were again children and women and that most of the cases they diagnosed were fevers and coughs and colds common during the rainy season.

“This is how doctors can help in their own way in their own expertise,” he said. “I am always grateful for this outpouring of support from fellow Thomasians. It’s the Thomasian spirit in action.”

Binangonan residents at the medical mission

Two months later, on September 16, the volunteers comprising the UST Class 1970 Medical Mission Society converged on Roxas District in Quezon City for a special medical and dental mission to assist residents whose homes were flooded by the southwest monsoon or “habagat.”

The floods that rose to a height of two meters were caused by the overflowing of two creeks that coursed through the flood-prone district and affected some 4,000 families. They were invited to help by the Holy Family Parish Church that held a mass in honor of the UST medical missionaries before the mission.

Dr. Ralph Curiano diagnoses a patient at Binangonan

For the fifteenth time since 2008, the veteran Thomasian volunteers unpacked cases of medicines; set-up equipment; and organized patients according to proven procedures. Then they went to work tending to the sick and injured amid intermittent rains.

Dr. Jimmy Barron diagnoses a patient at Roxas District

And for the fifteenth time, they spent their own money for the medicines and supplies they used, and donated their talents and time to a cause larger than themselves—caring for the least fortunate and the unlucky. No salaries are given and none are asked.

“It (the medical missions) lifts my spirit,” said Romy Villanueva, one of the core group that organized the missions. “It allows me to help in my small way.”

It is a statement of unconditional humanity shared by Cenon Fernandez, Lizbeth Benjamin, Ed Manahan, Malou Rico and Generoso Manuel, all of whom have served in most of the missions.

Nelia David, who has also served in almost all the medical missions, said the missions make her “. . . aware of how lucky we are. It’s also a fellowship for the batch; a bonding moment.”

She pointed out that the slogan printed on the back of their red shirts reads “Stayin’ Alive.” What the slogan really means, she said, is that the medical missions give Batch 1970 a cause for “Stayin’ Alive.”

USTHS Batch 70 volunteers

Upholding the Thomasian Spirit
The medical missions organized since 2008 by Batch 1970 remain the only ones conducted annually by any graduating class of UST High School. They uphold one of the high school’s core goals: to mold true Thomasians as “. . . responsible citizens dedicated to the service of God, the country and the whole world,”

But it is the unwavering commitment to the medical missions by the hard core of some 50 kabatchies in the Philippines and about the same number in the USA that has allowed this humanitarian movement to persevere. The Thomasian Spirit that unites these graduates runs long and runs deep.

It was that spirit that moved the kabatchies to donate the money needed to fund all the medical missions in 2008 and 2009. In 2010, the medical missionaries received invaluable assistance from the Philippine Charity Sweepstakes Office and United Laboratories, Inc.

Butch Mate, who organized the Binangonan mission, said Batch 1970 can help more Filipinos in the future with more assistance, especially in medicine and medical supplies.

“We can do more if we had the logistics,” Mate noted. “We are thankful for whatever support we receive.”

Awaiting their turn to onsult with doctors at the USTHS Class 70 medical mission in Roxas District

Something more meaningful
The medical missions originated from an idea that something more meaningful should replace the group’s quarterly get-together. The batch only rediscovered its members in 2007 and in February 2008 celebrated their Grand Reunion.

After the reunion, the Thomasians decided to do away with the get together and organize a medical mission in its stead. The response among those who attended the organizational meetings was enthusiastic and preparations were made to launch the maiden mission in 2008.

“Thank God for email and the cellphone,” Barron said in referring to the tools that allowed Batch 1970 to mobilize and stay in touch with one another in the Philippines and the United States while organizing the medical mission.

The late Sixto Esquivias III lends moral support to  his classmates

In October 2008, Batch 1970 launched its first medical mission in Payatas, Quezon City, site of the infamous mountain range of garbage. Besides the inner joy of helping the poor, the Thomasians remember Payatas for an intense stench that permeated everything.

Despite the noxious odor, Batch 1970 has held a medical mission every year at Payatas since 2008. This first medical, dental and pediatric mission helped over 800 beneficiaries.

Payatas also set the pattern for succeeding medical missions. At the forefront diagnosing patients are medical doctors and dentists from Batch 1970 including Dr. Barron, Dr. Ralph Correano, Dr. Titus de la Fuente and Dr. Perlie Battung-Pacia.

Assisting them are their children who are also doctors; doctors who are the children of other kabatchies ; spouses who are also doctors and volunteer doctors. At the medical mission sites, kabatchies take charge of administration, security, administer medical tests and dispense prescribed medicine. Kabatchies in the USA sent either financial or material support.

Dentists at the Roxas District medical mission

“We had a great response to our first mission in Payatas,” Dr. Barron noted. “We succeeded because of the all-out support from the batch.”

That the medical missions are now in their fifth year is a tribute to the unshaken enthusiasm among the medical missionaries, said Dr. Barron.

“Their commitment to the medical missions and their unselfishness remain strong. Some want to share their blessings with others. Some want to do humanitarian work,” he pointed out.

What the group saw as a one-off, free medical and dental mission has since blossomed into an open-ended commitment to serve as long as possible. Payatas was followed by San Rafael, Bulacan and Silang, Cavite.

Post medical mission meeting at Binangonan

The missions have also tended to the medical needs of the poor and unfortunate in Paltok, Bulacan and Montalban, Rizal.  Batch 1970 held four medical missions each in 2010 and 2011 and six in 2012. The missions will continue into 2013 and beyond.

“We plan to continue it until we can,” said Castillo. “Probably until we die. It’s our group’s legacy.”

USTHS 70 banner

Monday, October 30, 2017

Boracay: Nurturing the goose that lays the Golden Eggs

(Published in the ECCP Business Review, Feb. 2012)

Ah, Boracay, the world’s fourth best island destination in 2011, said readers of Travel + Leisure Magazine, a leading international travel magazine.

Ah, Boracay, whose White Beach was voted Asia’s best beach and the world’s second best by travelers who took part in a survey by, a leading online travel site, also in 2011.

European backpackers re-discovered Boracay for the world in the 1980s. Their word-of-mouth advertising of this then unknown, exotic Philippine Paradise with its pristine talcum-powdery white sand beaches unlike any other set in train a series of events leading directly to the praises—and the unbelievable economic bounty—Boracay enjoys today.

An ever rising flood of Filipino and foreign tourists has made Boracay the richest local government unit (LGU) in the Philippines. Only 7.5 kilometers long and a scant kilometer wide at its narrowest, this fortunate slice of real estate accounted for record-setting revenues of P16.7 billion in 2011, up a sizeable 17% over the P14.3 billion it earned in 2010.

It easily beat Quezon City, the Philippines’ richest city and arguably its most business friendly, which registered record revenues of P12.9 billion last year, a 13% improvement over P11.4 billion in 2010.

Boracay’s revenues, however, were close to 30% higher than Quezon City’s, an LGU 1,560 times larger in land area and 22,000 times greater in population.

Makati City, by the way, ended 2011 with revenues of P11 billion, a tenth higher than in 2010.

Recall that Boracay is only a “barangay” (or village) and one is left all the more astounded by how this “flyspeck-of-an-island” can consistently generate more income than any Philippine city, town or barangay. It is one of more than 370 barangays in the province of Aklan to which it belongs.

Not by Mother Nature alone
Boracay didn’t become this Golden Island by leaving Mother Nature to nurture its world famous White Beach all by herself. Mother Nature’s only good at growing wild grasses and causing wildlife population explosions in areas where she’s left unchecked.   

Boracay became Boracay because the local community and its LGU, the town of Malay, early on rightly decided that one of the paths to prosperity was to welcome investors without overburdening them with petty taxes imposed to generate “quickie revenues.”

Apart from local and national taxes mandatory to any business anywhere in the Philippines, Malay has not levied frivolous taxes on tourism enterprises and tourists, 909,000 of whom visited Boracay last year. About 360,000 of these tourists were foreigners.

Rey de la Rosa, Consultant for Boracay Government Affairs, said the LGU’s responsibility and that of the national agencies on Boracay is to ensure the security and safety of investors and the entire community on the island, which bills itself as a “Premier Tourist Community Destination.”

“Our community's commitment to the ‘One Island. One Goal’ concept means our goal is to complement each other and not compete against each other. Anything negative or good happening in Boracay is felt by all and we all know and realize this,” he told the Business Review.

More perks are in store for investors, de la Rosa said. The Tourism Infrastructure and Enterprise Zone Authority (TIEZA), an agency of the Department of Tourism, is now making plans to include Boracay in its plans for a type of Tourist PEZA (Philippine Export Zone Authority) zone for investors.

Investors in the new tourism zones are expected to receive the same tax incentives and other privileges now enjoyed by investors in PEZA zones around the country such as Subic and Clark.

“For investors here, the advantage is that Boracay, being an island, is easier regulated than land-based PEZA zones.”

Supportive LGU
The Malay municipal government under Mayor John Yap has consistently sided with the private sector against ordinances and projects emanating from the Aklan provincial government it considers detrimental to Boracay and its multi-billion peso tourism industry.

Only last September, the partnership between Malay and Boracay’s business sector successfully forced Aklan to abandon a controversial P1 billion reclamation project at the main jetty port on Aklan used by tourists to cross into Boracay.

The provincial government had wanted to expand the jetty port at Caticlan but without going through the necessary paperwork and consultations with the local community mandated by law. It had also apparently circumvented government laws in doing so.

Resistance to the project at the community level was so fierce the Sangguiang Bayan (municipal council) of Malay issued three successive resolutions against it. The private sector quickly obtained a Temporary Environmental Protection Order (TEPO) from the Supreme Court that stalled the project.

The TEPO said the reclamation project would damage the ecology that contributes directly to the creation of the powdery white sand that is the economic lifeblood of Boracay.

At the first hearing on the TEPO in September, the Supreme Court was informed that Aklan Governor Carlito Marquez had written a letter officially abandoning the project. There was widespread elation on Boracay following the provincial government’s retreat.

Malay and the private sector are again today united in opposing parts of a new revenue code being pushed by the Aklan provincial government. Controversial revenue raising measures seek to levy a “pass-through tax” on goods and merchandise transiting Aklan’s territory, and double the terminal fees (to P100 from P50) tourists have to pay at the jetty ports to enter and leave Boracay.

Section 133 of the Local Government Code, however, explicitly forbids this pass through tax that has long been a source of discord between the business community and local governments.

It says the taxing powers of provinces does not extend to imposing taxes, fees and charges and other impositions upon goods carried into and out of, or passing through, the territorial jurisdictions of local government units “. . . in the guise of wharfage, tolls for bridges or otherwise, or other taxes, fees or charges in any form whatsoever upon such goods or services.”

“Pass-through taxes” are illegal
Jesse Robredo, Secretary of the Department of Interior and Local Government again reminded all LGU to stop imposing and collecting fees and taxes on goods passing through their localities.

Robredo last October again urged local chief executives to refrain from enforcing any existing ordinance authorizing the levy of fees and taxes on inter-province transport of goods, regulatory fees from passengers in local ports and other additional taxes, fees or charges in any form upon transporting goods and passengers.

DILG memorandum circular No. 2015-151 re-emphasizes the prohibition on pass-through taxes and fees levied on inter-provincial transport of goods and services that can raise the prices of goods sold locally. The memorandum seeks to ban this sort of double taxation.

The secretary’s continuous appeals to LGUs to desist from imposing illegal and controversial revenue raising measures illustrates the effectiveness of “devolution” or the decentralization of political power from the national government downwards to the barangay.

LGUs became autonomous in 1991 and since then have legislated and collected taxes as mandated by the Local Government Code. Their power to tax rests on the Constitution.

Although one aim of devolution was to wean LGUs from their overreliance on “Imperial Manila” for funding, an unexpected result has been to leave some LGUs with the impression that the need for tax revenues trumps national laws and development priorities such as redirecting investments to the countryside.

And there’s a practical reason for LGUs targeting business firms: business taxes are the main source of tax revenues for cities. Towns, on the other hand, tend to derive most of their income from real property taxes with business taxes an important secondary source.

A study made in 2008 showed that the combined incomes of all cities (numbering some 120) reached P116 billion. The total income of all provinces (80) hit P65 billion while municipalities (1,500) generated P94 billion.

A simple mathematical calculation will confirm that funds generated by these LGUs from tax and non-tax sources were far short of their needs.

In the case of the average town, that calculation shows a town receiving about P5 million a month for its expenses. This might be good for a sixth class town (defined as one with a yearly income of P10 million) but will be inadequate for a first class town (P50 million).

Hence, the massive importance of the Internal Revenue Allotment (IRA) doled out every month by the national government to every province, city, town and barangay.

The IRA is an LGU’s share of revenues from the national government.  It is based largely on land area and population, meaning the more land or population in an LGU, the larger its IRA.

Municipalities, however, are totally dependent on their IRAs: the funds can account for as much as 90% of a town’s total revenues. Cities are typically less dependent than towns but IRAs still provide up to 70% of their revenues.

Some experts trace the penchant of towns for legislating “creative taxes” such as the pass-through tax to the delayed disbursement of IRAs by the national government.

Batangas Congressman Hermilando Mandanas last year railed loudly against the continuing delays in what should be the automatic monthly release of IRAs, saying the Constitution provides for this mandatory and automatic release of IRAs.

Mandanas noted that because of these unending delays, the national government owes LGUs a cumulative P500 billion in unpaid IRAs from 1992 to 2012. He estimates that P68 billion in IRAs were not released in 2011.

Mandanas this January filed before the Supreme Court a petition seeking to stop the release of capital outlays amounting to P60.75 billion in the 2012 national budget to compel payment of this massive debt.

Mandanas asked the SC to issue a writ of preliminary injunction or a temporary restraining order on the release of this amount, which is equivalent to the IRA for LGUs that he alleges has been misappropriated by the national government in the budget for 2012.

DBM Secretary Florencio Abad, however, told the Business Review this allegation has no concrete basis.

“The Department of Budget and Management has been faithful to the Local Government Code, especially the provisions on internal revenue allotment of local government units,” he said

Abad noted that Local Government Code specifically states that the IRA share of LGUs should be computed as 40 percent of all internal tax revenues collected three fiscal years prior to the current fiscal year.

The National Internal Revenue Code provides the sources of internal revenue collections include revenues from income tax, estate and donors' tax, value-added tax, excise tax, documentary stamp tax, other percentage taxes and other such taxes imposed and collected by the Bureau of Internal Revenue (BIR).

“Operationally, it is the BIR which provides our department with the aggregate computation of IRA for all LGUs, which we then distribute to all LGUs according to the formula provided in the Local Government Code,” he pointed out.

Abad assailed Mandanas’ assertion that the national government has not paid some P500 billion in IRA since 1992.

Abad said this comes from Mandanas’ own arbitrary computation that includes external revenue collected by the Bureau of Customs in the computation of IRA. Meanwhile, it is clear that the Local Government Code and the National Internal Revenue Code that internal revenue taxes do not include the collections of the BoC, said Abad.

“If Rep. Mandanas wishes to change the computation of the IRA, the formula for which is based in law, then the proper way is through the legislative route. Unless amended by Congress, we are bound to stick with what is mandated by law.”

Lower revenues=lower IRAs
This thorny issue of delayed IRAs is bound to get worse this year.

Abad has announced substantial cuts in the IRA for 2012. He said IRA funding for 2012 will drop to P273 billion from P287 billion in 2011, a fall of 5%.

Abad blamed the lower LGU IRA share to a sharp drop in revenues in 2009 due to a series of factors that included revenue-eroding measures enforced by the previous administration. Other politicians said the creation of 16 new cities was another major factor in slashing IRAs.

“Unfortunately, the IRA for 2012 has decreased, precisely due to lower revenue collections in 2009 as an effect of the global economic slump as well as revenue-eroding measures passed at that time. The Supreme Court ruling allowing the creation of 16 new cities has also affected the distribution of IRA,” he said.

The cuts are forcing LGUs to find ways to make up for their lower funding.

Tacloban City in Leyte said it would intensify tax collection. It also expects to earn P600 million from the sale of 40 government lots.

South Cotabato, site of the controversial Tampakan gold mine, will slash its maintenance and other operating expenses after receiving word its IRA will fall by P36 million to P2.1 billion. Its planned operating budget for 2012 was lowered to P440 million from P525 million as a result.

Davao City relies on the IRA for half its revenues. It is considering tax increases and improving the income of revenue-generating economic enterprises to offset part of the P300 million in lost IRA. Zamboanga City, which will lose P135 million in IRAs, is re-tooling its budget to cope with the lower funding.

Some LGUs, however, might be tempted to legislate “creative” fiscal solutions such as pass-through taxes to make-up for the lower funding. Abad feels that measures put in place by the government will serve to curb these excesses, however.

“We have nonetheless responded to the needs of LGUs who have been affected the most by these circumstances,” Abad said.

“In our Disbursement Acceleration Program crafted last year to accelerate public spending, we have allocated P6.5 billion as Local Government Support Fund for IRA-dependent LGUs. At the same time, in order to maximize the impact of local government resources, we have encouraged the local government units to align their programs, activities and projects with the national government’s priorities under the Aquino Social Contract.

“This way, national government can co-finance LGU’s critical development projects, such as school buildings, rural health centers, infrastructure that supports agriculture and tourism, and other endeavors.

Abad emphasizes the government is encouraging LGUs to become more financially sustainable, specifically by ensuring alignment of their activities with the priorities of the national government and by introducing more efficiency in revenue collection and overall operations.

“In fact, the Department of Budget and Management and the Department of Interior and Local Government are jointly implementing an LGU Public Financial Management reform program that will improve LGUs’ fiscal management.

“DILG is also closely monitoring the performance of LGUs and rewarding those which attain a ‘Seal of Good Housekeeping’ with Performance Challenge grants.

“The national government is also serious in streamlining business processes down to the LGU level. DILG and the Department of Trade and Industry are implementing a program that streamlines the business registration and permits system of LGUs.”

Abad noted that all of these, and other initiatives, seek to improve the competitiveness of LGUs.

“After all, LGUs are our critical partners in inducing sustainable development and inclusive economic growth. The national government is proactively working with LGUs, supporting them in their resource needs as much as we can while ensuring that they implement governance reform and competitiveness programs.” 

LGUs can also could consider Robredo’s long-term solution that LGUs formulate their own Local Investment and Incentives Code (LIIC) to attract investors—but subject to guidelines. Robredo said that under the Local Government Code, Local Development Councils at the provincial, city and municipal levels have to develop their own LIICs.

“The LIIC is a come-on for potential investors because it should not only spell out the local government’s investment policies and programs, but the local fiscal and non-fiscal incentives available to them, and the procedures for availing them as well,” he said.

Robredo, however, acknowledges that some LGUs might use their corporate powers as an opportunity for corruption.

“Even as we want to draw both local and foreign investors especially in priority areas and industries, we hope to eradicate leakages which can be used to circumvent the provisions of the law. It is for this reason that we deem it necessary to come up with a standard or guide for LGUs in formulating their LIIC,” Robredo said.

Investments at the LGU level
LGU overreliance on the IRA could be mitigated with more countryside investments and with the intense level of cooperation that has allowed Boracay to flourish as this country’s richest tourist destination for years.

The selflessness on Boracay recognizes that the island’s unique white sand is gold in another form. Both the LGU and the business community on Boracay (dominated by its over 350 tourist resorts) have realized that their divergent aims can be attained by together protecting the finite resource on which their wealth depends.

Because of this outlook, Malay is not as reliant on the IRA as it would be if it considered the sand as only a quickie revenue source and imposed frivolous taxes accordingly. Who knows, but there might now be a tax for diving at White Beach if Malay’s current leadership weren’t as enlightened.

Don’t laugh but just such a tax was levied late last year by the coastal municipality of Buruanga in Aklan. Buruanga is visible across the Tablas Strait from White Beach and is the site of Ariel’s Point where Boracay’s tourists travel to cliff dive.

Since late October, Buruanga has demanded that visitors who anchor within its municipal waters pay a mooring fee of P300 per boat; a diving fee of P100 per diver and an environmental fee of P50 per person. The new fees are authorized by an ordinance passed by the town’s Sangguniang Bayan but are probably in conflict with Section 133.

A Boracay resort owner said that while Buruanga has a legal right to charge tourists whatever fees it wants, these new fees will have a negative effect on the coastal tourism the town is trying to develop.

The sudden imposition of these fees, apparently without any prior public announcement, has triggered mounting complaints against the levies.

Now, for the real world
Boracay probably represents the ideal as far as a successful long-term partnership between an LGU and its business community goes. Outside Boracay, however, the partnership picture in some places tends to become blurred and in others downright adversarial.

The main culprit: a dearth of revenues that will bite deeper this year and in the coming years because of lower IRAs.

The enlightened self-interest at the core of Boracay’s “One Island. One Goal” concept can probably be used as a template in other LGUs blessed by an abundant natural resource such as strategic minerals or by exotic tourist locations.

LGUs should remember it isn’t merely “Don’t shoot the Goose that lays the Golden Egg,” but more important, “Let the Goose lay the Golden Egg first.”

In other words, first let the investor invest and do business in accordance with national and local laws and then let the LGU take its lawful share of the proceeds, also in accordance with national and local laws.

Recent episodes involving multi-billion dollar investments, however, tend to show a penchant for shooting the goose before the goose gets to lay a single egg. The result: no egg at all.

Journalist Amado Macasaet, publisher of the broadsheet newspaper, Malaya, a year ago wrote about a US$1 billion mining project that was thrown into disarray by a barangay chairman and members of his council.

The chairman denied the investor authority to operate a mine located in their barangay allegedly because they hadn’t been given grease money. Macasaet also wrote that other business projects have been set back, delayed or abandoned because of the alleged corruption at the barangay level.

Greed isn’t the only reason for harassing investors; sometimes ignorance of an investor’s business is also a reason. Macasaet said a proposal to set up a nickel operation in a barangay in Agusan took months before it could be given a permit by the barangay captain and his council.

He said the barangay officials would not ask questions about the project but just sat on the application for the permit.

Tampakan and responsible mining
And there’s Tampakan, a fourth class municipality of 33,000 persons in the hinterlands of South Cotabato that stands to turn almost overnight into one of the Philippines’ richest LGUs, perhaps surpassing even Boracay.

Tampakan’s untapped gold and copper reserves are so massive they stand to account for 1% (or P93 billion) of the Philippines’ entire Gross Domestic Product. Tampakan will have a mine life of up to 25 years.

Responsible mining practiced by large miners, however, offers a sustainable solution to the festering revenue problems faced by Tampakan and other LGUs fortunate enough to sit on massive mineral wealth.

For the Tampakan copper-gold project, the Philippines’ single largest mining project and foreign investment today, the problem is getting the project up and running. And that doesn’t appear to happening any time soon thanks to opposition to the project by the provincial and national government and not from the town and townspeople of Tampakan.

The national government has denied the mine operators (an Australian firm with a Philippine subsidiary) an Environmental Compliance Certificate (ECC) despite its compliance with the necessary requirements. The mine would have begun commercial production by 2016 had it received its ECC.

The national government said it returned the ECC application since the issue of South Cotabato’s open pit mining ban has not been resolved by the provincial government. It used a provincial ordinance issued by the former governor as the basis for denying the ECC.

The P254 billion Tampakan project is located in one of the largest undeveloped mine sites in Southeast Asia. Fully developed, the mine will contribute an average of one percent to the Philippines’ annual GDP, which also is equivalent to 10% of Mindanao’s GDP.

The project has the full support of the town of Tampakan and its town council led by Mayor Leonardo Escobillo, who said their way of life has improved with the initial investments made by the mining company.

Opposition to the project does not come from the town and its citizens, however, but from the provincial government and the national government. Escobillo has repeatedly appealed for the project to be given the go ahead.

Every year the project is delayed denies Tampakan huge tax revenues that could substantially reduce its dependence on the IRA, and improve the life of the townsfolk.

It also prevents Tampakan from taking a 40% share mandated by law of the gross collection derived by the national government from the preceding fiscal year from mining taxes.

The national government’s decision to deny Tampakan an ECC could end up discouraging mining investments, said the Australia and New Zealand Chamber of Commerce of the Philippines.

Henry Schumacher, Vice-President for External Affairs of the European Chamber of Commerce of the Philippines, said ECCP was also concerned as the government's move had undermined the mining industry.

"It shakes investor confidence," Schumacher said.

The Joint Foreign Chambers also support the project and want to see the Philippine Mining Act of 1995, which does not prohibit open pit mining, take precedence. The ban on open pit mining in South Cotabato was imposed by the province’s former governor.

Schumacher called for the government to detail a clear direction for mining investments.

"(We) need long term national strategy that is not undermined by local governments.  We are talking about responsible mining," he said.

Complicating the picture are recent national government moves to raise the excise tax to 7% from 2%; the imposition of more taxes and the removal of investment incentives for large-scale mining operations.

Too much money
The conflict between Tampakan on one hand and the provincial and national government on the other muddies the issue of devolution by turning this into a struggle for the ultimate control of immense wealth.

Now what to do with all that money.

The Norwegian Sovereign Wealth Fund is a good example of how to protect the revenues derived from mineral wealth.

Implemented in 1991, the fund safeguards Norway’s long-term interests through the use of petroleum revenues.

Its income consists of the cash flow from petroleum activities, which is transferred from the central government budget, and the return on the Fund’s capital, and the net results of financial transactions associated with petroleum activities.

The fund’s capital has been invested in the same manner as the central government’s other assets. It may only be used for transfers to the central government budget pursuant to a resolution by the Norwegian parliament.

The fund’s capital may not be used in any other way, nor may it be used to provide credit to the central government or to private sector entities.

Placing revenues from mining at Tampakan into a fund similar to that of the Norwegians will allay fears revenues might be misused, and will ensure the LGU that the money remains intact.

Today, it takes an LGU from two to three years to receive its shares of the excise tax from minerals from the national government. Excise tax payments by mining companies go directly to the national treasury and it takes that long before the LGU can get the money it generated in the first place.

This direct remittance to the national government has long been resented by LGUs. It is also an important reason why local officials are unable to quickly utilize the revenues derived from mining operations in their areas.

Clearly, self-interest seems to predominate all LGU levels. Money is indeed the root of all discord.

Measures being put into place by the national government to wean LGUs from their over reliance on the IRA are laudable but will take time. Perhaps the example of Boracay can guide LGUs, especially those blessed with mineral or tourism wealth, on how they should coexist and cooperate with business and together nurture the goose that lays the golden eggs.

“One Island. One Goal” can easily be translated into “One Town. One Goal” or “One Barangay. One Goal.”

All it needs is a long-term perspective, and a recognition that it takes two to tango.