How do you solve a problem like malaria?

(Published in Enrich magazine, 2013)

THEY SAY THAT NO NEWS is good news, and when it comes to that dreaded disease called malaria, this adage is spot on.

Once one of the most feared killer diseases in the Philippines, malaria no longer makes news the way it did during the latter half of the 20^th century. Its incidence has been steadily reduced to a point where the Department of Health is confident enough to predict the Philippines will be malaria-free by 2020.

The impending “death” of malaria as a killer of Filipinos is really good news. And it will be a historic success the government and its local and international partners involved in malaria’s eradication can be proud of.

For the generations born in the 21^st century, however, malaria is an unknown danger. The mosquito-borne menace that frightens them is dengue fever or “H-fever” (Hemorrhagic fever) as it was known in the 1950s.

History’s greatest mass murderer

But malaria is a far more fearsome terror—by far the deadliest killer of humans since modern humans surfaced on this planet 200,000 years ago. Scientists estimate malaria has caused 50% of all human deaths in the 2,000 centuries of human existence. That makes the female anopheles mosquito—the sole carrier of this deadly disease—the greatest mass murderer in history.

Exactly how many deaths has malaria caused? Scientists estimate that the total number of human beings that have ever populated the Earth (including today’s population) at some 107 billion persons. Malaria killed over 53 billion of these persons. These are far, far more deaths than all the wars in recorded history.

Malaria was the scourge of pre-Hispanic Filipinos whose chronicles note malaria-type symptoms among victims. It continued to remain one of the deadliest diseases during the Spanish colonial occupation. At the start of the American occupation in1903, malaria caused some 118,500 Filipino deaths in a total population of only seven million. Preventive measures such as the introduction of quinine caused the death toll to plunge to some 20,000 persons in 1935 out of a population that had risen to 13 million Filipinos.

Health authorities at the time noted that over 70% of “malarious” areas were located near mountains or hills, and that malaria was almost always associated with streams, which are the favored breeding grounds of the female anopheles mosquito.

A national anti-malaria campaign by the Philippine and U.S. governments in 1948 introduced DDT in an effort to stamp out malaria. It was called off in 1954 after studies showed no significant decreases in the malaria infection rate.

A commitment by the World Health Organization in the 1950s to eradicate malaria worldwide helped the Philippines in its fight against this deadly menace. New malaria eradication and control programs were initiated and implemented by successive Philippine administrations.

The importance this Administration attaches to eliminating malaria can be seen in its strong support for the sixth most important goal of the Philippines’ Millennium Development Plan: halting and reversing the incidence of malaria by 2015.

Secretary of Health Enrique Ona said this goal is definitely within reach. He cited data that shows an 80% drop in malaria cases in 2011 as compared to 2003.

“This decrease is the lowest malaria level on record for the country in 42 years, with only 9,642 cases in 2011 as compared to 43,441 in 2003,” Ona said.

That malaria does not continue inflicting massive losses on Filipinos today is one of the greatest triumphs of collective action and modern medical science. But the 9,642 malaria cases in 2011 show that a lot has to be done before the Philippines can claim total victory over the female anopheles mosquito.

Paroxysms

You have a role to play in this ongoing war against malaria. But first you have to learn more about your deadly adversary. Human malaria is a disease caused by a parasite called Plasmodium that is mostly transmitted via the bites of infected female Anopheles mosquitoes. Gorillas and some apes are also known to have been victims of malaria.

The word malaria, by the way, comes from the medieval Italian word “mal aria,” meaning “evil air.” The ancient Romans believed malaria was caused by vapors emitted by swamps, leading to malaria’s nickname, “swamp fever.”

Human malaria symptoms include high fever, shaking chills, flu-like symptoms, bloody stools, nausea and vomiting. The alternating episodes of high fever and severe shaking are the best known symptoms of malaria.

This “paroxysm” is a cyclical occurrence of sudden coldness followed by fever and sweating. How often this paroxysm occurs depends on the type of mosquito that caused the malaria. An infection by the parasite called P. falciparum can cause a recurrent fever every 36 to 48 hours.

Malaria parasites belong to the genus Plasmodium. In humans, malaria is commonly caused by P. falciparum, P. vivax,  P. malariae, P. ovale and P. knowlesi. Among those infected, P. falciparum is the most common predator. It accounted for three-fourths of cases while P. vivax infected some 20%. P. falciparum also causes the majority of deaths.

Severe human malaria is usually caused by P. falciparum, and is often called falciparum malaria. Symptoms of falciparum malaria are manifest from nine to 30 days after infection. Along with P. vivax, P. falciparum is the most common form of malaria in the Philippines. Infection with P. falciparum might also result in cerebral malaria, a form of severe malaria.

A. flavirostris: the usual suspect

The chief “vector” or carrier of malaria in the Philippines is “Anopheles minimus flavirostris” or “A. flavirostris.”  The female of this mosquito bites only at night. It breeds in shaded areas of rapidly flowing rivers, streams and irrigation ditches. A. flavirostris prefers shady places and clear, fresh water.

This mosquito does not normally breed in salt water, rice paddies or in water above 2,000 feet altitude. In many malaria hit areas in the Philippines, malaria is contracted in the foothills, mostly between flat coastal plains and higher ground below 2,000 feet altitude.

Today, only two provinces—Palawan and Tawi-Tawi—report more than 1,000 malaria cases a year. Four more (Sulu, Maguindanao, Mindoro Occidental and Zambales) have more than 100 cases but less than 500 cases annually. Most of those infected by malaria are boys between the ages of one and 10 years old.

Palawan accounts for over 80% of malaria cases. It stands to reason that reducing malaria in Palawan will greatly reduce the total incidence of malaria in the Philippines. The government and allied organizations are doing just that and in mid-2012 reported the incidence of malaria Palawan hit its lowest level.

Palawan reported some 5,000 cases in 2011 compared to 20,000 cases in 1991, a drop of 300%. Malaria in Palawan is confined mostly to the southern part of the island, specifically the municipalities of Quezon, Rizal and Narra. Palawan accounted for 55% of all malaria cases in 2011. Total malaria cases nationwide for the first ten months of 2012 fell to 5,000 compared to 9,124 cases of 2011.

Worldwide, malaria affects 216 million people and kills about 655,000 each year, according to WHO. Most of these deaths are among children in Africa, which is home to over 90% of all malaria cases in the world.

Malaria transmission can be reduced by preventing mosquito bites. This can be achieved by using mosquito nets and insect repellent, or by implementing mosquito-control measures such as spraying insecticides.

Sadly, no effective vaccine against malaria has been developed A variety of anti-malarial medications are available, however. Severe malaria is treated with intravenous or intramuscular quinine or with the artemisinin derivative, artesunate. This drug is superior to quinine in both children and adults and is given in combination with a second anti-malarial such as mefloquine.

Artemisinin became the treatment of choice for malaria in 2006. Thereafter, WHO called for an immediate halt to single-drug artemisinin preparations in favor of combinations of artemisinin with another malaria drug to reduce the risk of malarial parasites developing resistance.

A lot of kids these days are going on eco-tours, adventure tours, nature tours and heritage tours to the provinces. This boost to local tourism is great, but the smart traveler always plans his trips and always prepares for emergencies.

So be prepared if your sojourns take you to those six provinces where malaria is still a problem. Insect repellent should be a must bring necessity on all your trips. And if you decide to sleep outdoors, do so underneath that quaint piece of cloth called the mosquito net or “kulambo.” WHO estimates that the use of “insecticide-treated mosquito nets” can reduce malaria cases by half.

Moderate beer drinking can be healthy

(Published in Enrich magazine 2010)

IT'S ALMOST WIDELY ACCEPTED that drinking a glass of red wine daily might be good for your health. That’s because research has shown the abundant antioxidants in red wine seem to protect the body from heart attacks while also raising the levels of HDL (the good cholesterol) in the blood. What’s not that well known, however, is that beer has half the concentration of antioxidants in red wine and drinking beer in moderation could be as healthy an activity as a glass of red wine.

To claim a "healthy beer" exists would quickly be derided as pure tripe by teetotalers, health gurus and the intensely pious, however. Others would describe the phrase "healthy beer" as an oxymoron (a contradiction in terms) similar to other oxymora such as “dry beer,” “hard liquor” and “dry Martini.” But then, a “healthy beer” would be a totally ludicrous concept to those who still consider beer as “The Devil’s Brew”.

On the other hand, there’s a growing body of medical data that seems to point to the unsettling conclusion beer might indeed have some health benefits. And that the key to unlocking these benefits is drinking beer in moderation, moderation, moderation.

The world held its “1^st Beer & Health Symposium” a decade ago. This and subsequent symposia—while raising cynics’ eyebrows—sought to drive home the audacious conclusion “. . . beer is a well-balanced, low-alcohol beverage with significant levels of vitamins (in particular folates), minerals and silicon. Regular, moderate beer drinking may be a part of a healthy lifestyle together with wholesome food, exercise, keeping your weight down and not smoking”.

These claims aren’t all that surprising if one recalls previous studies that show all alcoholic drinks are linked to a lower risk of coronary heart disease (CHD) or heart attack. The groundbreaking Framingham Heart Study conducted from 1949 to 1966 in the USA showed moderate drinkers had 50 percent fewer deaths from CHD than non-drinkers. CHD is the leading cause of premature death in the Philippines and the developed world. It’s also the seventh leading cause of sickness in our country, according to the Department of Health.

This stunning benefit from moderate alcohol consumption, also called “The French Paradox,” can be assumed to be due to a drink’s alcohol content, whether the drink be red wine or beer. But also to moderate drinking. The concept of a “healthy beer” might not be so farfetched, after all.

Drink in Moderation

The sea change that now recognizes health benefits can be had from moderate alcohol consumption is best illustrated by modifications in the Dietary Guidelines for Americans. The official recommendation in 1990 was that “wine has no net health benefit.” In 1995, that recommendation was changed to “. . . if you drink alcoholic beverages, do so in moderation, with meals, and when consumption does not put you or others at risk.”

Quantified, “moderate drinking” means downing one to three drinks a day for most men, and one to two drinks for most women. A “drink” is this case is defined as a one-fourth liter glass (250 ml or some 12 grams by weight) with a strength of four to five percent alcohol by volume. This is the equivalent of half a pint of beer in the United Kingdom.

The American Heart Association (AHA) noted that if you drink alcohol, do so in moderation. AHA said men can down one to two drinks per day while women can take one drink per day. It defines a drink of beer as one weighing 12 fluid ounces or 355 ml. It cautions people who don’t drink alcohol not to begin drinking if they don’t already drink.

This data on moderate drinking, however, refers to healthy adults (mostly Caucasians who have larger physical builds than Filipinos). It’s also prudent to remember that the effect of one drink on a woman is almost equal to the effect two drinks have on a man.

This is because factors such as gender, body size, experience and food intake influence one's capacity to resist drunkenness. On average, a healthy person can metabolize or remove alcohol from his body at the rate of one-half ounce of alcohol per hour. Because of this snail’s pace, drinking in moderation remains the only sure way to ward of drunkenness.

The famous San Miguel Pale Pilsen (a pale lager) has an alcohol content that is five percent by volume or four percent by weight. The familiar San Mig bottle holds 320 ml of beer. In contrast, San Miguel's Red Horse Extra Strong beer has an alcohol content of seven percent in a larger 500 ml bottle.

Should it be called a Beer Belly?

Beer, the world's most popular alcoholic beverage, is made from malted barley (also called a starch source that will be converted to alcohol), cereals, hops (for flavor) yeast and water. These ingredients are organic substances that also help maintain a healthy, balanced diet, according to healthy beer advocates. The grains used to make beer also contain silicon that helps boost bone density.

To make beer or brewing beer, barley is sprouted (or malted), a process that increases the nutritional value of the cereals used. Sprouting also increases the vitamin content of beer. Despite this fermentation process, beer remains about 90 to 95 percent water with a relatively low alcohol content. Beer ranges from less than three percent alcohol by volume (abv) to around 14 percent abv.

Dr. Erik Skovenborg from Denmark, regarded as an expert on the effects of moderate alcohol consumption on health, said in 2001 that moderate drinking means drinking within the limits of your own health, always taking into account your family and friends. It’s a definition almost similar to that in the 1995 Dietary Guidelines for Americans. He noted most men and women tend to drink moderately, and argued a distinction should be made between the moderate consumption of alcoholic beverages and alcohol abuse or alcoholism.

He also said there isn’t a definite answer as to whether beer is fattening. The “amber nectar,” however, must be drunk in moderation and at meal times to head off weight problems. According to some studies, the infamous “beer belly” linked to obesity in beer drinkers might not be due to the beer at all but to other factors such as the consumption of food high in calories and rich in fat.

In addition, alcohol should never be imbibed along with potentially addictive medicines such as tranquillizers, sleeping pills and barbiturates. Persons with stomach, liver or pancreas problems shouldn’t drink alcoholic beverages. Taking either aspirin or paracetamol before or after alcohol consumption can seriously damage the stomach lining and should be avoided.

HDL and Antioxidant Benefits

Data was presented to members of the European Parliament and Europeans at the 2^nd Beer & Health Symposium in Belgium in October 2001 to support the case for the benefits of a moderate consumption of beer. Among these contentious pieces of scientific evidence is the alcohol in beer could increase serum levels of HDL; that alcohol’s an antioxidant; that drinking moderately may protect the heart from future heart attacks and that beer contains vitamins vital to the body.

Proponents of moderate beer and alcohol drinking say the amount of HDL in the blood increases when alcohol is consumed. Higher levels of HDL have been shown to be associated with a lower risk of coronary heart disease. One glass of beer a day can significantly increase HDL levels, according to some research.

The antioxidant benefit derived from beer is due to cereal grains such as malted barley. Cereal grains are a good source of antioxidants. One study showed that beer (both light and dark varieties) high in antioxidants generally have a high content of “polyphenols” that may reduce the risk of cardiovascular disease and cancer by still undefined mechanisms. Beer contains half the amount of antioxidants in red wine but more than twice that in white wine per drink of equivalent alcohol content. One bottle of wine is equivalent to six glasses of beer.

It’s not that well known but beer also contains vitamins. Beer is rich in most of the B- vitamins such as riboflavin (B2), niacin (B3), panthothenic acid (B5), pyridoxine (B6), biotin (B7), folate or folic acid (B9) and Cobalamin (B12). Research has shown that taking more Vitamin B9 or folates may provide protection against cardiovascular disease and cancer. An adequate folate levels is vital for the normal functioning of the enzymes responsible for healthy DNA.

To derive the most out of the health benefits accruing moderate beer drinking, one must also make healthy lifestyle changes such as having a healthy diet and regular exercise. No, it doesn’t mean drinking more beer. That would be alcohol abuse, which is dangerous both to the drinker’s health and to the safety of those around him. And remember there’s strong scientific evidence heavy drinkers don’t benefit from the significantly reduced CHD risk that comes only with moderate drinking.

Drinking too much or too fast causes headaches, nausea and a loss of control and judgment, all of which are dangerous and must be avoided. Sadly, drunk driving remains a leading cause of road accidents worldwide. Data from the Philippine National Police show drunk driving incidents rose by over six percent, or from 692 cases in 2008 to 735 cases in 2009. In the USA, some 11,800 persons died as a result of drunk driving accidents in 2008.

“Everything in moderation. Nothing in excess,” is a laudable aphorism to remember when drinking beer, wine or any alcoholic beverage.

Reducing our carbon footprint and all the stuff that will make this country a healthier place to live in

(Published in Enrich magazine, 2010)

THE WORLD CLIMATE conference at Copenhagen, Denmark last December fell short of a new binding pact to combat global warming by setting binding caps to slow carbon emissions. Viewed as a success by some nations and a failure by others, the conference did underscore a powerful commitment by 194 countries towards battling global warming —and protecting the health of people in the process.

It did set a commitment to limit global warming to two degrees Celsius (3.6 degrees Fahrenheit), but did not specify the all important global emissions targets for 2020 or 2050 to achieve this aim.

The Philippines sees itself as one of the winners at Copenhagen. It will receive $380 million in financial aid pledges to help it cope with the impact of climate change, a recognition of its lead role as an Asian leader in the fight to save the planet. The money will be used for programs in renewable energy, energy efficiency, clean urban transport, forestry investment and local water utilities.

The Philippines has been doing its bit to further reduce the adverse impact of climate change and pollution on both the economy and the health of Filipinos despite being a low emitter of greenhouse gases (GhGs). Scientists say GhGs contribute to global warming, which has worsened since the “Kyoto Protocol” on combating climate change was signed in 1997. The faster pace of warming has caused the world's oceans to rise by about 1-1/2 inches in the past 12 years due to the melting of 2.5 trillion tons of ice in Greenland and Antarctica.

The Philippines has become Southeast Asia’s leading wind energy producer partly because of its desire to fight climate change. That goal has also led to the Philippines generating more electricity from solar energy and to the increasing use of methane gas generated by garbage to produce electric power. Then there’s the growing use of biofuels as a replacement for carbon-based fuels such as diesel.

The Kyoto Protocol defines legally binding targets and timetables for cutting the GhG emissions of industrialized countries that ratified the protocol. The goal is to lower overall emissions of six greenhouse gases—carbon dioxide, methane, nitrous oxide, sulfur hexafluoride, hydrofluorocarbons and perfluorocarbons— averaged over the period from 2008 to 2012.

On the other hand, developing countries like the Philippines benefit from capital investments in “carbon offsetting” projects by industrialized countries, the introduction of clean technologies such as wind power and the implementation of sustainable development projects such as electricity from biogas.

Carbon footprint

The Philippines’ eco-friendly or sustainable activities give it a small “carbon footprint.” Which brings us to the question, what is a carbon footprint and why is a low carbon footprint important for the health of Filipinos?

A carbon footprint can be defined as the total GhG emissions produced by a country, an organization, event or a product. It is often measured by the amount of carbon dioxide (CO2) emitted, or its equivalent in other GhGs.

A country's carbon footprint can be measured by undertaking a GhG emissions assessment. Once the size of a carbon footprint is known, a strategy can be devised to reduce it, either through technological developments, better process, carbon capture, consumption strategies and others.

Reducing carbon footprint can be achieved by implementing sustainable processes such as solar energy and wind energy and through reforestation. This is called carbon offsetting. A Philippines success in carbon offsetting can be seen in a report last November that said the country’s trees absorbed 107 million tons of CO2. This led to an 80% reduction in its GhG emissions, giving the Philippines some 19 million tons of emissions consisting mainly of methane and nitrous oxide gases, according to data from the Department of the Environment and Natural Resources.

Further proof of the Philippines’ commitment to fighting climate change is the current growth in the wind industry sector that will soon make the Philippines Southeast Asia’s top producer of wind energy.

A competition among five companies to build the 86 megawatt (MW) combined power output facility at Burgos, Ilocos Norte heralds an assured future for wind energy. The Burgos facility will produce wind energy to sell to the Luzon power grid.

Sources in the wind sector said the Burgos facility will validate wind energy as both a sustainable and profitable resource. Once online, the facility will make the Philippines the top producer of wind energy in Southeast Asia. Experts say wind energy will contribute some 400MW to the country’s electricity grid within the next three years compared to 33MW today.

The wind farm in Bangui, which is adjacent to the Burgos wind farm, has proven wind energy can provide reliable and cheaper electric power. Twenty gigantic, three-bladed wind turbines are operational at the Bangui wind farm, the first large-scale wind power plant in Southeast Asia. This wind farm, which became operational in 2005, produces 25MW of clean electric power for local cooperatives.

The Burgos wind farm is the next logical step in the evolution of wind energy in the Philippines. It will be quite large, close to three times the size of Bangui, and should also accelerate the growth of wind energy in missionary areas or areas outside the main electricity grid.

This marked growth in wind energy use is being driven by the Renewable Energy Law passed in 2007. The law is drawing investments into the wind energy sector and is telling investors there is a good return on investment to be made by harnessing the wind to produce clean and renewable electricity.

The numbers supporting the case for making renewable energy this country's primary power sources are substantial. The World Wildlife Fund, one of the members of the Renewable Energy Coalition, estimates the Philippines has more than enough renewable energy potential: 7,404 MW for wind, 1,200 MW for geothermal, 2,308 MW for hydro and 235 MW for biomass. Less than one percent of the Philippines' entire energy needs comes from renewable sources today.

Renewable energy does work, and is an excellent way of reducing the country’s carbon footprint. The example of Europe in wind energy is good example. In 2006, the world's total installed wind energy capacity rose to over 74,000 MW from 59,000 MW in 2005.

Europe led the world in the number of countries with the highest total installed wind energy capacity. On the other hand, Asia is experiencing the strongest increase in installed capacity outside of Europe, with an addition of 3,679 MW, taking the continent to over 10,600 MW.

Electricity from garbage

Generating electricity from garbage also reduces the Philippines’ carbon footprint by reducing the amount of methane gas (a GhG) emitted by decomposing garbage. The largest such project today is the “Quezon City Controlled Disposal Facility Biogas Emission Reduction Project” at the Payatas dumpsite in Quezon City. It’s also the biggest biogas emissions reduction facility registered with the United Nations and is the first biogas emission reduction project in Southeast Asia.

The facility became operational in May 2008 and is removing over 116,000 tons of carbon dioxide from the country’s atmosphere every year. This P200 million joint project between the Quezon City government and the Italian firm, Pangea Green Energy S.r.l. is now extracting, collecting, flaring and converting biogas into electricity.

Biogas is produced during the fermentation of organic matter such as solid or biodegradable waste. Consisting mainly of methane and CO2, biogas can be used for heating, cooking and generating electricity. Methane from the collected biogas can produce some one million kilowatts of electricity annually, enough to supply 1,000 households with clean, carbon free power.

Doing our bit

The threat to health posed by a high carbon footprint goes beyond the dangers posed by pollution. A study published in the prestigious U.S. medical journal, The Lancet, in 2000 noted an increase of eight percent in hospital admissions per one degree Centigrade rise in temperature. This suggests global warming is likely having a strong effect on diarrheal diseases, and increases cases by millions worldwide per degree of temperature rise. Scientists note the world’s temperature has risen 0.4 of a degree since 1997.

Probably the most effective way the ordinary Filipino can help reduce his individual carbon footprint is by cutting down on electricity use. Most of this country’s electric power is generated by power plants that burn coal—the largest source of industrial atmospheric pollution and GhGs—so that more electricity use means more coal has to be burned.

We can also produce less garbage by reducing the amount of paper we use in our work or in school and cutting down on the use of plastic bags, for example. Recycling garbage also helps cut the carbon footprint. We should always remember that carbon footprint is not just some fancy scientific phrase meant to impress us. It’s at the center of a worldwide fight to ensure this planet remains liveable for generations to come. 

Zero sum or Win-win? The Philippines and the ASEAN Economic Community

(Published in the ECCP Business Review, 2013)

WILL THE PHILIPPINES be a winner or a loser with the advent of the ASEAN Economic Community (AEC) in 2015?

Clues that might yield a final answer to this key question can be found in two Scorecards published over the last three years by the ASEAN Secretariat based in Jakarta, Indonesia. The scorecards track the Philippines' readiness for the AEC, and those of the nine other Association of Southeast Asian Nations member states. There will be four scorecards until 2015.

So far, the Philippines did its part to ensure the free trade that underpins the AEC. It performed quite well by ASEAN integration standards in the second scorecard, this for the period 2010 to 2011.

Of the 19 categories that grade progress in this monitoring mechanism, the Philippines implemented all its targeted measures in nine categories and implemented half of the targeted measures in a further nine.

The Philippines, however, “failed” in one category—food, agriculture and forestry—where it implemented less than half of all targeted measures. Ominously, this sector has been identified by Filipino experts as one of two key problem areas (the other being manufacturing) that might suffer gravely because of ASEAN integration.

Food, agriculture and forestry includes food security; the free flow of safe and qualified products; improving competitiveness in international markets and the development of national good agriculture practices.

The Philippines’ scorecard saw it “pass” in the free flows of capital, skilled labor, and priority integration sectors; competition policy; intellectual property rights; minerals; ICT; taxation and e-commerce.

She did half of what was expected in the free flow of goods, investment and capital; consumer protection; transport; energy; SME development; initiative for ASEAN integration and external economic relations.

But these achievements fell short of those from 2008 to 2009 when the Philippines implemented all but two of the 19 targeted measures.  The laggards were the free flow of services and transport.

For 2008 to 2009, which is also described as Phase 1, the Philippines’s implementation rate stood at 94.55% as against the regional implementation rate of 86.7%. The Philippines met 91 of the 105 measures it set out to accomplish.

For 2010 to 2011 or Phase 2, the Philippines, implementation rate was 65.92% versus the ASEAN implementation rate of 56.4%.

The checkered performance for 2010 to 2011 reflects the increasingly difficult nature of the remaining integration challenges faced by the Philippines as it approaches December 2015.

ASEAN has announced an AEC Blueprint achievement rate of 80% for this period and admitted difficulty implementing the remaining 20%.

This April, President Benigno Aquino III said ASEAN’s efforts to create the single market are now in their hardest phase owing to protectionist muscle-flexing by sensitive sectors such as agriculture.

"They have finished with the easy parts but the accomplishments will not be as fast as in discussing the hard parts. When you reach that point, there can be some protectionist measures taken by each economy," Aquino said.

Among the key challenges within ASEAN identified by Aquino were creating a framework to open up the services sector, which includes banking, telecommunications, retail and insurance.

To do list

Unimplemented measures for both the Philippines and ASEAN are in trade facilitation and customs regulations; standards and conformance; services and investment liberalization; agriculture and forestry cooperation and consumer protection and transport.

The Philippines also needs to implement six measures that affect increased foreign equity and improve market-access in services and transport. A South Korean study submitted to the ASEAN Secretariat showed that the Philippines’ restrictive cabotage rule remains a major stumbling block to achieving ASEAN integration of shipping services.

The Cabotage Law of the Philippines prohibits foreign carriers from engaging in domestic coastwise trade and reserves coastwise trade for national flag carriers.

Also known as the Jones Act of 1920, the law was enacted to protect the interests of local ship owners against foreign ships. Almost a century of protection, however, has resulted in a domestic shipping industry that is effectively a cartel consisting of five shipping companies that control 90% of domestic shipping.

Critics blame the law for stunting interisland trade; contributing to the dearth of safe and well-maintained vessels; impeding the growth of local economies by fueling expensive consumer prices, undermining inclusive growth and discouraging investments that could make domestic shipping more efficient.

The National Economic Development Authority (NEDA) believes a cartel consisting of domestic shipping companies is contributing to the exorbitant cargo fees pummeling domestic shippers. NEDA also noted that domestic shipping lines have not been very efficient.

The deleterious effects of the Cabotage Law on trade can be seen in the irony that it is cheaper to ship to Hong Kong from Davao than to ship from Davao to Manila.

Arangkada, a project of the Joint Foreign Chambers of the Philippines, also noted it is cheaper to transship a container from Manila to Cagayan de Oro via Hong Kong or Kaohsiung than to ship directly from Manila to Cagayan de Oro.

It pointed out that the Philippines’ domestic shipping industry is not competitive due to the predominant use of small ships (200-300 TEU container ships compared to the more efficient 5,000 TEU foreign container ships).

The government does, however, recognize the law’s ill-effect and in 2008 formed an Anti-Cabotage Task Force (ACTF). ACTF said a massive reform or overhaul of the cabotage system will definitely benefit consumers, farmers, traders, buyers, investors, tourism operators and exporters. It noted the domestic shipping industry will also benefit since reforms will encourage more trade and business, resulting in more volume shipments.

Sen. Edgardo Angara said allowing foreign shipping firms to compete with domestic shipping can reduce the cost of transporting goods by 30%.

“This has been a long-standing issue. If we allow the foreign shipping firms to ship to different (local) ports, it will bring down or lower shipping costs by 30%.”

Angara’s views are not shared by Maritime Industry Authority (Marina) that claims local shipping is not strong enough to compete with international rivals. Administrator Vicente Suazo, Jr. said lifting the cabotage law may kill small- and medium-scale shipping operators.

"Instead, the country should continue to look for additional incentives to be given to local operators to acquire new vessels for them to be at par with their foreign counterparts," he said.

This, of course, does not make sense as it protects a few families that own shipping lines at the expense of inclusive growth, job generation and making the country more competitive. “Juan de la Cruz” continues to suffer because of the protection of a few rich families enjoying quasi monopolies. Given the Aquino Administration’s majority in both Houses of Congress, these reforms should be possible.

But there are other options: the Customs Commissioner has the power to declare more harbors as “international harbors’” that will allow international competition or international cooperation to lower shipping costs.

New and more modern vessels will be needed to facilitate the free flow of goods and investments that ASEAN has said is necessary to lower transportation and logistics costs between and within member countries.

The Philippines’ ranked 59^th in the World Bank’s 2012 Logistics Performance Index. In comparison, Singapore placed 1^st; Malaysia, 29^th, Thailand, 38^th and Indonesia 52^nd.

The index reflects assessments of a country's logistics based on efficiency of the customs clearance process, quality of trade- and transport-related infrastructure, ease of arranging competitively priced shipments and quality of logistics services, among others.

The Philippine Chamber of Commerce and Industry (PCCI) laments the constraints that lead to the high cost of logistics. Among the leading constraints is the Philippines’ inadequate infrastructure.

Opposition to ending cabotage, however, is fading. A report showing that Philippine cabotage is blocking ASEAN shipping integration could be the nail that finally shuts the coffin containing cabotage.

The report, “Formulating an ASEAN Single Shipping Market Implementing Strategy,” has identified cabotage as one of the major barriers to the Philippines’ accession to the ASEAN Single Shipping Market. It was transmitted to the ASEAN Transport Ministers meeting this June.

ASEAN this year targets the liberalization in logistics services such as maritime cargo handling services, storage and warehousing services, freight transport agency services, courier services, packaging services and customs clearance services.

The report said foreign ships calling in Philippine ports are needed in order for the Philippines to achieve sustainable growth and, more important, achieve a single ASEAN market bolstered by regional shipping integration. It also cited the lack of direct shipping services to Europe and the United States.

 “The insufficient cargo base and insufficient berth depth are some of the underlying factors for this lack of direct shipment between the Philippines and US or Europe,” it said.

Instead, shipping lines use Singapore, Malaysia, Hong Kong and Taiwan as transshipment hubs. This reliance on transshipments has led to unnecessarily longer shipping times and higher costs than under direct shipments.

Henry Schumacher, Vice President of the European Chamber of Commerce of the Philippines, noted that the European Union’s logistics industry urges ASEAN member states to liberalize the maritime transport sector by allowing international shipping companies to carry out international relays and transport international cargo.

“The industry encourages ASEAN to relax cabotage laws and allow international shipping companies to operate within domestic maritime to the benefit of local and ASEAN business,” he pointed out.

“Member countries should exercise non-discriminatory procedures in maritime trade and services with ASEAN countries.”

Schumacher said the EU’s logistic industry urges ASEAN to implement a common de minimis baseline of US$100, moving towards US$200 and the EU to implement a commercially viable de minimis baseline exempting shipments from import duties and taxes such as VAT, and any customs declarations.

“European business strongly supports the objectives of the ASEAN Logistics Roadmap and the Master Plan on ASEAN Connectivity in contributing to the ASEAN Economic Community by 2015 through liberalization and facilitation measures in logistics services and the creation of the integrated ASEAN logistics environment that includes maritime services.”

The bottom line is that to facilitate the free flow of goods and investments, AEC needs to lower transportation and logistics costs between and within member countries. Cabotage has no place in this.

The upcoming Roll-on/Roll-off (RoRo) ferry service between Davao City and Bitung, Indonesia has the potential to cut transportation costs between both ports by 5% to 10% compared to regular shipments, said the Philippine Exporters Confederation, Inc. The service is expected to begin in the third quarter of this year.

The Davao-Bitung RoRo will promote easier trade between Mindanao’s producers and markets in Indonesia. Bitung or Kota Bitung is a city on the northern coast of the island of Sulawesi. It lies some 350 nautical miles to the south of Davao City.

The direct route to Indonesia will correct absurd shipping situations such as that faced by one major food company that transports its cereals produced in Mindanao to Indonesia by first shipping these cereals to Manila, and from Manila to Singapore and from Singapore to Indonesia.

Ready or not

Cabotage is part of a larger, ongoing conversation about the Philippines’ preparedness for the AEC.  Judging from published comments by pundits, the Philippines will not be ready for the AEC by 2015.

There is near unanimous opinion that agribusiness and manufacturing—because of their uncompetitiveness—will suffer the most from the AEC’s more liberalized markets.  

The Philippines’ inability to develop or articulate a “strategic positioning goal” for itself has also come under scrutiny. Malaysia has said it wants to dominate “green technology” in the AEC; Indonesia wants more investments. And the Philippines?

But what causes the most anxiety among those fearful the Philippines will let slip the advantages offered by the AEC is a nagging perception the country remains unprepared for integration despite laudable progress to the contrary.

Rafael Alunan, former Secretary, Department of Interior and Local Government, believes “. . . the prevailing sense is that the country somehow seems unprepared to meet the competitive challenges when trade barriers are lifted to allow for the free flow of goods and services in the region.”

He noted that the business sector needs a carefully constructed environment to steel itself for the onslaught of liberalization while giving foreign competition a serious run for their money.

“Whenever ASEAN integration is taken up, the lack of preparedness and synchronicity of the government and private sector and weak state of competitiveness dominate the conversation,” he said.

Alunan sees agricultural and manufacturing sectors as the most vulnerable to ASEAN integration’s risks while BPO and tourism stand to benefit.

“Exploiting opportunities arising from ASEAN integration requires that we lessen our vulnerabilities to foreign competition and exposure to market risks.

“I’m not aware of contingency plans that aim to mitigate the risks posed by cheap products and services, and to strengthen our competitive advantage where we shine or could eventually shine.”

Romulo Virola, Secretary-General of the National Statistical Coordination Board until his retirement in 2012, said the Philippines is not yet ready to benefit from economic integration in 2015 given that we still have to focus on economic problems.

The PCCI’s leadership feels that policies need to be in place before the Philippines can truly integrate with ASEAN. Donald Dee, Vice-Chairman for Multilateral Trade, said these policies include a national single window and customs certification; mutual reciprocity agreements on export standards and a dispute settlement agency. The Philippines has to do this immediately “. . . or we will be left behind.”

The government, however, says the AEC is nothing to be scared of. Secretary of Trade Gregory Domingo told local business leaders to develop the confidence to seize opportunities.

“There are only two and half years before AEC. Do we have to panic? No,” he told PCCI members.

He reminded businessmen that integration will no longer have a significant impact on trade in commodities. Tariffs on over 99% of products traded within ASEAN were removed on January 1, 2010.

“If you’re thinking of lower tariffs because of the AEC, don’t worry. You’re already competing with other ASEAN countries.”

The downside facing the Philippine business community as regards the AEC, however, is that Filipinos have not been aggressive in taking advantage of the opportunities presented by lower tariffs, a failure Domingo said was caused by the absence of a local AEC information campaign.

The problems with agribusiness

The worst case scenario for the Philippines’ agriculture sector is a slow and painful decline at the hands of the AEC. This vulnerable sector accounts for over 10% of the Philippines’ GDP and 35% of the country’s workforce.

It’s also the chief source of the poverty bedeviling the Philippines, which has a poverty incidence of 40%. The World Bank estimates that about half of the rural population in the Philippines is poor.

A report by the University of Asia and the Pacific in 2010 identified agriculture as the main source of livelihood and income among the poor. It pointed out that developing agriculture by increasing incomes from land and non-farm jobs will have a tremendous impact on reducing poverty.

It recommended crafting a blueprint for the agriculture sector and pushed for increasing non-farm and off-farm jobs by increasing investments in food processing.

Arsenio Balisacan, NEDA Director General, said solving the huge underemployment problem in agriculture is crucial to reducing poverty and achieving “inclusive growth.”

He urged the private sector to help farmers and other agriculture workers increase demand for their products.

“Linking agricultural workers to the supply chain will increase effective demand for agricultural output and, hopefully, increase returns to their labor. However, we are aware that the agriculture sector will need to improve the quality and increase the quantity of its output,” he said.

Balisacan “. . . hopes the business sector can take on a huge role in this, perhaps through technology, additional training, equipment or others.”

Hence, the need to develop agribusiness, both as a means of making Philippine agricultural produce more competitive in the AEC and in mitigating poverty among farmers.

A turnover of PhP 123 quadrillion

ASEAN agribusiness carries massive potential economic power and the EU is proof of this. Businesses in the EU agri-food chain generate a turnover of PhP123 quadrillion (Euro 2.2 trillion) and provide direct employment to over 33 million Europeans. Taken together, the European food and drink industry is the largest manufacturing sector in the EU in terms of turnover, value added and employment.

Schumacher noted that Philippine agribusiness has a great future if built on successful models like Nestle Philippines and La Frutera, Inc.

Nestle has a long-running program that develops rural areas and communities by aiding coffee farmers and facilitates indirect and direct employment. Its 20-year old agronomy program provides access to farming technological advances; trains farmers and promotes sustainable practices.

Based in Maguindanao province, La Frutera is the Philippines' largest banana exporter. Its employees are practically all Muslim Filipinos, many of whom formerly fought against the government. La Frutera is proving that providing jobs, especially in rural areas, is the direct and sustainable way of alleviating poverty.

In ASEAN, outstanding regulatory issues are hindering development and growth. Further ASEAN agribusiness growth can be nurtured by solving issues in the regulatory arena that constrain development.

Schumacher identified some of the regulatory issues affecting ASEAN and the Philippines as tariff, taxes and non-tariff barriers; sanitary and phyto-sanitary standards and technical standards and product classification rules.

Among vital recommendations for solving these market access issues include phasing out import tariffs and non-tariff barriers over time; ensuring that ASEAN member states develop taxes and regulations that are simple, transparent and fully compliant with rules of the World Trade Organization and basing technical standards and product definitions on internationally recognized standards.

In the Philippines, agribusiness is being held in check by a dearth of locally made mechanized implements to speed-up production; limited irrigation; expensive fertilizer and the inability to combine small farms into larger farms to attain economies of scale through mechanized farming.

Manufacturing needs to resurrect

The debilitated state of Philippine manufacturing can be traced to a skewed “industrialization” over the past century that favored import substitution and exports of agricultural and forestry products having limited value-added. Coupled with high tariffs protecting factories that sold mostly to the domestic market, this “industrialization” rendered Philippine manufacturing unfit to compete in today’s globalized world.

The Philippines also didn’t develop its potential to be a major exporter and instead became dependent on remittances for much of its economic growth. Robust exports usually generate quality jobs in manufacturing and increase direct revenue for the government that overseas jobs cannot.

Arangkada gave this sober assessment on the state of manufacturing in a recent report:

“Domestic manufacturing has never faced more challenges to survival than today, such as high business costs, low import duties and extensive technical smuggling. As long as smuggling provides better profits than manufacturers, the economy will be one of traders and smugglers.”

Compounding these drawbacks is the absence of a national policy identifying manufacturing as a key component of economic development. There is also no national industrial master plan while funding for overseas trade and investment promotions remains puny.

More than a year ago, the Department of Trade and Industry asked industry sectors to prepare roadmaps to growth. Almost 40 were submitted, according to sources. These roadmaps, however, have not been made public and the Philippine Institute of Development Studies (PIDS), the government think tank, is said to be still drafting a strategy on the basis of these roadmaps.

The “Arangkada” team recently held focus group discussions on manufacturing, trying to zero in on five industries with the potential of employing a large number of people and five issues per industry that need to be addressed to make the selected industries grow.

The identified industries are garments/footwear; food/ agriculture; shipbuilding; electronics and automotive/aviation. Some of the issues hindering the growth of these industries are the inflexible Labor Code; unrealistic minimum wages; the need for domestic-market oriented industrial zones (managed by the Philippine Export Zone Authority); inadequate infrastructure and the excessively high cost of power and domestic transportation.

Despite manufacturing’s weakness, Balisacan said that the country must continue planting the seeds of a structural transformation of the economy to make it more industry and investment-led.

Infrastructure is the key

Former Budget Secretary Benjamin Diokno is pushing for more spending in public infrastructure to revive the manufacturing sector, which plays a key role in job creation.

"The message is clear. The best way to prepare for ASEAN integration is by making the Philippines stronger domestically. We have to ramp-up public infrastructure spending," Diokno said.

Diokno emphasized that the cost of financing is at historic lows. If projects are rolled out now, the Philippines can build more for cheaper.

"We will be stronger and ready to march forward with the rest of the world. That’s when we will benefit fully from ASEAN integration.”

To the Philippines’ advantage, public spending on infrastructure by the Aquino Administration is now robust, overturning a contraction in 2011. Spending surged in the first four months of this year to P75.2 billion, up a huge 45% from P52 billion year-on-year.

Infrastructure spending from January to April went mostly to covered road projects of the Department of Public Works and Highways; the construction of irrigation systems, classrooms and other educational facilities and hospitals and health centers.

“Through our budget reforms and, consequently, the improved quality of public spending, we were able to fill out crucial resource-and-supply gaps that may have affected the country’s fast-growing industries,” said Budget Secretary Florencio Abad.

The higher spending is closing the Philippines’ gap with other AEC member states. The Philippines last year invested 3% of its gross domestic product in infrastructure compared to the previous 2%. Average government spending on infrastructure in Southeast Asia, however, stands at 5%.

The aggressive infrastructure investments could help eliminate the poor infrastructure that remains one of the major causes of the Philippines’ inability to draw more foreign direct investments of FDIs.

The Philippines received a trickle of FDIs from 2001 to 2011. In these 11 years, only US$16.7 billion in FDIs flowed into the Philippines. In contrast, Thailand took in US$77.8 billion; Indonesia, US$64.7 billion; Malaysia, US$58.2 billion and Vietnam, US$49.4 billion.

In 2011 alone, the first full year of the Aquino administration, total FDI inflows were a miniscule US$1.3 billion. In this same year, Indonesia attracted US$18.2 billion; Malaysia, US$16.6 billion; Thailand, US$9.6 billion and Vietnam, US$7.4 billion.

The Asian Development Bank said the Philippines needs to target infrastructure spending equivalent to 7% or 8% of GDP to compete head-to-head against its neighbors in cornering FDIs. The World Bank suggested the Philippines increase its public infrastructure spending gradually, to reach 5% of GDP by 2016.

Like the European Economic Community on which it’s modeled, the ASEAN Economic Community is facing a win-win game—and so is the Philippines. It’s now a matter of the Aquino administration seeing through the remaining tough economic and political reforms that will ensure the Philippines win-wins in the face of entrenched monopolies; misguided nationalism and political meddling.

The only other alternative to the Win-win game now being played is the more lethal Zero sum game—and this is a game the Philippines can’t win, and shouldn’t be playing.

“Behold the turtle . . .”

(Published in the ECCP Business Review, 2013)

FIRST THINGS FIRST. A HEARTY “Hurrah!” must go to President Benigno Simeon Aquino for staunchly championing integrity and clean government. These virtues have since become the foundations of the current economic renaissance that saw growth climb to 6.6% in 2012, and have set in train events that might yet alleviate the decades’ long illnesses afflicting the “Sick Man of Asia.”

The President’s staunch support for the aims of the Integrity Initiative, the key transformational initiative championed by the European Chamber of Commerce of the Philippines (ECCP) and the Makati Business Club (MBC), is a critical reason why much of the progress in fighting corruption over the past year has occurred in government.

“At the bottom line of our strategy is ensuring a level playing field, one that is stable, rules-based and whose outcomes are predictable,” the President said during the 2^nd Integrity Summit co-organized by ECCP and MBC in September 2012.

The best laid plans, he noted, can be derailed when rules change and decisions are based on whims to benefit a few.

“This is what we are trying to change since we took over office,” he emphasized. “This is the rationale behind our agenda of integrity-based governance.”

The “Tone from the Top” has also pervaded the bureaucracy to such an extent a growing number of businessmen perceive the Philippines as a more honest and better place for business. Remarkable progress was made in just over two years in the fight against corruption, both in the public and private sectors and mainly because of the “Tone from the Top”, in government departments and in corporations.

The 2012 Survey of Enterprises on Corruption by the Social Weather Stations revealed that business executives who saw “a lot” of corruption in the public sector fell to 42% in 2012 from 64% in 2009 after having been at 60% or more since 2000. 

The “Tone from the Top” has also infected the legislature. Without doubt, the recently ended 15^th Congress was far more productive than the 14^th Congress convened from 2007 to 2010. But more important than the sheer quantity of legislation it passed is the quality of the laws enacted.

Speaker Feliciano Belmonte Jr. said the 15^th Congress was instrumental in restoring investor confidence, achieving growth and reducing poverty over the past three years. He noted that the 15^th Congress enacted a total of 219 laws. Of the 36 priority bills listed by the Legislative-Executive Development Advisory Council (LEDAC), 11 have been enacted.

“We will be remembered as the House that passed the most number of historic and game-changing laws with less histrionics,” Belmonte boasted.

“From reproductive health to sin taxes to human rights compensation, long given up for dead for fear that they will disturb the status quo, these bills now end up as banner legislation for change.”

Belmonte said the House enacted the sin tax reforms; the GOCC Governance Act of 2011; the Act Further Strengthening the Anti-Money Laundering Law; the Data Privacy Act and the Act Rationalizing the Taxes on International Air Carriers, among other key legislation.

In this context, however, actions of the Supreme Court need to be watched, as the Tribunal is interfering more and more in actions taken by the Executive and the Legislative branches of government. Also of concern are the TROs regarding the Reproductive Health Law and the Cybercrime Law; decisions undermining the delivery of fiscal incentives and retroactive rulings on the 60:40 ownership provision, to name a few.

The record of purposeful action exhibited by the 15^th Congress should be carried into the 16^th Congress that will convene in July 2013. The President’s party and its allies are expected to maintain their control of both houses of Congress during this year’s national elections.

Eagerly anticipated by the business community, especially investors, are the enactment of vital bills that almost made it during the previous Congress. Should all go as the President wishes, this year could see low hanging fruit that have been ripening on the vine for a decade finally become laws of the land.

The more attainable seem to be the Rationalization of Fiscal Incentives Bill or House Bill 4935 and the Philippine Fair Competition Act or House Bill 4835. Both bills could see the President’s signature within the year. But let’s keep our fingers crossed. Both bills support the attraction of productive investment, inclusive growth and a level playing field.

It will still be an uphill fight before House Bill 4788 or the Customs Modernization and Tariff Act becomes a law within this year or the next. House Bill 4667 that aims to create the Department of Information and Communications Technology has been banished into the wilderness for lack of a champion among the administration.

The Foreign Investment Negative List (FINL) is expected to remain true to its name, Negative, in the next two years after the President last year expanded the list of investment areas and economic activities reserved for Filipinos. The Joint Foreign Chambers (JFC) are in touch with the Administration to at least improve those areas in the FINL that can be improved without legislation and amendments to the Constitution.

Investors hoping for an easing of the strict Constitutional prohibitions on ownership will have to wait that much longer before any meaningful change occurs. Malacanang has announced there will be no review of the economic restrictions imposed by the Constitution in this administration.

A long, straight road

A lot was accomplished by the 15^th Congress but a lot more needs to be done by its successor, however.

ECCP has identified four areas that need to be addressed to create the level playing field: clean business or ethical business practices; fair competition protected by anti-trust laws; equal taxation (remove unfair taxation on foreign-owned businesses) and equal opportunity for all investors (remove economic provisions in the Constitution that limit foreign ownership).

President Aquino’s “Daang Matuwid” (The Straight Road) that leads to this level playing field, however, is still marred by a few stubborn bumps that need to be smoothed out. Among the more intractable are those limiting the inflow of foreign direct, productive investments.

As someone concerned with this problem commented,” You can’t win playing football uphill.” Playing fair and competing fair should be the name of the game.

What makes enacting a single competition law or anti-trust law such a tough job is treading the fine line separating anti-competitive behavior, monopolies, the vested interests of a few and combinations in restraint of trade from legitimate business behaviors such as efficient production, aggressive marketing, technological innovations and other honest means that lead to competitive advantages.

Anti-trust or competition laws regulate and maintain market competition by prohibiting or regulating anti-competitive behavior. Three actions that anti-trust laws normally seek to prohibit are monopolies, cartel-like behavior and abuse of dominant market position. Anti-trust laws are needed to promote a freer market and more open trade and, in a Philippine setting, are key to dismantling existing dominant market positions in key industries such as telecommunications, energy, banking, media, retail, and a few others.

The century-old Sherman Anti-Trust Act and the Clayton Act are the U.S.’ premier anti-trust laws and are uncompromising in their prohibitions against business activities federal regulators deem anti-competitive.

The Philippines does not have a comprehensive anti-competitive framework similar to these two laws. What it has is an alphabet soup of laws beginning with the Constitution that address the anti-competition problem piecemeal. None of thenine existing laws dealing with anti-competitive acts provide a comprehensive solution to this problem.

The Senate in the just ended 15^th Congress had five anti-competition bills on its plate, none of which passed into law. Of this number, Senate Bill No. 123 authored by Senate President Juan Ponce Enrile is considered most likely to be enacted.

But more support has been received by House Bill 4835, otherwise known as the Philippine Fair Competition Act or the Competition Policy Antitrust Act that almost made it into law during the 15^th Congress.

The failure by President Aquino to certify as urgent this anti-trust bill that seeks to penalize anti-competitive agreements and mergers was seen as a key reason for the bill being carried over into the 16^th Congress.

The bill intends to establish the Philippine Fair Competition Commission to help ensure that businesses do not enter into anti-competitive agreements and anti-competitive mergers and abuse their dominant position.

“This would hit big businesses, definitely, but this would also help improve the business climate and encourage more foreign investors,” said Cagayan Representative Rufus Rodriguez.

The bill covers cartelsthat are defined as a “. . . combination of firms, providing goods in relevant markets, acting or joined together to obtain a shared monopoly to control production, sale and price, or to obtain control in any particular industry or commodity, or a group of firms that agree to restrict trade.”

The Fair Competition Commission will have the power to investigate “. . . on its own initiative or upon the complaint of any person, any and all violations of this act and other competition laws and cause the issuance of a cease and desist order prior to the commencement of a preliminary inquiry, and/or the institution of a civil or administrative action.”

Under the bill, anti-competitive agreements could be either horizontal or vertical. The former refers to agreements entered into between two or more enterprises operating at the same level in the market.

On the other hand, vertical agreements cover those at a different level of the production or distribution chain, and relating to the conditions under which the parties may purchase, sell or resell certain goods or services.

Another provision penalizes price fixing or the agreement among competitors to raise, suppress, fix or otherwise maintain the price at which their goods and services are sold.

A single competition law should assist immensely in leveling the uneven playing field advantages enjoyed by those with the resources to effect anti-competitive behavior. It could also whittle down somewhat the enormous business advantages enjoyed by the 40 richest families in the Philippines, many of them Chinese, which together control 76% of the country’s gross domestic product.

The House passed the fair competition act on third check -- second reading only -- while the Senate was working on a modified new bill, but did finish this legislation in the 15^th Congress. The Senate version will have to be reintroduced in the 16^th Congress that convenes in the second half of 2013.

Fortunately, however, President Aquino signed Executive Order 45 creating a Competition Office within the Department of Justice. Heading the Competition Office is Assistant Secretary Geronimo Sy who is creating the organization and is involved in capacity building. Working groups focusing on various regulatory areas have been created and sector studies are being undertaken that focus on sectors such as telecommunications and power distribution dominated by a few players.

ECCP is liaising with the Competition Office regularly to see to it that competition policy is fairly applied. It is also working closely with the Competition Office and both Houses of Congress to institutionalize completion policy through legislation. ECCP is reiterating that the Office for Competition needs to be institutionalized before 2016, in case no Anti-Trust law is passed.

Belmonte is confident the 16^th Congress will pass the bill in order to ensure healthy competition in all sectors.

Customs modernization

A notably notorious roadblock to fair competition is the Bureau of Customs. By engaging in patently illegal activities, some bureau personnel do serious damage to the economy by increasing the cost of doing business; depriving the economy of vital tax income and fostering an anti-competitive image of the Philippines as a haven for corruption.

The intractable and systemic corruption infesting the BOC has led its current Commissioner, Rozzano Biazon, to suggest the bureau be abolished and replaced by a professional institution run by private officials and employees.

Short of this radical step, however, the government is left with the option of pushing through with the long delayed plan to enact into law House Bill 4788 or the Customs Modernization and Tariff Act.

In an April 2012 letter to Ralph Recto, Chairman of the Senate Ways and Means Committee, the Joint Foreign Chambers of Commerce of which ECCP is a member, noted the Philippines is committed to bring its customs procedures in line with the 78 other members that have ratified the Revised Kyoto Protocol of the World Customs Organization. This has not happened.

JFC continued its constructive approach and provided the Commissioner of Customs and the former chair of the Senate Ways and Means Committee, Senator Ralph Recto, with requested changes to the CMTA very recently.

CMTA aims mainly to enhance the government’s collection of revenues through taxes and duties; provide more safeguards against smuggling or fraud and promote international trade by making import trade transactions faster, more predictable, efficient and transparent.

House Bill 4788 that seeks to prescribe the Customs Modernization and Tariff Act of 2011 was approved by the House of Representatives on Aug. 15, 2011 and was transmitted and received by the Senate on Aug. 18, 2011. It was not enacted into law during the 15^th Congress and its benefits have again been deferred.

Despite this, Customs still hopes to complete the national single window (NSW) network project in 2013 to comply with the country’s commitment to become part of the ASEAN Single Window by 2015. The ASEAN single window is an initiative to establish electronic windows that will facilitate international trade and investment through faster clearance by Customs.

The bureau is now working on the second phase of the NSW that will integrate data and services into a single portal in which 40 government regulatory agencies are connected to a network linked to the BOC.

NSW allows electronic transfer of data and documents relevant to the processing of imports between partner agencies, making it easier for traders to transact business with the government.  It eliminates the need for importers to bring documents from regulatory agencies such as import permits and clearances, the processing of which usually adds to the time and cost borne by businesses.

Biazon said the system minimizes opportunities for graft since the transfer of information is electronic.  The system also prevents the use of forged or recycled permits and clearances, a common practice under the existing system that relies on the submission of physical documents. Biazon said his goal to fully computerize and modernize Custom’s operations to curb smuggling and corruption.

DICT: sidetracked

It took an entire decade, but the Senate and the House finally passed their respective bills on third reading in February 2012 that would create a Department of Information and Communications Technology or DICT. The authors of both bills were ready to convene in bicam, but Malacanang halted the process.

President Aquino dashed hopes for the bill’s passage into law by relegating the principal tasks of a DICT (or the expanded Information and Communications Technology Office or ICTO) under the Department of Science and Technology (DOST).

He also discarded a provision of the Philippine Development Plan (2011-2016) that calls for the creation of a DICT. According to the plan, “The DICT should result in a thorough implementation of the national e-strategies cutting across other critical sectors such as e-education, e-health, and the country’s representation in international and regional ICT bodies.”

The President’s reason for putting the DICT on ice echoed those of the critics of a separate department: it would be an “unnecessary bureaucracy” in a bureaucracy with too many departments, most of which have their own ICT units.

It will be essential that the advantages accruing from a DICT are implemented by ICTO, which is expected to serve as the primary policy, planning, coordinating, implementing, regulating and administrative entity of the executive branch of the government that will promote, develop, and regulate integrated and strategic ICT systems and reliable and cost-efficient communication facilities and service.

As in the case of the Office of Competition, it will be essential that offices created by the President under an Executive Order will be institutionalized before this Administration bows out in 2016.

9^thFINL: not exactly helpful

The Foreign Investment Negative List is now more negative than before. Much to the surprise of the foreign investor community, President Aquino on October 29, 2012 signed Executive Order 98 expanding the list of investment areas and economic activities reserved for Filipinos under the 9^th Regular Foreign Investment Negative List.

The latest FINL now considers real estate and psychological and respiratory therapy as professions where foreign practice is not allowed or is limited. It replaces EO 858 or the 8^th Regular Foreign Investment Negative list signed in February 2010.

Executive Secretary Paquito Ochoa, Jr. said the addition of real estate, psychology and respiratory therapy is based on foreign practice limitations imposed under several newly legislated laws: the Real Estate Service Act of the Philippines (RA 9646), the Lending Company Regulation Act of 2007 (RA 9474), the Philippine Respiratory Act (RA 10024) and the Philippine Psychology Act (RA 10029).

Ochoa said that except for RA 9474 that allows foreign ownership of up to 49% in lending companies, the three others limit the practice of non-Filipinos in the areas of real estate and health care such as respiratory therapy and psychology, unless there is a reciprocity arrangement prescribed by a law.

The FINL consists of sub-lists A and B. List A specifies areas of economic activity where foreign ownership is prohibited or limited by the Constitution or by laws. These includemass media,the practice of all professions, advertising, small-scale mining and ownership of private lands.

List B enumerates limitations on economic activities regulated by law such assmall-and medium-scale domestic enterprises, defense-related industries andbusinesses that have implications on public health and morals such as gambling and massage clinics.

"For now, List B stays while the changes to the negative list covers only List A," Ochoa pointed out.

The dismay of foreign investors at the expanded 9^th FINL was revealed in a letter sent by the JFC to the government a week after the new FINL was announced. JFC urged the government to review its FINL to make it "less negative" for foreign investors.

In a joint statement, JFC said the government should review the FINL to determine whether the existing restrictions are in the national interest.

"Year after year, government departments passively apply the same legal restrictions and add new ones when Congress creates them. A review is overdue. This could be done by an inter-agency team instructed to review various restrictions on foreign equity investment in the participation in the Philippine economy of foreign equity, taking into consideration whether restrictions impede investment, job creation, and competitiveness," JFC said.

JFC noted that the Philippine economy remains more closed to foreign investments compared to its Southeast Asian neighbors.  It cited the World Bank's Investing Across Borders 2010 report that showed the Philippines and Thailand having some of the strictest foreign equity rules among the 87 countries surveyed.

"Restrictions in legislation and/or in interpretations of what should or should not be in the FINL should be easier to liberalize. Restrictions are scattered through various laws, some quite old, and most have rarely been reviewed to determine whether they remain in the national interest, especially whether they stand in the way of creating jobs.”

One of the changes to the FINL being advocated by the JFC is the removal of the restrictions on practice of all professions. JFC maintains that foreign investors can own companies that provide services covered by the Professional Regulatory Commission (PRC) as long as the services are provided by licensed Filipino professionals.

Foreign direct investments in the Philippines remain low, which could be partly attributed to a "Negative List that is too negative," said the JFC.

The Philippines received a trickle of Foreign Direct Investments or FDIs from 2001 to 2011. In these 11 years, only US$16.7 billion in FDIs flowed into the Philippines. In contrast, Thailand took in US$77.8 billion; Indonesia, US$64.7 billion; Malaysia, US$58.2 billion and Vietnam, US$49.4 billion.

In 2011 alone, the first full year of the Aquino administration, total FDI inflows were a puny US$1.3 billion. In this same year, Indonesia attracted US$18.2 billion; Malaysia, US$16.6 billion; Thailand, US$9.6 billion and Vietnam, US$7.4 billion.

JFC expressed hope the government would make changes to the next FINL due out in 2014.

"Throughout 2012 we have been encouraged by consistent reports of manufacturing firms of several nationalities relocating from China, Japan, and Thailand because of rising costs, floods, and political risks. Vietnam, Indonesia, and the Philippines – the so-called VIP economies – are being considered by these firms for new and expansion manufacturing investments," the JFC said.

"The Philippine government can build on the growing optimism about improved opportunities to invest in the Philippines by making a serious effort to make the Negative List less negative."

Hopes for a more positive FINL in 2014 during the 16^th Congress seem to be dim, however.

Socioeconomic Planning Secretary Secretary Arsenio Balisacan, Finance Secretary Cesar Purisima and Trade Secretary Gregory Domingo said they have agreed to consult stakeholders in a government review of the FINL.

Purisima said, however, there will be no review of the economic restrictions imposed by the Constitution.

"We will not be reviewing lifting economic restrictions in the Constitution. That is currently off the table,” he said. “Limiting the items on the FINL will allow the Philippines to be more connected to the global economy, which will result in more business and employment for Filipinos.”

Balisacan said the Philippines needs to enhance the competitiveness of key sectors to ensure it benefits from ASEAN integration in 2015.Trade Secretary Gregory Domingo said the review of the list would help the country attract more foreign direct investments.

"This process is a crucial step to attract more foreign investments that will create more quality jobs for our people and strengthen our country’s trade negotiations strategy," Domingo said.

Fiscal incentives: the pressing need for clarity

The Rationalization of Fiscal Incentives Bill pending for over a decade has to again wait in line to be enacted by the incoming 16^th Congress. The chances of this occurring look encouraging.

The bill seeks to rationalize and simplify the grant and administration of fiscal and non-fiscal incentives to promote foreign and domestic investments. Its swift passage, however, has been hamstrung by conflicting proposals from the Department of Finance (DOF) and the Department of Trade.

There are also multiple versions of the bill before the Committee of Ways and Means: the DOF version; SB 2755, authored by Sen. Edgardo Angara; SB 2379 by Sen. Manny Villar and SB 2142 by Sen. Ralph Recto.Then there is House Bill 4935 supported by the JFC and the ECCP.

The Senate bill proposed by the DOF relegates the Board of Investments into a pure investment promotions agency, giving up the power to administer incentives to the Philippine Economic Zone Authority (PEZA).

House Bill 4935, however, establishes the BOI as the central power for industry development, investment promotion, investment facilitation, policy formulation and administration of incentives that will be implemented by all other investment promotion agencies, including the Philippine Export Zone Authority.

ECCP and the JFC have always held the passage of House Bill 4935 is critical to the government’s aim of increasing Philippine competitiveness in terms of attracting foreign investments.

JFC has suggested to the Ways and Means Committee further refinements to the House of Representatives’ Substituted Bill. Among the JFC recommendations are the retention of the income tax holiday given the fierce tax competition to lure foreign investors and the granting of incentives for strategic projects.

JFC supports a draft bill presented by Sec. Purisima in March that will force incentives-giving agencies to budget incentives and argue the relevance of making incentives available.  There was not enough time to file this bill in the 15^th Congress. The bill is going to be filed early in the 16^th Congress and has a good chance to be approved.

FOI: a test of Presidential resolve

Transparency International estimates that corrupt public officials, employees, contractors and suppliers abscond with some 20% of the Philippines’ annual budget because of lack of transparency in government contracts and transactions. The country’s national budget for 2013 is P2.06 trillion and some P400 billion in public revenues will likely be lost to corruption this year.

This economic rationale for the Freedom of Information (FOI) bill failed to sway the President, however. His inaction in not certifying the FOI as urgent before the 15^th Congress ended is seen by his critics as a reflection of his ambivalent attitude towards the bill.

Malacañang confirmed the President had no plans of certifying the FOI bill as urgent. Spokesman Edwin Lacierda said the President would rather see the measure debated fully, regardless of whether it is passed in the current or the next Congress.

“We want a healthy debate. . . That’s what we want and in fairness to all constituents, let’s have a healthy debate,” he said

Some analysts, however, believe the “death” of the FOI in the 15^th Congress was due more to Congress running out of time. Belmonte said the FOI was one of the priority bills of the House when Congress resumed session on January 21 but noted that mustering a quorum in the nine session days before Congress recessed proved an insurmountable challenge. The need for Congressmen to attend to their re-election bids made sure of that.

Quezon Representative Lorenzo Tañada, one of the FOI’s champions, said in December 2012 he hoped the House would at least tackle the bill in the three remaining weeks of session. The FOI bill is still in the period of sponsorship.

Once sponsored, the bill will go through the period of debate and amendments before the second reading vote. Unless certified as urgent by the President, the measure will wait for three days before it can be taken up for third reading.

Critics said the 15^th Congress’ decision not to enact the long-overdue FOI bill gives credence to suspicions the House is insincere in its support for the government’s anti-corruption campaign, and Congressmen do not truly support the “Daang Matuwid” crusade.

FOI advocates, however, can take heart in President Aquino’s statement he will strive for the passage of the FOI within his presidency.

In the end, the President and his allies are to be commended for their courage in pushing forward—albeit gingerly—with legislation heavy with long-term and true transformational benefits.

For as that old adage goes, “Behold the turtle. He makes progress only when he sticks his neck out.”