DAVAO CITY -- As the Carlson Rezidor Hotel Group and SM Prime Holdings, Inc. prepare to open their third Philippine hotel in December, the partnership is going slowly on expansion plans that depend on improved accessibility outside the country’s major cities.
The upcoming medium-scale hotel under the Park Inn by Radisson brand, located in Clark, Pampanga, will be the first in Luzon after the Radisson Blu in Cebu that opened in 2010 and the Park Inn by Radisson Davao in 2013.
“Slowly and gradually, that portfolio of Park Inn by Radisson hotels will grow and move in secondary and tertiary cities [as] the country continues to grow,” Andre De Jong, Carlson Rezidor vice-president for operations in Southeast Asia and Pacific, said in an interview here.
“We are looking at opportunities that would come in locations where it would make sense. Hence, those destinations at this point in time where there’s a demand for hotels. Other destinations may need a little bit longer to grow, to get connected to and to really justify the existence of 100- or 200-room hotels to make business sense out of that,” he added.
The immediate expansion plans include a hotel in Metro Manila and another in Cebu, in the reclamation area.
“The Philippines is growing infrastructure-wise. Roads, transportation -- everything is improving, and when those places get connected, there will be more business activity, justifying international hotel operations,” he added.
At present, Mr. De Jong said, about 75% of the partnership’s client base consists of local travelers.
The Carlson Rezidor group is also exploring other partnerships, particularly for opportunities in the resort segment for areas such as Palawan and Boracay, two of the country’s known beach destinations.
“Will we see more potential as well? Yes, more so in the resort business, and on the back of improved connectivity and accessibility, these destinations will only grow in popularity,” Mr. De Jong said.
“But, I reckon that would be 2017-2018… they take time,” he added.
For 2016, the hotel management group has 10 hotels lined up for opening across the Asia-Pacific.
ASEAN INTEGRATION
Mr. De Jong said the group also anticipates growth in the hotel industry with the economic integration of the Association of Southeast Asian Nations (ASEAN), beginning December this year.
“If you look at ASEAN as a whole, the hotel business will benefit from that, [given the] convenience of travel when the restrictions are lifted; it would be far easier to get around, be it for leisure or business,” he said.
The Carlson Rezidor has signed up for their first hotel in Vietnam and several in Indonesia.
“There are other developing countries like Myanmar and Cambodia where we see a lot more attractions when it comes to hotel opportunities. These countries offer great opportunities as they grow, open up, [and] stabilize economically and politically,” Mr. De Jong said.
“These countries are individually growing; some are faster, some are more successful, but as a joint platform (ASEAN Economic Community), that growth will only multiply, in my view, as a powerful economy,” he said.
The Carlson Rezidor has more than 1,370 hotels in operation and under development with 220,000 rooms across 110 countries. The group’s brands are Quorvus Collection, Radisson Blu, Radisson, Radisson Red, Park Plaza, Park Inn by Radisson, and Country Inns and Suites by Carlson.
source: Businessworld
Friday, November 20, 2015
Sunday, October 25, 2015
‘Farm sector not ready for Asean integration’
The agriculture sector’s persistent low growth performance continues to drag the economy’s local output, measured as the GDP, and it appears to economists and business leaders to be an arena
where the Philippines has the littlest hope of competing well as the economic fusion of nations under the Asean happens.
where the Philippines has the littlest hope of competing well as the economic fusion of nations under the Asean happens.
This dim view, as indicated by actual historical data, is in stark contrast to a fearless forecast made by Agriculture Secretary Proceso J. Alcala some five years ago that the Philippines should no longer be importing rice by the end of the Aquino administration that is even now winding down its affairs in preparation for an exit some eight months hence.
According to figures presented by Ateneo economics professor Cielito Habito, also the head of the United States Agency for International Development Trade-
Related Assistance for Development Project, the agricultural sector very nearly contracted in the second quarter this year by growing at a rate of 0.5 percent. Prior to that, the sector posted an expansion averaging only 1.1 percent in the first quarter. In contrast to the disappointing performance, the $285-billion Philippine economy reported a modest 5.6-percent GDP expansion in the second quarter this year.
Related Assistance for Development Project, the agricultural sector very nearly contracted in the second quarter this year by growing at a rate of 0.5 percent. Prior to that, the sector posted an expansion averaging only 1.1 percent in the first quarter. In contrast to the disappointing performance, the $285-billion Philippine economy reported a modest 5.6-percent GDP expansion in the second quarter this year.
In terms of job creation, the country’s unemployment rate
actually moderated to 6.5 percent in July from 6.7 percent a year earlier. The 768,000 new jobs created in the industry and services sector thus far have proven insufficient to compensate for the loss of 877,000 jobs in the agricultural sector the past year alone.
actually moderated to 6.5 percent in July from 6.7 percent a year earlier. The 768,000 new jobs created in the industry and services sector thus far have proven insufficient to compensate for the loss of 877,000 jobs in the agricultural sector the past year alone.
This moderating trend in almost all aspects of the agricultural sector has been noticed also by business leaders like Asia-Pacific Economic Cooperation (Apec) COO Summit COO Guillermo Luz.
Luz said in an earlier exclusive forum with Apec CEO Summit media partner the BusinessMirrror that the government should start rethinking it’s strategy to win back the Philippines’s former position as the foremost agricultural producer in the region.
Luz said one of the measures that could help the country compete in agricultural production is to revisit the agrarian-reform program, which, according to him, has not worked to the country’s advantage because the resulting smaller farmer landholdings do not produce as much agricultural output as the large landholdings have.
The country’s foremost economist and Finance Undersecretary Gil Beltran has recommended that the Philippines import more rice on top of what it already regularly imports to ward off inflationary pressures on food anticipated in the wake of the devastation wrought by Typhoon Lando on the rice-producing provinces of the country.
According to Beltran, rice production in the so-called food basket of Central Luzon would likely contract by 8.2 percent for the whole year, bringing the total rice production forecast to negative
2.5 percent.
2.5 percent.
“As of October 20, 2015, the Department of Agriculture has estimated that 360,00 metric tons of palay has been damaged due to Typhoon Lando, of which, 326,000 tons was borne by Central Luzon. Assuming 0.65 conversion rate, total palay loss translates into 234,000 tons of rice, or roughly seven days of annual rice consumption,” Beltran said in the economic bulletin.
source: Business Mirror
Monday, October 19, 2015
OECD final report on Base Erosion and Profit Shifting (BEPS) -- Overview
(First of two parts)
On Oct. 5, 2015, the Organisation for Economic Co-operation and Development (OECD) issued the final report on all 15 BEPS Action Plans. This caps two years of work started in September 2013, when G20 Leaders endorsed the ambitious and comprehensive Action Plan on BEPS, to restore confidence in the international tax framework which was designed more than a century ago.
According to the OECD (2014), Explanatory Statement, OECD/G20 Base Erosion and Profit Shifting Project, OECD, the current rules have revealed weaknesses that create opportunities for Base Erosion and Profit Shifting, thus requiring a bold move from policy makers to restore confidence in the system and ensure that profits are taxed where economic activities take place and value is created. This package of 13 reports, delivered just two years later, includes new or reinforced international standards as well as concrete measures to help countries tackle BEPS. It represents the results of a major and unparalleled effort by the OECD and G20 countries working together on an equal footing, with the participation of developing countries.
Among the highlights of the OECD Final Reports are the new transfer pricing approach and reinforced international standards on tax treaties, the setting of minimum standards on harmful tax practices, treaty abuse, country-by-country reporting and dispute resolution, action items requiring national legislation particularly in hybrid mismatches and interest restriction, and analytical reports with recommendations concerning digital economy and multilateral instruments.
In this column, we provide an overview of the 15 BEPS Action Plans to give our readers an idea of what to expect in terms of Philippine tax developments in the context of the international tax framework.
Action 1: Addressing the tax challenges of the digital economy
The final report recommends that the list of exceptions to the definition of permanent establishment (PE) be modified to ensure that the listed exceptions are restricted to activities that are “preparatory” or “auxiliary” in character. The report also recommends the issuance of a new fragmentation rule to ensure that the fragmentation of business activities among closely related companies shall not be possible. Modification of the definition of a PE to address artificial arrangements through “conclusion of contracts” agreements between companies belonging to a multinational group is also recommended, along with revisions to the OECD Transfer Pricing Guidelines and the Controlled Foreign Company (CFC) rules.
Action 2: Neutralizing the effects of hybrid mismatch arrangements
The final report recommended that changes be made both to domestic law and the OECD Model Tax Convention in order to neutralize the effects of hybrid mismatch arrangements, which necessarily exploit differences in tax treatment of a single entity or instrument under the laws of two or more tax jurisdictions to achieve double non-taxation including long-term deferral.
Part 1 of the report for Action 2 basically recommends the linking of rules that align the tax treatment of an instrument or entity with the tax treatment in the counterparty jurisdiction but otherwise do not disturb commercial outcomes. Also, Part 2 aims to ensure that hybrid instruments and entities do not abuse the treaty benefits and will not prevent the application of the changes in domestic law as recommended in Part 1.
Action 3: Designing effective controlled foreign company rules
The final report for Action 3 sets out recommendations that will effectively prevent taxpayers from shifting income into foreign subsidiaries. The recommendations were not meant to be minimum standards, but were designed as building blocks to help achieve the said goal.
The action point named six building blocks for the design of effective CFC rules. Briefly, these six building blocks are:
• Definition of CFCs -- How to determine when stockholders have sufficient influence over a foreign company as well as non-corporate entities and their income should be covered by the CFC rules;
• CFC Exemptions and threshold requirements -- CFC rules should only apply to CFCs that are subject to effective tax rates that are meaningfully lower than those applied in the parent jurisdiction;
• Definition of Income -- CFC rules should include a definition of what constitutes CFC income and provides for a non-exhaustive list of approaches or combination of approaches that the CFC rules could use to define CFC income;
• Computation of income -- CFC rules should use the rules of the parent jurisdiction to compute the CFC income to be attributed to shareholders. Moreover, CFC losses should only be offset against the profits of the same CFC or other CFCs in the same jurisdiction;
• Attribution of income -- When possible, the attribution threshold should be tied to the control threshold and the amount of the income to be attributed should be calculated by reference to the proportionate ownership or influence; and
• Prevention and elimination of double taxation -- To ensure that the CFC rules will not eventually lead to double taxation such as the allowance of foreign tax credits.
Action 4: Limiting base erosion involving interest deductions and other financial payments
The final report acknowledges BEPS risks involving interest deductions and other financial payments. To address these risks, the report recommended the “fixed ratio rule” which limits an entity’s net deductions for interest and payments. So as not to restrict a group’s ability to incur third-party debt for non-tax reasons, the report also recommended a “group ratio rule” which would enable an entity with net interest expense above a country’s fixed ratio to deduct interest up to a certain level.
Recognizing that banks and insurance sectors have specific features which must be considered before any rules to address BEPS for this sector are issued, the report recommends the development of suitable and specific rules which will address BEPS risks in these sectors.
Action 5: Countering harmful tax practices more effectively taking into account transparency and Substance
The final report on Action 5 focuses on the definition of substantial activity to assess preferential regimes as well as transparency. This aims to address the concern that preferential regimes are currently being used for artificial profit shifting and lack of transparency in connection with some rulings.
It was agreed by the countries that for purposes of substantial activity, the requirements used to assess preferential regimes should be aligned with the substantial activities that generate them and the agreed approach is called the “nexus approach.”
Action 6: Preventing the granting of treaty benefits in appropriate circumstances
In order to address treaty abuse, it was recommended that treaties between States categorically state that the treaty intends to avoid creating opportunities for non-taxation or reduced taxation through tax evasion or avoidance, including treaty shopping arrangements. Moreover, the introduction of anti-abuse rules, limitation-on-benefits rule and limits on the availability of treaty benefits were recommended to be included in the OECD Model Tax Convention. Where the LOB rule cannot apply, the introduction of a more general anti-abuse rule based on the principal purposes of transactions or arrangements in the OECD Model Tax Convention is proposed.
Action 7: Preventing the artificial avoidance of permanent establishment status
The report for Action 7 primarily recommends the amendment of Article 5 (the Business Profits provision) of the OECD Model Tax Convention. This is to address common tax avoidance strategies which are used to circumvent the PE definition. These strategies allow an entity to operate in a country without creating a PE through commissionaire agreements, activities which are preparatory and auxiliary in character but in reality are in itself core business activities, and the splitting of contracts among closely related parties.
In the second part of this article, we will discuss the remaining Action Plans, including issues on transfer pricing, measuring and monitoring BEPS, and mandatory disclosure, among others.
Ma. Fides A. Balili and Maria Margarita D. Mallari-Acaban are a Partner and a Senior Director, respectively, of SGV & Co.
According to the OECD (2014), Explanatory Statement, OECD/G20 Base Erosion and Profit Shifting Project, OECD, the current rules have revealed weaknesses that create opportunities for Base Erosion and Profit Shifting, thus requiring a bold move from policy makers to restore confidence in the system and ensure that profits are taxed where economic activities take place and value is created. This package of 13 reports, delivered just two years later, includes new or reinforced international standards as well as concrete measures to help countries tackle BEPS. It represents the results of a major and unparalleled effort by the OECD and G20 countries working together on an equal footing, with the participation of developing countries.
Among the highlights of the OECD Final Reports are the new transfer pricing approach and reinforced international standards on tax treaties, the setting of minimum standards on harmful tax practices, treaty abuse, country-by-country reporting and dispute resolution, action items requiring national legislation particularly in hybrid mismatches and interest restriction, and analytical reports with recommendations concerning digital economy and multilateral instruments.
In this column, we provide an overview of the 15 BEPS Action Plans to give our readers an idea of what to expect in terms of Philippine tax developments in the context of the international tax framework.
Action 1: Addressing the tax challenges of the digital economy
The final report recommends that the list of exceptions to the definition of permanent establishment (PE) be modified to ensure that the listed exceptions are restricted to activities that are “preparatory” or “auxiliary” in character. The report also recommends the issuance of a new fragmentation rule to ensure that the fragmentation of business activities among closely related companies shall not be possible. Modification of the definition of a PE to address artificial arrangements through “conclusion of contracts” agreements between companies belonging to a multinational group is also recommended, along with revisions to the OECD Transfer Pricing Guidelines and the Controlled Foreign Company (CFC) rules.
Action 2: Neutralizing the effects of hybrid mismatch arrangements
The final report recommended that changes be made both to domestic law and the OECD Model Tax Convention in order to neutralize the effects of hybrid mismatch arrangements, which necessarily exploit differences in tax treatment of a single entity or instrument under the laws of two or more tax jurisdictions to achieve double non-taxation including long-term deferral.
Part 1 of the report for Action 2 basically recommends the linking of rules that align the tax treatment of an instrument or entity with the tax treatment in the counterparty jurisdiction but otherwise do not disturb commercial outcomes. Also, Part 2 aims to ensure that hybrid instruments and entities do not abuse the treaty benefits and will not prevent the application of the changes in domestic law as recommended in Part 1.
Action 3: Designing effective controlled foreign company rules
The final report for Action 3 sets out recommendations that will effectively prevent taxpayers from shifting income into foreign subsidiaries. The recommendations were not meant to be minimum standards, but were designed as building blocks to help achieve the said goal.
The action point named six building blocks for the design of effective CFC rules. Briefly, these six building blocks are:
• Definition of CFCs -- How to determine when stockholders have sufficient influence over a foreign company as well as non-corporate entities and their income should be covered by the CFC rules;
• CFC Exemptions and threshold requirements -- CFC rules should only apply to CFCs that are subject to effective tax rates that are meaningfully lower than those applied in the parent jurisdiction;
• Definition of Income -- CFC rules should include a definition of what constitutes CFC income and provides for a non-exhaustive list of approaches or combination of approaches that the CFC rules could use to define CFC income;
• Computation of income -- CFC rules should use the rules of the parent jurisdiction to compute the CFC income to be attributed to shareholders. Moreover, CFC losses should only be offset against the profits of the same CFC or other CFCs in the same jurisdiction;
• Attribution of income -- When possible, the attribution threshold should be tied to the control threshold and the amount of the income to be attributed should be calculated by reference to the proportionate ownership or influence; and
• Prevention and elimination of double taxation -- To ensure that the CFC rules will not eventually lead to double taxation such as the allowance of foreign tax credits.
Action 4: Limiting base erosion involving interest deductions and other financial payments
The final report acknowledges BEPS risks involving interest deductions and other financial payments. To address these risks, the report recommended the “fixed ratio rule” which limits an entity’s net deductions for interest and payments. So as not to restrict a group’s ability to incur third-party debt for non-tax reasons, the report also recommended a “group ratio rule” which would enable an entity with net interest expense above a country’s fixed ratio to deduct interest up to a certain level.
Recognizing that banks and insurance sectors have specific features which must be considered before any rules to address BEPS for this sector are issued, the report recommends the development of suitable and specific rules which will address BEPS risks in these sectors.
Action 5: Countering harmful tax practices more effectively taking into account transparency and Substance
The final report on Action 5 focuses on the definition of substantial activity to assess preferential regimes as well as transparency. This aims to address the concern that preferential regimes are currently being used for artificial profit shifting and lack of transparency in connection with some rulings.
It was agreed by the countries that for purposes of substantial activity, the requirements used to assess preferential regimes should be aligned with the substantial activities that generate them and the agreed approach is called the “nexus approach.”
Action 6: Preventing the granting of treaty benefits in appropriate circumstances
In order to address treaty abuse, it was recommended that treaties between States categorically state that the treaty intends to avoid creating opportunities for non-taxation or reduced taxation through tax evasion or avoidance, including treaty shopping arrangements. Moreover, the introduction of anti-abuse rules, limitation-on-benefits rule and limits on the availability of treaty benefits were recommended to be included in the OECD Model Tax Convention. Where the LOB rule cannot apply, the introduction of a more general anti-abuse rule based on the principal purposes of transactions or arrangements in the OECD Model Tax Convention is proposed.
Action 7: Preventing the artificial avoidance of permanent establishment status
The report for Action 7 primarily recommends the amendment of Article 5 (the Business Profits provision) of the OECD Model Tax Convention. This is to address common tax avoidance strategies which are used to circumvent the PE definition. These strategies allow an entity to operate in a country without creating a PE through commissionaire agreements, activities which are preparatory and auxiliary in character but in reality are in itself core business activities, and the splitting of contracts among closely related parties.
In the second part of this article, we will discuss the remaining Action Plans, including issues on transfer pricing, measuring and monitoring BEPS, and mandatory disclosure, among others.
Ma. Fides A. Balili and Maria Margarita D. Mallari-Acaban are a Partner and a Senior Director, respectively, of SGV & Co.
source: Businessworld
Thursday, October 15, 2015
Should the Philippines join the TPP?
Everybody is agog over the passing of the Trans-Pacific Partnership (TPP). Even people I know that only have a passing interest in international trade are all of a sudden asking, in somewhat hushed, noticeably excited tones, about its implications for the Philippines. So the curmudgeon in me might have been more apparent this time around when my reply revolved a mere two words: not much.
To begin with, nobody outside the negotiators has really studied the TPP. The actual, official texts may be released (particularly by the US) by early next month.
Having said that, the TPP, of course, is an expanded version of the 2005 Trans-Pacific Strategic Economic Partnership Agreement and currently includes as parties Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, Vietnam, and the United States. The TPP covers almost 40% of the global economy and affects not only tariffs but also services, investment rules, patents (including over pharmaceuticals and even, allegedly, control of public information), agriculture, the environment, and government procurement.
Of those 12 TPP members, the Philippines already has existing free trade relationships with seven -- Association of Southeast Asian Nations (ASEAN) Common Effective Preferential Tariff (CEPT), ASEAN-Australia and New Zealand, ASEAN-Japan, Philippines-Japan Economic Partnership Agreement -- plus the Asia-Pacific Economic Cooperation and the (now unfortunately expired and still awaiting renewal) Generalized Scheme of Preferences (GSP) relationships with the US.
So on that specific regard, one question that we need to ask is how the Philippines is faring with regard to utilizing its already available free trade agreement benefits.
Not much if we’re to judge by the CEPT (with some studies pegging it at a mere 20%) and US GSP (which reportedly has a utilization rate of 70% but with the context that the goods covered only constitute 10% of total Philippine exports to the US).
Heritage Foundation’s Economic Freedom Index is quite instructive in this regard: this 2015, the Philippines overall showed improvement.
But there were concerns raised regarding “open markets”, with “trade freedom” getting a lowered score. Noted, is the average tariff rate at 4.8%. “Domestic companies are favored in government procurement bids. Rice producers are subsidized and protected from competition. Foreign investment in several sectors is restricted.”
For regulatory efficiency, business freedom also showed a lowered score due to the fact that “incorporating a business takes 16 procedures and 34 days. Completing licensing requirements remains time-consuming, taking about three months on average. The labor market remains structurally rigid, with varying degrees of flexibility across economic sectors and regions of the country.”
The 2014-2015 Global Competitiveness Report almost reflects the Economic Freedom Index -- lamenting regulatory inefficiency and red tape and lackluster rule of law. But it does give us good marks in “intensity of local competition.”
The insight that I suggest from the two international reports is twofold: First, we really don’t have an issue as to us being plugged into the international trading system, what with our membership already into the World Trade Organization (WTO), in addition to several free trade agreements.
Finally, the problem is our internal structures that only prevent us from benefitting substantially from international trade.
Of what use is Philippine membership in more trade agreements for ordinary Filipinos if they’re bogged down by red tape and high taxes, amidst world-beating-in-being-horrible airports, the world’s worst traffic, slow online speeds, flooding amidst water shortages, and the incredibly bizarre inability to produce simple drivers licenses and passports?
Now, the position of my fellow experts and commentators on the matter is that membership in more trade agreements such as the TPP will provide external pressure for the Philippines to shape up.
But that is wishful thinking.
For two reasons: One, we’ve long been members in other trade agreements and look at us now. So much for external pressure.
Finally, as a sovereign country, I don’t see the point in wanting the Philippines rendered vulnerable to international litigation simply because our country can’t do things unilaterally because our government officials can’t muster the political will to do what is right.
Besides, note our quite jubilant reaction in the immediate aftermath of the Cancun WTO Ministerial debacle of 2003 (amidst the huge disappointment expressed by the US), immediately followed up by our quite unsubtle public rejection of US invitations to enter into a trade partnership with it right there and then.
This has therefore led, to the present day: when the Philippines expressed public interest in joining the TPP, this was simply responded to with a set of conditions for us to comply with -- improved rule of law, opening up foreign ownership of businesses or property, addressing State ownership of certain industries, strict protection of intellectual property, and so on. Clearly, the US has little patience with flaky allies.
In any event, the TPP still has to go through the constitutional processes of its members. The US, in particular, being already in its presidential election season, may see a TPP vote no earlier than next year.
That should give the Philippines a modicum of time to put its priorities right.
Jemy Gatdula specializes in international economic law (WTO and ASEAN), and teaches international law and legal philosophy at the UA&P School of Law and Governance.
jemygatdula@yahoo.com
www.jemygatdula.blogspot.com
Mr. Gatdula is also on Facebook and Twitter
source: Businessworld
To begin with, nobody outside the negotiators has really studied the TPP. The actual, official texts may be released (particularly by the US) by early next month.
Having said that, the TPP, of course, is an expanded version of the 2005 Trans-Pacific Strategic Economic Partnership Agreement and currently includes as parties Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, Vietnam, and the United States. The TPP covers almost 40% of the global economy and affects not only tariffs but also services, investment rules, patents (including over pharmaceuticals and even, allegedly, control of public information), agriculture, the environment, and government procurement.
Of those 12 TPP members, the Philippines already has existing free trade relationships with seven -- Association of Southeast Asian Nations (ASEAN) Common Effective Preferential Tariff (CEPT), ASEAN-Australia and New Zealand, ASEAN-Japan, Philippines-Japan Economic Partnership Agreement -- plus the Asia-Pacific Economic Cooperation and the (now unfortunately expired and still awaiting renewal) Generalized Scheme of Preferences (GSP) relationships with the US.
So on that specific regard, one question that we need to ask is how the Philippines is faring with regard to utilizing its already available free trade agreement benefits.
Not much if we’re to judge by the CEPT (with some studies pegging it at a mere 20%) and US GSP (which reportedly has a utilization rate of 70% but with the context that the goods covered only constitute 10% of total Philippine exports to the US).
Heritage Foundation’s Economic Freedom Index is quite instructive in this regard: this 2015, the Philippines overall showed improvement.
But there were concerns raised regarding “open markets”, with “trade freedom” getting a lowered score. Noted, is the average tariff rate at 4.8%. “Domestic companies are favored in government procurement bids. Rice producers are subsidized and protected from competition. Foreign investment in several sectors is restricted.”
For regulatory efficiency, business freedom also showed a lowered score due to the fact that “incorporating a business takes 16 procedures and 34 days. Completing licensing requirements remains time-consuming, taking about three months on average. The labor market remains structurally rigid, with varying degrees of flexibility across economic sectors and regions of the country.”
The 2014-2015 Global Competitiveness Report almost reflects the Economic Freedom Index -- lamenting regulatory inefficiency and red tape and lackluster rule of law. But it does give us good marks in “intensity of local competition.”
The insight that I suggest from the two international reports is twofold: First, we really don’t have an issue as to us being plugged into the international trading system, what with our membership already into the World Trade Organization (WTO), in addition to several free trade agreements.
Finally, the problem is our internal structures that only prevent us from benefitting substantially from international trade.
Of what use is Philippine membership in more trade agreements for ordinary Filipinos if they’re bogged down by red tape and high taxes, amidst world-beating-in-being-horrible airports, the world’s worst traffic, slow online speeds, flooding amidst water shortages, and the incredibly bizarre inability to produce simple drivers licenses and passports?
Now, the position of my fellow experts and commentators on the matter is that membership in more trade agreements such as the TPP will provide external pressure for the Philippines to shape up.
But that is wishful thinking.
For two reasons: One, we’ve long been members in other trade agreements and look at us now. So much for external pressure.
Finally, as a sovereign country, I don’t see the point in wanting the Philippines rendered vulnerable to international litigation simply because our country can’t do things unilaterally because our government officials can’t muster the political will to do what is right.
Besides, note our quite jubilant reaction in the immediate aftermath of the Cancun WTO Ministerial debacle of 2003 (amidst the huge disappointment expressed by the US), immediately followed up by our quite unsubtle public rejection of US invitations to enter into a trade partnership with it right there and then.
This has therefore led, to the present day: when the Philippines expressed public interest in joining the TPP, this was simply responded to with a set of conditions for us to comply with -- improved rule of law, opening up foreign ownership of businesses or property, addressing State ownership of certain industries, strict protection of intellectual property, and so on. Clearly, the US has little patience with flaky allies.
In any event, the TPP still has to go through the constitutional processes of its members. The US, in particular, being already in its presidential election season, may see a TPP vote no earlier than next year.
That should give the Philippines a modicum of time to put its priorities right.
Jemy Gatdula specializes in international economic law (WTO and ASEAN), and teaches international law and legal philosophy at the UA&P School of Law and Governance.
jemygatdula@yahoo.com
www.jemygatdula.blogspot.com
Mr. Gatdula is also on Facebook and Twitter
source: Businessworld
Wednesday, October 14, 2015
Cultural diversity in global teams: A wake-up call for AEC
The 21st century is the time of globalization. Boundaries are disappearing among companies, industries, and countries, and competitive pressures simply cannot be ignored. Work teams consisting of people with different cultural backgrounds separated through space and time are one of the critical success factors for the development of companies, whether small or big. Thus, managing cultural diversity is important for them to operate successfully.
The Association of Southeast Asian Nations Economic Community (AEC) is supposed to boost regional trade and production that will deliver free movement of goods, services, skilled labor, and capital in one of the most diverse and fast-moving regions in the world.
As a result of joint ventures, strategic alliances, mergers, and acquisitions, global teams within the AEC are being and will continue to be created. These teams are increasingly becoming “multicultural” so that members of different nationalities have to learn how to work together effectively and efficiently on common projects at different times and in different locations.
Unfortunately, most global teams, whether within or outside of the AEC, are ineffective and still far from delivering the competitive advantage needed to sustain a company’s global capability.
Some cases are in point: first, cultural issues are mostly ignored or at least not valued sufficiently by management. Management guru Geert Hofstede, who studied the value dimensions of cultural differences, concluded that different cultures create differences among team members. The value dimensions of high power distance vs. low power distance, individualism vs. collectivism, masculinity vs. femininity, high vs. low uncertainty avoidance, and long-term vs. short-term orientation, if not managed accurately, can prevent a team from operating successfully.
Second, geographic distance seems to be a major difficulty to overcome despite great progress in communication technology.
Some cultures (particularly Asian cultures) still rely on face-to-face meetings, which involve intensive personal contact to enhance relationships and build trust. Then there are communication styles (i.e., verbal vs. nonverbal, direct vs. indirect, low context vs. high context) that differ among cultures.
A project’s success highly depends on the constant and unhampered flow of communication among team members.
Moreover, problem-solving over distance is critical to global teamwork, and discussions across countries and continents often consume a lot of time.
Third, there’s the work variety of team members. Very frequently, most, if not all, team members work on other projects in their home country. It is almost impossible for them to integrate all their tasks to achieve a balance between their home-country and global-team obligations. This balancing act creates coordination and control issues, which are tough to handle in global teams.
Last, creating a team spirit remains a challenge for global teams.
Large geographic distances make it difficult for team members to build camaraderie. Some cultures, especially the highly individualistic ones, do not usually resort to teamwork in solving problems. They may not have enough experience, and they may think differently about working with people of other nationalities.
People from different cultural backgrounds think differently -- not better; just differently. And different ways of thinking put fresh perspectives on tasks and problems.
The range of available alternatives to solve problems and complete missions becomes enormous.
Whether we’re talking about a meeting held in Bangkok, a project site visit in Jakarta, video conferencing in Singapore, or an inspection in Manila, cultural diversity among global teams has become a reality and therefore must be recognized, understood, and respected throughout the organization.
Beatriz Kaamiño-Tschoepke teaches Organizational Behavior and Human Resource Management at the Ramon V. Del Rosario College of Business of De La Salle University. She is a professional intercultural trainer and consultant in international business, intercultural management, and communication.
cibmworks@gmail.com
source: Businessworld
The Association of Southeast Asian Nations Economic Community (AEC) is supposed to boost regional trade and production that will deliver free movement of goods, services, skilled labor, and capital in one of the most diverse and fast-moving regions in the world.
As a result of joint ventures, strategic alliances, mergers, and acquisitions, global teams within the AEC are being and will continue to be created. These teams are increasingly becoming “multicultural” so that members of different nationalities have to learn how to work together effectively and efficiently on common projects at different times and in different locations.
Unfortunately, most global teams, whether within or outside of the AEC, are ineffective and still far from delivering the competitive advantage needed to sustain a company’s global capability.
Some cases are in point: first, cultural issues are mostly ignored or at least not valued sufficiently by management. Management guru Geert Hofstede, who studied the value dimensions of cultural differences, concluded that different cultures create differences among team members. The value dimensions of high power distance vs. low power distance, individualism vs. collectivism, masculinity vs. femininity, high vs. low uncertainty avoidance, and long-term vs. short-term orientation, if not managed accurately, can prevent a team from operating successfully.
Second, geographic distance seems to be a major difficulty to overcome despite great progress in communication technology.
Some cultures (particularly Asian cultures) still rely on face-to-face meetings, which involve intensive personal contact to enhance relationships and build trust. Then there are communication styles (i.e., verbal vs. nonverbal, direct vs. indirect, low context vs. high context) that differ among cultures.
A project’s success highly depends on the constant and unhampered flow of communication among team members.
Moreover, problem-solving over distance is critical to global teamwork, and discussions across countries and continents often consume a lot of time.
Third, there’s the work variety of team members. Very frequently, most, if not all, team members work on other projects in their home country. It is almost impossible for them to integrate all their tasks to achieve a balance between their home-country and global-team obligations. This balancing act creates coordination and control issues, which are tough to handle in global teams.
Last, creating a team spirit remains a challenge for global teams.
Large geographic distances make it difficult for team members to build camaraderie. Some cultures, especially the highly individualistic ones, do not usually resort to teamwork in solving problems. They may not have enough experience, and they may think differently about working with people of other nationalities.
People from different cultural backgrounds think differently -- not better; just differently. And different ways of thinking put fresh perspectives on tasks and problems.
The range of available alternatives to solve problems and complete missions becomes enormous.
Whether we’re talking about a meeting held in Bangkok, a project site visit in Jakarta, video conferencing in Singapore, or an inspection in Manila, cultural diversity among global teams has become a reality and therefore must be recognized, understood, and respected throughout the organization.
Beatriz Kaamiño-Tschoepke teaches Organizational Behavior and Human Resource Management at the Ramon V. Del Rosario College of Business of De La Salle University. She is a professional intercultural trainer and consultant in international business, intercultural management, and communication.
cibmworks@gmail.com
source: Businessworld
Thursday, October 1, 2015
Philippines’ Monde Nissin buying British meat substitute firm Quorn for $831M
LONDON/MANILA -- Philippine instant noodles maker Monde Nissin Corp. is buying British meat substitute company Quorn Foods for £550 million ($831 million) to capitalize on rising demand for health foods, in what will be the third largest overseas purchase by a firm in the Southeast Asian nation.
Monde Nissin beat competition from some global food giants to clinch the deal for Quorn, which had sales of £150.3 million in 2014. United Kingdom-based investment firms Exponent Private Equity and Intermediate Capital Group, Quorn’s owners, announced the sale on Wednesday.
The deal comes as Asian firms are increasingly venturing outside home markets in search of targets in the food and drinks sector.
“It’s a matter of diversification,” Augusto Cosio, fund manager at Manila-based First Metro Asset Management Inc, said on Thursday of Monde Nissin’s acquisition of Quorn.
“Their income is already too dependent on one market.”
Reuters had previously reported that Monde Nissin was among the parties to have shown interest in Quorn Foods.
It attracted interest from French yogurt company Danone, Singapore-based Wilmar International, Canadian French fries producer McCain and Ireland’s Kerry Group, sources had said.
Quorn is a mycoprotein meat substitute, made by fermenting a type of fungus. It is sold on its own, in ready-meals or in products that replicate burgers, sausages or chicken fillets.
Quorn Foods aimed to benefit from a trend of consumers eating healthier food and less meat.
It claims that in the past five years it has cut 60 billion calories from consumers’ diets.
Monde Nissin is owned by Betty Ang, the Philippines’ 19th richest person, and is planning an initial public offering as early as next year.
Earlier this year, it bought Australia’s Black Swan, a brand of chilled dips, and Nudie, which sells premium juices.
It has ambitions to do larger deals and emerge as a health and wellness company, according to one person familiar with the company.
The Quorn deal is being funded by Bank of the Philippine Islands (BPI), BDO Unibank, Inc. and Metropolitan Bank & Trust Co., Reginaldo Anthony Cariaso, chief operating officer of BPI’s investment banking subsidiary, told Reuters.
Monde Nissin did not respond to Reuters requests for comment. -- Reuters
Monde Nissin beat competition from some global food giants to clinch the deal for Quorn, which had sales of £150.3 million in 2014. United Kingdom-based investment firms Exponent Private Equity and Intermediate Capital Group, Quorn’s owners, announced the sale on Wednesday.
The deal comes as Asian firms are increasingly venturing outside home markets in search of targets in the food and drinks sector.
“It’s a matter of diversification,” Augusto Cosio, fund manager at Manila-based First Metro Asset Management Inc, said on Thursday of Monde Nissin’s acquisition of Quorn.
“Their income is already too dependent on one market.”
Reuters had previously reported that Monde Nissin was among the parties to have shown interest in Quorn Foods.
It attracted interest from French yogurt company Danone, Singapore-based Wilmar International, Canadian French fries producer McCain and Ireland’s Kerry Group, sources had said.
Quorn is a mycoprotein meat substitute, made by fermenting a type of fungus. It is sold on its own, in ready-meals or in products that replicate burgers, sausages or chicken fillets.
Quorn Foods aimed to benefit from a trend of consumers eating healthier food and less meat.
It claims that in the past five years it has cut 60 billion calories from consumers’ diets.
Monde Nissin is owned by Betty Ang, the Philippines’ 19th richest person, and is planning an initial public offering as early as next year.
Earlier this year, it bought Australia’s Black Swan, a brand of chilled dips, and Nudie, which sells premium juices.
It has ambitions to do larger deals and emerge as a health and wellness company, according to one person familiar with the company.
The Quorn deal is being funded by Bank of the Philippine Islands (BPI), BDO Unibank, Inc. and Metropolitan Bank & Trust Co., Reginaldo Anthony Cariaso, chief operating officer of BPI’s investment banking subsidiary, told Reuters.
Monde Nissin did not respond to Reuters requests for comment. -- Reuters
Sunday, September 6, 2015
Asean integration provides green light for PR professionals
In my earlier article, I wrote about how 2015 marks a milestone with the Asean Economic Community (AEC) in place. This will open more regional cooperation and will improve the scale efficiencies, dynamism and competitiveness of Asean members.
AEC will enable easier movement of goods, services (that include public relations and marketing communications), investments, capital and people (that includes you!). Ultimately, it will offer new ways of coordinating supply chains, or access to new markets for established products.
At the recent HR Summit organized by the Asian CEO Forum, I asked one of the summit panelists on what she thought could be opportunities and threats for communications professionals in the context of this development, Pinky Belizariois, the HR director for Asia Pacific of Oberthur Technologies, a leading electronic and supplies company, and, with a pulse reading on the movement of people in the region, here is what she has to say:
The year 2015 is the year of Asean integration.
What competitive opportunities do you see for Filipino professionals and companies in public relations, communications, marketing and related fields?
So much has been said about the Asean integration and the prospects look like a professional league with novices and amateurs competing with experts: it promotes an equal playing field. Having said that, any Asean nation can benefit from the technology transfer, integrating the local culture with a regional flair to make it palatable to the greater global arena.
The Philippines is a resilient, flexible and adaptable nation with highly skilled professionals and citizens who cultivate their inherent talent to achieve growth potentials. Even educational background or the lack of it is not a hindrance to studying, learning and acquiring more competencies to compete and mash up with their regional and global counterparts.
Given the possession of excellent communication skills, an environment for overachievement and the wanton need to excel abroad, we can see more and more Filipinos getting noticed in writing, blogging and creating visual vehicles to support businesses. Thus, web development, graphic design and content editorials will be a great platform to be recognized.
What threats and difficulties do you foresee?
Government support will be crucial in providing the landscape for enhancing technical educational skills and encourage businesses to flourish with incentives for growth.
It will be inherently difficult to offer courses with a competitive edge over Korean subsidy for foreign education or over the Singaporean educational system, which is already among the top 3 in the world. We are fast losing our Filipino experts to the growth centers because of the gravy on the train, which of late has been influenced by the amount of skilled work force.
The best is reserved for those who can afford to pay for the elusive American dream. We lag far behind our compensation and our benefits look incredibly poor compared to the US and Europe and the Middle East. A days’ rate in Cupertino, for example, is equivalent to a month’s pay in Fort Bonifacio.
Any concrete tips for those seeking greener pastures or expansion in Asean?
The winner in the Asean integration race is the one who can mix culture with price. It is the name of the game. The prize goes to the company who can adapt easily, pay in a “higher” currency and retain the elusive talent for a good number of years. The organization must be led with homegrown talent, an Asian who has the tenacity to pursue the growth, perseverance to run after it and the anticipation to change the course of the business when it needs to and where it needs to.
Within a competitive environment for excellence, if you got the right talent in the right company, you will receive the right price. That is how this game is going to be won.
Any other observations and practical advice?
There is a major influx of foreign workers in Asia and this cuts our growth. Countries like Singapore and Indonesia have responded by forging stricter rules for foreigners so local talent are getting a foothold.
Asian workers, on the other hand, are usually relegated to low-end jobs, even if a limited few have conquered the global arena as executives or industry leaders. We need more of these people: highly educated, critically skilled and with the vision of an eagle seeking its prey– determined to win against all others, non-Asians or Asians alike.
We need visionaries, entrepreneurs who are willing to take risks. We must go out of our comfort zones and invest in honest to goodness R&D, create uniquely Asian products and leave it to the Chinese to copy and paste. The region would like to see excellence in cooperation between nations and to support partnerships among countries in terms of resource sharing, easing off taxation in collaborative productive work, less politics but more socio-cultural initiatives that foster strong relationships.
PR Matters is a roundtable column by members of the local chapter of the UK-based International Public Relations Association (Ipra), the association of senior professionals around the world. Richard Burgos is a past national chairman of Ipra Philippines and recently returned to the country at the conclusion of a three-year stint as chief of staff of the Office of the Director General of the International Crops Research Institute for the Semi-Arid Tropics based in Hyderabad, India.
We are devoting a special column each month to answer our readers’ questions about public relations. Please send your comments or questions to askipraphil@gmail.com.
source: Business Mirror
Sunday, August 16, 2015
The ASEAN Economic Community beyond 2015
As we approach the formal establishment of the ASEAN Economic Community (AEC) by the end of the year, now is a good time to consider broader targets beyond 2015. After all, a competitive, sustainable, and inclusive region is a grand and worthy project that deserves careful tending and collaboration.
First is the need for unrelenting focus on implementation and follow-through. This is especially true for initiatives having to do with cross-border flow of trade. Besides tariffs, much can still be done to ease the movement of goods across various Customs regimes.
The ASEAN Single Window, for instance, is a work in progress that is meant to link the 10 National Single Windows and enable the single submission and processing of data for customs clearance and qualification for tariff privileges. ASEAN members will also need to improve on their ports and airports to handle large shipment volumes. Furthermore, ports will need to invest rapidly in automation to minimize human error, save time, and enhance overall efficiency. Above all, continuous dialogue between governments and the business community is recommended to manage change and pave the way for continued reforms.
The second recommended priority is the eradication of infrastructure bottlenecks by considering regional financing and also enhancing public-private partnership (PPP) frameworks.
For ASEAN to be a truly competitive region, infrastructure development is crucial. The Asian Development Bank has estimated that ASEAN requires an annual infrastructure investment of $60 billion annually until 2020. Most private financing of infrastructure projects in ASEAN has been bank-funded, with projects in Malaysia, the Philippines, and Singapore, for instance, being largely supported by domestic institutions. The EY report recommends the development of alternative funding sources such as debt capital markets to address the longer-term capital constraints posed by large-scale projects. Further development of investment and legal frameworks, as well as enhanced disclosure requirements, are essential to develop such bond markets.
In this connection, the report points to some existing initiatives; for example, the Asian Bond Market Initiative (ABMI) was endorsed in 2003 and a new ABMI road map was agreed upon in 2008 to further develop the regional bond markets to be more accessible for investors and users. The Credit Guarantee and Investment Facility was set up under the framework of the ABMI to provide credit enhancement to investment-grade companies in the region to issue bonds in the local currency bond markets. Furthermore, the ASEAN Infrastructure Fund was created in 2011 comprising equity contributions from ASEAN member countries and co-financed by the Asian Development Bank to address the region’s critical infrastructure development needs.
Such financing projects require not only government support but also greater private sector investment and expertise to ensure that infrastructure programs are successfully implemented. Such collaboration is likewise needed in establishing and implementing appropriate PPP regulations and frameworks, as well as building government capacity to manage complex infrastructure projects.
The third priority area is labor mobility, particularly of professionals, that will require careful consultation and collaboration. This is an issue that is recognized in the AEC Blueprint. When investing or expanding in the region, companies may want to use a mix of manpower from headquarters as well as the local work force or have local talent trained elsewhere in the region. In such scenarios, the movement of labor will be critical.
The report notes that ASEAN private and public sector decision makers will have to weigh all sides of the issue to move forward. On the one hand, mobility encourages diversity of experience and access to the best talent from a larger population. On the other hand, developing member states face the risk of brain drain, while schemes to give mobility preferences to ASEAN members could also create an uneven playing field for talent from outside the region.
Just like other priority areas, this issue will require great care as well as continued dialogue because it will certainly be an important part of the longer-term goals to create an integrated region.
The fourth recommended priority is the need to build taxation into the AEC agenda. The global tax environment is undergoing large changes driven by the Organization for Economic Cooperation and Development’s (OECD’s) Base Erosion and Profit Shifting (BEPS) initiative.
The OECD released the 15-point BEPS Action Plan in July 2013. It sets out the organization’s views that weaknesses in the international tax system are underpinned by gaps in the interaction of domestic tax rules of various countries, the application of bilateral tax treaties to multi-jurisdictional arrangements, and the rise of the digital economy with the resulting relocation of core business functions. Recommendations to address these are expected to make the global tax landscape more challenging and, perhaps, uncertain for companies and investors.
The report notes that ASEAN governments would do well to consider having a specific tax agenda as a key workstream for the AEC after 2015 given this looming backdrop. As a group, ASEAN members may be able to speak with a single voice and exert a collective and authoritative influence on future global tax discussions if taxation is highlighted as a key area of discussion.
The fifth recommended priority is financial integration. As this can arguably be one of the most challenging goals for ASEAN members, the report emphasizes the need for careful action to manage the risks of liberalization.
In terms of financial services liberalization, clear and adequate provisions are needed to distinguish Qualified ASEAN Banks. Dedicated attention to monitoring the progress of financial integration is essential. Human resource capacity building as well as legal, tax, and regulatory systems are also critical to support the financial market infrastructure.
In terms of capital account liberalization, the private and public sectors need to be wary of the risk of excess flows of capital that may arise from capital account liberalization. ASEAN members should consider capital controls and macro-prudential regulations to manage such risks.
In terms of the harmonization of payment and settlement systems, there remains an issue where ASEAN members currently adopt varying standards which make regional payment and settlement systems non-interoperable and linkages costly. To resolve this, there will be a need to adopt common best practices and standards.
Among all three financial areas, the report highlights the need to be careful of excessive deregulation as this could create an overly complex banking system with active international banks that are too large and difficult to supervise. Above all, banking services should be developed with an eye to serving the real economy.
All five priority areas will require continued dialogue and deliberation between and among ASEAN members even beyond 2015. Full regional economic integration is truly a complex project. With proactive and sound collaboration between the private and public sectors, there can only be more milestones of success for the AEC.
Cirilo P. Noel is the Chairman and Managing Partner of SGV & Co.
source: Businessworld
Tuesday, August 11, 2015
Foreign policy challenges under ASEAN integration, Chinese expansionism
De La Salle University professor and security strategist Renato De Castro presented an important foreign policy challenge before the diplomatic and foreign policy community during the last July 29th Albert Del Rosario Institute roundtable discussions in Makati.
Focused on Philippines-Association of Southeast Asian Nations (ASEAN) relations with China, de Castro set the background for discussing the opportunities and issues that confront the post-Aquino III government.
The context: ASEAN prepares for the 2015 community-building project.
Current chair Malaysian Prime Minister Najib Razak’s statement of the 26th ASEAN Summit in Kuala Lumpur and Langkawi affirmed the progress made by member states in the various sectors of implementing the road map, the Initiative for ASEAN Integration (IAI) and the ASEAN connectivity master plan.
However, current ASEAN integration is taking place against Chinese expansionism in the South China Sea (SCS).
The Diplomat’s associate editor and Asian security expert, Prashanth Parameswaran, probes into the strategic unfolding of China’s “incremental assertiveness” or a “step-by step” process of operationalizing and enforcing its contentious nine dash line policy which began with creeping incursions in the Reed bank in 2009.
Its “reef expansion” activities proceeded with the de facto take over of the Scarborough shoal in 2012; placement of an oil rig in Vietnam’s exclusive economic zone in 2014 and massive land reclamations in 2015.
Centre for Strategic and International Studies senior associate, Bonnie Glaser was more categorical in describing China’s assertiveness in shifting from “rapid island building” in Fiery Cross, Johnson, Subi, Sand cay reefs, etc., to the militarization of reclaimed islands. According to Glaser, islands are now increasingly being equipped with military facilities such as airstrips and materiel for surveillance, monitoring and patrol.
The scale of China’s expansionism is so unprecedented that the transformation of the water features prior and after reclamation is now documented in a dedicated link in the Asia Maritime Transparency Initiative (http://amti.csis.org/island-tracker/).
ASEAN-China relations scholars are in agreement that China’s revisionism of the status quo in the SCS is fast overtaking the ability of ASEAN member states to conclude a Code of Conduct.
Scholars have argued that for the Philippines, the absence of a code may bear negatively on the outcomes of arbitration under the United Nations Convention on the Law of the Sea, especially when submerged islands are reclaimed and “generate” maritime entitlements for the littoral state.
Beyond rules formation, the Code of Conduct will be ASEAN’s “unified position” in dealing with China on the SCS matter. Twice did the ASEAN-Philippines attempt at an immediate passage of a Code of Conduct. First in 1999 as a reaction to Chinese military incursions in the Mischief Reef and second, in 2012, in response to the stand off between Philippines-China naval forces at Scarborough shoal.
History tells us that these failed attempts were reflective of the precarious nature of ASEAN centrality in the face of territorial conflicts with China. On the one hand, it also reveals much of the volatility of China’s commitment to proceed normatively on this issue.
Developments since 2012 have not only indicated the slow pace of ASEAN’s negotiations with China on the code of conduct but they have also ascertained China’s preference for “ambiguity” and dichotomy in approaching politico-security and economic issues and in engaging ASEAN in high and low politics.
Statements of the Chinese Foreign Ministry tell us that China does not see the need to expedite negotiations on the code.
It denies the existence of freedom of navigation issues in the SCS and insists that a regime on dispute settlement will evolve only after many maritime cooperative projects are cultivated between China and ASEAN, as a means of implementing the non binding Declaration on the Code of Conduct (2002). This includes projects on the low politics kind such as seminars/workshops on search and rescue, hotline communication, etc.
Yet, how does one build trust when mistrust has penetrated the high politics side of maritime affairs in the SCS?
A more perplexing question is found in China’s “dual track” approach to the SCS disputes.
China insists that ASEAN cannot assert a regional identity when bilateral conflicts are at stake.
Many ASEAN-China scholars have looked at this as a clearly Machiavellian strategy of divide and conquer. It mirrors a bigger actor’s condescending view of a smaller (regional) actor. In practice, the force behind any regional grouping is a united front. Not to recognize this for ASEAN undermines its role in the construction of a southeast Asian regional infrastructure.
Against what appears as tumultuous relations with China, are foreign policy opportunities in working with ASEAN’s non-claimant yet “interested” states of Singapore and Indonesia. Both have supported an expeditious and early conclusion of the code of conduct.
In addition, they have also argued that the SCS security extends beyond the realm of territorial and maritime disputes and towards non traditional piracy and terrorism that pose a real threat to regional stability.
Managing the outcomes of arbitration, possible joint development of SCS islands, coupled with Enhanced Defense Cooperation Agreement and the Armed Forces of the Philippines’ modernization as “inter-mestic” responses to an expansionist China will occupy the agenda of the next Philippine president. Indeed,the SCS issue shows that it is high time for the next administration to pay more attention to foreign policy.
Alma Maria O. Salvador, is Assistant Professor of political science at Ateneo de Manila University (ADMU).
Daisy See is assistant professor of Chinese Studies at ADMU.
source: Businessworld
Focused on Philippines-Association of Southeast Asian Nations (ASEAN) relations with China, de Castro set the background for discussing the opportunities and issues that confront the post-Aquino III government.
The context: ASEAN prepares for the 2015 community-building project.
Current chair Malaysian Prime Minister Najib Razak’s statement of the 26th ASEAN Summit in Kuala Lumpur and Langkawi affirmed the progress made by member states in the various sectors of implementing the road map, the Initiative for ASEAN Integration (IAI) and the ASEAN connectivity master plan.
However, current ASEAN integration is taking place against Chinese expansionism in the South China Sea (SCS).
The Diplomat’s associate editor and Asian security expert, Prashanth Parameswaran, probes into the strategic unfolding of China’s “incremental assertiveness” or a “step-by step” process of operationalizing and enforcing its contentious nine dash line policy which began with creeping incursions in the Reed bank in 2009.
Its “reef expansion” activities proceeded with the de facto take over of the Scarborough shoal in 2012; placement of an oil rig in Vietnam’s exclusive economic zone in 2014 and massive land reclamations in 2015.
Centre for Strategic and International Studies senior associate, Bonnie Glaser was more categorical in describing China’s assertiveness in shifting from “rapid island building” in Fiery Cross, Johnson, Subi, Sand cay reefs, etc., to the militarization of reclaimed islands. According to Glaser, islands are now increasingly being equipped with military facilities such as airstrips and materiel for surveillance, monitoring and patrol.
The scale of China’s expansionism is so unprecedented that the transformation of the water features prior and after reclamation is now documented in a dedicated link in the Asia Maritime Transparency Initiative (http://amti.csis.org/island-tracker/).
ASEAN-China relations scholars are in agreement that China’s revisionism of the status quo in the SCS is fast overtaking the ability of ASEAN member states to conclude a Code of Conduct.
Scholars have argued that for the Philippines, the absence of a code may bear negatively on the outcomes of arbitration under the United Nations Convention on the Law of the Sea, especially when submerged islands are reclaimed and “generate” maritime entitlements for the littoral state.
Beyond rules formation, the Code of Conduct will be ASEAN’s “unified position” in dealing with China on the SCS matter. Twice did the ASEAN-Philippines attempt at an immediate passage of a Code of Conduct. First in 1999 as a reaction to Chinese military incursions in the Mischief Reef and second, in 2012, in response to the stand off between Philippines-China naval forces at Scarborough shoal.
History tells us that these failed attempts were reflective of the precarious nature of ASEAN centrality in the face of territorial conflicts with China. On the one hand, it also reveals much of the volatility of China’s commitment to proceed normatively on this issue.
Developments since 2012 have not only indicated the slow pace of ASEAN’s negotiations with China on the code of conduct but they have also ascertained China’s preference for “ambiguity” and dichotomy in approaching politico-security and economic issues and in engaging ASEAN in high and low politics.
Statements of the Chinese Foreign Ministry tell us that China does not see the need to expedite negotiations on the code.
It denies the existence of freedom of navigation issues in the SCS and insists that a regime on dispute settlement will evolve only after many maritime cooperative projects are cultivated between China and ASEAN, as a means of implementing the non binding Declaration on the Code of Conduct (2002). This includes projects on the low politics kind such as seminars/workshops on search and rescue, hotline communication, etc.
Yet, how does one build trust when mistrust has penetrated the high politics side of maritime affairs in the SCS?
A more perplexing question is found in China’s “dual track” approach to the SCS disputes.
China insists that ASEAN cannot assert a regional identity when bilateral conflicts are at stake.
Many ASEAN-China scholars have looked at this as a clearly Machiavellian strategy of divide and conquer. It mirrors a bigger actor’s condescending view of a smaller (regional) actor. In practice, the force behind any regional grouping is a united front. Not to recognize this for ASEAN undermines its role in the construction of a southeast Asian regional infrastructure.
Against what appears as tumultuous relations with China, are foreign policy opportunities in working with ASEAN’s non-claimant yet “interested” states of Singapore and Indonesia. Both have supported an expeditious and early conclusion of the code of conduct.
In addition, they have also argued that the SCS security extends beyond the realm of territorial and maritime disputes and towards non traditional piracy and terrorism that pose a real threat to regional stability.
Managing the outcomes of arbitration, possible joint development of SCS islands, coupled with Enhanced Defense Cooperation Agreement and the Armed Forces of the Philippines’ modernization as “inter-mestic” responses to an expansionist China will occupy the agenda of the next Philippine president. Indeed,the SCS issue shows that it is high time for the next administration to pay more attention to foreign policy.
Alma Maria O. Salvador, is Assistant Professor of political science at Ateneo de Manila University (ADMU).
Daisy See is assistant professor of Chinese Studies at ADMU.
source: Businessworld
Wednesday, July 15, 2015
Major Philippine ports ready to meet the challenges and opportunities of Asean economic integration
AS the country’s premier gateways, major ports in the Philippines are vital conduits for the movement of trade and commerce both local and international.
Due to the Philippines’s archipelagic nature, more than 80 percent of the country’s commercial goods are transported via the seas, thus emphasizing the importance of ports in the overall trade picture.
When the Philippines became party to the Asean Free Trade Agreement (Afta) several years ago, it clearly understood the implications, impact and potentials that it will bring to the country’s economy.
Eventually, the Afta was transformed into the more precise Asean Trade in Goods Agreement (Atiga) and Asean Framework Agreement on Services (Afas), which became the heart of the Asean economic community since.
Having outlined a common objective, stakeholders, particularly the Asean member-countries that include the Philippines, needed to adopt a change in their mind-sets or a shift in paradigm in order to take on the needed reforms and meet the requirements on or before the economic-integration deadline set at the end of the year.
While there were initial skepticisms and apprehensions on the capability of the country to adopt the needed reforms and be ready to take on the Asean economic integration, Prof. Federico M. Macaranas, during his presentation to the Center for Futuristics Society at the Asian Institute of Management Conference Center way back in October 2013, believed that the country already has the impetus to make the grade.
Accordingly, some of the strengths of the Philippines going into the Asean Economic Cooperation (AEC) 2015 include governance improvements that resulted in stronger economic fundamentals and investment upgrades; a very strong network of overseas Filipinos which continuously brings information on markets; financing options; transferable technologies, and, most especially, the influx of foreign-exchange remittance.
However, those factors alone, though vital, are still not enough for the Philippines to become contented that it shall be able to meet the seemingly complex, but otherwise basic, requirements of the Asean economic integration.
There are still plenty of things that are needed to be done, including implementing economic agreements committed and signed by the government; dealing with business leaders who seek for protection and preferential treatment, instead of proactively providing solutions to long-term problems; and the Filipino public who must continue to be vigilant with its battle against corruption and inefficiency in the government.
Just the battle against corruption and efficiency alone would be enough to send apprehensions to sky-high levels, given the history of the Philippines and its nearly unending battle with the issue time and again.
The good thing is that the government realizes these perceptions and, thus, knows that the only way to be able to ensure that it is aboveboard in its dealings is to be more transparent, compared to the previous administration; and capitalize on modern technology to move toward computerization of systems and processes.
ENSURING BETTER LEVELS
The lesser government people dealing directly with the public on key transactions, the lesser the opportunities to go the way of corruption. Apart from ensuring better levels of productivity, computerized systems also take out bureaucracy, which has become the bread and butter in the past and the breeding ground of so-called midnight deals or under-the-table arrangements.
Naturally, those who got affected by the modernization and computerization initiatives were the first to complain, disguising it as a crusade for and on behalf of the human work force.
But the Philippine government already knows how to handle the situation, having learned from the countless lessons of the past. It knows and understands that drastic times need drastic measures, although the situation hardly appears to be anything close to drastic actually.
While the conservative and apprehensive businessmen and economists continue to worry about changing comparative advantages, bad environments of doing business, more complex and chaotic global conditions when the Asean economic integration finally materializes, it is obvious that there are also plenty of opportunities in store for the country and the business community. The potentials to tap into the global market without hardly breaking a sweat also lies there. The government understands that, too, that is why it has continuously strived to balance the perception of the key economic players.
In order to further address the challenges relative to the regional economic initiative, the government has started implementing reforms in investment and trade promotion. More than just knowing and understanding the weaknesses or the flaws in the system, it is important that changes and reforms must be adopted, no matter how difficult or analogous to the proverbial bitter pill it may be.
It is obvious that the Philippine government did well with its history lessons following the automation of business procedures in national government agencies, streamlining of procedures across various offices, and making them more transparent and consistent, too. These initiatives, though taking a long time coming, were vital steps to build confidence to the government by both the public and the business sector.
UNIFY VARIOUS INVESTMENTS
Sustaining further its economic thrusts, the government is now seriously working to unify various investment bodies, as well as striving to adopt Philippine Economic Zone Authority operation practices, harmonize incentives and seriously looking into the possibility of changing the 60-40 rule on foreign equity in the country. The Asean economic integration is expected to bring in a significant number of new investors and investments in the country, but the 60-40 equity rule would certainly shun off many, if not all, of them.
The government understands the economic fundamentals to make the Asean economic initiative work to its favor, so it also knows the needed steps to be done to make it happen. While it recognizes the foreboding of some economic players, it has learned to discern which apprehensions are legitimate and needed attention, and which are merely being propelled by vested interests.
Bureau of Customs
As the Bureau of Customs shall play an important role when the Asean economic integration takes effect, the government also spared no time in changing not only the image of the agency, but also its major systems and procedures in order to make it more efficient. It has been known since practically time immemorial that the bureau is the breeding ground of corruption. The government literally waged war against the department just to make sure that it cleanses its image. While there are still remnants of the bureau’s sordid past, the government remains unperturbed and is all eyes and ears.
Its initiative to make the bureau and its personnel toe the line is getting a big boost with the government’s initial efforts to institute a national single window and linking its databases with that of the Customs department in order to improve risk management. The government is now working on instituting automation in areas of Customs operation which are applicable for modernization, thus preventing personnel in dealing with the public in most cases.
EFFECTIVE GOVERNANCE of PPA
In terms of the country’s ports, the government has done a wonderful job, due primarily to the effective governance of the PPA. During the past administration, the goal of the agency was to turn at least 10 major gateways into world-class international ports within a projected time-frame. It appears that the PPA is well on its way of meeting its target and projection toward such end.
The current port administration complemented the lofty target by introducing automation and streamlining processes in the country’s major ports and outports. The initiatives did not only ensure that these facilities will be serving as gateways for people, trade and commerce, they will actually be serving more people and goods at less the time.
There were previous studies detailing some neglected physical port facilities in some key areas of the country, but the PPA has done wonders in turning things around by resorting to the public-private partnership (PPP) project. One perfect example of such partnership clearly in play is in the Manila North Harbor (MNH), the countrys’ biggest domestic port.
From being nearly a run-of-the-mill domestic port, whose importance has been clearly overlooked in the past, the MNH is now fast becoming a model of how PPP can effectively work in the ports.
Having a success story to speak and be proud of, the PPA, under the directive of the Department of Transportation and Communications (DOTC), is now seriously looking into adopting the same scheme toward the development of other outlying ports.
While the PPA may have sufficient resources to turn a good number of ports in the country into world-class gateways, subscribing to the PPP, instead of working all by itself, would build further resources to develop more ports and venture into new port-infrastructure projects in other areas of the country.
There is also a great possibility that, given the status of the Philippines as a maritime country brimming with potentials, the advent of the Asean economic integration may actually bring forth foreign investments in ports, port infrastructure and port operations. Thus, it is imperative that the Philippines needs to review its cabotage policy and lay down the right framework to pave the way for the entry of foreign investments in the country’s port system.
PPA is ready
So the question now beckons, are ports in the Philippines ready for the Asean economic integration? If the question is asked to the PPA and the DOTC, for sure, the answer is yes. If a similar query is thrown to the stakeholders of the ports, it is likely that the answer would be “yes,” with some minor apprehensions.
As for the public, whose general perception of ports is generally based on the facilities it sees in the gateways, as well as the automated systems and streamlined procedures it gets to encounter, it is likely that more than 60 percent would go for the affirmative, with the remaining figures shared among the negative, the undecided and those who could not care less.
For sure, there will be challenges and issues that will also come with the Asean economic integration but with the right systems and infrastructure in place, along with transparent governance, the Philippines will be more than ready to welcome the opportunities that the regional initiative will bring forth to the country and the Filipino people, in general.
source: Business Mirror
Wednesday, June 24, 2015
SM Prime eyes Thailand, Malaysia, other Asean markets for expansion
PROPERTY conglomerate SM Prime Holdings Inc. plans to expand into Southeast Asian markets like Thailand and Malaysia to seize the opportunities offered by the forthcoming Association of Southeast Asian Nations (Asean) economic integration.
SM Prime chief financial officer John Ong announced plans to expand outside the Philippines and China during an investors’ conference organized by the Bank of Philippine Islands (BPI).
APART
from China, because there is certain affiliation in China, but we continue to accept, we continue to receive invitations in other Asean countries like Thailand and Malaysia. So we continue to entertain those opportunities and we look at synergy,” Ong said.
from China, because there is certain affiliation in China, but we continue to accept, we continue to receive invitations in other Asean countries like Thailand and Malaysia. So we continue to entertain those opportunities and we look at synergy,” Ong said.
He said they are looking to expand within the business segments the conglomerate is engaged in, particularly malls and residences.
“We continue to entertain those opportunities. We would definitely entertain [these] and we would be glad to go to other areas in Asean region,” he added.
With the establishment of an Asean Economic Community (AEC), Asean will be characterized by free movement of goods, services and investments as well as freer flow of capital and skills.
Asean groups Indonesia, Malaysia, Philippines, Singapore, Thailand, Brunei Darussalam, Vietnam, Laos, Myanmar and Cambodia.
Ong stressed that the expansion plan is not yet factored in SM Prime’s five-year roadmap to double its income to P32 billion by 2018.
The conglomerate allotted P400 billion in capital expenditures until 2018 to grow its office, mall, leisure,HOTEL and residential portfolio by two-fold.
and residential portfolio by two-fold.
It will construct 26 new SM malls and 20 residential projects in the Philippines and six malls in China. SM Prime will also expand its offices,HOTELS and leisure businesses.
and leisure businesses.
Ong said he expects no change in terms of revenue mix from the current levels, as SM Prime works to double its income.
“We expect that we will continue with the 60 percent revenue contribution coming from our malls, 30 percent coming from our residential and the rest should be coming from our commercial and the hotel and convention centers. In the next four years leading to 2018, we are looking at the same trend in terms of revenues,” he added.
source: Manila Times
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