Recently, it has been all over the news that prices of rice in the southern part of the Philippines have been skyrocketing despite the claims of the Department of Agriculture that we were attaining 100% rice-sufficiency. Early this year, exporting rice to our neighboring Asian and western countries started, which signified that the goal to achieve rice-sufficiency for the country was at hand. However, prices of rice in some parts of Mindanao and the Visayas region rose. People were now questioning the claims of the government about the self-sufficiency for rice of the country. They viewed this increase in rice prices as a shortage in supple of the staple. Despite of these allegations thrown by different groups against the government, Agriculture Secretary Proceso J. Alcala said the there was enough rice for the country.

“There is no reason to panic. We are expecting that rice prices will normalize in a few days, as palay harvest is starting, particularly in major rice producing provinces,” Secretary Alcala said. The harvest season was expected to be this coming October, and some farmers have already started reaping palay in their own farms during the past weeks, especially in the northern part of the country. DA officials visited Isabela to see farmers harvesting palay. Isabela was expected to produce more than 167,700 metric tons this September, while the entire Cagayan Valley region was expected to harvest 264,700 MT of palay from over 61,450 hectares this third quarter.

National Food Authority (NFA) Administrator Orlan Calayag said “the NFA inventory is bigger this year, compared to the same period last year, and so we don’t foresee any shortage.” This means that rice would still be affordable, or would even have lower prices. The government also warned groups who were manipulating prices and supply of rice to beware.

Link to the news:
http://www.da.gov.ph/index.php/2012-03-27-12-04-15/2012-04-17-09-30-59/4360-da-chief-assures-ample-rice-supply

by:
Bamba, John Ray
Canovas, Raphael
Lee, Sohyun
Pascual, Emmanuel Gerardo
 
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China Eastern Airlines will be opening direct flights from Manila to China in the Ninoy Aquino International Airport 1 (NAIA 1) by next month (October 18) to cope with the increasing air traffic between Philippines and China. According to Channe Chen, the general manager of China Eastern Airlines (Manila office), the airline has been given the green light by the Civil Aeronautics Board (CAB) and Civil Aviation Authority of the Philippines (CAAP) to have daily operations to Shanghai. Furthermore, Chen said that passengers from the Philippines could use Shanghai to gain access to other cities in China as well as serve as a transit point to major cities in Europe, US, Japan, Korea, Australia, and other Asia Pacific region.

Tourism undersecretary Daniel Corpus said that the decision of the airline company to open direct flights from Manila to Shanghai would help address the increasing traffic between Philippines and China. Moreover, this would create higher tourism rates coming from China.

Air traffic and air congestion are some of the issues that the Philippine airline industry are facing nowadays. Since there are only a few airports that could hold international flights, it would be a challenge for these terminals to manage daily flights. But because there is a pressing need to address the air traffic between Philippines and China due to the increasing number of passengers who travel from one point to another, it is a good decision to open more flights from the company to accommodate more passengers. On the other hand, the terminal must be able to manage the possible airport congestion due to the additional flights that they would be accommodating. But with this, the decision of opening daily flights to Shanghai would create not only possible continuous increase in tourism rates from China but also higher revenues, possible cheaper airfares and more access to China and other parts of the world that the airline has access to.

Source: http://www.philstar.com/business/2013/09/20/1229451/china-eastern-airlines-mounts-daily-flights-shanghai


Created by:
Flores
Navlani
Ner
Oppus

 
According to the Bangko Sentral ng Pilipinas (BSP), the central bank of the Philippines, loans provided for by commercial and universal banks went up to P3.60 trillion from the P3.23 trillion last year. Although it is slower than the 13% growth recorded during the month of June this year, it still increased at a growth rate of 11.7%, which is still significantly good. Basing from the graph that follows, the gross total loan portfolio of commercial and universal banks grew at more than 10% for the past 3 years. With the entry of the month of July this year, the total loans still increased at a growth rate that is above 10%.

As one of the most important function of commercial and universal banks, the issuance of loans and credits to borrowers represent one of the major demand determinants of the industry. Banks, in general, provide loans to many types of consumers; from individual customers, business firms, corporations, or whole industries. Since 2005, banks have been offering much of its loans to auto loans, real estate loans, and consumer loans. In fact, the growth from 2009 until today is generally attributed to real estate loans, according to the BSP. In the data provided for by the BSP in the article, real estate loans were at P614.47 billion, the highest portion during the month of July this year. The high loans attributed to the real estate sector can be traced from the legislation of “The Act Providing Regulatory Framework for Real Estate Investment Trust” last 2009. The bill aims to stimulate the development of the real estate sector in the Philippines, which can be seen from the productivity of the sector in the past 5 years.

 Moreover, consumer loans also jumped up to P269.08 billion in July at a 12.3% increase from last year. Consumer loans are those that are provided to individual customers and business firms. In fact, this is also one of the main drivers of the demand for loans in the banking industry. When looking at the input-output table of the banking industry since the year 2000, personal consumption has always been at the top three most important destinations of outputs for banks. This means that most of the outputs, at this point it would refer to loans, go directly to personal businesses or transactions by ordinary consumers.

 The high growth rates of the bank lending this month of July only represents how strong the demand for banking services is. Moreover, it generally represents that the banking industry is already a strong industry. This smooth liquidity and flow of money could be the main support for the economic growth of the Philippines. This, of course, is to be monitored by the BSP closely to be able to relate to the central bank’s financial stability objectives.


Del Rosario, Keren Michelle P.
Desamparado, Lorenze Matthew G.
Somes, Elliane P.
 

 
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Cassava production in the Philippines has been lagging behind prioritized agricultural crops such as rice and corn. The reason behind this is that these staple food crops will greatly help the country meet its target of food self-sufficiency by 2013 under the Aquino Administration unlike cassava. But the irony is that this root crop has the highest potential to combat malnourishment as it has the highest content of carbohydrates and other vitamins and minerals compared with other crops. Its other potentials are being studied by the Bureau of Agricultural Research (BAR) for future developments in other industries. Currently, cassava is being widely used by local feeds manufacturers as raw material for animal feeds. One major company utilizing this as its flagship crop is San Miguel Corporation (SMC). Despite this, cassava production is slacking behind other agricultural crops due to its major setbacks.

The San Jose Multi-purpose Cooperative (SJMC) established in South Cotabato, a province located in the SOCCSKSARGEN region, gives numerous incentives and benefits to cassava farmers to increase their yield. It buys produce from farmers at a higher price in order to address poor pricing policies. Traders usually buy cassava produce at a cheaper price leaving farmers with short profits. The cooperative also provides capital to local farmers and manufacturers in order to boost production. Because the root crop is highly perishable, postharvest losses remain high. The cooperative was able to tap the Mindanao Rural Development Program (MRDP) community fund of P3.5 million to buy and upgrade existing cassava postharvest facilities and machineries. Because of these opportunities spearheaded by the SJMC, the volume of cassava produce particularly cassava chips used in feeds manufacturing, has greatly increased heavily due to efficient production. The cooperative then tied-up with San Miguel Corporation (SMC) in a marketing agreement towards producing cassava chips and pellets for animal feeds manufacturing. This opportunity will boost the income of cassava farmers in the region as it assures them of a buyer of their produce at a profitable price.

            Mindanao has the highest share of 57% in cassava production in the Philippines. The cooperatives together with assistance funds given to local farmers give opportunities and incentives to boost productivity in the region. With ongoing research and studies on the potential of the rootcrop and government support, there is a high possibility of adopting the cassava farming as a lucrative enterprise nationwide. 

by:

Bamba, John Ray
Canovas, Raphael
Lee, Sohyun
Pascual, Emmanuel

Sources:

*http://www.businessmirror.com.ph/index.php/en/business/agri-commodities/2220-co-op-turns-cassava-farming-into-lucrative-enterprise
*http://www.bar.gov.ph/digest-home/digest-archives/364-2011-4th-quarter/2043-cassava-the-staple-food-of-the-masses

 
According to the local unit of Dutch banking firm ING, the Philippines can still attract investments despite the 10 billion pork barrel scam. The ING Bank Manila Country Manager Consuelo Garcia viewed this as a good thing that can make the country improve the process and can make the country more efficient in releasing the government funds.

Garcia said that the investors still have the confidence due to the strong macroeconomic fundamentals of the country. She said that they have seen some of the reforms, although they want more. The country also became an investment grade which made the borrowing cost cheaper. She Mentioned that the cost of funding and expansion are still manageable because of the manageable inflation and the low interest rates.

The issue on pork barrel scam can possibly turn-off many investors so the statement of Garcia about the investors' confidence is helpful in keeping the country's investment grade. The level of investors' confidence can greatly affect the investors of Mutual Funds, Unit Investment Trust Funds (UITF), and Variable Universal Life Insurance. (VUL)

Thus, despite the issue of pork barrel that makes the country unstable, the country still did not lose investors. The demand in Mutual Funds, UITF and VUL may not be affected.

Source:

http://www.philstar.com/business/2013/09/06/1179541/ing-investor-confidence-still-ok-despite-pork-barrel-scam


by
 
The Philippine movie industry, apart from other industries comprising the entire local arts and entertainment industry has started to see the light in the coming years as most of those engaged in the business would soon receive incentive systems that would encourage them to increase their productivity and would therefore lead to sustainable economic growth in the long-run.

First, the local film industry is soon to receive corporate tax breaks which entitle movie exhibitors and other theater owners’ exemptions from paying amusement taxes provided that the movies are locally-produced and that these are comprised of Filipino artists.  The proposed “Local Arts and Entertainment Industry Promotions Act” is geared towards giving exemptions from moviemakers as regards the total costs incurred in a local movie’s entire theatrical run.

Second, there are also amendments being proposed, such as that of Section 140 of Republic Act 7160, which is also called the Local Government Code of 1991, which now gives local films consisting of predominantly Filipino actors the chance to generate more revenues as tax exemptions are now granted. Instead, a company’s net income usually increases as government revenues are to be assumed to be at zero rate (due to exemption).

Third, the bill amends Section 109 of Republic Act 8424, also known as the National Internal Revenue Code. Producers are then faced with an incentive to produce more films since the importation of raw materials and equipments are to be given VAT exemptions provided that the Bureau of Internal Revenue has the sole right to evaluate which raw materials and equipments are to be used. Exemptions are not only confined to film production and projection, but also include that of album production, theatrical plays, and other forms of art.

The analyses are as follows: more than a decade ago, the movie industry remains one of the most highly-taxed in Asia given the corporate income tax, VAT, and amusement taxes – whereas others do not charge their locally-produced films with any tax so as to encourage participation in movie production and distribution. Just like what the President of South Korea did to encourage local national determination, the Philippines can take on an initial “sure” step in providing incentive systems that would boost producer activity and productivity.

Perhaps, the industry can once more experience another Golden Age of Philippine Cinema. Volume of films will surely increase and most likely, the quality of the film will not suffer for an increase in quantity of local films. Companies may then veer away from the “Pito-Pito” Scheme which only allots seven days for shooting and finishing a film – sacrificing quality then over an increase in quantity, If quality is then assured, there could be a lot of domestically-produced films which can promote Philippine culture and which could also represent the country in prestigious award-giving bodies internationally such as the Cannes Film Festival. The proposed bill then not only assures increase in profitability but also indirectly implies an increase in a film’s overall quality. 

Source: http://www.congress.gov.ph/press/details.php?pressid=7163 

Authors:
John Camu
Josette Quintos
Rige Tuason
Althea Salcedo
 
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Business World Online reported that the Bureau of Internal Revenue wanted an addendum to the Sin Tax Law by covering distilled spirits into the stamp tax policy, following from the stamp tax they had placed on cigarettes.

First and foremost, what does stamp tax mean?    

Stamp Tax, according to the Business Dictionary.com, is a kind of tax levied on legal transactions which includes transfer of products or documents; hence, it can be considered as a “tax on the transaction of documents”[1]. Based on the report, “official tax stamps on products signify that all tax obligations of the manufacturer have been paid”[2], and taxpayers may include any enterprise, company, unity, or individual who executes and receives specified economic documents on distilled spirits. 
The full motivation for this reform was not explicitly stated in the article, but it was said that they wanted to “monitor the supply and sale of distilled spirits except beer”. Some of the details were the following: 1) Stamp tax on cigarettes will happen in April 2014, while stamp taxes for distilled spirits will follow; 2) all alcohol products except beer will be under the new policy; and 3) the firm who will win the tax stamp project for cigarettes will also handle the stamps for distilled spirits. 

This new policy seems to be very interesting but perhaps, one important question here is that: Is this new law sound and fair enough for all the parties involved, which includes the government offices, the business producing alcoholic products, and the consumers themselves.

There was no mention yet of how much tax would be applied but let us see the major advantages and disadvantages of this new policy:

First advantage was that illegal trade of distilled spirits can be avoided. According to the news report of Philippine Stat on the same issue, “studies have shown that there were known illegal trading of tobacco products due to the absence of stamp taxes on cigarettes”[3] and this caused informal distribution networks and important transaction costs to be not monitored.

With the new stamp tax, the supply and demand of the alcoholic beverages can be recorded properly. Under-the-table transactions can be prevented thereby protecting the market and the trade of these products. These are all pluses to the Philippine economy knowing that the sale of alcoholic beverages is relatively inelastic.

However, with this new stamp tax, revenues of companies producing alcoholic beverages can come out to be constrained. Since transaction of documents will now be heavily monitored, they can be subjected to tight rules and procedures that would significantly decrease opportunities for sale and marketing. This stamp tax would obviously incur a lot of costs for the alcoholic beverage industry. Would it not result to a decline of profits from the companies’ increasing costs?

For the alcoholic beverage industry, this is one issue that should be addressed and that should be anticipated. The policy’s motivation is good but is this the whole motivation by the government? Of course, the opportunity of getting more funds from the industry is one advantageous point for them, and so, we have to assess if this new policy is reasonable enough and fair enough to the whole society.        Also, another detail that should be given notice is that, why is that beer isn’t included in the proposed policy? Is it because beer sales is slowly declining and the sale and market of distilled spirits is gaining momentum at this time? Would this not show how the government is just after the revenues that it will get from the said industry?

With this new stamp tax, will the alcoholic beverage industry improve or on the other hand, worsen? Unless the government clearly states it reasons and clears out the doubts of corruption issues and ill profit-motivated laws, the society, both the producers and the consumers of the affected products will not be satisfied. Hence, we can expect for a rebellion from these agents.

For the economy, will this new stamp tax act be beneficial or not? Little is still known about it. What is needed is to further investigate on the details on this law and supervise its progress until its full implementation so as to prepare everyone for both and worst and the best things that could come from it.

Sources: 
[1] "What is stamp tax? definition and meaning." BusinessDictionary.com - Online Business Dictionary. http://www. businessdictionary.com/definition/stamp-tax.html (accessed September 6, 2013).
[2] Business World. "BIR wants liquor tax stamps." Business World Online. www.bworldonline.com/ content.php?section=Economy&title=BIR-wants-liquor-tax-stamps&id=75840 (accessed September 6, 2013).
[3] dela Pena, Zinnia . "Paper-based stamps on distilled spirits eyed   | Business, News, The Philippine Star | philstar.com." philstar.com | Philippine News for the Filipino Global Community. http://www.philstar.com/business/2013/09/02/1160791/ paper-based-stamps-distilled-spirits-eyed (accessed September 6, 2013).

(Taken from Business World Online, September 1, 2013 Issue)

by: Emilio Antonio | Marcella Karaan | Julian Martinez | Ivy Zuniga

 
The 38-year-old Presidential Decree No. 612 or the Insurance Code was amended into Republic Act No. 10607. President Aquino signed this into law last August 15 to further strengthen and supervise the insurance industry.
 
Under this amended Insurance Code, capital requirements for both life and non-life insurance firms will increase every three years until 2020 in order to provide more resilience during financial crisis and to protect the money of policyholders. This law also requires new life and non-life insurance companies to have P1 billion in paid-up capital meanwhile for existing insurance companies, a net worth of P250 million by June 30, 2013; P550 million by December 31, 2016; P900 million by December 31, 2019; and, P1.3 billion by December 31, 2022
 
Increased capital requirement provide substantial benefits to both the company and the policyholders. These include buffers during economic crisis, investment losses and defaults. Other than this, having large capital requirement will also increase the liquidity of the company. Thus, they can more or less weather their finances even during slowdown periods.
 
However, some insurers resist this because they said it would create an unequal playing field against multinational companies. For life insurance industry alone, 25 out of the 33 industry member-companies “would either find difficulty convincing shareholders to put up additional capital or be forced to fold up in the event of such an increase”.  
 
The passage of this law will definitely impact the insurance industry in both ways: positively, for policyholders since their money is more protected as well as for multinational companies which are capable of meeting the huge capital requirements, and negatively, for some Filipino-owned insurance firms that will find it difficult to raise the money to be the demand of this new law.
 
Sources:
http://ph.news.yahoo.com/pnoy-signs-insurance-code-163841989.html
http://business.inquirer.net/49361/insurers-want-capital-hike-plan-junked

by:
Caccam, Florencio
Cetoy, Krizia
Escarnuela, Kristine Rose
Yap, Lorelie
 
Turkish Flour is reported to be cheaper than the local flour. According to Benito Lim, the president of the Filipino-Chinese Bakery Association, Inc. (FCBA) said that Turkish Flour costs P700 per bag, P200 lower than the price of the local flour. Also, according to the data of the Philippine Association of Flour Millers (PAFMIL), the export price of the Turkish flour costs P348 per metric ton (MT) while local flour would cost P470 per MT. 
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This is why the bakers disagree with the price hike of the Turkish flour that is already set on August 20, 2013, having the 7% import duty of the flour raised to 20%. These bakers prefer the Turkish flour since it is much cheaper compared to the local flour. Pinoy Tasty is said to be mostly made from Turkish flour. On the other hand, the millers would agree to the price increase of the flour since it would mean that these bakers would now choose to buy the local flour from them. Both sides have their own reasons on why or why not to continue the flour tariff hike.

According to the bakers, the price increase would close 25,000 small-community bakeries as it is more than half of their production cost. Their products, like the Pinoy Tasty, would cost from P3 per loaf to P40, and Pandesal would cost P1.50 per piece to P24 per bag. This made the bakers to buy huge amount of Turkish flour before the day of August 20 arrived. 

Conversely, for the millers, they said that the price of the flour should not go up like that any time. According to Ric M. Pinca, the director of PAFMIL, said that Pinoy Tasty should only go up by P0.65 while pandesal would cost only P0.4 more. Another is that, if the Turkish flour continues to be imported to the country, by 2017, there will be a total takeover from the locally produced flour. An example that could lead to this is the massive importation of the flour during these past months, according to Pinca. In July, 14,000 MT or 594,700 bags of Turkish flour arrived which was 54% more from June. It is reported that the Philippine flour industry only grew 1 – 2% from last year and that the government should take action.  
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From what we see, both are trying to convince the departments that would be responsible for the price hike to abolish it or to push it through, no matter how their data appears to be unbelievable. For the bakers, it would be impossible for the Pinoy Tasty to cost P37 more per loaf. The government would likely to regulate price increase if that indeed could happen. For the millers, even though the Department of Agriculture is on their side of agreement, seems to be simplifying the facts. There is a great difference from the predicted prices of the bakers from the millers. From a P37 compared to a centavo change, which is more believable? The greater question is: How did they come up with such data? 


Links to the news:
*http://www.gmanetwork.com/news/story/318121/economy/business/turkish-flour-tariff-hike-may-wipe-out-many-small-bakeries-bakers-assn
*http://www.bworldonline.com/content.php?section=Economy&title=DA-pushes-flour-tariff-hike&id=74003
*http://www.bworldonline.com/content.php?section=Economy&title=Turkish-embassy-bucks-dumping-claims&id=74711
*http://www.bworldonline.com/content.php?section=Economy&title=Turkish-exporters-defy-dumping-claims&id=74438
*http://business.inquirer.net/136141/millers-refute-need-to-hike-bread-prices-too-much-bakers-disagree


By: Bamba, Canovas, Lee, Pascual
 
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IN the past week, the Philippines has yet again experienced another catastrophe. From the 18th of August until the 22nd, a typhoon set foot in the country. It started as a Habagat (monsoon) which eventually turned into a tropical storm after a few days. What’s worse was that a Low Pressure Area (LPA) intensified the said typhoon causing heavier rainfalls throughout Luzon, especially in NCR and the Region IV-A.

In spite of this event, acts of charity sprouted from every part of the country. This was somehow a response to a similar event that happened last year – when a Habagat unexpectedly devastated the country. Different government agencies, NGOs, educational institutions and even student organizations initiated several relief operations. These institutions were able to replicate last year’s efforts by calling out for donations and distributing them to affected areas and evacuation centers.

On the other hand, assistance was not only shown through relief goods but also with the free services provided by numerous private companies. Smart Communications, Inc., the leading mobile telecommunications company, initiated “Libreng Tawag” (Free Call) stations in many evacuation centers. These stations gave free access to evacuees to call their families and guarantee their safety.

“Network preparedness is critical before, during and after disaster and emergency situations. Learning from past experiences, we have worked toward making our entire network and organization ready. And because of these preparations, our network was fully operational with only minimal disruptions.” said Ramon Isberto, Smart Public Affairs Group head.

There was a total of 25 stations in 17 cities and municipalities which were greatly affected.

Smart’s engineers also equipped their cell sites with high powered generators for long lasting service, in case of possible power shortage. They also ensured those areas which are usually outside the coverage that they can still use the coverage despite the weather.

Furthermore, Smart Comm. also had some relief efforts wherein they distributed goods to some affected areas. They also provided faster access to SMS and financial services the telecommunication company gives.

Through these actions, Smart was able to ensure that anyone may contact their loved ones in the middle of the calamity. People who are also stranded in the middle of the typhoon, especially the flooded communities, may easily ask for assistance. With this, it can really be proven that assistance during calamities is not limited with providing goods such as food and clothing.

News courtesy: http://www.philstar.com/telecoms/2013/08/24/1126431/smart-deploys-record-number-libreng-tawag-stations

Photo courtesy: http://www.rappler.com/bulletin-board/36957-smart-libreng-tawag-relief-operations-maring

Members:
Bulahan, Lyndon
Galeon, Francis Jake
Pestaño, Zenon