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The CenSEI Report (Vol. 2, No. 17, April 30-May 6, 2012)
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cenSEI
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Strategic Analysis and Research by the
CENTER FOR STRATEGY, ENTERPRISE & INTELLIGENCE
The Executive is prepared to enforce the law and to carry out the instructions of this decision. But before we say that we will implement such-and-such by such-and-such date, we have to know what we are being tasked to do and that is not yet clear ~ President Benigno Aquino III on Supreme Court final decision to distribute his family’s Hacienda Luisita with compensation set at 1989 land valuation The Cojuangcos should just agree to distribute the land for free since the Cojuangco family had already profited several times over from the land since 1958. [President Aquino] said it was the farm workers’ turn to benefit from the land ~ Bayan Muna Representative Teodoro Casiño
Report
Volume 2 - Number 17 • April 30 - May 6, 2012
4 The Magic Formula of MVP
From Indonesian food and Philippine phones, Manuel V. Pangilinan has expanded First Pacific into power, water, tollways, mining and hospitals. He’s not done yet • The $1.5-million bet: Turning $1.5 million into billions in 30 years • PLDT stocktaking: The High Court ponders the telecom giant’s ownership
14 Giving ICT Its Own Ministry
Nearly a dozen years since it was first proposed to Congress, the Department of Information and Communications Technology Bill may finally pass. It’s about time • The BPO bonanza: It’s not enough for balanced development, says the ADB
NATION
22 Justice for the Fallen Trees
A World Bank report spotlights the daunting and sometimes deadly challenge of enforcing the law on illegal loggers. One must-do: give communities a stake in protecting the forest • The Bank’s prescriptions: What must be done to make lawless loggers pay for their greed • Logging and flooding: The U.N. argues against knee-jerk linking of mega-floods to mowed-down forests
WORLD
32 Step Aside, GDP — It’s Time for GNH
A United Nations conference in New York spotlights Gross National Happiness as the proper goal and measure of development. It’s not just the economy that counts • Paradise loft: A Himalayan land seeking happiness for all • What’s wrong with GDP?: The Bhutanese Prime Minister explains • Happiness by the numbers: The nine domains and 33 indicators of GNH • It does not compute: Not everyone thinks happiness can be calculated
TECHNOLOGY
42 The End of the Job Resumé?
Social networks and search engines are replacing the tréaditional resume as primary tools for finding the right people for the job. Listen up if you want to get hired • Building online profiles: Tips on uploading your best foot forward • Facebook Pro: Top social networks for business and career • Search me: The art of online reputation management
POINT & CLICK You can access online research via the Internet by clicking phrases in blue
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Center for Strategy, Enterprise & Intelligence provides expertise in strategy and management, enterprise development, intelligence, Internet and media. For subscriptions, research, and advisory services, please e-mail report@censeisolutions.com or call/fax +63-2-5311182. Links to online material on public websites are current as of the week prior to the publication date, but might be removed without warning. Publishers of linked content should e-mail us or contact us by fax if they do not wish their websites to be linked to our material in the future.
When Paradigms Shift, Make Sure to Get Early Warning
It is one essential of strategy: keeping watch on paramount paradigms underpinning one’s sector or field of expertise and executive responsibility, and gauging when these structures and principles are under strain, facing challenge, or breaking down and giving way to new foundational frameworks. The price of missing the shifting earth beneath can be stratospheric, as Kodak’s demise, Nokia’s troubles, and the fall of despots in ages past have shown. So at the Center for Strategy, Enterprise and Intelligence, we’ve made a regular habit of flagging trends and ideas that may upstage, upset or upend the established norms and structures, and quickly tell readers of The CenSEI Report about them. While some, if not many, of these nascent trends could still disappear into thin air, it’s always better to be forewarned of many possible disruptions than be surprised by one of them. Past installments of The CenSEI Report have expounded on the rise of Generation C, the Internet-and-cellphone-connected global community sharing the vast online world; as well as the surge in cure-resistant diseases and lifestyle maladies, and top technology trends that will change your health. In several issues we plotted the emerging Asian geopolitical landscape, marked by China’s economic and military rise and its growing rivalry with America, and the possibilities and opportunities of renewable energy, which are spawning a plethora of green gadgets and jobs for the future. On the global front, our New Year world economic forecast highlighted expected shifts in global trade, industry and investment well beyond this year’s initial forecasts for planet-wide slowdown and eurozone crisis. And our two recaps of the World Economic Forum touched on, among other potential disruptions, the changing fears of movers and shakers worldwide regarding the leading dangers in the coming decade. It wasn’t your usual recession and financial turmoil, but basics like food and water. Plus: cyber-threats. This week, The CenSEI Report’s trend-spotting continues, with our articles on Gross National Happiness (GNH) and online reputation building. Backed by no less than the U.N. General Assembly, GNH is being touted as a better goal and measure of development than the decades-old gross domestic product. While joy by the numbers isn’t going to replace GDP anytime soon, if and when it does, it’s good to know now the parameters that could shape government plans and voter preferences. And if one thinks trend-spotting only matters to macro-planners, our Technology story on online personnel search and its impact on the traditional resume offers a paradigm shift story with paycheck implications. Quite simply, if your online profile doesn’t impress, it may cost you your next career move.
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From Small Things Big Things One Day Come: The Empire of First Pacific
By John Carlo Gil M. Sadian
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little Hong Kong-based trading company of 30 years ago is now an empire that controls major companies providing electricity, food processing, hospitals, management, mining, telecommunications, tollways management, and water service The secret of Manny Pangilinan’s success: Capital expenditures in utilities with steady cash flow will pave the way to invest in everything else after that In April, Manuel V. Pangilinan and Jaime Augusto Zobel de Ayala inked a memorandum of agreement to form an exclusive strategic partnership to jointly pursue and develop light rail projects in line with the government’s public-private partnership program. This venture with a “friendly competitor” – Pangilinan’s Philippine Long Distance Telephone has 70% of the local telephone
STRATEGY POINTS
A little Hong Kong-based trading company of 30 years ago is now an empire that controls major companies providing electricity, food processing, hospitals, management, mining, telecommunications, tollways management, and water service The secret of Manny Pangilinan’s success: Capital expenditures in utilities with steady cash flow will pave the way to invest in everything else after that
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market, with Ayala’s Globe Telecomm picking up the remainder -- marks another milestone in Pangilinan’s apparent drive to build an empire fit to compete with the oldest oligarchs of the country. It all started way back in 1981 when Pangilinan founded First Pacific Limited in a cramped, 50-square-meter office with six people and a little capital from foreign friends. It was a small company originally intended to engage in trading business in Hongkong. Thirty years later, the four major corporations under its umbrella would comprise the premier investment management and holding company in the
region, earning billions of dollars with tens of thousands of people under its employ. The past couple of years saw First Pacific increase its profits by 40% through a capital management program introduced by Pangilinan, enabling the company to pay the highest ever pay-out of dividends to its stockholders in line with company’s “commitment to deliver a minimum of 25% of recurring profit to shareholders.” According to Pangilinan, this was made possible by the strong performances of the four corporations under its umbrella: Indonesia-based Indofood and Philippinebased Metro Pacific Investments
First Pacific: How it all started
The interesting story of First Pacific’s origins in Indonesia and Hong Kong can be found among the corporate profiles on the Utah-based site FundingUniverse.com. When Indonesia's war for independence broke out in 1947, an enterprising Chinese immigrant, Liem Sioe Liong, aided the rebels against the Dutch colonial forces. During this time, he became acquainted with a young lieutenant colonel named Suharto. Soon after Indonesia gained independence, this immigrant adopted the Indonesian name Soedono Salim and, with the help of Suharto, who came to power in 1965, built monopolies in the country's clove, cement, and flour markets. Like many Southeast Asian Chinese tycoons, who belong to small minorities in their countries but own big portions of economic assets, Salim sought to channel some capital to overseas investment havens. To help their business expand outside Indonesia, he tasked his son Anthony to tap outside talent. Anthony approached Hong Kong-based Filipino investment banker Manuel Pangilinan to set up a deposit-taking company in Hong Kong that would enable the Salims to expand into consumer products and finance. With just $1.5 million in startup capital, Pangilinan set up First Pacific Limited in 1981 as a small trading firm which would eventually grow into one of the most profitable investment and holding companies in the region, reporting a profit (net of exceptional gains) of HK$1.57 billion (US$202 million) on turnover of HK$54.8 billion (US$7.03 billion) in 1996. The Salim family’s daring move of letting an “outsider” control a family business was a bit of a risk, but given that it appears to have been worth it, it seems likely that they’ll keep the hands-off approach to First Pacific and let the man who turned a little trading firm into what is now a multi-billion-dollar enterprise continue to run the show.
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Corporation (MPIC), Philex Mining and Philippine Long Distance Telephone Company (PLDT), shown in the chart below. reported a 7% decline in core net income. From last year’s figure of ₧42 billion, lower service revenues and higher operating costs brought down net income to ₧39 billion.
THE FOUR PILLARS OF FIRST PACIFIC’S EMPIRE
Major group firms, with FP stakes and New York (NYSE) or Philippine
(PSE) listing codes
PLDT 25.8%* (PSE: TEL; NYSE:PHI) MPIC (PSE: MPI) Indofood (PSE: MPI) Philex# (PSE: PX) 59.1%*
First Pacific (HKEX: 00142)
50.1%*
31.3%*
*Economic interest as at 3 November 2011 # Two Rivers Pacific Holdings Corporation, a Philippines affiliate of First Pacific, holds a additional 15.0% interest in Philex
Source: “Business Structure” chart, First Pacific Company Ltd.
Record growth for Philex. The core net income of Philex, the controlling interest in which First Pacific acquired in Dec. 2009, reached a record high ₧5.6 billion, a 34% increase from its previous record of ₧4.2 billion in 2010. This is due to higher metal production and unprecedented market prices for gold, copper and silver. As the most profitable mining company in the Philippines, Philex delivered a 400% increase in its contribution to First Pacific’s revenues for 2011. Promising results from exploration activity and search for suitable acquisitions further drives Philex in its expansion plans for the next couple of years. Lower income but brighter prospects for PLDT. For the year 2011, PLDT
The loss was just partially offset by a higher equity share in the earnings of Meralco, which by itself rose on the strength of higher tariffs and slightly higher sales than a year earlier. PLDT’s fixed line business grew from 1.8 million subscribers in 2010 to 2.2 million subscribers, with an addition of 47,000 more PLDT subscribers and another 296,000 Digitel subscribers. . The total subscribers of PLDT’s cellular networks as of year-end 2011 stood at 63.7 million. The PLDT Group’s combined postpaid cellular subscriber base now leads the
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market with 1.9 million, 1.4 million of whom were with Sun Cellular. Meanwhile, PLDT Group’s total broadband subscriber base increased by 45% to 2.9 million with additional of 356,000
After the National Telecommunications Commission approved the acquisition, several groups expressed concern that PLDT’s acquisition of Digitel would result in a virtual monopoly in the cellular network business as it leaves Globe
PLDT'S MOBILE SUBSCRIBERS
Smart Talk 'N Text Red Mobile Sun Network Total subscribers 27.1 million 20.5 million 1.4 million 14.7 million Additional for 2011 1.4 million 1.5 million 1.9 million
Source: TCR compilation of figures from First Pacific March 6, 2012 press release announcing PLDT audited financial and operating results for 2011, p. 4
subscribers to SmartBro. Over 1.1 million of these subscribers use the prepaid service. PLDT myDSL, on the other hand, increased by almost 100,000 as it now has 742,000 by year-end 2011. Recently acquired Sun Cellular also registered an additional 551,000 broadband subscribers. Seeing 2012 as a “year of alignment” so it could go back to better figures, PLDT will focus on integrating Digitel and closing its two-year ₧67 billion capital expenditure program. Capital expenditures for 2011 amounted to ₧31.2 billion, which is 8% higher compared to last year. These were spent on major improvements in both its mobile and fixed networks, which include increasing its 3G population coverage to 70%, upgrading wireless transport network covering up to 82% of Metro Manila sites and its fixed transport network by rolling out 54,000 km of fiber assets. Despite the bright prospects brought about by PLDT’s acquisition of Digitel, the possibility of legal battles may upset the telco giant’s business strategy for 2012.
Telecom as PLDT’s only competitor. Consumer rights advocate TXTPower fears that the consumers will eventually suffer under the merger. TXTPower head Tonyo Cruz said, “We still suffer from bad service, below par customer service, iron-clad contracts, interconnection fees, unstable and unreliable calls,” even with the merger. Former President Fidel Ramos also saw the anti-trust implications of the acquisition, as reported in a story posted on the Antitrust Law Center website, saying that it “may result in a disservice to the public, noting that the deal is meant to primarily stifle competition in the telecommunications industry and not to improve service.” Ventures in mass media through MediaQuest. Meanwhile, over the last few years, Pangilinan has made major capital investments in mass media through MediaQuest Holdings, a PLDT Trust Fund company. The most important acquisition to date came in 2009, when MediaQuest bought Associated Broadcasting Company, the erstwhile ABC5. In two years’ time,
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TV5 has become a major player, pacing a close third to perennial competitors GMA7 and ABS-CBN. For this year, TV5, which currently holds 15% of the market, has earmarked ₧4 billion in capital expenditures, a huge bulk of which is
So who really controls PLDT?
Another issue hounding PLDT is its compliance with the 40% constitutional cap on foreign ownership of public utilities. Article XII, Section 11 of the Constitution provides that “no franchise, certificate, or any other form of authorization for the operation of a public utility shall be granted except to citizens of the Philippines or to corporations or associations organized under the laws of the Philippines at least 60 percent of whose capital is owned by such citizens.” PLDT maintains that it does not violate the said constitutional mandate because foreign ownership only accounts for 13% of the company. PLDT got this figure by counting preferred shares as part of the capital. But some quarters disagree. As shown in the table below, independent of the number of shares, the value of PLDT’s non-voting preferred stock (convertible and non-convertible redeemable) is set at over ₧4.4 billion, while the value of its voting common stock is just over P1 billion. If one assumes that non-voting preferred stock is owned mostly, if not entirely, by Filipinos, one could argue that Filipinos own over 80% of the company.
PLDT CAPITAL STOCK, 2011 AND 2010
December 31, 2011 2010
Serial Preferred Stock 10% Cumulative Convertible Preferred Stock A to II Cumulative Non-convertible Redeemable Preferred Stock Series IV Common Stock
₧4,059 360 ₧4,419 ₧1.072
₧4,059 360 ₧4,419 ₧947
Note: Preferred stock carries a par value of P10 per share, while common stock carries a par value of ₧5 per share
Source: PLDT Annual Report for fiscal year ended Dec. 30, 2011, as submitted to U.S. Securities and Exchange Commission, p. 9
But if one combines that with the common knowledge that control of PLDT resides in the control of its voting common stock, significant portions of which are still held by foreign companies such as the Hong Kong-based First Pacific and Japan’s Nippon Telephone and Telegraph DoCoMo, then we face a situation where foreign companies effectively control a public utility supposedly owned by Filipinos. On June 28, 2011, the Supreme Court ruled that that the term “capital” in relation to Art. XII Sec 11 should be considered as shares of stock entitled to vote in the election of directors. According to Senior Associate Justice Antonio Carpio, counting the entire capital stock in determining foreign ownership, as how PLDT did it, will betray the mandate of Article XII that public utilities must be “effectively controlled by Filipinos.” PLDT sought reconsideration of the ruling, and the case is currently pending before the Supreme Court. The Court heard the oral arguments of PLDT on April 17, while the arguments of the government will be heard on June 26.
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allocated for the completion of its new state-of-the-art building in Mandaluyong. Not seem to be satisfied with the growth of TV5, Pangilinan admitted that the PLDT Group “have been interested in GMA for 10 years, but there are no discussions going on,” and that “We’ve talked to them the first time in 2002, then maybe five years ago.” If ever such a deal were to materialize, the PLDT Group would be on the verge of owning 60% of the market share, making ABS-CBN a helpless competitor. For its part, GMA7 denies that there is already a “done deal” between Pangilinan and the owners of GMA7. According to GMA7 president Gilberto Duavit Jr., “The network is not for sale, but that is not to say it will not be sold depending on the offer price.” This affirms that there are indeed “preliminary” negotiations taking place, and that everything would have to depend on the price Pangilinan is willing to offer to the Duavit, Jimenez, and Gozon families, who own GMA7. Based on the value of GMA7 stocks, the company is valued at around ₧31 billion. If one would take into account the customary premium being paid by buyers for such major acquisitions, the reasonable “asking price” for GMA7 would be around ₧45 to 51 billion, but the three families are reportedly demanding ₧60 billion. That buying price would be equivalent to a 94% premium that Pangilinan would be paying for the shares. This is where the parties fail to agree. However, the 39% income drop of GMA7 last year could set the stage for a deal to be sealed. Note that MediaQuest also owns National Broadcasting Corporation and Cignal Digital TV, and has minority shares in the
broadsheets BusinessWorld and Philippine Daily Inquirer. Last year, the PLDT subsidiary tried to acquire 87.5% of The Philippine Star, but negotiations did not push through. As of this time, it has a 10% stake in the Star, and a 10% stake in the Inquirer. MPIC: Bringing the basics to higher ground. In an attempt to answer the growing demand for vital services, Pangilinan’s holding firm Metro Pacific Investments Corporation, through its six subsidiaries, offer vital services in “groundwork for basic services” which would “pave the way for a strategic response to the changing times.” MPIC has been trying to answer the country’s growing demand for clean and potable running water, efficient distribution of electrical power, state-of-the-art tollway systems and world-class medical care. The performance of MPIC speaks well about how it has indeed answered the demands stated above. It reported a 32% increase in core net income from the 2010 figure of ₧3.9 billion to ₧5.1 billion for 2011. This was primarily due to high tariffs and sales by Meralco and Maynilad and the strong performance of its healthcare operations. Meanwhile, Metro Pacific Tollways Corp. had little earnings for 2011 compared to 2010 due to the expiry of its income tax holiday.
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METRO PACIFIC INVESTMENTS CORPORATION STRUCTURE
Source: Corporate Structure, Metro Pacific Investments Corporation website
Maynilad flushes out indebtedness, pumps in profitability. In 2006, when the Lopez-owned Benpres Corp. gave up its concession over Maynilad Water Services Inc., MPIC entered into a joint venture that took over the debt-strapped water concessionaire. A corporate rehabilitation plan was thus laid out to revive the dying water utility company. During the process, MPIC poured in huge capital expenditures to renew Maynilad’s water treatment facilities, lay new pipelines, and upgrade its systems. This resulted in higher water pressure, broader coverage of its concession
area with an expanded reach and customer base—over 150,000 new households coming into Maynilad’s revenue stream. Five years later, Maynilad is a company of profitability and sustainable growth. Serving more than 9 million people in the western cities of Metro Manila and a large part of Cavite province, the new Maynilad now boasts of a “transformational management that changed the culture of the company from a public utility to customer-oriented mindset.” The following figures show how effective Pangilinan’s
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5-year, ₧36-billion capital expenditure program has been. In 2011, Maynilad poured in a little over ₧9 billion in capital expenditures, which brought in 14.3% revenue growth, from ₧12.05 billion in 2010 to ₧13.77 billion in 2011. This was due to an 8.3% increase in billed volume and 5.7% average tariff increase. This resulted in a core net income of ₧6.01 billion, 24.2% higher than 2010’s ₧4.83 billion. Lost water due to leakage and theft has also declined to just 42.2% from the previous year’s 51% as the leak repair program continues to bear positive results. This “non-revenue water” reduction program will be pushed further in 2012, as Maynilad pours in ₧3.4 billion for diagnostics, leak repairs and the establishment and maintenance of district metered areas. These capital expenditures have transformed Maynilad from a debt-ridden water utility company into a profitable water concessionaire that now has more than a million billed customers, 84% of which are enjoying 24-hour continuous water supply. In fact, foreign firms have already showed interest in Maynilad. MPIC chief financial officer David Nicol has confirmed reports that foreign firms have set eyes in acquiring minority stakes in Maynilad. Of interest is the fact that among those who have indeed shown “constant interest” in acquiring shares are some Japanese companies, which could result to more access to Japanese official development assistance (ODA) loans. But given that MPIC has no intention of reducing its 55%-share in the water utility, “nothing has been signed and nothing has been done” as of this time, according to Nicol.
Transforming the transport landscape through Metro Pacific Tollways. Committed to its vision of “providing high quality public service through improved expressway systems” which Pangilinan sees as “catalysts for economic development,” MPIC has under its own umbrella the Metro Pacific Tollways Corporation (MPTC) and the Tollways Management Corporation (TMC). These two companies are MPIC’s “management arms” in building a broader tollway network. For the year 2011, MPTC’s pre-tax income rose 23% due to the efficient management of operating and financing costs in the North Luzon Expressway (NLEX). However, due to the expiration of MPTC’s income tax holiday, core net income only rose by ₧10 million, from ₧1.47 billion in 2010 to last year’s ₧1.48 billion. Nonetheless, bigger capital investments would most likely spur growth for this year as MPTC continues its massive infrastructure projects in Luzon. Just recently, in what has been touted as the “largest infrastructural project in the country in the last ten years,” MPIC has entered into a partnership with the Manila North Tollways Corp. in the massive rehabilitation and expansion of NLEX and its interconnection with other major roads in Luzon, most significant of which is the Subic Clark Tarlac Expressway (SCTEX). A revised agreement between MPTC and the Bases Conversion and Development Authority regarding MPTC’s takeover of SCTEX had already been signed and is only awaiting the approval of President Aquino. Once approved, MPTC plans to invest ₧325 million to integrate SCTEX with NLEX to
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facilitate seamless travel between these two major expressways. MPTC also plans to link NLEX to Manila’s port area through its Harbour Link Project which will be constructed by fourth quarter of this year with target completion by 2014. Not only that, Harbour Link would also be linked by a 13.5 kilometer Connector Road to the South Luzon Expressway at Makati’s Gil Puyat Ave. This will bring together the North and South toll road systems together for the first time, with travel time between the two major expressways cut to just 20 minutes. MPIC’s detailed engineering drawing and design are already completed in preparation for a Swiss challenger. The project will be awarded before 2012 ends. For both the Harbour Link and the Connector Road projects, MPTC will pour in ₧32 billion in capital investment. Empowering Meralco. Since the publication of the chart above, which was current as of the first quarter of 2010, Pangilinan, through Beacon Electric, has reportedly increased Metro Pacific’s stake in the Manila Electric Company (Meralco) from 34.8% to 48.02%. Meralco, the country’s largest powerdistribution company, saw 22% growth in its core net income at ₧14.89 billion despite a measly 1% increase in electricity sold to customers. This is due to an ₧8.7-billion capital expenditure program in 2011, which was aimed at boosting new service applications, improving distribution facilities and replacing meters and transformers. Meralco also managed to decrease system loss to an all-time low of 7.35%, as a result of its loss-reduction initiatives, which include
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stronger pilferage management and deepening partnerships with local government. Meanwhile, it was announced that aside from its improved electricity distribution network, Meralco will also enter the power generation and retail electricity supply businesses later this year. This will be made possible by a joint venture with Aboitiz Power and Taiwan Cogeneration to develop an aggregate 600MW coal-fired base load plant in Subic, Zambales expected to be commissioned by 2016. Investing in health care through MPIC’s Hospital Group. After a series of investments in the last couple of years, the MPIC Hospital Group now comprises six full-service tertiary hospitals with approximately 1,800 beds: Makati Medical Center in Makati, Cardinal Santos Medical Center in San Juan, Our Lady of Lourdes Hospital in Manila, Asian Hospital in Muntinlupa, Riverside Medical Center in Bacolod, and Davao Doctors Hospital in Davao. The combined core net income of the Hospital Group for 2011 rose 17% to ₧560 million despite huge capital investments made in improving the already MPIC-owned hospitals and the acquisition of Riverside and Our Lady of Lourdes. Of significant contribution was the growth of the outpatient departments of Cardinal Santos and Davao Doctors. Our Lady of Lourdes also underwent renovation under the new management and has also invested in new digital diagnostic machines and a state-ofthe-art eye center.
Late last year, MPIC completed acquisition of 100% of the shares of Colinas Verdes Hospital Managers Corporation, operator of the Cardinal Santos Medical Center in San Juan. This made Cardinal Santos a direct wholly-owned hospital of MPIC. At the same time, MPIC also inked an agreement to acquire a majority interest in Asian Hospital. The over-arching question remains. The empire that Pangilinan has built -- and is still building -- has been constructed with infusions of foreign capital and management expertise. So when we consider the extent to which First Pacific and Metro Pacific, along with their specially created subsubsidiaries, continue to extend their reach into the Philippine economy, from telecommunications to other equally strategic industries, such as electricity, mass media, mining, roads, and water, the case of who really owns and controls PLDT, the nation’s largest telecommunications company, while important in its own right, becomes even more significant. The Supreme Court could very well determine that the Philippine economy needs capital, and that the foreign capital that Pangilinan has been able to attract to local industries is just as good as, if not better than, local capital, thereby doing away with restrictions on foreign ownership. Then again, it could just as easily determine that strategic industries should remain in the control of Filipino citizens, which would continue to test the creativity of First Pacific and Metro Pacific’s legal advisers.
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It’s About Time for the DICT
The Department of Information and Communications Technology is a must for the country’s digital future
By Marishka Noelle M. Cabrera
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he legislation is at least a dozen years in the making. Back in 2001, then President Gloria Arroyo said in her first State of the Nation Address: “I ask Congress to enact laws to address internet privacy and security, allow for multimedia convergence, and create a department of telecommunications nd information technology.” Looks like it may finally happen. In February this year, the Senate unanimously passed on third and final reading the bill creating the Department of Information and Communications Technology (DICT) through a reorganization of communications-related agencies into a separate entity, as reported by the Philippine Daily Inquirer. Senate Bill No. 50, titled the Department of Information and Communications Technology Act, aims to ensure the provision of a reliable, strategic, and costeffective ICT infrastructure, foster a policy environment that will promote a broader, market-led development of ICT, and accelerate the convergence of ICT facilities, among other objectives. Two months earlier in December, the House of Representatives had passed its own DICT measure. House Bill No. 4667, according to another Inquirer report, intends the department to “develop and implement policies and government programs that would boost and improve the country’s competitiveness in the IT field.” It is now down to the bicameral committee to iron out differences and produce a unified version for congressional and presidential approval. If the DICT is finally created, it comes none too soon. The Philippines successfully built
STRATEGY POINTS
Congress may soon pass the bill creating the Department of Information and Communications Technology (DICT). Will President Aquino sign it? Increasing competition and rapid technological change and challenges demand the focus, clout and know-how of a Cabinet department for ICT Among issues that the future DICT must address: bringing to all Filipinos the knowledge and opportunity to benefit from the ICT revolution
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ICT-enabled services into a P7-billion-plusa-year export sector in the Arroyo decade. But increasing global competition and rapid technological advances and challenges in ICT, including cyber-attacks and privacy issues, demand sophisticated new policies and initiatives. Senator Edgardo Angara, chair of the Senate Committee on Science, Technology, and Engineering, and principal sponsor of SB 50, says in a GMA News report: “ICT is only getting more embedded into our everyday lives. This only enhances the multiplier effects of developing its sector and all other industries that are enabled by it. I am convinced that a DICT will be essential in ensuring that the benefits of ICT become all the more far-reaching and transformative.”
ICT committee chair Freddie Tiñga said in the newspaper report. “We have to keep pace with the emergence of new technologies rapidly changing the world’s economic landscape.” Will the President sign the law? The Palace may need convincing. Last year Presidential Communications Operations Office Secretary Herminio Coloma reiterated that the Aquino administration is not keen on creating a new department due to the additional costs involved, as reported by GMA News.
Plainly, having the clout and focus of a Cabinet department dedicated to ICT alone would be far better than the current sharing between the Science & Technology (DOST) and the Investment promotion video on Philippine ICT sector YouTube Transport & Communications (DOTC) departments. Under the proposed measures, the DICT will absorb the ICT Then during National ICT Month last June, Office now under the Department of Science President Benigno Aquino III appointed a and Technology, the National Computer new commissioner to join the Commission Center, Telecommunications Office, and on Information and Communications all operating units of the Department of Technology (CICT), which had just unveiled Transportation and Communications that its Philippine Digital Strategy 2011-2016. have to do with communications. Further, But days later, Aquino demoted the CICT the new department will control the to an office under the DOST. The CICT e-government fund, a special account in the head, who once held Cabinet rank under yearly state budget to spend for government Arroyo’s Executive Order 269 creating the technology projects. commission, was replaced by an executive director under the new set up. “ICT needs to have its own governing body to set new directions,” Taguig’s Second District Senator Angara then wondered in his article Representative and House in the Manila Bulletin: “Time will soon
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tell whether the downgrading of ICT is one of the short-sighted actions of the present administration.” If the DICT bill finally lands on President Aquino’s desk, Angara and other proponents will see if Malacañang now shares their perspective. Research South conference: Research for Improving ICT governance in the AsiaPacific, Cheryll Ruth R. Soriano found the country’s universal access policies and strategies to be “technology-centric,” without much focus on the citizens’ capabilities and the usability of technology. Support for the DICT. Various ICT Soriano posits that in order to achieve and business stalwarts certainly do. With universal access to ICT, there must be the the passing of the bill participation of government forming a separate agencies at the local and ‘By creating DICT, industry national levels, as well as the a department observers are lauding private sector, and the DICT the move. Manila will have to “orchestrate solely for the Bulletin columnist and the whole process.” ICT sector IT expert Jerry Liao and new says the Philippines An article from Telecomasia. technologies, is sending a strong net believes the time is ripe the nation signal that it is “ready for an ICT department since can be on top to participate and telecommunications and ICT of the curve, compete in the digital are “the most dynamic sectors not behind it’ economy.” More and in the Philippines.” In fact, ~ Roberto Romulo more businesses and the report says, the economy individuals will be can support the “limitless” inclined to transact possibilities that a developed online, Liao says, because they know ICT sector would bring. that there is a department that will protect their interests. Even countries with less per-capita income than the Philippines have their Philippine Star columnist and own ICT departments, like Pakistan’s competitiveness advocate Roberto Ministry of Information Technology and Romulo wrote in 2009 that if the country Vietnam’s Ministry of Information and wants “national modernization and Communications. India, the country’s development,” the DICT is a must. top competitor in the business process “The IT is a transformational force in outsourcing (BPO) and knowledge the world today transforming not only process outsourcing (KPO) industries, economies but the way we live,” he has its Ministry of Communications and continues, “By creating a department Information Technology. On the other dedicated to the sector and the new hand, Myanmar, Laos and Cambodia do not technologies, the Philippines has a chance have a separate ICT ministry. to be on top of the curve, not behind it.” Lagging in the global ICT race. One In her 2007 paper “Universal Access in the concern that the new department would Philippines: A Review of Strategies and need to address is the one-notch drop in the Policies” for the Communication Policy Philippines’ Networked Readiness Index
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(NRI) rank in “The Global Information Technology Report 2010-2011” to 86th from 85th in the 2008-2009 report, compiled by the World Economic Forum and top European business school INSEAD. NRI measures the “capacity of countries to fully benefit from new technologies in their competitiveness strategies and their citizens’ daily lives.” Sweden takes top spot, followed by Singapore and Finland. The Philippines lags other Asian countries like Taiwan (6th), Korea (10th), Japan (19th), Malaysia (28th), China (36th), India (48th), and Thailand (59th). Pakistan trails the Philippines at No. 88, while Cambodia is at 111, and Bangladesh is at 115. The report reminds readers, “For ICT to be used effectively, technology needs to be matched to the local context and be sensitive to people’s needs.” The government of Taiwan, for instance, “has placed ICT at the heart of its competitiveness agenda.” The report continues, “Through incentive programs and massive investment in ICT infrastructure, the government has been a catalyst of these positive developments.” Seacoop, an initiative to strengthen the cooperation in ICT research between Europe and the Association of Southeast Asian Nations, released in 2010 its “ICT policies, programmes and research priorities in the 10 Asean countries.” The report provides an overview of each Asean country’s ICT policies and programs, such as Singapore’s Intelligent Nation 2015 (iN2015), Thailand’s Second ICT Master Plan 2009-2013, and the e-government initiative in Brunei, to name a few. For its part, the country unveiled last year the Philippine
Digital Strategy, “Transformation 2.0: Digitally Empowered Nation,” with the following strategic thrusts: transparent government and efficient services, Internet opportunities and digital literacy for all, and ICT industry and business innovation for national development. A 2004 publication of the United Nations Development Programme-Asia Pacific Development Information Programme (UNDP-APDIP) assessed the different ICT policies and e-strategies in the region. It suggests: “To take advantage of ICT developments, individual country governments must not only put their own internal policies and programmes in order, but also align these with trends evolving from an increasingly interconnected world.” In their paper, “Issues on the Philippines’ Information and Communications Technology (ICT) Competitiveness,” Glenn Sipin, Jose Lloyd Espiritu, and Oliver Malabanan of De La Salle University agree: “The ability of a country or a region to compete in the new global market for new products and services … depends greatly on how well it can use ICT to support its products.” ICT is vital for economic growth. The ICT industry has the potential to contribute some $50 billion worth of annual direct revenues to the country’s economy by 2016, according to a Business Mirror report on the ICT Industry Stakeholders Consultation Workshop organized by the DOST’s Information and Communications Technology Office (DOST-ICTO). Alejandro Melchor III, DOST-ICTO deputy executive director for ICT industry development, cited government support for
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the industry and added that apart from the $50 billion in expected capital inflows, the country may also expect around “$150 billion in indirect investments in the economy, through real estate, transport and telecommunications, banking, taxes and others.” In the news report, participants are calling for state support in key areas, such as “talent development, domestic ICT development, countryside industry development, advancement of ICT-enabled creative industries, ICT marketing and research, as well as expansion into highvalue markets.” And why not? Technological readiness is regarded as the ninth in the 12 pillars of competitiveness in The Global Competiveness Report 2011-2012 of the World Economic Forum. This pillar, the report explains, “measures the agility with which an economy adopts existing technologies to enhance the productivity of its industries, with specific emphasis on its capacity to fully leverage information and communication technologies (ICT) in daily activities and production processes for increased efficiency and competitiveness.” BPO: still a sunshine sector. One industry that needs the prioritization of ICT is BPO. It has been a beacon of hope for the economy in recent years. In its “Philippines Quarterly Update: From Stability to Prosperity for All,” the World Bank, noted that the BPO sector continued to drive
The Philippine Business Process Outsourcing Industry, 2004-2011
Employment, thousands and % change
800 700 600 500 400 300 200 100 0 100.5 2004 163.3 235.6 299.0 372.0 442.2 Employment level, lhs YOY growth, rhs 523.0 80% 70% 60% 50% 40% 30% 20% 10% 2005 2006 2007 2008 2009 2010 2011 0%
THE BPO BONANZA
638.0
Revenues, $ billion and % change
14 12 10 8 6 4 2 0 1.5 2004 2.4 3.2 4.8 6.1 Revenues, lhs YOY growth, rhs 8.9 80% 70% 60% 50% 40% 30% 20% 10% 2005 2006 2007 2008 2009 2010 2011 0%
11 7.2
Charts from Arangkada Philippines, based on data from Business Process Association of the Philippines
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growth last year, despite the economic slowdown. “The BPO industry’s total (i.e., direct plus indirect) contribution to growth through real estate, construction, retail trade, and telecommunications is estimated
to account for some 11 percent of GDP in 2011,” the Bank estimates. World Bank senior consultant Raja M. Mitra examines in his paper, “BPO Sector
Is the Philippines too dependent on BPOs?
The business process outsourcing (BPO) industry has helped buoy the Philippine economy for the past decade. However, experts warn against relying too much on the magic of BPOs. In the Asian Development Bank’s “Transforming the Philippine Economy: Walking on Two Legs,” senior country economist Norio Usui warned that while the BPO sector has had positive contributions to the economy, it is not the “savior.” He notes that jobs created in the industry are a mere 1% of the total labor force and mostly benefits those with a tertiary degree. Meanwhile, unskilled workers with only secondary or primary education are left without a fighting chance. Usui argues that both manufacturing and service sectors must be developed in order to solve the problems of high unemployment, slow poverty reduction, and low investment and attain a sustained, more inclusive growth. Asian Development Outlook 2012 of the ADB echoes Usui’s insights. Growth has, the report says, relied on services, as evidenced by the rise of BPO, and not so much on the productivity of industry. Stronger growth is needed to make a dent in reducing unemployment and poverty. The World Investment Report 2011 of the United Nations Conference on Trade and Development (UNCTAD), meanwhile, cautions the Philippines and other developing countries against relying too much on non-equity modes (NEM) of foreign direct investments.
As explained by economics Prof. Jovi C. Dacanay of the University of Asia and the Pacific in an ABS-CBN News report, “NEMs are types of FDI and contractual agreements that may be business-to-business or government-to-business that have no high fixed assets,” and can be in the form of contract manufacturing, services outsourcing, contract farming, and franchising, among others. The ventures require light, low-cost facilities which would be easy to move or even abandoned if and when the skilled labor they harness in the country are more profitably sourced elsewhere. Thus, argues the UNCTAD report, NEMs pose risks to developing countries since “employment in contract manufacturing can be highly cyclical and easily displaced.” The ease with which transnational corporations can transfer production threatens the working conditions and stability of employment. The article “End of Contract: The BPO Industry in Crisis,” published in the University of the Philippines’ The Philippine Collegian newspaper, tackles the danger of overdependence on foreign markets in light of U.S. President Barack Obama’s move to bring jobs back home to Americans, instead of outsourcing overseas. As the American leader said, “It is time to stop rewarding businesses that ship jobs overseas, and start rewarding companies that create jobs right here in America.” The article then admonishes: “Obama’s pronouncements serve both as warning and an opportunity — a chance for the country’s economy to get rid of the shackles of excessive foreign dependence and volatile markets.” At least, that’s the hope.
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Growth and Inclusive Development in the Philippines,” the possibility of BPO and other ICT development to be major catalysts for economic growth and socio-economic transformation. Data from the paper shows that IT-BPO industry revenue grew from $1.32 million in 2004 to approximately $6.3 million in 2008. And according to data from the Business Process Association of the Philippines (BPAP), the BPO sector grossed $11 billion and employed 638,000 Filipinos last year (see charts, page xx). Hopefully, the passage and signing of the DICT bill into law will be done soon enough, given the benefits that a focused ICT department will bring. Soriano says in her paper: “There is overwhelming optimism worldwide towards the opportunities that the information and communication technology (ICTs)
It’s about time for DICT
revolution promise to bring to the developing world: more efficient governments, productive businesses, globally competitive knowledge workers, and empowered rural communities.” In a vibrant ICT environment, industries with great potential for growth can prosper and impact other sectors. One clear winner is the local property market, which is accommodating increased demand from the BPO sector for office and residential spaces, as reported by international real estate firm Jones Lang LaSalle Leechiu. As a catalyst for economic development, dilly-dallying on the government’s ICT policy is not an option. Rather, clearness in policy and mindfulness in priorities are needed to ensure that the Philippines will be riding the ICT wave instead of being run aground.
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NEWS ON THE NET
Business
PHL negotiates with WTO for grace period to rectify excise taxes on alcoholic drinks
In accordance with a negotiation that occurred between the World Trade Organization (WTO) and a Philippine delegation, the Philippines now has until March 8, 2013 to comply with the WTO ruling that found current Philippine excise taxes on imported liquor in violation of global trade rules. The Department of Trade and Industry (DTI) says that the country needs to enact a new law to facilitate compliance. DTI Secretary Gregory Domingo stated last Wednesday that the Philippines was successful in asking for a longer grace period – initially the U.S. and the European Union had offered a period of time that would have set the compliance deadline four months earlier than March 2013. The WTO issue is a timely one, as excise taxes have recently become a hot topic in local news. New six tax bill HB 5727, authored by Cavite Representative Jun Abaya, seeks to raise excise taxes on cigarettes and liquor by as much as 1000%. London-based British American Tobacco is supporting House Bill 5727 and is looking at a threefold increase in Philippine sales this year; as compared to its sales in 2009, when it decided to pull its brands Dunhill and Lucky Strike out of the country. Another development is the recommendation of the International Monetary Fund to impose excise tax on Philippine telecommunication services, in order to mitigate sin tax increases and related adverse effects; as seen in the report entitled "Philippines: Technical Assistance Report on Road Map for a Pro-Growth and Equitable Tax System." Gen Northern Energy Corp. to bid for the controversial Angat water project. Aside from Ayala Corp. and Metro Pacific, diversifying conglomerate San Miguel Corp. has also expressed interest in bidding for the contracts of LRT Lines 1 and 2.
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MPIC, Ayala Corp team up for LRT projects under gov’t program
Two of the Philippines' largest conglomerates – Ayala Corp. and Metro Pacific Investments Corp. – have joined forces in a strong push for the infrastructure space. Last week both Ayala and Metro Pacific disclosed that they had signed an agreement to form an exclusive strategic partnership in order to undertake the development of light rail projects and related real estate undertakings. In particular, instead of bidding against each other, the two companies are looking to bid for LRT projects under the government’s Public Private Partnership (PPP) program as one group – starting with the LRT Line 1 to Cavite, currently the biggest contract up for auction in the PPP lineup. This is not the first time an alliance like this has been forged; in 2010, both companies teamed up with Lopez-run First
Clark Freeport exports climb up to 143% in 1st two months
According to state-run Clark Development Corp. (CDC), export products shipped out from the Clark Freeport Zone in Pampanga ballooned to 143% in the first two months of 2012, as compared to numbers from last year. The CDC further noted in a statement that total exports amounted to over $594.2 million from $244.3 million; and that export products were led by semiconductors and electronics. The Clark Freeport Zone is a hotbed for economic opportunity and activity in the Philippines; it alone accounts for an estimated 8.1% of the $48.5-billion Philippine exports in 2011. Another revenue-generating industry thriving in the Clark Freeport Zone is domestic travel, which has grown 96% from 2006 to 2011. Following the footsteps of low-cost carrier Cebu pacific, new travel industry player AirAsia launched its maiden flight last April 20 from Clark International Airport, boasting of daily flights and affordable rates.
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Giving Justice to the Fallen Trees
The daunting, deadly challenge of making illegal loggers pay for their greed
By Pia Rufino
STRATEGY POINTS
The countries can effectively fight illegal logging through criminal justice system punishing organized crime and tracing and confiscating illegal logging profits, the World Bank said. In the Philippines, bills urging for harsher punishment—life imprisonment and death penalty—against illegal loggers are filed in the Congress. Log ban in all natural forest is declared in the Philippines to curb illegal logging negatively affecting companies and workers in the wood industry.
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F
or 10 seconds, imagine a vast forest the size of five football fields, perhaps big enough to cover the area between Quirino Grandstand and Roxas Boulevard. That’s the size of wooded land cleared by illegal loggers in the world in the time you were imagining it. According to a World Bank report released last month, “Justice for Forests: Improving Criminal Justice Efforts to Combat Illegal Logging,” every two seconds, a combined area of forest the size of a football field is cleared by illegal loggers on the planet. In some countries, contraband timber accounts for as much as 90% of all logging, generating criminal proceeds of US$10 billion to $15 billion a year. You don’t need to tell that Melanie Dirain for her to know how serious illegal logging is. For one thing, as forest specialist with the Department of Environment and Natural Resources (DENR), she enforced the log ban against lawless loggers in Cagayan province. For another, on February 7, Dirain was killed in her office in Sanchez Mira, Cagayan, a murder caught on CCTV and witnessed by two of the victim’s officemates. As reported by ABS-CBN, Dirain’s assailant surrendered two weeks later.
Dirain was posthumously honored as one of the Heroes of the Environment with the annual Fr. Neri Satur Award, an accolade named after another martyr in the war against illegal logging. As Philippine Daily Inquirer columnist Rina Jimenez David recounted, Fr. Satur was assassinated on October 14, 1991, on the way to Valencia town, Bukidnon. Armed men shot him with a shotgun and bashed his head in with a rifle butt. He was among 45 clergy members deputized by DENR as “forest protection officers” as requested by then Malaybalay Bishop Gaudencio Rosales, now Cardinal and Manila Archbishop Emeritus. Violence and threats against forest crusaders like Dirain and Satur is one major reason why, as the World Bank study found, law enforcement against illegal logging has had little effect in most countries, including the Philippines. The Bank cited findings of the four-year study by a Virginia-based non-profit environmental organization Conservation International. It assessed enforcement in four forest-rich countries —Brazil, Indonesia, Mexico, and the Philippines — where the chances of illegal logging being penalized is less than 0.1% (see page 5 of Bank report).
Forest martyrs: Hooded gunman shooting DENR forestry specialist Melanie DIrain, on CCTV (left); Cardinal Gaudencio Rosales interview on Fr. Neri Satur ABS-CBN & CBCP videos
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For effective enforcement, the World Bank recommended an integrated criminal justice strategy punishing organized crime and tracing and confiscating illegal logging profits. This will address one major failing of most anti-illegal logging campaigns: excessive focus on small offenders like slash-and-burn farmers, while letting big illegal loggers operate with impunity, as noted in the report’s executive summary. residual and natural forests or forests composed of indigenous trees and not planted by man, based on section 2.1 of the executive order. Meanwhile, tree cutting and harvest for “site preparation” for tree plantations and clearing for road construction are spared from the prohibitions set by EO 23.
To enforce the moratorium, EO 23 likewise created the National Anti-Illegal Logging Overall, use of the justice and law Task Force (NAILTF) chaired by the DENR enforcement system to fight illegal logging and composed of secretaries of Department in most heavily forested countries is of Interior and Local Government, “minimal [with] few documented successes Department of National Defense, and chiefs … and little data to explain” of Philippine National Police why the police and the and Armed Forces of the courts have not been used Philippines. The task force is Rather than more extensively to protect supported by a P10-million more laws and woodlands. The bank also budget, according to article 3 law enforcers, urges more cooperation of executive order. the government among agencies in the should mobilize forest law enforcement and During the 2010 presidential criminal justice sectors elections, Aquino said that communities through committees or he would engage the police and give them task forces. and military authorities, incentives to local communities and protect trees Log ban and antilocal government agencies illegal logging force. in campaign against To fight illegal logging in illegal logging, in a the Philippines, in February last year, survey conducted by Greenpeace among President Benigno Aquino signed Executive Presidential aspirants. (p25) Order No. 23 (EO 23) imposing a logging moratorium in residual and natural forests, “This new approach to fight illegal logging and creating an anti-illegal logging task is seen to ensure convictions in court cases force. The directive is issued after Aquino filed against illegal loggers,” Paje said a saw flood and landslide damage in Albay, year after EO 23 was signed. He said its according to an article from the Presidential implementation has seen the confiscation of Communications Operations Office. 12,014,244 board feet of contraband forest products, and the filing of 461 cases against EO 23 restricts the Department of violators, as of Feb 28. Environment and Natural Resources (DENR) from issuing and renewing logging Secretary Paje added in his official permits and contracts or agreements to statement that NAILTF, which arrests
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Enforcing the law and bringing justice to the forest
The 2012 World Bank report, Justice for Forests Improving Criminal Justice Efforts to Combat Illegal Logging, provides policy and operational recommendations to help countries effectively use criminal justice system in fighting illegal logging. Outlined on pages 39-40, the proposed measures are based on legal and operational frameworks already in place in most countries. • Develop an integrated criminal justice strategy that adopts and implements clear and comprehensive policies targeting illegal logging’s features of corruption and organized crime, as well as its financial aspects. • Improve domestic cooperation between agencies in the forest law enforcement and criminal justice sectors, using such tools as interagency committees or task forces. • Adopt measures for entities subject to anti-money laundering rules (like financial institutions) to exercise enhanced due diligence for high-risk customers in the forestry sector. • Support and encourage NGOs’ efforts to raise awareness about illegal logging and to help detect those crimes. • Call for criminal justice to be integrated as part of development assistance programs to combat illegal logging. For law enforcement, investigators, and prosecutors, these initiatives are urged: • Forest law enforcement actors should proactively approach those in the criminal sector and request assistance and cooperation in investigations, prosecutions, and the confiscation of the proceeds of these crimes. • Law enforcement, investigators, and prosecutors should attack high-level corruption by targeting both those who provide and those who receive the bribes. • All law enforcement practitioners should focus their resources on high-value vulnerabilities (whether forest, group, or company) and high-level criminals— not low-level offenders. • Investigators and prosecutors should consider all applicable offenses—not simply regulatory environmental offenses—as early as possible in the investigation. • All practitioners should “follow the money” and use anti-money laundering measures and asset confiscation to deter future crime. • Regulators should strictly enforce anti-money laundering measures. This should include scrupulous compliance with the FATF Recommendations and due diligence requirements— particularly when it comes to enhanced due diligence for PEPs and suspicious transactions within the forestry sector. • Law enforcement, investigators, and prosecutors should employ all available criminal tools to address these complex crimes, such as electronic surveillance, undercover operations, and witness protection measures. • All practitioners should improve international cooperation by using mutual legal assistance requests and informal peer-to-peer requests for information and assistance, as well as by participating in regional networks.
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violators of the order and confiscates illegally harvested forest products, will be augmented by members of PNP and AFP “for fire power,” and forestry and legal officers from the DENR and the Department of Justice “to provide the technical and legal muscle.” ‘Legalizing’ forest plunder? However, according the Center for Environment Concerns (CEC)Philippines, a non-government organization advocating nature protection in the country, saw gaps in the log ban, saying that the move might “legalize the current state of forest plunder,” according to its Feb. 1 report, "The Threatened State of Philippine Forests," by Cheamson Boongaling. The author said that since EO 23 does not categorically ban commercial logging, the main cause of deforestation, “the timber companies can still legally cut trees, under the assumption that they operate outside prohibited natural and residual forests.” Likewise, based on the article, the log ban does not address the issue of corruption in DENR related to permits for large-scale commercial logging. Since logging is allowed in “plantation forests” or areas where trees were planted by timber firms, the author argue that loggers can be abusive by labeling natural and residual forests as plantation forests or through the actual expansion of plantations. The impact on industry and jobs. Unhappy about the log ban, the Philippine Wood Producer Association (PWPA) called on the President to reconsider the imposition of the moratorium for it will result in long-term negative impacts on the businesses of legitimate members of the wood-using and -dependent industries,” PWPA said in an official statement. PWPA is the national association of corporations, partnership and individuals involved in forest management, forest
LOGGING ACTIVITIES IN THE 120,000 Volume confiscated (cu.m.) 100,000 80,000 60,000 40,000 20,000 1986
Confiscation
plantation development, manufacturing of lumber, veneer and plywood and other downstream value-added wood products as well as in trading of these products, according to the group’s website. In January 2011, before EO 23 was signed, and while the President was still announcing plans to ban logging, PWPA told media that wood producers stand to lose at least ₧30 billion in investment and $1 billion in annual exports from the total log ban, as reported in Business Mirror.
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The group further said the moratorium would force companies in the wood industry to close, causing some ₧2 billionloss in government revenues from direct forest taxes from companies and affecting around 2 million Filipino workers in wood processing companies. PWPA also believes a total log ban raises prices of lumber and wood products because of
volume of illegal logs declined, based on a “Review of Multi-Sectoral Forest Protection Committees in the Philippines” by Britishbased think tank Overseas Development Institute in 2005. More legislation ahead. In January, the House of Representatives has approved on third and final reading House Bill (HB) 5485 known as the proposed Sustainable Forest Management Act of 2011 imposing life imprisonment to people engaged in illegal logging in the country, according to a press release. Under the bill, “harvesting, gathering or collecting timber or other forest products from any forestland with a market value of more than ₧500,000 and without authority from DENR will be declared illegal punishable with life imprisonment.”
PHILIPPINES FROM 1986-2001 2500 Number of incidences, hotspots, and controlled 2000 1500 1000
500 1994 1995 1996 1997 1998 1999 2000 2001
The author of the bill, Cagayan de Oro City Rep. Rufus B. Rodriguez, Incidence Hotspots Controlled noted that as of 2000, the leading Source: A Review of ‘Multi-Sectoral Forest Protection Committees cause of forest disturbance is illegal in the Philippines p.3 Overseas Development Assistance, Feb 2005 cutting, with a total of 4,920 hectares of land destroyed, the highest tightening supply to a drastic increase in incidence since the 1990s. illegal logging. The following month, Secretary Paje called It also noted illegal logging activities on lawmakers to classify illegal logging provide for about a million cubic meters as a heinous crime, punishable by death, of lumber demand every year. Meanwhile, following the killing of Dirain and another the total lumber demand of the country, environmental protector by suspected including the volume needed for export, is illegal loggers in February, as reported in a about 3 million cubic meters. DENR press release. Paje also said the two incidents are just a “tiny fraction” in the The country saw illegal logging incidents long list of environmental protectors who increase from 262 in 1992 to more than have died in the line of duty. “The list is 2,000 in 1996 and 1997. However, the getting longer by the month,” he added.
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House Bill 00744, filed in 2010, would declare illegal logging a heinous crime to be meted capital punishment. The death penalty had been abolished in the 1987 Constitution but restored during the Ramos administration. However, then-President Gloria Macapagal Arroyo started commuting death sentences during her term until the eventual abolition of the death penalty in 2008, according to a Jan. 2011 ABS-CBN report on a couple of House bills seeking to reinstate the death penalty for various crimes. Currently, illegal logging in the Philippines carries a maximum penalty of 20 years’ jail, according to a Feb. 2011 Straits Times Indonesia report on the Philippine log ban that was reprinted in the Jakarta Globe. Cutting, gathering, and or collecting timber or other forest products without licenses shall be punished with the penalties imposed under Articles 309 and 3010 of the Revised Penal Code, according to Section 68 of Presidential Decree No. 705, or the Forestry Reform Code of the Philippines. Capital punishment for illegal logging is also proposed in Indonesia, based on a briefing paper on the death penalty in Indonesia uploaded to the website of UPR Info, a Geneva-based non-profit and nongovernment organization.
Flooding and illegal logging: A contrarian view
In a recent hearing of the members of the House Committee on Natural Resources, the lawmakers whose districts were hit by Typhoon Sendong last December blamed illegal logging as the main cause of flooding that killed “957 people and displaced thousands of residents.” The legislators also dismissed the explanation of Assistant Secretary Daniel Nicer of the Department of Environment and Natural Resources citing initial findings of the DENR investigating team that illegal logging was not the main cause of massive inundation. Among those at the hearing were Reps. Rufus Rodriguez of Cagayan de Oro City and Rep. Vicente Belmonte Jr. of Iligan City. In January they had authored House Resolution 2042, asking Congress to probe the reported involvement of local government officials, environment officers, and police and military forces in illegal logging in Lanao del Sur, despite the logging moratorium. Deforestation caused by logging, both legal and illegal, is always pinpointed as the main culprit every time the country experiences massive and destructive floods and landslides such as those triggered by Tropical Storms Ondoy, Juaning and Sendong, says the Society of Filipino Foresters in its January 2012 official statement on the Visayas and Mindanao disasters. However, the group blamed the Sendong flood on the usually large amount of rain over a short period, aggravated by climate change. It argued that “forest can minimize but cannot totally prevent the occurrence of floods.” The U.N.’s Food and Agriculture Organization (FAO) and Indonesia-based research group Center for International Forestry Research (CIFOR) would agree. Their 2005 study, “Forest and floods: Drowning in fiction or thriving on facts,” aimed to separate fact from fiction in issues related to forests and water, and to dispel some common misconceptions about the role of forests in flood mitigation.
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In July 2004, Nabiel Makarim, thenMinister for Environment of Indonesia, reportedly said that legislation was being drafted that seeks to make death the maximum sentence for illegal logging, saying that “[p]resent laws are not enough as the penalties are too small. The heavy penalty [of death] is to deter anyone thinking of clearing forests illegally or starting a fire.” The UN Human Rights Committee considers that certain economic crimes do not meet the standard of serious crime and should therefore not be subject to the death penalty, the document said.
Legality or community? While there is much concern and attention accorded to law enforcement and criminal justice, one area of success has long been community-based forest conservation and development initiatives. Since monitoring and enforcement are the main weaknesses of current antiillegal logging campaigns, mobilizing communities and giving them incentives to protect woodlands could be one effective solution. Indeed, as the U.N. Food and Agriculture Organization report “Community forestry in the Philippines” notes, among the reasons for community-based forest
The paper argues: “Contrary to popular belief, forests have only a limited influence on downstream flooding, especially large-scale events. It is correct that on a local scale, forests and forest soils are capable of reducing runoff … But this holds true only for small-scale rainfall events, which are not responsible for severe flooding in downstream areas. During a major rainfall event (like those that result in major flooding), especially after prolonged periods of preceding rainfall, the forest soil becomes saturated and water … runs off along the soil surface.” The FAO-CIFOR paper further asserts that forests do not conserve water for gradual release downstream. In fact, as much as 35% of precipitation stays in the canopy of leaves and branches and is lost to evaporation. Most of the rain falling to the forest floor is consumed by the trees themselves. Hence, after the gush of water from the woodland after a downpour, there is little additional flow that follows. According to the FAO-CIFOR report, governments can respond to floods with logging bans so that
public will see that they are taking decisive steps to stop flooding. “The unfortunate outcome is that intended results are rarely achieved, but scarce funds are misallocated and unnecessary hardships are heaped upon those segments of society that become scapegoats for flood-related disasters and damages,” the report stated. To be sure, there are opposing views that link flooding to deforestation. In their study, “Global evidence that deforestation amplifies flood risk and severity in the developing world,” four professors from Singapore, Leeds, U.K., and Darwin, Australia, concluded: “Extracted measures of flood severity (flood duration, people killed and displaced, and total damage) showed some weaker, albeit detectable correlations to natural forest cover and loss.” And the need to preserve forests for biodiversity and climate-change mitigation remains. But perhaps the knee-jerk logging ban response to storm disasters deserves more reflection. For one thing, it may mask the real causes of deadly floods.
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management (CBFM) are precisely “dismal performance of the state in forest governance” and “forest protection and sustainable use more effectively achieved when local communities plan and implement these themselves.” For those very reasons, then-President Fidel Ramos issued Executive Order No. 263, “Adopting community-based forest management as the national strategy to ensure the sustainable development of the country’s forestlands resources.” With some two decades experience in CBFM, the Philippines is “ahead in the game of social forestry,” writes Catriona Moss of the Center for International Forestry Research. With the community allowed to harness forests for livelihood, they take it upon themselves to protect it from illegal loggers and poachers. Besides the usual patrols,
Getting tough with illegal loggers
village folk have even helped police and forest rangers catch contraband with text messages. However, with President Aquino’s ban on logging of virgin forest, there is a need to check how the prohibition may affect sustainable cutting in CBFM areas. That may hit not just the forests, but the poor communities that protect and depend on them. University of the Philippines Los Baños professor Juan Pulhin, in his 2005 study, “Community Forestry in the Philippines,” cites CBFM as crucial to EO 263 objectives of environmental protection, social justice and rural development, and respect for indigenous peoples’ rights. Quite simply, the state, with all its resources, has never been able to stop the lawless loggers. It must harness the people’s help not just by force of law or appeals to patriotism, but also through sustainable livelihood and profit.
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Nation
Balikatan winds down
The 28th Balikatan Joint Military exercises between the Philippines and the United States ended Friday in a closing ceremony in Camp Aguinaldo, Quezon City. This year’s Balikatan exercises began on April 5 with at leat 7,000 Filipino and American troops participating in the various activities. The war games focused on military exercises, civic action, humanitarian assistance, and disaster response operations. The joint exercise also featured civil-military activities, including engineering civic action programs, wherein engineers from the Philippines and the US constructed five school buildings in Palawan. Government chief negotiator Marvic Leonen said these decision points would guide discussions on the substantive agenda of the peace negotiations. The 10-point agreement includes the matter that the autonomous political entity will have a ministerial form of government. The other points outlined in the document include guarantee of human rights; listing of powers reserved for the national government in relation to the autonomous setup; recognition of the need for power-sharing and wealth-sharing; commitment for continuity based on previous consensus in the already 15-year negotiations; and recognition of “Bangsamoro identity and the legitimate grievances and claims of the Bangsamoro people.” The November 2011 decision ordered the distribution of the hacienda to its farmer-tenants for compensation of P40,000 per hectare, based on the land’s value in 1989. The High Court voted 8-6 to finally settle the issue of which property valuation to use with Chief Justice Renato Corona, Associate Justices Presbitero Velasco, Arturo Brion, Teresita Leonarda-de Castro, Roberto Abad, Jose Perez, Jose Mendoza and Martin Villarama voting for the majority, and Associate Justices Lucas Bersamin, Ma. Lourdes Sereno, Diosdado Peralta, Mariano del Castillo, Bienvenido Reyes, and Estela Perlas-Bernabe voting in favor of Hacienda Luisita’s petition. Justice Antonio Carpio inhibited himself, as his former law firm represented petitioner-inintervention Rizal Commercial Banking Corp. in its former deals with the hacienda. President Benigno Aquino III, a member of the hacienda owner Cojuangco family, said that the executive branch will immediately implement the decision of the Court through the Department of Agrarian Reform. Party-list lawmakers, on the other hand, called on the complete pullout of military troops within the hacienda to allow the farmerowners to move and live freely in their lands.
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Government to replace ARMM
The Philippine government and the Moro Islamic Liberation Front (MILF) have agreed to create a new autonomous political entity to replace the Autonomous Region in Muslim Mindanao. The two panels have recently concluded a round of talks and have signed a document containing their “decision points on principles.” This document is the first major document of the negotiations signed under the Aquino administration.
SC final ruling pegs Hacienda Luisita value on 1989 prices, not 2006
The Supreme Court upheld its November 2011 decision that just compensation for Hacienda should be based on the 1989 value of the estate, and not on the 2006 price earlier prayed for by the Cojuangco family in their motion for reconsideration.
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GNH vs. GDP: Will Happiness Trump Economic Development?
A little nation champions a major paradigm shift in charting national progress, and finds U.N. support
By Joanne Angela B. Marzan
STRATEGY POINTS
“GNH is more important than GDP. The understanding of what humans need to make them happy is vital to our society.” – His Majesty the Fourth King of Bhutan, Jigme Singye Wangchuk The idea of measuring national development not just in terms of economic output but also in environmentally sustainable and subjective terms seems to be gaining traction
F
or several decades now, a small, relatively unknown Asian country sandwiched between the two giant nations of China and India has been waging a war against the world. Or rather, against the world’s accepted measurement of progress, the Gross Domestic Product (GDP). Bhutan, a Buddhist kingdom turned constitutional monarchy, has refused to measure its national progress solely by GDP, and has, in fact, developed its own measurement of the collective well-being of its 700,000 citizens, its Gross National Happiness (GNH). Based on the “premise that true development of human society takes place when material and spiritual development
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occur side by side to complement and reinforce each other,” GNH was introduced as a concept by Bhutan’s Fourth King, His Majesty Jigme Singye Wangchuck, sometime in the 1970s. From there, gauging national happiness consisted of the government asking its residents, “Are you happy in Bhutan?”, as reported in a May 2009 Bhutan Times article by Tashi Dorji, as posted in bridgetobhutan.com. It wasn’t until 2005 that the government mandated the Centre for Bhutan Studies (CBS) to come up with GNH indicators, which were then put through a pilot survey from Sept. 2006 to Jan. 2007. Following that pilot survey, the First Gross National Happiness Survey was conducted from Dec. 2007 to March 2008, and the Second Gross National Happiness survey from April to December 2010, as reported on the CBS site dedicated to gross national happiness. Bhutan takes center stage. On April 2, 2012, after relentlessly promoting GNH, Bhutan took center stage, when it convened a panel discussion on the theme of happiness and well-being during the United Nations’ 66th General Assembly, pursuant to United Nations Resolution 65/309, “Happiness: towards a holistic approach to development,” which was adopted on August 25, 2011. U.N. Secretary General Ban Ki-Moon, in his opening remarks during the discussion, expressed his support for a “new economic paradigm that recognizes the parity between the three pillars of sustainable
The last Shangri-La
Bhutan, or the Land of the Thunder Dragon, is a Buddhist kingdom located at the southern tip of the Himalayas. Dubbed the world’s last Shangrila, Bhutan boasts of having one of the richest biodiversity in the world, with about 3,281 plant species per 10,000 square km and about 700 bird species. It might come as no surprise to find that Bhutan has the strictest anti-tobacco legislation in the world, as reported in Time recently, having banned the sale of tobacco in December 2004, the first nation in the world to do so. According to a November 7 CNN report on Bhutan, Bhutan didn't even have paved roads until the 1960s, shunned foreign tourists until the 1970s, and was the last country to get television service, which it got in 1999. Also, there are no fast-food restaurants. An October 29 Business Bhutan report on fast-food giants KFC and Pizza Hut trying to get into Bhutan quoted an economic affairs ministry official as saying their proposals “might be rejected because the government has always been against junk food,” and that, “having KFC and Pizza Hut does not go together with the ideals of Brand Bhutan initiative and the philosophy of advocating Gross National Happiness.” The country primarily exports electricity to India that comes from hydropower. The aforementioned CNN report said that Bhutan’s hydropower industry has the potential to develop into a massive industry. At present, with only 5% usage of its potential, Bhutan Prime Minister Lyonchen Jigmi Y. Thinley said that “more than 60% of Bhutan’s GDP comes from hydropower.” The kingdom became a constitutional monarchy in 2006, when King Jigme Singye Wangchuck announced his abdication in favor of his son Jigme Khesar Namgyel Wangchuck, as reported by the BBC in July 2008.
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development.” He identified the three pillars of sustainable development to be “social, economic and environmental wellbeing,” saying that these three together define gross global happiness. In an April 2 interview with UN News Centre, Bhutan’s Prime Minister Lyonchen Jigmi Y. Thinley, called GNH a “philosophy or development paradigm,” which is based
Misgivings about GDP as a measure of progress. As Ronald Colman, executive director of GPIAtlantic put it in his “Measuring Real Progress” article, published in the June 2010 Oxford Leadership Journal, “GDP growth statistics were never meant to be used as a measure of progress, as they are today . . . In fact, activities that degrade our quality of life, like crime, pollution, and addictive
What's wrong with GDP?
In the video below, Bhutan‘s Prime Minister Lyonchen Jigmi Y. Thinley expounds on the problems with the GDP model: “What is wrong with the GDP model is that it is entirely economicscentered, based on the belief that limitless economic development can take place, fully neglecting and ignoring the reality that there are natural and social boundaries within which growth can take place. And when these boundaries are crossed, then sustainability becomes a question. It is also a development model that has no regard for the human individual.”
Source: Video uploaded to YouTube by GNHcentreMedia, April 1, 2012
 
on the “belief that the aspiration, the ultimate goal of every human individual, is happiness” and that the government should therefore “create conditions” that will allow its people to achieve happiness. He defined GDP as only a “measure of the goods and services exchanged in a marketplace at a given time in a given country” and that the GNH paradigm has allowed GDP to be positioned where it rightfully belongs: “a small part in a bigger matrix.”
gambling, all make the economy grow. The more fish we sell and the more trees we cut down, the more the economy grows. Working longer hours makes the economy grow. And the economy can grow even if inequality and poverty increase.” In his article, Colman quotes no less than the “principal architect” of GDP, Simon Kuznets, as having said 40 years ago that, “The welfare of a nation cannot be inferred from a measurement of national income.”
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Hence, according to an April 5 article by Yuval Rosenberg in The Fiscal Times, a growing number of economists have questioned the real-world value of measuring GDP, suggesting that we need to develop a different measure to better reflect the well-being of individuals and families.
leaders: Prime Minister David Cameron of the United Kingdom and President Nicolas Sarkozy of France. In 2006, then-Conservative Party leader David Cameron spoke of promoting happiness and well-being for the people, saying, “We should be thinking not just what is good for putting money in people's pockets but what is good for putting joy in people's hearts.”
Those economists include: Nobel laureates Joseph Stiglitz and Armatya Sen, who headed a commission created by French President Nicholas Sarkozy to look into the “When politicians are measurement of social looking at issues they We should be progress; Jeffrey Sachs, should be saying to thinking not just director of the Earth themselves, ‘how are we what is good for Institute at Columbia going to try and make putting money in University, who was sure that we don't just people's pockets a featured speaker make people better off but but what is good at the U.N. meeting we make people happier, convened by Bhutan, and; we make communities for putting joy in Kenneth Rogoff, former more stable, we make people's hearts. chief economist at the society more cohesive’,” - British Prime International Monetary he added. Minister David Fund, who wrote a recent Cameron piece entitled “Rethinking When Cameron became the Growth Imperative,” Prime Minister in May in which he highlighted 2010, he continued to some shortcomings of modern work towards measuring happiness and growth theory. well-being. A Nov. 2010 article in The Guardian reported that his government “As the old axiom goes, what gets measured was going to direct the Office of National gets managed. And as it turns out, we’ve Statistics to produce measures to gauge been measuring the wrong things,” general well-being. said economist Umair Haque, director of the Havas Media Lab, and author of As reported in The Telegraph in Sept. “Betterness: Economics for Humans,” as 2009, French President Sarkozy unveiled reported in the Fiscal Times article. “a ‘revolutionary’ plan to make joy and wellbeing the key indicators of growth, Support for GNH concept in UK, rather than traditional yardsticks like a France. The concept of measuring country's gross domestic product (GDP).” national happiness has at least two prominent supporters among world Continued on page 38
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Happiness is: 4 pillars, 9 domains, 33 indicators
In order to define and measure happiness, the Bhutanese government has identified four pillars: good governance, sustainable socioeconomic development, cultural preservation, and environmental conservation. The four pillars are further broken down into nine domains: psychological wellbeing, health, time-use, education, cultural diversity and resilience, good governance, community vitality, ecological diversity and resilience, living standard, and education. “The domains represent each of the components of wellbeing of the Bhutanese people, and the term ‘wellbeing’ here refers to fulfilling conditions of a ‘good life’ as per the values and principles laid down by the concept of Gross National Happiness,” as the Center for Bhutan Studies (CBS) posted on its website.
Source: “The 2010 Gross National Happiness Index: Part I,” Centre for Bhutan Studies, slide-show presentation uploaded to slideshare by Centre for Bhutan Studies on Nov. 3, 2011, slide 9
 
• Assets •Housing • Household per capita income
Living Standards
• Life satisfaction •Positive emotions • Negative emotions • Spirituality
Psychological Wellbeing
• Ecological Issues •Resposibility towards environment • Wildlife damage (Rural) • • Donations (time & money) • Community Relationship • Family • Safety
Ecological Diversity and Resilience
• Mental health • Self reported health status • Healthy days • Disability
Health
From the nine domains, a total of 33 “statistically reliable, normatively important, and easily understood by large audiences” indicators (see figure left) were formulated. Per the table (right), the 33 indicators are then weighted within each domain, with objective indicators given higher weights (as high as 50% each for work and sleep in the Time Use domain) while subjective and self-reported indicators are given lower weights (self-reported health status in the Health domain, governance performance and fundamental rights in the Good Governance domain, responsibility towards environment and ecological issues in the Ecological diversity & resilience domain got 10% each). Each of the 33 indicators has what is called a sufficiency threshold
Time Use
Comunity Vitality
GNH
• Gov't performance •Fundamental rights • Services • Political Participation
• Work •Sleep
Educational
• Literacy • Schooling • Knowledge • Value
Good Governance
• Sparknative Language •Cultural Participation • Artistic • Driglam Namzha
Cultural Diversity and Resilience
Source: “The 2010 Gross National Happiness Index: Part I,” Centre for Bhutan Studies, slide-show presentation uploaded to slideshare by Centre for Bhutan Studies on Nov. 3, 2011, slide 28
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and a happiness threshold. A sufficiency threshold “shows how much a person needs in order to enjoy ‘sufficiency’ or how much is enough, normally, to create a happiness condition.” Meanwhile, the happiness threshold is the set cutoff for one to be considered happy. The happiness threshold has been set as sufficiency in at least six out of the nine domains of happiness. Through this method, CBS was able to arrive at the overall GNH Index. The GNH Index ranging from 0-1, with 1 being the highest, reflects the percentage of Bhutanese who are happy and the percentage of domains in which not-yet-happy people have achieved sufficiency (headcount and intensity). Headcount is the percentage of Bhutanese who are considered happy and intensity is the average sufficiency enjoyed by the Bhutanese. According to the 2010 GNH Survey, Bhutan registered an overall GNH Index of 0.743. The headcount was 40.9%, which means that 40.9% of Bhutanese “have sufficiency in six or more of the nine domains and are considered ‘happy’,” while 59% of the population who were unhappy “lack sufficiency in 43% of the domains.” This translates to the following results: “unhappy Bhutanese on average lack sufficiency in just under four domains and enjoy sufficiency in just over five domains.” According to CBS, “by scrutinizing important demographic characteristics of happy people,” it is able to identify which indicators contribute the most to happiness. It also added that the analysis of happiness is the “key to developing policies to sustain happiness.” On the other hand, by analyzing who are not happy, the government would be able to develop policies that will increase GNH. “These policies include developing special support for certain groups (the uneducated, women, farmers and national work force members), as well as focus on regions,” CBS added.
WEIGHTS ON THE 33 INDICATORS
Domain Psychological wellbeing Indicators Life satisfaction Postive emotions Negative emotions Spirituality Self reported health stat Healthy days Disability Mental health Work Sleep Literacy Schooling Knowledge Value Zorig chusum skils (Art) Cultural participation Speak native language Driglam Namzha (Etiquette) Political participation Services Governance performance Fundamental rights Donation (time & money) Safety Community relationship Family Wildlife damage Urban issues Responsibility towards environment Ecological issues Per capita income Assets Housing Weight 33% 17% 17% 33% 10% 30% 30% 30% 50% 50% 30% 30% 20% 20% 30% 30% 20% 20% 40% 40% 10% 10% 30% 30% 20% 20% 40% 40% 40% 10% 33% 33% 33%
Health
Time use
Cultural diversity& resilience
Good Governance
Community vitality
Ecological diversity & resilience
Living Standard
Source: “The 2010 Gross National Happiness Index: Part I,” Centre for Bhutan Studies, slide-show presentation uploaded to slideshare by Centre for Bhutan Studies on Nov. 3, 2011, slide 31
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The plan came from a report of a commission led by Nobel economics laureautes Joseph Stiglitz (2001) and Armatya Sen (1998), who were appointed by Sarkozy to find ways of measuring wellbeing and sustainability. The report’s main objectives are as follows: • Better measures of economic performance in a complex economy • Shift in emphasis from measuring economic performance to measuring people’s well-being • Recognize that well-being is multi-dimensional, and that many dimensions are missed by conventional income measures According to an April 7 article in Business Bhutan, Australia and New Zealand now have a “wellbeing framework which looks beyond the gross domestic product to measure growth.” Brazil, Canada, China, Japan, Italy and South Africa, on the other hand were mentioned to be “seriously looking for better measures than GDP.” Not happy with GNH? While Bhutanese leaders might be beside themselves over their successful run at the United Nations happiness conference, some Bhutanese people are not exactly jumping up and down over this. “Back home, though, it’s not all admiration and commendation. As expected, some sections of society pointed out some of the
• Objective and subjective dimensions of well-being are both important • Use a pragmatic approach towards measuring sustainability • Physical indicators for environmental pressures
glaring problems at home, both through formal and informal channels. While all views did not hold water, some of them were pertinent. For example, addressing pressing issues like the rupee crisis needed more attention than ‘offering GNH to the world’, as some Bhutanese like to put it,” stated an April 6 op-ed piece in the Bhutan Observer.
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Getting a handle on happiness
Not everyone is convinced that Gross National Happiness (GNH) is the alternative to Gross Domestic Product (GDP) as a measure of national progress. For one, happiness is considered by many as difficult to measure. According to Charles Kenny, a senior fellow at the Center for Global Development in Washington, as quoted in an April 2 article by Robert Paulson on the difficulty of measuring happiness, published in cigionline.org, the website of the Canada-based Centre for International Governmental Innovation: “[W] ith child mortality, we know what we are measuring -- we are measuring the number of kids who die between the ages of 1 and 5 in developing countries, for example, or worldwide. With happiness, there is very much less understanding about what we are talking about.” Nobel laureate and founder of behavioral economics Daniel Kahneman, in a March 2010 video on Ted.com has identified three cognitive traps that make it “almost impossible to think straight about happiness.”
Source: The Riddle of Experience vs Memory uploaded to Ted.com on March 2010 http://www.ted.com/talks/daniel_kahneman_the_riddle_of_ex-
 
Kahneman identified the first cognitive trap as not fully admitting the complexity of the word “happiness.” He added that “happiness” has been used and abused, to the point of making it completely irrelevant. The second cognitive trap is the “confusion between experience and memory.” Kahneman said that there is a difference between “being happy in your life” and “being happy about your life or happy with your life.” The third cognitive trap, according to the father of behavioral economics, is what he called the “focusing illusion.” He defined this as the “unfortunate fact that we can’t think about any circumstance that affects well-being without distorting its importance.”
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GNH vs. GDP: Will happiness trump economic development?
“Some people looked at the conference from the high pedestal of international recognition while others looked at it from the standpoint of domestic needs. These differing perspectives sparked a new debate on GNH. The debate was, however, not about whether GNH, as a development philosophy, is good. It’s about whether, like charity, it should begin at home,” it added. In response, Prime Minister Thinley bravely admitted that Bhutan is still struggling to fully implement GNH. “I wish to submit that, contrary to what many mistakenly believe, Bhutan is not a country that has attained GNH and it is not from a pedestal that we serve as a humble facilitator today. Like most developing nations, we are struggling with the
challenge of fulfilling the basic needs of our people,” said the Bhutanese Prime Minister in the aforementioned Business Bhutan article. And yet, if there is one thing that we can all learn from Bhutan, it is that it had the audacity to challenge globally accepted standards and principles that do not work for them. For let’s face it, GDP growth alone has failed to improve the plight of the poor. And quite honestly, only economists can claim to fully understand what GDP and all other economic indicators are all about. With concepts as fundamental as happiness and well-being, Bhutan has shown the rest of the world another way to think about what should constitute real progress.
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Pope orders cardinals to investigate ‘Vatileaks’
Pope Benedict has organized a commission of cardinals to investigate the documents leaks to the media; which have shown alleged corruption within the Vatican state. The documents – which were broadcast over television in January – included private letters to the pope from Archbishop Carlo Maria Vigano, deputy governor of Vatican City from 2009 to 2011; who was transferred to Washington, in the U.S., after he exposed what he called "a web of corruption" related to the awarding of Vatican contracts to Italian contractors at inflated prices. The scandal has come to be known as "Vatileaks." The Holy See has also announced a criminal investigation to be undertaken by its own police force, in conjunction with the administrative investigation. News of the purported criminal investigation is notable, as they are very rare in the Vatican. In 1998 a sensational criminal investigation was opened after Cedric Tornay, a 23-year-old Swiss Guard, killed his commander and the commander's wife before committing suicide. The recent "Vatileaks" have also allowed another long-buried issue to come to light – that of the 1983 disappearance of Emanuela
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Orlandi, then a 15-year-old daughter of a Vatican employee. The Catholic Church has recently given permission for Italian gangster Enrico De Pedis' tomb – located in a Roman basilica – to be opened; investigations have long connected the mobster to Orlandi's disappearance.
the Cold War. In response to the "Balikatan" exercises, China last week staged a six-day joint naval drill with Russia in the Yellow Sea.
France wants 300 U.N. observers in Syria in 2 weeks
France, under the leadership of President Nicolas Sarkozy, has long called for Syrian President Bashar al-Assad to step down. In this sentiment's vein, the European country has strongly supported the economic sanctions against Syria, and is now ostensibly lobbying for a military solution as the U.N.'s last resort. Furthermore, French Foreign Minister Alain Juppe criticized Syria's decision to refuse entry to U.N. observers on the basis of their nationality, calling it "unacceptable." Juppe has said that May 5, when Kofi Annan presents a report on Syria to the U.N. Security Council, will be the "moment of truth" – likely alluding to the conflict-ridden country's failure to comply with Annan's peace plan. Said Juppe, "We cannot allow the regime to defy us. We would have to move to a new stage with a Chapter 7 resolution at the United Nations to take a new step to stop this tragedy." France wants at least 300 U.N. observers situated in Syria within two weeks, which would be needed for the "Chapter 7" resolution plan to be of any use; Chapter 7 of the U.N. charter makes it possible for the U.N. Security Council to authorize actions which can ultimately include the use of military force.
Philippines, U.S. stage war games near disputed South China Sea
War games between American and Philippine troops – called "Balikatan" exercises – were recently concluded and deemed successful, but not without raising tensions between the Philippines and China. Last Wednesday, part of the exercises included a mock assault to retake a small island situated near disputed territories in the South China Sea. China warned the Philippines that "internationalizing this issue will only complicate and magnify the situation," while it warned the U.S. that these actions have raised the risk of armed confrontation over the contested areas. Lieutenant General Juancho Sabban, commander of military forces in the western Philippines, told reporters that "China should not be worried about Balikatan exercises." The war games are conducted annually, and are part of the 1951 Mutual Defense Treaty, one of the alliances the United States built in Asia during
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Will the Resumé Become Obsolete?
Maybe not just yet, but cloud computing is already changing how companies and job applicants are finding each other
By Tanya L. Mariano
STRATEGY POINTS
Surveys show that more and more recruiters and HR professionals comb online sites for information about job applicants Online tools help job seekers build reputations and connect with key people Online profiles and the traditional resume will work together to present a big-picture view of applicants’ job fit
If
you’re looking for a job right now, you may want to do more than just update that resume. The digital age is empowering both employers and job seekers in ways never before possible. Chris Rickborn, COO of Unrabble, even goes so far as to predict that the cloud will kill the resume. “Shifting from a traditional resume to an on-line profile presents a huge opportunity for improving the hiring process for both the candidate and employer. Candidates can provide a much more comprehensive view of their skills, potential and accomplishments while employers can avoid getting swayed by clever resume-writing or overlook qualified candidates in a haze of sameness,” writes Rickborn in an April article published in Web magazine TechCrunch.
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He adds that some advantages of an online profile over the traditional resume include: better collaboration (especially between hiring managers who review the same sets of applications), constant accessibility, and greater cost efficiencies. Unrabble is a service that helps streamline the hiring process by automating core tasks, authenticating claims made through social networks, and automatically ranking top candidates according to skills, among other functions. While one might say Rickborn has everything to gain by making such a grand declaration, a number of companies and HR practitioners, although not entirely in agreement with him, do believe that one’s online presence is now a big part of the hiring process. Screening applicants’ online profiles. According to a Wall Street Journal report, while most companies still think the resume is Step One in the recruitment process, some already recognize the importance of information available online. For instance, when New York-based venture-capital firm Union Square Ventures was looking for an investment analyst, it asked applicants for links to sites that form their “Web presence,” which includes social-network profiles, plus a video showing why they are interested in the position. It did not ask for the traditional curriculum vitae. Amish Shah, CEO of technology recruitment firm Millennium Search, says their clients have even started giving them a “laundry list” of websites where candidates must participate in order to be considered for a job, reports Technology Review.
Several studies also indicate wide adoption of online profile screening by employers. A 2011 study presented at the British Psychological Society conference on occupational psychology by OPP, a company that specializes in psychological tools, training, and consultation, finds that 56% of employers check an applicant’s Facebook, Twitter, and LinkedIn pages, as reported in ZDNet. Another survey by online reputation management firm Reppler has 91% of 300 professionals saying they use socialnetworking sites to screen prospective employees, with 47% indicating that the initial phase at which they visit socialnetworking sites to screen prospective employees is after receiving an application. In another indication of the importance of social-networking sites, 69% of respondents said they have rejected a candidate because of what they saw about them on a socialnetworking site, while an almost identical 68% said they have hired a candidate on the same basis. According to the Reppler survey, the most cited reasons for dismissing a candidate include lying about their qualifications (13%); posting inappropriate photos or content (11% each); ranting about former employers, co-workers, or clients (11%), and; demonstrating poor communication skills (11%). The reasons for hiring someone based on information collected online include: having a profile that reflects positively on the candidate’s personality, communications skills, and job fit (39%); validation of professional qualifications (36%); profile demonstrates candidate’s
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creativity (36%), and; having good references posted by others (34%). A 2010 survey conducted by market research firm Cross-Tab for Microsoft finds that 70% of U.S. recruiters and human-resource (HR) professionals have rejected candidates based on content they found online, and “respondents from the U.K. and Germany report the same trend,” albeit less frequently. The report surveyed 275 recruiters, hiring managers, and HR professionals and 330 consumers in France, Germany, the U.K., and the U.S. The top five sources of information used by the respondents to research about applicants are search engines, socialnetworking sites, photo- and videosharing sites, professional- and businessnetworking sites, and personal Web sites. The table below, taken from the report, provides further detail. Earlier, in 2009, online employment website Career Builder’s survey within the U.S. of 2,667 hiring managers and HR professionals found that 45% of employers tap social networking sites to screen an applicant, 22% higher than the previous year’s figure, and another 11% “plan to start using social networking sites for screening.” It also found that the information technology and the professional- and businessservices industries top the list of industries most likely to research about potential employees online. Candidates also taking advantage of online tools. On the other side of the recruitment table, job seekers (young people, especially) are also using online tools to build their reputation, showcase their skills, and connect with other people of similar interests.
HOW RECRUITERS DIG UP DIGITAL DIRT
Percent of recruiters and HR professionals who use these types of sites when researching applicants Search engines 78% Social networking sites 63% Photo and video sharing sites 59% Professional and business networking sites 57% Personal Web sites 48% Blogs 46% News sharing sites (e.g. Twitter) 41% Online forums and communities 34% Virtual world sites 32% Web sites that aggregate personal information 32% Online gaming sites 27% Professional background checking services 27% Classifieds and auction sites 25% None of these 2%
Source: “Online Reputation in a Connected World,” 2010, conducted by Cross-Tab, commissioned by Microsoft
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The afore-mentioned Technology Review article cites a few who were successful in harnessing the employment potential of online communities. For instance, David Herrema, 26, landed his software developer job at consulting firm Accenture because of his participation in the SAP Community Network, an online network of some two million registered
users created by SAP to bring together people all over the world who work with its products. From mining the network for bug fixes and configuration tips, contributing blog posts and videos, and writing about environmentally sound business practices, Herrema caught the attention of important people.
How to build a professional online profile
1. Join professional social networks – Websites such as LinkedIn, the top social network for professionals, allow users to present their qualifications (employment information, education, membership in specialized groups), provide links to their personal websites and other online profiles, and connect with people in their professional network. They can also give and receive recommendations from these contacts, allowing for a more comprehensive view of one’s credentials. Plus, these websites are usually search engine optimized, which means your LinkedIn profile, for instance, will be among the top results when your name is searched in Google or other search engines. See box on “Top professional social networks” for a list of other professional social networks. 2. Start a blog – A blog gives you great control over what kind of information about you is floating in the cloud. Share your ideas, write about your industry and what interests you, tell the world who you are in as many words as you want, and, if all goes well, you can develop a following and key people will notice. WordPress, Blogger, and Tumblr are the most popular blogging platforms around. SEO plug-ins to increase your online visibility are also available for download. Keep in mind, however, that a professional blog can be candid but must exude professionalism, so if you want to write about personal matters, consider creating a separate personal blog. 3. Participate in online communities and forums – Niche online communities provide an avenue for discussion, collaboration, and networking for people of similar interests. As illustrated by the experience of Accenture senior software developer David Herrema and 3D Robotics CEO Jordi Muñoz, online communities, whether set up by big corporations or private individuals, can help you land a job that otherwise would not have been accessible to you through traditional job searching means. Research where people in your field of work, or in the industry you want to join, hang out online and start participating. 4. Consider alternative formats, such as video resumes or the VisualCV – If you are confident enough in front of the camera, consider attaching a video resume to your current professional profiles. Do not upload a poorly shot video, however. Writer Sharlyn Lauby of Mashable cautions that the production quality should be up to par and that the final product accurately portrays your professional experiences and goals. Another alternative mentioned by Lauby is the VisualCV, an online resume-building platform that pulls digital content such as blog posts, social media profiles, presentations, videos, and other kinds of interactive media into a traditional resume format to make it easy to read. This is especially recommended for those with a huge amount of work available online, as it brings together all these scattered content into one place. However, make sure that “the target company is progressive enough to handle it,” the article quotes Kris Dunn, an HR blogger. Dunn’s VisualCV is available here.
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Another one is Jordi Muñoz, who met stick to the traditional resume. In his post Wired chief editor Chris Anderson through on TheLadders’ blog, Evans argues that an online community called DIY Drones, online profiles are not effective in getting which Anderson formed to discuss how to recruiters to see the most pertinent details make your own unmanned aerial vehicles. about an applicant. Writes Evans: “Online Anderson was impressed by Muñoz’s profiles have pictures, and unfortunately, knowledge and invited him to form a recruiters tended to focus on them for company, and it was only the simple reason that later that he discovered that pictures naturally draw "As hiring Muñoz “was 19 years old the eye. We found they managers turn and entirely self-taught.” kept recruiters from increasingly to Today, Muñoz is the CEO locating the most relevant the Internet for of drone-kit maker 3D information, like skills information about Robotics, and company and experience.” prospective job founder Anderson serves hires, job seekers as chairman. This finding is illustrated should keep their in the heat map below, online profiles Online profile will not generated by tracking current and behave recruiters’ eyes while replace the resume, professionally in some say. A 2012 study viewing LinkedIn profiles, the digital space." which shows that the by U.S.-based online job-search company profile picture receives - Robert Hosking, TheLadders used eyethe longest viewing time. OfficeTeam tracking technology to executive director make a heat map of the Bulk of the respondents resume to show where in the OfficeTeam’s recruiters spend the most time looking 2011 survey also think it is not likely and which parts they ignore. They found that online profiles on social and that recruiters spend on average just six professional networking sites will seconds before they decide to dismiss eventually replace the resume, according or consider a candidate, and that they to a news release by the staffing services spend almost 80% of their resume company. Of the over 500 HR managers evaluation time looking at the following surveyed, more than a third think it is details: name, current title/company, somehow likely that online profiles will previous title/company, start and end render the resume obsolete, but more dates of previous position, start and end believe that this is an unlikely scenario: dates of current position, and education. 42% think it is not very likely, and 21% Information outside of these items was think it is not at all likely to happen. merely scanned for keywords that matched the job vacancy. Says OfficeTeam executive director Robert Hosking, “The resume continues to be an Will Evans, experience design manager of important job-hunting tool, but it's also TheLadders, recommends that job hunters useful for professionals to create online
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profiles that highlight their expertise and qualifications… As hiring managers turn increasingly to the Internet for information about prospective hires, job
Consequently, it is allowing employers to gather more details about job candidates, enabling them to make better, more informed decisions.
Top professional social networks
LinkedIn still tops the list, but newcomers such as BrachOut and BeKnown, which also integrate with Facebook, are amassing a following. Xing and Ecademy are also good options for business professionals and entrepreneurs. Programmers can join GitHub, and artists can create online portfolios and connect with other artists through Behance or Artrise. For scientists and researchers, ResearchGate,which currently has over 1.5 million members, allows for networking and sharing of scholarly works.
Photos distract recruiters -- When reviewing online profiles, recruiters look at profile pictures the longest, which may mean they pay less attention to more relevant information
Source: “Keeping an eye on recruiter behavior,” 2012, TheLadders, page 5
 
seekers should keep their online profiles current and behave professionally in the digital space." The resume will stay, but online profiles will be an integral component of candidate evaluation. The cloud is opening up new ways for job seekers to build a reputation, make an impression, and connect with key people.
But the traditional resume could still provide essential information about applicants that could then be supplemented and possibly put into context by additional material gleaned online, so a resume-less world seems a tad unrealistic. Unrabble’s Chris Rickborn himself acknowledges that there are big challenges
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to overcome before the online profile completely takes over, e.g., privacy concerns and behavioral changes, which, he says, demonstrate a few realities, such as candidates’ desire to tailorfit their resume to each job opportunity and a reluctance to upload comprehensive career information onto an online public domain where they could lose control of the content. Also, most companies, including otherwise nontraditional ones like Google, still require a resume, according to the aforementioned Wall Street Journal article. The future of the resume could be a mix of the traditional curriculum vitae and one’s online presence, which consists of content shared by candidates themselves and information generated by others. Because online content can come from all directions and from a multitude of sources, and because the screening of online profiles has become an integral component of the hiring process, online reputation management should be on top of the to-do list of job seekers.
‘Google’ yourself: The importance of
According to a 2010 report (available as a free download after registering at their website) by Proofpoint, a company that provides cloud-based email security solutions, 8% of U.S. companies has fired employees because of what they deemed inappropriate conduct on social media networks. A 2012 survey by Microsoft, released on January 28, “Data Privacy Day,” found that 14% of respondents “believe they have been negatively impacted by the online activities of others, even unintentionally so. Of those, 21% believed it led to being fired from a job, 16% being refused health care, 16% being turned down for a job, and 15% being turned down for a mortgage,” according to a blog post by the company’s Chief Privacy Officer, Brendon Lynch. And while a whopping 91% have done something to manage their online profiles at some point, only 44% think about the repercussions of their online activities on their reputations, and just 38% consider the long-term effects of their online activities on other people’s reputations. Major findings of the survey, which used a total of 5,000 interviews with adults and children from respondents in the U.S., Germany, Ireland, Spain, and Canada, are presented in the following video. A more detailed report on the results is available on this downloadable presentation. Tales abound of employees who were terminated because of content posted on social networks – wild photos, inappropriate comments, and information that prove they lied to their boss regarding their whereabouts.
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online reputation management
Job applicants are also being judged based on their online conduct. And as much as people would like to argue that their offline selves are more refined than their less inhibited online personas, a 2011 study by the University of Texas at Austin indicates that your Facebook personality reflects the real you. information is accurate and up-to-date, and ask yourself if it builds the kind of reputation that you want to have. Review how it affects people in your network and whether or not you would like to keep some details private.
3. Safeguard your online reputation As reported – Think before you in weblog write something or ReadWriteWeb, share digital content “Looking at the big such as photos and five personality videos, respect other traits - openness, people’s reputation conscientiousness, and privacy, and stay extraversion, vigilant in monitoring agreeableness your online presence. and neuroticism Some search Professor Samuel   engines allow you to D. Gosling and his set up alerts that let Source: “What does your online image project about you?” 2012, colleagues found you know when there Microsoft Corporation. Video hosted on Bing.com that self-reported is any new mention personality traits are of your name or other accurately reflected in online social networks such as personal information. Also, reassess once in a while Facebook.” who has access to your content and adjust your privacy settings as you see fit. All these statistics and empirical findings point to the importance of managing one’s online presence. So, 4. Cultivate and maintain a positive professional what can you do to stay in control of your reputation reputation – Join professional social networks, in the World Wide Web? Microsoft shares some tips. start a professional blog, and join online forums, but consider separating your professional and personal 1. Discover what information about you is online profiles. See box on “How to build a professional – Use search engines, blogs, social networks, online online profile” for more information. communities you belong to, and other relevant websites to check what information about you is 5. Restore your reputation when inaccurate or available on the Web. negative information about you surfaces – If you believe certain information made available online 2. Evaluate the image your online presence distort your reputation, ask for it to be removed or projects about you – Check to see if the corrected, but do so politely.
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NEWS ON THE NET
Technology
confirmed; involving hundreds of AOL patents Microsoft had just recently acquired. In addition, Facebook also released its quarterly results, showing climbing operating costs and sagging revenues. It is said that prospective investors may have to wait a week longer to set their sights on Facebook's roadshow, as the company will have to discuss recent events – particularly their consolidated potential impact on Facebook's valuation – with the Securities and Exchange Commission. In related news, changes in the company’s terms-of-use document were revealed last Friday, in an effort to ease users' privacy and data use concerns. services. The plan is to tap the thousands of asteroids passing close to Earth; to extract their raw materials – precious metals, minerals, and even water. Planetary Resources currently employs around 20 people, and is overseen by former NASA Mars Mission manager Chris Lewicki.
Google offers cloud storage service
Internet giant Google has launched another new feature for its users -- a consumer cloudstorage service called Google Drive. Going head to head with rivals Dropbox and Microsoft's SkyDrive, Google Drive gives users an initial 5GB of free cloud storage, with payment options to increase the space up to 16TB. Furthermore, the service can be installed and accessed through a Mac or PC, or as an Android tablet or phone application. An equivalent iOS application is also expected to be released soon. A CNET article outlines the useful features of Google Drive. The recent move by Google has sparked controversy and has highlighted content ownership and user privacy issues; owing to comparisons between Google's all-encompassing privacy policy and the policies of its cloudstorage competitors.
Apple soars 10% as profit doubles
Apple sold 35.1 million iPhones during the first quarter of 2012, thoroughly exceeding analysts' expectations and helping to nearly double the California-based company's profit last quarter. Following news of disappointing iPhone activation numbers from U.S. companies Verizon and AT&T, Apple's first-quarter numbers come as a relief to its investors. Overall Apple sales soared 59% to $39.2 billion, and net income escalated to $11.6 billion – $12.30 per share – up 95% from last year. Analysts are now predicting a glowing second quarter for the technology giant. In other Apple-related news, an International Trade Commission judge ruled last week that Apple infringed on a Motorola Mobility patent in making the iPhone. This is only the latest and certainly not the last development in Apple and Motorola Mobility's patent wars. In June, two patent-related trials – one with Apple suing Motorola Mobility, and one with Motorola Mobility suing Apple – are set to start in Chicago.
Billionaires bankroll gold rush to mine asteroids
Google Inc. executives Larry Page and Eric Schmidt, Google founding director K. Ram Shriram, and former Microsoft chief software architect Charles Simonyi are among those bankrolling a potential asteroid mining venture. Planetary Resources, based in Washington, aims to open deepspace exploration to the private sector. However, its goal right now is to develop and sell lowcost robotic spacecraft for initial surveying missions. Within five to ten years, Planetary Resources hopes to progress from selling Earth-orbiting observation platforms to providing prospecting
Facebook deals may add a week to IPO timing
Due to recent acquisitions by Facebook Inc, the social networking company's IPO may be pushed back, according to a knowledgeable source. Facebook recently bought photo-sharing start-up venture Instagram for $1 billion. Last Monday, a $550 million deal between Facebook and Microsoft Corp. was
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