Strategic Analysis and Research by the

Center for Strategy, enterpriSe & intelligenCe
It may be a long fight but I have to protect my name, which I have protected through my 40 years in public service. I will fight back ~ Sacked National Bureau of Investigation Director Magtanggol Gatdula The head of the principal agencies will be a person who has our trust and confidence. The trust is no longer there ~ President Benigno Aquino III on his dismissal of Gatdula

Volume 2 - Number 3 • January 23-29, 2012

WORLD

4 Is a Cold War Heating Up in Asia?

Amid tensions in surrounding seas, China has been boosting defense spending and weapons development, including ballistic missiles able to reach all of Asia. Worried by Beijing's arms buildup, Washington is strengthening security ties with allies from Delhi and Manila to Seoul and Tokyo. • Tale of two armies: As the global and regional security landscape changes, America and China roll out new defense policies and initiatives — with special mention of each other

NATION

The landmark Hacienda Luisita case may signal the final push to distribute the handful of large estates still in landlords’ hands. Sadly, however, having their own farm to till have done little to uplift the tillers. • A centuries-old problem: Since the 1700s, the Philippines has tried to distribute land. We’re still at it • Stock list: Thirteen vast estates now under the stock distribution option possibly affected by the Hacienda Luisita ruling

16 Land for the Landless

26 Running on Green Energy

The country aims to switch big time to renewable energy. Will that ambition switch off the lights? • Everything but the oink: A biomass generator turns filthy waste into clean power • The Philippine energy plan: Can it deliver a renewable future? • From farm to gas pump: Cultivating sugarcane, coconut and cassava for biofuel • Tax breaks for clean power: The Department of Energy's investment guidelines • Beating the oil habit: The struggle to wean the nation away from petroleum.

BUSINESS

35 From BPO to KPO

After leading the world in call centers, the Philippines gears up to climb the outsourcing ladder to more sophisticated business and knowledge processes. Can we rise to the top again? • Two legs or one pogo stick? The strategy debate over services vs. manufacturing

40 The Making of an Asian
Southeast Asia’s surging economies want to keep the growth pace up and lure global capital by rolling out more and more infrastructure. Can the Philippines keep up with the neighbors — and stay globally competitive?

Infrastructure Boom

TECHNOLOGY

48 Is Your Phone Spying on You?

Telecom companies and phone makers deny violating laws, but third-party cellphone apps may be gathering more user info than users have allowed • Lawsuit flood: U.S. privacy lawyers get to work • Snoop apps: How they get to know you and whom they might tell

POINT & CLICK You can access online research via your Internet connection by clicking phrases

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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. 

Meet the cenSEI Gate Keeper
With an endless stream of news, briefings, media statements, interviews, speeches, video, in-depth studies, and other information inundating the online world every second, how does one choose the topics to tackle and the material to highlight? With one question — “What’s our story here?” – The cenSEI Report Senior Editor Bill Huang keeps watch over the information that finds its way into our pages. The former editor of locally-based online news site CyberDyaryo and the Union of Catholic Asian News, a Bangkok-based Catholic Church news site leads Monday meetings with editors and writers-analysts. Together, they review the past and current weeks’ events and issues, and decide which ones to strategize, analyze, and research for our readers. “What's our story here?” is Huang’s constant question to every item on the table. “From nine years as editor of Manila- and Bangkok-based online news publications, I've learned that news means little if we can't figure out the context, the bigger picture, in which the news is taking place,” he explains.

Editor Huang: 'What's our story here?'

Assignments start not with, “What is this piece going to be about?” but rather, “What's our story here?” For Huang, the difference in queries reflect a subtle but still significant shift in culture, from a beat- and event-focused style of news gathering to a strategic and analytic approach appropriate to planning and decision making. Huang is no stranger to extracting crucial, lasting knowledge from fleeting facts and figures. He did much of it earning his MA in Financial Economics from Fordham University in New York, then working in Maryland state's Economic and Community Development department. And his years in the local computer industry – in both selling computers and writing about them – steeped him in the technology that cenSEI now uses to harness the Internet for lasting, in-depth knowledge.

“A big part of what The cenSEI Report does is to link readers to the big pictures that masses of bits and bytes amount to,” sums up Huang. Read on and see what the Gate Keeper is letting in this week. 

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WORLD

Is a New Cold War Heating Up?
By Marishka Noelle M. Cabrera

China beefs up its guns as America refocuses on Asia

STRATEGY POINTS
China's 2011 defense budget rose 12.7% to nearly $100 billion Worried over Beijing's power, the U.S. and its allies enhance ties In range of PLA rockets, should the Philippines get closer to the U.S.?

Barack Obama’s marching orders were clear. At the Pentagon just days after New Year, the U.S. Commander-inChief unveiled a new security strategy: “Sustaining Global Leadership: Priorities for 21st Century Defense.” And a good number of Washington’s words were bound to ruffle dragon scales in Beijing. For instance: “the growth of China’s military power must be accompanied by greater clarity of its strategic intentions in order to avoid causing friction in the region.” Or: “sophisticated adversaries will

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use asymmetric capabilities, to include Yansheng bristled: “The accusations ... in electronic and cyber warfare, ballistic and this document are totally baseless.” He cruise missiles, advanced air defenses, urged Washington to “deal with China and mining, and other methods, to complicate the Chinese military in an objective and our operational calculus. rational way, be careful in States such as China its words and actions, and For some and Iran will continue do more that is beneficial to pursue asymmetric to the development of of China’s means to counter relations between the neighbors, our power projection two countries and their the People's capabilities.” militaries.” So guess where America The state agency Xinhua Army has been will shift its gaze and was more measured, but guns: “while the U.S. flexing muscles still perturbed. Its editorial military will continue acknowledged: “Legitimate and practicing to contribute to security interests of the United globally, we will of States, the world’s biggest militarism in necessity rebalance power, in the Asia-Pacific recent years toward the Asia-Pacific region are generally region.” The italics are respected.” Commentator Washington’s. Just in Yu Zhixiao even allowed: case anyone missed the paper’s fine print, “The U.S. [security] role, if fulfilled with President Obama himself spelled it out, a positive attitude and free from a Cold as China’s news agency Xinhua reported: War-style zero-sum mentality, will not “We'll be strengthening our presence in the only be conducive to regional stability and Asia Pacific, and budget reductions will not prosperity, but be good for China, which come at the expense of this critical region.” needs a peaceful environment to continue its economic development.” And it’s not just America that China may need to fret over in the future. “The Still, Xinhua warned: “If the United States United States,” the new Pentagon policy: indiscreetly applies militarism in the is also investing in a long-term strategic region, it will be like a bull in a china shop, partnership with India to support its ability and endanger peace instead of enhancing to serve as a regional economic anchor regional stability.” The Beijing editorial and provider of security in the broader summed up: “The United States has the Indian Ocean region.” The term “American greatest potential to secure world peace and Indians” now conjures on a far more stability, but it also has the greatest power ominous image than arrows and feathers. to create chaos. ... The United States should learn from its past painful experiences Flexing militarist muscle. Beijing was and play a constructive role in the Asiahardly tickled by all this, to say the least. Pacific instead of recklessly practicing As the World Socialist Website reported, militarism. After all, might does not always Chinese Defense Ministry spokesman Geng make right.”

Liberation

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A TALE OF TWO ARMIES
Sustaining U.S. Global Leadership: Priorities for 21st Century Defense
• A defense strategy “that transitions our Defense enterprise from an emphasis on today’s wars to preparing for future challenges … and supports the national security imperative of deficit reduction through lower defense spending. … The balance between available resources and our security needs has never been more delicate.” • Primary missions of the U.S. Armed Forces: - Deter and Defeat Aggression - Project Power Despite Anti-Access / Area Denial Challenges - Counter Weapons of Mass Destruction - Maintain a Safe, Secure, and Effective Nuclear Deterrent - Defend the Homeland and Support Civil Authorities - Operate Effectively in Cyberspace and Space - Conduct Stability and Counterinsurgency Operations - Conduct Humanitarian, Relief, and Other Operations - Provide a Stabilizing Presence

• The U.S. will continue nurturing alliances in Asia and Europe, and build partnerships in Africa and Latin America. "… we will develop innovative, low-cost, and small-footprint approaches … exercises, rotational presence, and advisory capabilities." • “States such as China and Iran will continue to pursue asymmetric means to counter [U.S.] power projection.” They include cyber warfare, ballistic and cruise missiles, and advanced air defenses. • "Violent extremists continue to threaten U.S. interests, allies, partners, and the homeland. The primary loci of these threats are South Asia and the Middle East." • “U.S. economic and security interests are inextricably linked to developments in the arc extending from the Western Pacific and East Asia into the Indian Ocean and South Asia…” • Over the long term, “China’s emergence as a regional power will have the potential to affect the U.S. economy and security.” The growth of China’s military “must be accompanied by greater clarity of its strategic intentions to avoid friction.” • President Obama: 'In a changing world that demands our leadership, the United States of America will remain the greatest force for freedom and security the world has ever known'

Maybe the People’s Liberation Army should read Xinhua more. In fact, for some of China’s neighbors, the PLA has been flexing muscles and practicing militarism in recent years, as if Chinese might made China right. Early last year, for instance, some countries fretted over Beijing’s plan to boost its defense budget by

12.7% to 601 billion yuan or $91.5 billion, as Xinhua reported, up from 7.5% in 2010. Li Zhaoxing, spokesman of the National People’s Congress, explains: "The limited military strength of China is solely for safeguarding its national sovereignty

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HIGHLIGHTS OF U.S. ANd CHINA dEFENSE PAPERS
China’s National Defense in 2010
• “International strategic competition and contradictions are intensifying, global challenges are becoming more prominent, and security threats are becoming increasingly integrated, complex and volatile.” • “China is still in the period of important strategic opportunities for its development, and the overall security environment for it remains favorable.” • China’s defense policy is “defensive in nature.” • The goals and tasks of Chinese defense: - Safeguarding national sovereignty, security, and interests of national development - Maintaining social harmony and stability; - Accelerating the modernization of national defense and the armed forces - Maintaining world peace and stability • Asia-Pacific security is seen as volatile with tensions on the Korean Peninsula and in Afghanistan, plus occasional disputes over territorial and maritime rights. • “Profound changes are taking shape in the Asia-Pacific strategic landscape. Relevant major powers are increasing their strategic investment. The United States is reinforcing its regional military alliances, and increasing its involvement in regional security affairs.” • “The United States … continues to sell weapons to Taiwan, severely impeding Sino-US relations and impairing the peaceful development of cross-Strait relations.” • “China takes an active part in establishing security dialogue and building security mechanisms in the Asia-Pacific region” • “China attaches great importance to military transparency, and makes efforts to promote mutual trust with other countries in the military sphere.” • “China will never seek hegemony, nor will it adopt the approach of military expansion now or in the future, no matter how its economy develops.” and territorial integrity, and would not pose a threat to any country. China is committed to peaceful development and a national defense policy that is defensive." Nevertheless, China watchers believe the country’s defense spending is higher than what its leaders care to disclose, more than the discrepancy in many other countries. More on that later. The biggest army gets tougher. China’s People’s Liberation Army or PLA is the world’s largest with 2.3 million regulars and 1.2 million reserves, according to Business

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Insider’s “12 Frightening Facts About China’s Massive Growing Military.” Since the 1990’s, the PLA has been strengthening its land, sea, air, and space capabilities. And with the rise of China’s economy in recent decades, experts say it is only natural to increase public spending in key areas, including defense. “China’s Military Power” from the U.S. Council of Foreign Relations quotes James Mulvenon of the Center for Intelligence Economist). In 2008, American spending accounted for 48% of global expenditure, while China’s was a mere 8%, as shown in a Visual Economics chart. As percent of the budget, Beijing’s 18.2% is less than Washington’s 19.3% and Russia’s 18.7%. Then again, President Obama’s new global security strategy would involve “leaner” forces. With the U.S. trimming troops, a Forbes article warns, “China’s military power will equal [America’s] in a relatively brief period of time.” This assumes Beijing spends more than it tells. In three years, the report predicts, “the United States and China will be spending roughly equal percentages of their annual [economic] output on defense.”

How true China’s numbers? In “Assessing Chinese Military Transparency” from the Institute for National Strategic Studies of Washington’s National Defense University, Michael Kiselycznyk and As Al Jazeera reports, the worry may be how China uses its future clout Phillip C. Saunders argued that China is “significantly less transparent than its peers,” especially visResearch and Analysis: “China's military a-vis the “plethora of information about modernization makes perfect sense to me U.S. military capabilities, strategies, as a natural evolution commensurate with and budgets”. The report adds: “Greater China's rise as a great power.” transparency about military capabilities and intentions can be an important tool Notably, Beijing’s defense spending in building confidence and reducing remains a fraction of the biggest outlay, that unwarranted security concerns.” of Washington: nearly $700 billion in 2010, or 4.8% of GDP (China 2.1%, India 2.7%, In “Chinese Military Power: What Vexes South Korea 2.8%, Britain at 2.7%, and the United States and Why?” by Naval Saudi Arabia at 10.4% as compiled by The War College professor Jonathan Pollack

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says the U.S. Defense Department “faults China for a highly constricted approach to military transparency, including a supposed reliance on strategic deception, a penchant for extreme secrecy, a significant understatement of the budgetary resources allocated to national defense, and obscurity on how the PLA might employ force in a future crisis.” Over time, China has gradually become more transparent. In its 2011 Annual Report to Congress on Military and Security Developments Involving the People’s Republic of China, the U.S. Defense Department recognized that Beijing has made “modest, but incremental, improvements in the transparency of its military and security affairs,” but remains uncertain as to how it will use its growing capabilities. Not that the U.S. or any other country is so free and open about its military strategies and tactics. Beijing’s soft-power strategy. Still, the report finds one thing clear and consistent: “Rather than challenge the existing global order, China has adopted a pragmatic approach to international relations and economic development that seeks to strengthen the economy, modernize the military, and solidify the [Chinese Communist Party’s] hold on power.” In other words, Beijing uses ‘soft power’ to advance its interests in the region, according to the Congressional Research Service report “China’s ‘soft-power’ in Southeast Asia.” Its growing influence, the report claims, can be attributed to non-military inducements, such as culture, diplomacy, foreign aid, trade, and investment.

To be sure, China is no different from any other major power with self-serving policies. Still, it maintains that its might is purely defensive and, on occasion, available for international peacekeeping. Its 2010 Defense White Paper reiterates that China “will never seek hegemony.” Rather, China is said to be “confronted by more diverse and complex security challenges” and that “[p]rospects for world multi-polarization are becoming clearer”. The U.S., meanwhile, is said to be “reinforcing its regional military alliances, and increasing involvement in regional security affairs”. The missile threat. Nonetheless, many in the region remain in a state of disquiet over China’s military modernization. One particular area of growing concern is the PLA’s missile capability, which could do much to reduce the U.S. Pacific Fleet’s decadesold supremacy in the region’s waters. That new security equation wrought by Chinese rocket forces we shall review in the next part of this article. “China has the most active land-based ballistic and cruise missile program in the world,” a 2009 Pentagon report claims. That is hardly surprising, since the world’s biggest nuclear arsenals, America’s and Russia’s several thousand warheads, are up for reduction to 1,550 each under their 2010 Strategic Arms Reduction Treaty (START), which took effect in February 2011.

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Meanwhile, China has to more than double its nukes just to reach one-third of the agreed U.S. and Russian stockpiles. It has about 240 warheads, with 175 in active mode and 65 in reserve, according to Western estimates cited in The Japan Times. Those two assessments point to China’s missile strategies. Battlefield rockets can severely degrade or neutralize opposing forces, such as the vastly superior carrierbased and long-range aircraft of the United States. The forest of anti-ship and antiaircraft batteries along the coast would deter even a wellprotected carrier group from getting too close ‘China’s growing should there be fighting strategic power over, say, Taiwan or the Spratlys. puts it in a

Who’s in the firing line? The Nuclear Threat Initiative lists China’s possible targets with its current ballistic missiles: position to short-range for areas Long-range and either defy along the border intercontinental missiles, including Taiwan; on the other hand, could the West's medium-range for make nuclear powers demands or nearby countries like the U.S. think twice like Japan, India, about nuking China, thus work with it and Southeast Asian casting some doubt on to build a new nations; intermediatethe so-called "nuclear world order’ range for targets in umbrella" over American Central Asia and the allies. If Chinese atomic — Stanford Western Pacific (where weapons hit Japan or the University study Russia and America Philippines, would the have land- and seaU.S. retaliate, knowing based nukes); and that China could nuke intercontinental for European Russia, Los Angeles or New York in retaliation? the continental United States, and Western Europe. ‘The most alarming weapon.’ For some Western security experts, an antiA Wired magazine article discusses ship ballistic missile (ASBM) is the “most the book Chinese Aerospace Power by alarming weapon China is developing.” Andrew Erickson of America’s Naval Mounted on mobile launch vehicle, it is War College. He argues that China’s PLA China’s first missile that can change compensates for its relative weakness by course to hit a moving target. When deploying more and more missiles. “For launched, the ASBM will rise to reach every category of weaponry where the space and then “maneuver at hypersonic People’s Liberation Army lags behind speeds on its way back down.” Aircraft the Pentagon, there’s a Chinese missile to carriers, the core of U.S. power projection help make up the difference,” in the Asia-Pacific region, could be Erickson explains. seriously threatened.

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In September last year, moreover, China confirmed the successful testing of its anti-missile system to shoot down projectiles in mid-air, the International Business Times reported. Such batteries could protect military bases and rocket and artillery arrays from attack by missiles and unmanned drones, America’s new weapons of choice. Aviation Week also reported that China’s first stealth fighter jet had just emerged from a secret development program. The anti-radar technology would make it harder to spot Chinese jets attacking naval vessels. The J-20’s test flight “overshadowed” the 2011 Beijing visit of U.S. Defense Secretary Robert Gates, according to The New York

Times. The Daily Beast, a division of Newsweek, said the “timing of the aircraft’s release seemed an unsubtle wave at the Taiwan issue.” No worries about Chinese rockets. The paper “China’s Nuclear Arsenal: Status and Evolution” by the Union of Concerned Scientists, based in Cambridge, Massachusetts (like Harvard), concludes that China’s size and pace of development of its nuclear forces are in line with the view that “the fundamental purpose of China’s nuclear arsenal is to assure potential nuclear adversaries that China can retaliate in response to an attack.” China emphasizes its policy of no-first-use of atomic weapons, in its defense white paper.

An interactive graphic from The Economist shows the ranges of the various types of missiles and the areas that could be affected if they are launched.

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“China’s Ballistic Missile Programs: Technologies, Strategies, and Goals” by John Wilson Lewis and Hua Di of Stanford University, reminds readers: “It thus would be a mistake to regard China’s aspirations toward defense development as being any more sinister than those of other great powers.” As for transparency, China’s nuke deployment and storage are even Plainly, the PLA and its burgeoning missile capability can threaten much of Asia, and even make hard for the U.S. to make good on its defense commitments in the region. Moreover, China’s economic rise can further intimidate its neighbors and even the superpower across the Pacific. Any country wanting a decent slice of its market cannot afford to pick a fight with China, and that includes the U.S. — now China’s biggest debtor, with the latter’s nearly $1 trillion in U.S. Treasury bills. America assures allied Asia. Still, in talks with President Benigno Aquino III on the sidelines of the mid-November ASEAN Summit in Bali, his American counterpart assured: “We are looking out for each other when it comes to security.” In Manila for the 60th anniversary of the Philippines-U.S. Mutual Defense Treaty, Secretary of State Hillary Clinton declared amid Filipino celebrations over Manny Pacquiao’s November boxing win, that America was in the Philippines’ corner. With Washington on its side, Manila has been matching tough talk from Beijing. The Department of Foreign Affairs lashed out at China for its “grossly irresponsible” warning in an editorial, “Don't take peaceful approach for granted,” from The Global Times, owned by the Chinese Communist Party’s People's Daily newspaper, to the

documented in “China's Nuclear Warhead Storage and Handling System,” a report by Project 2049, a research group with the aim, “Guiding decision makers toward a more secure Asia by 2049.” Still, while some American experts may feel China isn’t as big a threat as its missile arsenal may suggest, neighboring Asian countries cannot but feel less secure, especially with longstanding disputes over Taiwan, in the South and East China Seas, and border areas of India, Vietnam, and even Russia.

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other claimants of the disputed Spratlys. The editorial admonished: “If these countries don’t want to change their ways with China, they will need to prepare for the sounds of cannons.”

The Association of Southeast Asian Nations, which includes Spratly claimants Malaysia, Taiwan and Japan have With Washington Philippines and their worries too. China on its side, Vietnam, is hoping has been consistent in Manila has there won’t be its One-China policy cannons over the toward Taiwan. In the been matching islands. At its 44th 2010 report of the U.S. tough talk Summit in Bali in Department of Defense, mid-November, “The PLA is developing from Beijing ASEAN agreed with the capability to deter on the Spratlys. China on a new Taiwan independence Let’s hope agreement to avoid or influence Taiwan conflict and reduce to settle the dispute the frictions tensions in the on Beijing’s terms don’t go from South China Sea, while simultaneously the bombastic updating the 2002 attempting to deter, delay, Declaration on the or deny any possible U.S. to the ballistic Conduct of Parties support for the island in the South China in case of conflict.” The Sea. The Philippines report adds, “The balance also tabled a proposed agreement for a of cross-Strait military forces continues to “Zone of Peace, Freedom, Friendship and shift in the mainland’s favor.” Cooperation in the South China Sea,” which the 10-nation grouping scheduled Japan, for its part, fears that China will for study. use its “growing economic leverage and military prowess to throw its weight America continues to enhance its presence around and dominate the region,” in the region. This month U.S. Senators according to “Countering China’s Military John McCain, Joseph Lieberman, Sheldon Modernization” from the Council of Whitehouse, and Kelly Ayotte met with Foreign Relations. Japanese military President Aquino and Foreign Affairs analyst Shunzi Taoka tells Aljazeera's Secretary Alberto del Rosario. The visit "Inside Story" that he does not believe in comes amid increased U.S. military aid a Chinese military threat. He claims that

to the Philippines, including two surface ships delivered last year to help patrol Philippine-claimed areas in the South China Sea. In a report from The Philippine Star, McCain said: “If there is indeed a withdrawal of the U.S., then I believe that that would mean a lessening of stability in the region.”

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about 70% of Chinese exports come from foreign factories operating in China, so it can ill afford hostilities with the markets for its goods. From arms buildup to dialogue? Nonetheless, Stanford’s Lewis and Hua argue, “China’s strategic military prowess places it in a position either to defy presumptuous Western demands and

Is a new cold war heating up?

and tensions. In this global economy where interests of individual countries are deeply intertwined, strategic dialogue more than sheer dominance is crucial. Indeed, in keeping the peace, nations must rally on the side of global order where international bodies play a pivotal role in promoting peace, cooperation and harmony. Hence, the move for genuine

China's might on parade: Some ask if all the worrying is valid

interference or to work with the West to build a new world order.” In other words, the PLA’s burgeoning missile capabilities are helping ensure that issues with China would not be settled by Western military superiority. That may be a good thing if the emerging military standoff leads to more restraint and dialogue in settling regional disputes

resolution of conflicts would not simply be on China’s terms, or that of any other big power for that matter. So is China’s military resurgence making trouble for Asia? Let’s just hope it would lead everyone, including the Chinese and the Americans, to be more careful about rattling or brandishing sabers. Talk now and, hopefully, shoot never.

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NEWS ON THE NET
World
Bangladeshis and “retired officers with extreme religious views” to oust Prime Minister Sheikh Hasina’s government. Hasina was elected in December 2008, ending two years of militarybacked emergency rule in the country. Bangladesh has had a long history of major army coups and smaller rebellions and is deemed highly susceptible to military adventurism. for help from their local religious leaders, hiring musicians to perform safety songs, and spreading oil on the train carriages — have all failed. An extreme measure, therefore, has been taken: concrete balls, which could deliver serious blows and cause head injuries, hanging over train tracks. Riding trains in Indonesia can be chaotic, as chronicled by this article from The Jakarta Globe and video from YouTube.

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Cruise ship captain in troubled waters
The Costa Concordia cruise ship disaster – in which the vessel ran aground off the coast of Giglio Island– has claimed at least 11 lives, and about two dozen people are reportedly still missing. At the center of investigations as to how the tragedy occurred is the ship's captain, Francesco Schettino. The transcript of Schettino's conversation with an Italian coast guard on that fateful night paints the picture of a captain who was not willing to go down with his ship.

Interestingly, the ouster plot was allegedly instigated through the Internet, with this facebook page and this weblog, which both promise to “bring down changes” in the south Asian country.

Slow aid to Africa famine may lead to over 50,000 deaths
Oxfam and Save the Children, two leading British aid organizations, said that the international community failed to see the signs and take note of early warnings that East Africa was headed towards a famine. It took over six months before aid was brought to Africa—a delay that would cost 50,000 to 100,000 lives. The findings are outlined in a joint briefing paper called, "A Dangerous Delay: The cost of late response to early warnings in the 2011 drought in the Horn of Africa." An article from The Guardian suggests that psychological and organizational factors were the reasons why the response was belated, and not lack of political will.

Bangladesh Army says it foiled bid to oust Hasina
The Bangladesh Army claims to have thwarted a coup attempt instigated by some non-resident

Indonesia deploys concrete balls to stop 'train surfing'
Train surfing is a problem that Indonesian railways have been trying to combat for some time. Previous attempts to discourage it — including spraying the roofs with paint, threatening illegal commuters with dogs, appealing

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NATION

Agrarian Reform at a Crossroads
Even as Hacienda Luisita faces breakup, it is clear the landless need far more than just their own land
By John Carlo Gil M. Sadian

STRATEGY POINTS After decades of failed land reform, farmers in 13 other haciendas see some glimmer of hope with the Supreme Court's ruling distributing Hacienda Luisita to its rightful owners

It’s been a problem for two and a half centuries. As early as 1751, the Spanish colonial government already recognized land distribution as a means to pacify peasants involved in a series of uprisings against the Dominican and Augustinian religious orders in some parts of Luzon. Spanish King Ferdinand VI, in issuing the Royal Decree of November 7, 1751, acknowledged the reason behind these disturbances: the friars’ usurpation of vast tracts of land which deprived peasants not only of ownership, but also of the fruits of the land that they till.

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Today, the struggle to give land to the landless continues. Last week farmers at Hacienda Luisita, the country’s largest plantation majority-owned by the Cojuangco family of President Benigno Aquino III, called on the Supreme Court to hold fast to its November 2011 decision. By a 14-0 vote, the justices ordered Luisita’s distribution and declared invalid the stock distribution option (SDO) which had enabled landowners to avoid breaking up their estates by just giving farmers shares in firms that would own the lands, like Hacienda Luisita, Inc. (HLI). The Luisita case gained added prominence when impeached Chief Justice Renato Corona, whose Senate trial began last Monday, alleged a conspiracy to remove him with the aim of reversing or watering down the 14-0 High Court ruling on the hacienda. The unanimous landmark decision for the landless echoed a previous major ruling to “dramatize the urgent demand of the dispossessed for a plot of earth as their place in the sun.” Hope for farmers in other estates. More than the resolution of one isolated agrarian case, the HLI decision has been seen as a victory for landless peasants throughout the country. “The Supreme Court decision,” Inquirer.net reported, “has given some hope to farmers opposing the SDO on ten other large estates around the country.” The leftist Kilusang Magbubukid ng Pilipinas expressed hope that the HLI decision “should fast-track the revocation of other SDO schemes,” which KMP saw as “a way [for landowners] to skirt the provisions of the Comprehensive Agrarian Reform Law

(CARL) and avoid the actual distribution of land to farmers.” For Lani Factor of Task Force Mapalad, the group working with the farmworkerbeneficiaries (FWBs) of Hacienda Anita in Negros Occidental, the High Court ruling “has a great implication” and should “set a precedent for other areas under the SDO scheme.” Katarungan secretary general Danny Carranza, on the other hand, believes “the Luisita decision has given the farmers the ammunition to challenge SDO schemes in other plantations,” and that “there is no more reason why the SDO should be permitted” in other estates around the country. Kilusang Magbubukid, Task Force Mapalad, and Katarungan asked the Department of Agrarian Reform (DAR) to “speed up the pending SDO appeals and distribute the land to the farmers.” The long, hard road to liberation. But if you think SDOs will start falling like sugar cane stalks under the bolo, think again. The Hacienda Luisita story amply demonstrates how wily, powerful and determined landowners are in amassing and protecting their estates. Indeed, Philippine Daily Inquirer columnist Rigoberto Tiglao Jr. echoes a widely held view — repeatedly denied by the Palace — that the Corona impeachment is a means to reverse the HLI ruling or get a hefty compensation for the land to be distributed. And as the country’s sad experience in agrarian reform shows, even if farmers get the land they sought for generations, it is no guarantee of a better life.

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The controversy in the sprawling agricultural-industrial-residentialcommercial estate of Hacienda Luisita stretches back half a century ago, about the time President Aquino was born. His family corporation got a state loan to buy the estate — on condition that it would eventually be distributed to the tillers. Fifty years later that condition remains unfulfilled. Straddling the municipalities of Tarlac, Concepcion, and La Paz in Tarlac province, the 6,443-hectare Hacienda Luisita was originally owned by the Compañia General de Tabacos de Filipinas (Tabacalera), a Spanish company which also had a controlling interest in the sugar mill situated within the hacienda, the Central Azucarera de Tarlac (Azucarera). In 1957, Tabacalera offered to sell the entire hacienda together with the controlling interest in Azucarera in a single indivisible transaction, with the hacienda price to be paid in pesos and the Azucarera cost in dollars. Tarlac Development Corporation (Tadeco) of patriarch Jose Cojuangco Sr. sought government assistance for funds to buy the hacienda. As narrated by Justice Arturo Brion in his dissenting opinion, Cojuangco persuaded the Central Bank to pledge part the country’s foreign reserves as security for his dollar loan from a New York bank. He also got a P5.911-million loan from the Government Service Insurance System (GSIS). State financing was granted as long as “Cojuangco would acquire Hacienda Luisita for distribution to farmers within 10 years from its acquisition.” Even after a decade, Tadeco still held on to the hacienda. The Cojuangcos claimed it had no tenants, so there was no one to distribute the land to. The government took no action until 1980, when the martial-law regime filed a case. Notably, then President Ferdinand Marcos’s bitter political rival, Benigno Aquino Jr., under arrest since 1972, was married to a Cojuangco family member, Corazon, who became president after Marcos fell in 1986. Their son is now also president, but back in 1980, the Marcos government won the suit against HLI, which the family appealed. The SDO is born. Corazon CojuangcoAquino became president while the appeal was pending. In July 1987 she issued Executive Order 229 outlining her agrarian reform program. The EO offered the stock distribution option as a way of complying with the land reform law without actual transfer of land to the tiller. The government then withdrew the case against President Corazon Aquino’s Cojuangco family, and both the Central Bank and GSIS did not object. On June 10, 1988, Aquino signed the Comprehensive Agrarian Reform Law. Republic Act 6657 recognized SDO as a mode of compliance. At present, 13 haciendas in the country have stock distribution schemes. As noted in the HLI decision penned by Justice Presbitero Velasco, the Cojuangcos

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incorporated Hacienda Luisita, Inc. on August 23, 1988 to acquire 4,915.75 hectares of the hacienda from Tadeco in exchange for HLI shares. At that time, the value of the agricultural land stood at P196.63 million — one-third of HLI’s total assets of P590.55 million.

Subsequently, HLI and 5,848 qualified farmworkerThe Luisita rulings. While beneficiaries entered the original High Court into an agreement decision dated July 5, 2011, ~High Court adopting the company’s did not invalidate Luisita’s Associate Justice SDO plan. In a SDO scheme, it insisted that DAR-administered “control over the agricultural Jose Mendoza referendum, 5,117 land must always be in the FWBs opted to receive hands of the farmers.” The shares, while 132 chose ruling left to PARC and DAR land distribution. Thus, then Agrarian the responsibility of ensuring that the Reform Secretary Miriam Defensorfarmers always own most of HLI’s common Santiago, now a senator, approved the SDO shares, and that the farmland is always on November 21, 1989. more than half of HLI’s total assets. In this way, the farmers will always comprise Farmers question the SDO. Fourteen the majority of the board of directors. The years later in 2003, two petitions were filed company was also ordered to conduct a in the DAR seeking to renegotiate or void referendum asking farmer-beneficiaries the SDO. Reason: HLI did not give farmers who still wanted stock instead of land. home-lot titles, their 10% dividends, and their one-third share in the proceeds from The farmers’ groups questioned this setup selling 500 hectares of the estate, plus in their Motion for Reconsideration. the hacienda supervisors’ 1% share in the After four months, by a vote of 14-0 with company’s gross sales. Justice Carpio inhibiting (his firm was lawyer of one of the parties), absent, the After reviewing the SDO terms and Court agreed with Justice Velasco that conditions and HLI compliance reports, “in line with Our finding that control over the Presidential Agrarian Reform Council agricultural lands must always be in the (PARC), under then President Gloria hands of the farmers, We reconsider our Arroyo, issued Resolution 2005-32-01 on ruling that the qualified FWBs should be December 22, 2005, revoking the SDO and given an option to remain as stockholders placing Hacienda Luisita under compulsory of HLI, inasmuch as these qualified FWBs land distribution. will never gain control given the present

'If there is no actual land distribution, there is no land reform'

HLI challenged the PARC resolution in Hacienda Luisita, Inc. vs. Presidential Agrarian Reform Council, which the Supreme Court ruled unanimously in favor of PARC and the FWBs. Notably, in July of that year, Corazon Aquino joined groups calling on Arroyo to resign over accusations of fraud in the 2004 presidential elections.

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proportion of shareholdings in HLI”, since the beneficiaries hold just a third of the shares. Thus, the Court struck down the SDO scheme and ordered the immediate distribution of the 4,915.75 hectares of land. The Supreme Court also ordered that the farmers receive one-third of the proceeds of the 1997 sale of 500 hectares of Luisita (a share worth P1.25 billion), and just compensation paid by the government for 80.51 hectares used for the SubicClark-Tarlac Expressway (valued at P80.5 million). Nine justices agreed with Justice Velasco that the acquisition cost for the land should be pegged at 1989 rates, since the SDO scheme violated conditions for its validity from that year. Two Aquino-appointed justices joined Justice Bersamin's opinion that DAR and Land Bank should determine the price, following the CARL. The President's first appointee on the bench, Lourdes "Maylou" Sereno, filed her own dissenting opinion, arguing that the 2006 land price should be used. The Cojuangcos estimate that valuation at P1 million per hectare — 25 times the 1989 rate. Justice Teresita Leonardo-De Castro signed the decision with a note expressing her “vehement disagreement with Justice Sereno’s opinion which will put the land beyond the capacity of the farmers to pay, based on her strained construction/ interpretation of the law.” At the 2006 price, land reform compensation for the President’s family would amount to nearly P5 billion, compared with P200 million at the 1989 valuation. President Aquino urged his family to comply with the High Court ruling, but added, “there should be just compensation.” Meanwhile, his spokesperson Secretary Edwin Lacierda has said that if Corona is removed, the President “needs someone of the likes of Maylou Sereno” as the next Chief Justice. No wonder many think money is behind the Corona impeachment. Other large estates face break-up petitions. According to a Manila Bulletin report, before the cancellation of the Luisita SDO, the total area covered by the 14 existing SDOs throughout the country “is 8,388 hectares, which is large enough to provide more than 29,000 metric tons (MT) of rice per cropping season or thousands of kilos of vegetables during the offseason.” A few months after the original Supreme Court decision, the Philippine Star reported that “about 289 agrarian reform beneficiaries in six sugar landholdings in [Negros Occidental] are seeking cancellation of Stock Distribution Option (SDO) agreement, citing alleged non-compliance and violations of the agreement by the management.”

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HACIENDAS UNDER THE STOCK DISTRIBUTION SCHEME
Hacienda
Hacienda Luisita, Inc. 6 haciendas of Arsenio Al Acuna Ledesma Hermanos Agricultural Corp. SyCip Plantation, Inc. Hernandez Sugar Plantation, Inc. Negros Industrial By-Prod and Proc., Inc. Wuthrich Hermanos, Inc. SVJ Farms, Inc. Asia Agro-Industrial Services

Province
Tarlac Negros Occidental Negros Occidental Negros Occidental Iloilo Negros Occidental Negros Occidental Negros Occidental Davao del Sur

Crop
Sugarcane Sugarcane Sugarcane Sugarcane Sugarcane Sugarcane Sugarcane Sugarcane Coconut

Hectares
4,916 650 1,024 685 231 438 174 170 100

Approval
11-Nov-89 15-Feb-91 13-May-91 13-Nov-91 28-Feb-92 1-Sep-92 16-Nov-92 26-Apr-94

With the exception of Hacienda Anita (170 hectares with 144 FWBs), run by SVJ Farms Inc., five of these six plantations are owned by firms controlled by Arsenio Al Acuña: (1) Arsenio Al Acuña Agricultural Corp., (2) Archie Fishponds Inc., (3) Elenita Agricultural Development Corp., all in Cadiz City; (4) Maria Clara Marine Ventures in Bago City, and (5) Palma Kabankalan Agricultural Corp. in Ilog town. The same report stated that farmers in Hacienda Tabigue, the only Acuñaowned estate not subject to any petition for SDO cancellation, are also expected to file their own petitions together with the farmers in Hacienda Fortuna (1,024 hectares, 747 FWBs) run by Ledesma Hermanos Agricultural Corp. in San Carlos City and Hacienda Sto. Tomas (174 hectares, 177 FWBs) run by Wuthrich Hermanos Inc. in Calatrava town also in Negros Occidental. Nine of the remaining 13 estates under the SDO scheme are in Negros Occidental, covering a total area of 2,348 hectares with 1,813 FWBs. Out of these figures, the merger of Acuña’s six haciendas covers

a total area of 650 hectares with 565 beneficiaries. The only SDO scheme not facing any petition for cancellation is that in Hacienda Najalin (438 hectares, 273 FWBs) in La Carlota, Negros Occidental, which is owned by NAJALIN Agri Ventures Inc. of Rudolph E. Jularbal and Joaquin G. Teves. Failure of Philippine land reform. Redistributing land, however, is not the same as uplifting the farmers. A World Bank study on land policy found the Philippine agrarian reform “inherently more problematic” with a “universally poor” track record. Thus, CARP never made any “impact on distribution or recognition of informal occupation by communities over many generations.” A review of the CARP commissioned by German labor group Deutsche Gesellschaft für Technische Zusammenarbeit (GTZ), on the other hand, concluded that “If agrarian reform is only about land distribution, then the performance of DAR is a great success.” However, it pointed out that “because it is also about raising quality of life and spurring industrialization, it is certainly a little success, or a failure.”

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The study noted that the decades-old program has “failed to increase agricultural productivity, reduce rural poverty, and landowners' investment in rural-based industries.” Over a quarter of FWBs nationwide already sold the land they acquired under CARP. The sellers comprise big groups of beneficiaries in Laguna (53% of FWBs), Nueva Ecija (41%), Iloilo (35%), and Quezon (26%). It added: “that 66 percent of 3.1 million agrarian reform beneficiaries have not been given support services; the Land Bank of the Philippines has not been giving crop loans to agrarian reform beneficiaries because less than 17.8 percent of them [about one in every six] can’t even pay for their amortization of the purchase price of the land; and neither was there enough funds to pay landowners.” By comparison, the study added, Japan, South Korea and Taiwan “attributed their success to the sufficient support services and pursuance of industrialization as an important component of agrarian reform.”

Without state support and credit, farmers are unable to maintain the productivity of estates deprived of landlord investment after distribution. And as small producers, they also lost the market clout of the big plantations they used to work for. Cooperatives are supposed to afford them credit and clout, but these groups have not been universally successful either. In sum, while the Hacienda Luisita case may grab headlines, especially with the innuendo linking it to the impeachment, the bigger and longer-term challenge for Philippine land reform lies in providing beneficiaries support services and credit. That is for the Palace, not the Court, to address. So will the government give the landless not just land to till, but the wherewithal to make it bountiful? That depends largely on the leader whose mother came up with the SDO and whose family has denied their farmers the dignity of owning the land they work for as long as he has been alive.

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Can we solve a centuries-old problem?
To better understand the reason for the dismal status of the Philippine land reform program, it is fitting to look into the history of government attempts to implement this centuries-old dream of distributing land to the landless. Early attempts at land reform. According to the Department of Agrarian Reform (DAR), the history of land reform in the Philippines can be traced back to pre-colonial times, when cultivation was done commonly by kaingin (slash-and-burn method). Back then, “everyone in the barangays regardless of status had access to land and mutually shared resources and the fruits of their labor.” Under this “stewardship” system, “food production was intended for family consumption only.” When the encomienda system was introduced by the Spanish colonial government, native rural communities were organized and each Christianized family was assigned four to five hectares of land to cultivate. This system was beneficial to the Filipinos because, according to the DAR study, “land distribution under this system was uniform so no landless class emerged.” However, this led to abuses on the part of the friars who collected tributes, thereby “decreasing the share of native Filipinos in their own harvest.” The birth of the Hacienda system. The DAR report recounts that the hacienda system started during the early part of the 19th century when the colonial government opened Philippine economy to the world market as an “exporter of raw materials and importer of finished goods.” Under the policies of the government at that time, “agricultural exports were mandated and hacienda system was developed as a new form of ownership. More people lost their lands and were forced to become tillers.” Later on, the revolution against the Spanish Crown became the offshoot of “the people’s aspirations for agrarian reform and for a just society.” This is the reason that when the Americans took over, they pursued several land reform policies granting land ownership and registration rights to address social unrest. The DAR report concludes that the American strategy did not work because there was no limit imposed on the size of landholdings that one could possess, resulting in landholding “concentrated in the

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hands of fewer individuals” and “more lands placed under tenancy.” Under this setup, the landowners “preferred to go after new opportunities in the cities and left their farms idle or to the management of the katiwala.” This resulted, according to DAR, in planting and harvesting. Roxas also negotiated with the Ayala-Zobel family for the purchase of 8,000 hectares of land in Batangas which were later on sold to landless farmers.

Unfortunately, lack of support facilities from the government forced these farmers to resell their lands to the land-owning class. This, according to the DAR, “gave basis Without credit, inputs, irrigation, knowhow to doubt the real meaning of the and other support services, many farmers land reform program.”

or their descendants abandon the land their families tilled for generations
“poorly and unjustly-managed” haciendas. Social disorder arose from this system, with more peasants and workers’ organizations bonding together against the abuses of landlords. According to DAR, this gave birth to the Communist Party of the Philippines. The share-tenancy system. Meanwhile, the outbreak of the Second World War brought about an opportunity to change the playing field. During the Occupation, peasants and workers organized the Hukbo ng Bayan Laban sa Hapon (Hukbalahap) to fight off the Japanese. Secondary to this, the Hukbalahap was able to take over vast tracts of land which they distributed to the people. However, during the Liberation, “these estates were confiscated and returned to its owners,” and this led to “some of the farmer-tenants choosing to join the Hukbalahap movement rather than to go back and serve their landlords under the same conditions prior to the war. The answer of the Roxas Administration to this problem was to establish a 70-30 sharing arrangement where 70% of the harvest will go to the person who shouldered the expenses for animals,

It was the Magsaysay Administration that tried to implement an “honest-togoodness” land reform program through legislation and establishment of government institutions that would make it easier to distribute land to the landless. However, the government’s interventions did not really improve land ownership and the tenancy situation as shown by only 41 haciendas being distributed out of the targeted 300. The DAR paper attributes this to “lack of funds and inadequate support services provided for [the Magsaysay Administration’s] programs.” Thus, “landlords continued to be uncooperative and critical to the program,” resulting in the continued problems in its implementation. The leasehold system. The most comprehensive approach towards land reform came under the “Father of Agrarian Reform,” President Diosdado Macapagal, who pushed for the enactment of the Agricultural Land Reform Code (RA 3844). This law abolished share-tenancy and converted tenantfarmers into lessees who can eventually become owner-cultivators of the land they tilled. The program targeted 18,377 hectares for distribution in the provinces of Pangasinan, Bulacan, Nueva Ecija,

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Pampanga, Tarlac, Occidental Mindoro, Camarines Sur, and Misamis Oriental. According to the records of the DAR, the program was able to accomplish 99.29% of its target by distributing 18,247 hectares to 7,466 FWBs. Under the Marcos regime, land reform focused on tenanted lands devoted to rice and corn only. Under Presidential Decree 27, tenants who worked for landholdings of over 7 hectares could purchase the land they tilled, while share-tenants on lands less than 7 hectares would become leaseholders. In addition to these, the Marcos land reform program included a package of services extended to farmers in the form of credit support, infrastructure, farm extension, legal assistance, electrification, and development of rural institutions. The CARP and its fate. When Corazon Aquino assumed the presidency, she declared that “the stewardship of the land that the landlords were said to have neglected shall now pass to the tillers.” Thus, Executive Order 229 outlined the land reform program of a president who was heir to the family that owned one of the largest estates in the country. It was under EO 229 that the SDO was first introduced. Later on, Aquino approved the Comprehensive Agrarian Reform Law (CARL) (RA 6657) which institutionalized the SDO scheme that allowed a “corporate landowner” to give its farmers shares of stocks instead of actual land. As discussed earlier, there are 13 haciendas in the country under their respective SDO schemes. Land distribution under Cory Aquino’s CARL was originally scheduled for 10 years. However, in 1998, because of the program’s failure to accomplish its goal, President Fidel Ramos extended it for another 10 years to expire in 2008.

On August 5, 2009, eight months after the extended CARP expired, President Gloria Macapagal-Arroyo signed the Comprehensive Agrarian Reform Program Extension and Reforms. RA 9700 restored compulsory acquisition and extended the land acquisition and distribution component for five years to June 30, 2014. RA 9700 spelled out three phases for the acquisition and distribution of lands in five years, ranging in size from 10 hectares up to over 50 hectares, through the modes of voluntary land transfer, offer to sell, and compulsory acquisition. Under the new law, a landholding will be distributed up to a maximum of three hectares for each qualified beneficiary. According to DAR, RA 9700 “strengthened and improved CARL” with its 150 billion-peso budget. Whether the second extension of the CARP would finally work or fizzle out just like the previous ones depends mainly on the political will of the government to sustain the program through follow-through support and credit facilities. After all, land reform is not just the distribution of land to the landless, but the installation of the farmers to their rightful place as the masters of the soil. Without sufficient government support to enable them to sustain the land that would be given to them, there is no reason to expect them to even try to cultivate the land their ancestors tilled for decades. The success of the land reform program can only be claimed the moment the farmers themselves view land not as a liability, but as a valuable asset worth holding on to.

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Will the country's ambitious renewable-energy plan be undermined by its growing energy needs?
By Gary Olivar

The Green Power Dilemma

STRATEGY POINTS The Philippines has plans to shift to renewable energy, but the business community wants it to address the country's current energy needs and problems first

Per the Power Development Plan 20092030 from the Department of Energy (DOE), the Philippines’ peak energy needs will grow at an average 4.41% rate in Luzon for that period, 4.97% in Visayas, and 4.86% in Mindanao, and the country will need sufficient total capacity to generate an estimated 24,500 MW of peak demand by 2030, from a base of 9,226 MW in 2008. (see tables that start on the opposite page) The DOE launched an ambitious National Renewable Energy Program in June, with the objective of increasing the country’s renewable energy capacity to 15,400 MW by

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2030 from about 5,400 MW at present, and increasing the contribution of actual energy from renewable sources to at least 50% of the country's energy mix by then. Ambitious and controversial. While the national plan is ambitious, it's also controversial, mainly because of a feed-in-tariff (FIT) scheme in place for encouraging the development of renewable-energy sources. The following feed-in-tariff rates were proposed in May 2011 by the National Renewable Energy Board – an agency

THE OUTlOOK fOR lUzON luzon Energy Sales and Peak Demand Average Annual Grwoth Rate, 2009-2030
Period Base year 2008 (Actual level) 2009 2018 2030 AAGR 2009-2018 2019-2030 2009-2030 Energy Sales, GWH 41,275 42,768 64,303 109,477 % 4.53 4.53 4.53 Peak Demand, MW 6,822 7,036 10,393 17,636 % 4.3 4.51 4.41

Table from Power Development Plan, 2009-2030, Department of Energy

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THE OUTlOOK fOR THE VISAyAS AND MINDANAO
Visayas Energy Sales and Peak Demand Average Annual Grwoth Rate, 2009-2030
Period Base year 2008 (Actual level) 2009 2018 2030 AAGR 2009-2018 2019-2030 2009-2030 Energy Sales, GWH 6,565 6,857 10,601 19,121 % 4.91 5.04 4.98 Peak Demand, MW 1,176 1,331 1,887 3,404 % 4.89 5.04 4.97

Mindanao Energy Sales and Peak Demand Average Annual Grwoth Rate, 2009-2030
Period Base year 2008 (Actual level) 2009 2018 2030 AAGR 2009-2018 2019-2030 2009-2030 Energy Sales, GWH 7,578 7,966 11,904 20,470 % 4.62 4.62 4.62 Peak Demand, MW 1,228 1,359 2,031 3,493 % 5.18 4.62 4.86

Table from Power Development Plan, 2009-2030, Department of Energy

Since the publication of those proposed tariff rates, the open hearings to discuss them have been stalled, mainly due to procedural questions raised by Foundation for Economic Freedom, a free-market think tank (of GREEN GRID PRICING POWER which this writer is a trustee). Apart from the procedural Proposed fIT rates for different renewable-energy sources questions, the think tank has already come out strongly Biomass P7/kwh up to the first 250 MW of capacity against the new tariffs, on legal grounds and in fairness to the Run-of-river hydropower P6.15/kwh up to the first 250 MW consuming public. Wind P10.37/kwh up to the first 200 MW As reported in The Philippine Star, both the Philippine Solar P17.95/kwh up to the first 100 MW Chamber of Commerce and Industry and the Department Source: TCR compilation of figures from energytechnologyexpert.com of Trade and Industry oppose feed-in-tariffs because they Given the above capacity mix and respective would add to local power costs, already caps, the overall weighted “universal among the highest, if not the highest charge” to electricity consumers would work in Asia. out to about 12.5 centavos/kwh. This may not seem like much on an individual level, Meanwhile, the Federation of Philippine but on that basis, the total cost will still run Industries also wants the ERC to defer the into billions of pesos, which bothers fiscal proposed tariff rates, as reported in the conservatives. Philippine Daily Inquirer. Its opposition Ocean power P17.65/kwh up to the first 10 MW

created to oversee implementation of the country’s Renewable Energy Act of 2008 – for consideration by the overseeing Energy Regulatory Commission (ERC):

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Literally everything but the 'oink'
As reported in The Manila Bulletin, in an innovative operation reminiscent of the last Mad Max movie, “Thunderdome,” the Ngo family of General Trias, Cavite is about to double, to 1.1 MW, the power it produces from the pig manure excreted on its swine farm. The number of pig heads will increase from its current 64,000 to about a hundred thousand, with each pig capable of producing two kilos of waste a day, which in turn converts into 0.31 to 0.34 cubic meters of gas. Since the power generated is for its own use, the farm cannot claim available income tax incentives on its biogas waste to power operation. But it remains eligible for duty-free importation of capital equipment under the Renewable Energy Act, and can also register for carbon credits.

to the inclusion of wind and solar power is based not just on high proposed tariff rates, but also because the intermittent nature of wind and solar power prevents them from generating electricity 24/7, which would then require backup generation. The federation did support the inclusion of biomass-fed generation facilities in the feed-in-tariff regime. Reasons to consider feed-in-tariffs. Defenders of the proposed tariff regime, led by the likes of Sen. Edgardo Angara, advance the following arguments in its favor: • Subsidies are needed in order to encourage investment in renewable-energy technologies and support expansion of the renewable-energy market until unit costs start to come down due to learning curve efficiencies and economies of scale. • There will be industry spin-offs up and down the value chain, such as the potential creation of a solar photovoltaic wafer manufacturing industry to supply market demand for solar photovoltaic facilities.

• The subsidies are subject to review every three years anyway, and will come off once renewable-energy technologies achieve cost parity with fossil-fuel power sources to the national grid. • The country has to share in the global responsibility to combat climate change by addressing the issue of greenhouse gases and the enlarging global carbon footprint. Tariff opponents retort that we need not be in such a hurry. The Philippines can simply wait for the costs of renewable-energy technology to come down on their own, due to increasing usage elsewhere in the world, technology advances, and manufacturing efficiencies – the latter most pronounced in the case of silicon chip-based technologies such as solar photovoltaic wafers, which will follow Moore’s Law of halving unit costs every two years. The national renewable-energy program might also require tremendous resolve to implement and maintain, in light of a recent dire warning of a full-blown power crisis by 2014, as reported

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in a Philexport News and Features story carried in various media outlets on Nov. 21. According to the story, a study conducted by University of the Philippines engineering professors led by Rowaldo del Mundo and Edna Espos warned of up to 84 days of power outages on Luzon island by 2014 if new power plants aren't built soon. Additional ‘juice’ from the global market. What can put additional “juice” into the game for renewable-energy developers are the financing opportunities opened up by being able to trade in carbon credits on the global market, using your own carbon-reduction projects. This is exactly what one Philippine company, PhilCarbon Inc., is planning, as it recently

Ambitious and well-equipped for the future?
As previously reported in Part 1 of this series, the Department of Energy's renewable-energy program aims to more than double the country’s geothermal and hydropower-generating capacities – which comprised 98.7% of the country's renewable-energy capacity in 2010 – while expanding significantly the share of wind, solar, biomass, and ocean power-generating capacities -- 1.3% of the renewable-energy capacity in 2010 -- to 13.84% by 2030. (see table below).

THE PHIlIPPINES’ RENEWABlE ENERGy TARGETS
Sector
Installed Capacity, (MW) as of 2010

Target Capacity Addition by 2015 220.0 341.3 276.7 1,048.0 269.0 0.0 2,155.0 2020 1,100.0 3,161.0 0.0 855.0 5.0 35.5 5,156.5 2025 95.0 1,891.8 0.0 442.0 5.0 35.0 2,468.8 2030 80.0 0.0 0.0 0.0 5.0 0.0 85.0

Total Capacity Addition (MW) 2011-2030

Total Installed Capacity by 2030

Geothermal Hydro Biomass Wind Solar Ocean Total

1,966.0 3,400.00 39.0 33.0 1.0 0.0 5,438.0

1,495.0 5,394.1 276.7 2,345.0 284.0 70.5 9,865.3

3,461.0 8,724.1 315.7 2,378.0 285.0 70.5 15,304.3

To be sure, the Philippines looks well-equipped to wean itself from fossil-fuel dependence, as the Department of Trade and Industry (DTI) noted in an online prospectus for prospective investors in local renewable-energy ventures. The country is already the world’s second-largest producer of geothermal energy (after the United States), and the island of Mindanao already relies mainly on hydropower. According to the prospectus, renewable-energy sources such as hydropower, natural gas, and geothermal already generate 21%, 18%, and 12%, respectively, of the country’s power requirements. Moreover, there is growing interest in solar and wind energy, as well as enormous potential for the state-of-the-art technology of tidal power, given the archipelago's inter-island waters and long coastlines.

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registered its local hydropower projects abroad for the opportunity to trade carbon credits even beyond 2012, the expiry date for targets under the current Kyoto Protocols. Pending any extension, companies like PhilCarbon can continue to trade credits by registering themselves under the UN’s Clean Development Scheme in order to qualify for participation in the European Emissions Trading Scheme. According to the company's website, aside from two mini-hydro development projects already started in Zamboanga City and in Cordon, Isabela, the company is also developing

the Philippine Daily Inquirer that it has been laying down the groundwork for the establishment of a national renewableenergy market for the issuance, monitoring, and possible trading of renewable-energy certificates issued to electricity suppliers and distributors who source their power from renewable sources. According to the report, the DOE hopes to have guidelines published by the first quarter of 2012. (Renewable-energy certificates are meant to help renewable-energy producers maintain revenue streams for financing future projects. For an introduction to the emerging market for renewable-energy

Filling up with cane, coconut and cassava
In a preliminary report published last August, Roehlano Briones of the Philippine Institute for Development Studies studied the viability of cultivating biofuel feedstock (sugarcane for bioethanol, coconut for cocobiodiesel, and cassava as a possible alternative bioethanol feedstock) on marginal lands, which is estimated to comprise 6.4% of the country's total land area. His statistical analysis based on a survey of farmers in Negros (sugarcane), Romblon (coconut), and Isabela (cassava) concluded that such ventures can be profitable for both investors and contract-grower farmers without affecting food security, i.e., diverting resources away from food crops. Moreover, biofuels development on marginal lands is not expected to cause significant input intensification. What might be of more concern to policy-makers rather than livelihood or environmental issues, could be the maintenance of policy coherence within the entire RE agenda as well as containing costs that might be imposed on fuel consumers. For a quick overview of the country's biofuels situation as of 2008, a year after the promulgation of the Philippines Biofuels Act, click on this link to the Asia Pacific Economic Cooperation biofuels section.

two much larger wind projects, in Sagada, Bontoc, and in Bulalacao, Oriental Mindoro. To complement its national renewableenergy plan, the DOE recently disclosed to

certificates in the U.S., a January 2005 technical report from the Colorado-based National Renewable Energy Laboratory discusses the possibilities – and the problems – attendant to this still-new innovation.)

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The global opportunities for trading carbon credits, along with growing domestic demand for electricity, explain why renewable-energy sources continued to be preferred activities in the latest Investment Priorities Plan (IPP) for 2009, which spells out a wide scale of tax and non-tax incentives. It will be interesting to see who will ultimately carry the day on this issue: the fiscal conservatives and the pragmatic businessmen asking for existing power costs and supply issues to be addressed first, or the environmentalists, technophiles, and their political allies calling for the development of clean and limitless energy for the medium- to long-term. In the end, it simply boils down to timing—the conservatives are willing to wait for the market to do its work, the activists want to give the market a push because the environmental issues are deemed urgent.

Renewable energy incentives
To attract investment in the renewable energy sector, the following are the incentives: a. Tax and duty-free importation of components, parts and materials for the manufacture and/or fabrication of renewable energy (RE) equipments and components. b. Tax credit on domestic capital components, parts and materials equivalent to one hundred percent (100%) of the amount of the value-added tax and customs duties that would have been paid for the components, parts and materials had these items been imported. c. Income tax holiday and exemption on sale of RE equipment, machinery, parts and services for seven (7) years starting from the date of recognition/accreditation for an RE manufacturer, fabricator and supplier of RE equipment. d. Zero-rated value-added tax transactions for RE manufacturers, fabricators and suppliers. Individuals and entities engaged in the plantation of biomass resources such as, but not limited to jatropha, coconut, and sugarcane also stand to benefit from the Renewable Energy Act as they are entitled to duty-free importation and exempted from value-added tax on all types of agricultural inputs, equipments and machineries for a period of ten (10) years as long as they are certified by the DOE.

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The struggle to beat the nation's petroleum habit
According to the Asian Development Bank's Energy Outlook for Asia and the Pacific book, published in October 2009, demand for energy in the Philippines rose rapidly after 1990, peaking in the late 1990s before starting to decline despite continued economic growth. This seeming paradox was the result of such factors as the growing importance of the services sector, which is comparatively non-energy-intensive, and a shift in residential energy generation from biomass (e.g. firewood) to comparatively more efficient commercial fuels. Within the country’s total mix of energy sources, oil continued to dominate, although its demand pattern is changing. The oil-dependent transport sector almost doubled its share of total final energy demand (TFED) from 17.4% in 1997 to 31.4% by 2006. But outside transport, total primary energy demand (TPED) for heat and electricity generation has been shifting, from oil to coal and biomass. From a peak of 51.7% in 1997, the share of oil in TPED fell to 31.8% by 2006, followed closely by biomass (mostly residential use) at 26% and geothermal sources at 21%. The ADB's forecast for the next 20 years calls for natural gas to become the country’s leading feedstock for electricity generation, increasing its share from 29.8% in 2005 to 41.7% by 2030. Coal will follow closely behind due to its abundance within the country and the region as well as its cost advantage over other fossil fuels, increasing its share from 27% to 37.3%. Its section on the Philippines concludes that despite aggressive promotion of renewable-energy technologies, renewable energy's share in the country's power-generation mix is projected to decline from 17.5% to 11.7% over the same period, as more traditional energy sources like natural gas and coal continue to enjoy superior supply and cost characteristics.

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NEWS ON THE NET
Nation
Kelly Ayotte (New Hampshire) arrived on Tuesday for a scheduled meeting with Foreign Affairs Secretary Albert del Rosario to discuss trade and investment issues and, more importantly, the issue regarding China and the South China Sea (see China story in World section). Videos of days three and four of the trial—showing Senator Drilon ferreting out the SALN from Vidal and Rutaquio testifying on the certificate of title of a Taguig property, respectively-- can also be viewed in YouTube.

Oil firms hike fuel prices anew
Prices of gasoline and diesel products rose anew to as high as 70 centavos per liter of gasoline and 90 centavos per liter of diesel. This was the fourth oil price hike just within the month of January, which oil companies attribute to increases of fuel prices in the world market. Transport groups warned of a nationwide strike if the situation remains unaddressed by the government. The Energy Department meanwhile revived its Pantawid Pasada Program, even as its Secretary, Jose Almendras, clarified that the fuel subsidy cards are just a stop-gap measure to cushion the effect of spikes in oil prices.

The Senators expressed their support to the Philippine position on the South China Sea and revealed that two more U.S. ships are “on their way” to the Philippines, according to GMA News Online. In May last year, a Hamilton class cutter was donated by the U.S. Coast Guard to the Philippine Navy.

Senate begins impeachment trial
On the first week of the impeachment trial of Supreme Court Chief Justice Renator Corona, the prosecution team presented Supreme Court Clerk of Court Enriquetta Vidal and Taguig City Registrar of Deeds Randy Rutaquio, among others, to shed light on the Chief Justice’s statements of assets, liabilities and net worth (SALN) from 20022010, as well as land titles he allegedly owns, in connection with Article II of the Impeachment Complaint. Unsurprisingly, copies of the SALN soon became available on the Internet, such as here.

Travel guide ranks NAIA-1 2nd worst terminal worldwide
Ninoy Aquino International Airport ranked second in the new list of the world's 10 worst airport terminals according to Frommers.com based on comfort, conveniences, cleanliness and customer service. The website's editor described the airport as small and with very few options for shopping and dining. Last year, NAIA 1 was listed as the world's worst airport based on online polls and reviews of travel website sleepinginairports. com. Airport officials said that the terminal's renovation has been accelerated to improve its facilities.

U.S. senators meet President Aquino
U.S. Senators John McCain (Arizona), Joseph Lieberman (Connecticut), Sheldon Whitehouse (Rhode Island) and

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From BPO to KPO
By Tanya L. Mariano

The Philippines prepares for the next wave in outsourcing
After overtaking India as the world’s top call-center hub, per The New York Times, the Philippines is also emerging as a viable knowledge-process outsourcing (KPO) site, according to a study from an international research firm. As reported in an Australian newspaper, Ovum, an independent technology analyst firm, says that while India will remain the top KPO destination in the foreseeable future, the emergence of other viable alternatives – i.e., China, the Philippines, and Sri Lanka – has allowed vendors to pursue a multi-shore strategy. According to the news report (Ovum's study itself is not available online), the Philippines is carving a niche from offering industryspecific services to hospitals and healthcare providers. Health-care outsourcing

STRATEGY POINTS The Philippines is seen developing as a hub for high-level outsourcing services Labor shortage looms, as demand for skilled workers outpaces supply ADB senior economist Norio Usui warns against over-dependence on outsourcing, and urges developing the manufacturing sector for long-term growth

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is “expected to grow significantly during the next few years, with a notable increase in demand coming from the US as a result of the recent reforms in healthcare regulations.” value-added outsourced services. As well it should.

Defining KPO. According to a Inquirer news report local economists warn that the Philippines should There might be an unexpected if welcome side effect venture into higher value outsourcing accompanying the maturation of outsourcing in the services to cope with Philippines: it could keep educated Filipinos from moves leaving the country to take on jobs for which they are in the U.S. to overqualified. promote “insourcing,” that is, bringing Locals getting into the KPO business. jobs back to America rather than In August, the Philippine Daily Inquirer offshoring services to lower cost countries. reported that multinational pharmaceutical President Barack Obama himself said, firm Zuellig, together with global KPO firm speaking to a group of business and Adec Solutions, will put up a KPO firm political leaders gathered at the White in the Philippines to provide back-office House on January 11, 2012 for the solutions to pharmaceutical companies “Insourcing American Jobs” forum, that worldwide, tapping the country’s KPO his administration would be putting capabilities and the high number of healthforward tax proposals that reward care professionals. companies that create jobs in the U.S. and punish through denial of tax breaks those Even smaller local outsourcing companies that outsource overseas. are joining the KPO bandwagon. Anticipating a shift in demand from In light of the recent call for “insourcing,” voice to non-voice services, Cebu- and developing higher-level services may be Las Vegas-based Northern Worx KPO the key to ensuring the stability of the aims to get a share of the KPO market by Philippine outsourcing industry. offering “personalized service packages to global clients” and changing their name Knowledge process outsourcing, or KPO from “Northern Transcription Work,” the for short, a term coined in 2004 by global Inquirer reported in October. KPO firm Evalueserve, is the offshore relocation of high-level business processes The Philippine KPO industry is a rapidly that require expertise in specific fields and growing sector. According to the Business includes equity, credit, and investment Processing Association of the Philippines research; legal services; market research (BPAP), the KPO sector and other nonand analytics, and; high-level research voice BPO sectors such as back- and midand development. office business support recorded the fastest growth among BPO sectors, posting an Below is a graph differentiating KPO from annual growth rate of 30% in 2010. BPO, from the website of BPO Watch India, All these suggest that the Philippines is a leading source of BPO news and research. looking beyond call centers and to higher KPO has its origins in the late 1990s,

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according to an Ovum report that highlights growth opportunities in outsourcing legal processes, when “several multinational companies began experimenting with offshoring research and analytics services to India.” The estimated value of the KPO market. Today, various sources peg the value of the global KPO market at anywhere between $2.9 billion (estimate by India’s National Association of Software and Services Companies) and expect $9 billion (according to Evalueserve), and expect it to be worth $7.9 billion to $17 billion by 201415, as reported by Web technology industry magazine, IT Bizcharts.
!

24%, and the $17-billion revenue target will be achieved by 2014. According to BPO Watch India, this is because during the recession, KPO services were the first to be canceled or postponed by clients. Citing Evalueserve chairman Dr. Alok Agarwal, BPO Watch explains, “while IT and BPO services were seen as a costsaving measure, the impact of KPO service on business was little understood, and immediate value for money was not seen.” The outlook for the Philippine KPO industry. In 2010, the non-voice BPO and KPO sectors in the Philippines employed 101,750 people and earned $1.6 million in revenues, based on the 2010 International Outsourcing Summit debrief prepared

Atos, an international information technology (IT) services company serving as the IT partner for the HIGHER DEGREE 2012 Olympic Games OF COMPLEXITY in London, expects the KPO industry to grow to about $12.5–13.5 billion by 2012, with India cornering approximately $9–10 billion of the market. These figures, however, LESS COMPLEX AND MORE are significantly lower PROCESS-ORIENTED than what analysts had earlier expected. In a 2004 report, Evalueserve had anticipated KPO to grow from $1.2 billion in 2003 to $17 billion in 2010, implying a compound annual growth rate of 46%. However, as reported by Indian analyst-consultant Rahesh Prabhakar Kaila in his blog, Evalueserve is now estimating that the industry's compound annual growth rate will be

KPO: BPO'S SOUPED-UP SIBlING
INSIGHT-DRIVEN RELIES ON KNOWLEDGE ARBITRAGE GREATER COLLABORATION BETWEEN VENDOR AND CLIENT SCALE-UP BASED ON SKILLS AND DOMAIN EXPERTISE

KNOWLEDGE PROCESS OUTSOURCING BUSINESS PROCESS OUTSOURCING

VOLUME-DRIVEN

RELIES ON COST ARBITRAGE

OUTSOURCED PROJECTS CAN BE EXCLUSIVE OF THE CLIENT

SCALE-UP BASED ON INFRASTRUCTURE AND LOGISTICS

Diagram from BPO Watch India

by BPAP, KPMG, a global network of professional services firms, and Team Asia, a strategic marketing communications firm. As early as 2009, KPO firms were already expanding their employee base in the Philippines. As reported in The Manila Bulletin, a survey of KPO executives

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in the country conducted by BPAP and Outsource2Philippines (O2P) showed that “almost 60 percent of respondents providing KPO services said their firms will increase their employee base between 11 to 200 percent this year. Another 10 percent will maintain their current employee base, and 29 percent will expand from less than five percent to 10 percent.” Philippine IT-BPO market as well is a looming labor shortage. Speaking at the 2011 International Outsourcing Summit held in Manila in October, BPAP chairman Fred Ayala said that the global demand for high-quality Filipino talent could boost industry revenues and job generation from $9 billion with 1.8 million jobs in 2010 to $25 billion with 4.5 million jobs in 2016. However, Ayala warns, “…our supply of talent is a huge constraint, in both quantity and quality. Demand is growing at over 20% annually but our supply of graduates is only growing at 30%. And only 5%-8% are hire-able. There are also huge pockets of untapped demand in the UK, Australia, and Europe in both nonvoice and IT. In short, a tremendous amount of demand is being wasted.”

WHy OUTSOURCE TO THE PHIlIPPINES?
Ten reasons to consider the Philippines as an outsourcing destinaton:
Global leader in voice BPO (over 340,000 employee) No. 2 destination for non-voice IT-BPO services (over 200,00 employee) Low infrastructure and labor costs up to 80% less than in developed countries Large pool of college graduates each year (over 400,00 graduates) Good english-speaking skills (over 70% of college graduates speak English) Young and fresh talent pool (one of the youngest and fastest growing workforces in the world) Large developed Central Business Districts and suitable for BPOs ( 2 million square kilometers leased to BPOs) Customer-centric, warm and hospitable cultures (positive customer feedback) Strong government and academe support (training and curriculum support) Various investment incentives available (4 to 8 year income-tax holiday)
Chart from Business Processing Association of the Philippines

The data below, from the aforementioned debrief, shows the advantages of outsourcing services, including non-voice services, to the Philippines. Furthermore, real estate advisory firm CB Richard Ellis says the Philippines is the most cost-effective outsourcing destination in Asia. A looming labor shortage? One challenge to achieving the full potential not just of the KPO industry but of the wider

To address this problem, the government released a P500-million training fund to enable BPAP and the Technical Education and Skills Development Authority to work together and provide short-term remedial training for the voice, animation, game development, software development, and health-care services sectors. A need to step up KPO marketing efforts. Aside from expanding the talent

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pool, the Philippines may also have to step up its efforts to market itself as a destination for non-voice services in order to encourage investments. Gaurav Gupta, managing partner of Everest Group, says increasing international visibility will enhance the world’s awareness of the complex and high-level services that the Philippines can offer. Gupta's remarks were part of a BPAP release introducing the "IT-BPO Road Map 2011-2016," an in-depth study published in 2010, which serves as the industry's plan for future expansion. Meanwhile, there might be an unexpected if welcome side effect accompanying the maturation of outsourcing in the Philippines: it could keep educated Filipinos from leaving the country to take on jobs for which they are overqualified. BPAP Executive Director for External Affairs Martin Antonio S. Crisostomo sees a bright future in the BPO industry awaiting our “Modern Day Heroes.” In his article, “It’s Time for the Heroes to Come Home,” published in BPAP’s October 2010-January 2011 issue of their newsletter “Breakthroughs,” Crisostomo said the search for talent should also reach out to Filipinos working abroad, which can be done through online media and social networking. “There are about eight million OFWs all around the world. If we can only tap a million of them, that will bring us more than what is needed to realize our ambitions in the 2016 Road Map,” he maintained.

Two legs or one pogo stick?
In a 2011 working paper, “Transforming the Philippine Economy: Walking on Two Legs,” Asian Development Bank senior country economist Norio Usui warns that the government should not rely too much on the outsourcing sector, as manufacturing is still the key to achieving longterm growth. Usui notes that the BPO sector only employs 1% of the labor force, while the unemployment rate stands at 7%, and argues that since BPO jobs usually require a college degree or, at the very least, proficiency in English, “The BPO industry cannot answer the huge employment needs of the unskilled labor.” The report identifies the three central issues plaguing the country – high unemployment, slow poverty reduction, and stagnant investment – and argues that the country needs to “walk on two legs,” that is, develop both services and manufacturing sectors in order to attain “higher, sustained, and more inclusive growth.” Meanwhile, an Agence France Presse report carried on several local online news sites discusses BPAP predictions that outsourcing employment will grow to 900,000 by 2016, assuming a 10% annual growth rate, and that outsourcing revenue will reach $20 billion by then, assuming a 15% annual growth rate. Apart from giving many Filipinos a chance to stay at home instead of working abroad, if that revenue target is met, that would bring the industry almost to the level of OFW remittances, over $18 billion in 2010 but that only counts remittances coursed through formal channels. Estimates of total remittances can add anywhere from another 25-33% to official figures. The report quotes Trade Secretary Gregory Domingo's attribution of economic benefits to the growth of the local outsourcing industry, e.g., increased car sales and the proliferation of 24-hour convenience stores. The report also credits the local outsourcing industry with the transformation of Manila's skyline, with skyscrapers rising to house foreign banks and technology companies.

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An Asian Infrastructure Boom in the Making
Can ASEAN's infrastructure fund generate a tide of projects to lift the region as the world slumps?
By Verbo Bonilla

STRATEGY POINTS
• The ASEAN Infrastructure Fund paves the way for greater regional integration, bringing us closer to an ASEAN Community in 2015 • To capitalize on the opportunities presented by the fund, the Philippine government must be ready to implement its infrastructure program

Within this decade, we may well see an unprecedented wave of infrastructure development within ASEAN (Association of Southeast Asian Nations), thanks to a new lending facility called the ASEAN Infrastructure Fund. Formally launched in September with $485.2 million in initial funding from nine ASEAN members and the Asian Development Bank (ADB), the fund is touted as the largest-ever ASEANled initiative. The Fund “will help forge the road, rail and energy links the region needs to create a greater degree of well-being for its people,” said Dato’

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Seri Ahmad Husni Mohamad Hanadzlah, Malaysia’s Minister of Finance II. The Fund is part of a greater effort to realize an integrated ASEAN Economic Community by 2015. According to the bloc's Master Plan on ASEAN Connectivity, a key step towards realizing an ASEAN Community is “enhancing regional and national physical, institutional and peopleto-people linkages.” The critical importance of such linkages is evident, especially for a region crisscrossed by sea lanes and made up of nations with

diverse cultures. Physical linkages such as ports, roads and rails, in particular, would facilitate trade and other activities between ASEAN nations, supporting greater regional integration. The creation of the Infrastructure Fund augurs well for the region, and presents an opportunity that should be taken full advantage of by countries such as the Philippines. We explore in this article the importance of the Fund, how our country compares to the rest of our neighbors in terms of infrastructure, and how we might take part in a potential regionwide public-works boom.

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The goal of regional integration. Kozluk and Sutherland (2009) showed Members of ASEAN recognize that their that infrastructure investment can have a respective nations possess varying levels positive effect on growth, one that is greater of development. An for countries with initially important goal of lower levels of infrastructure regional integration, development. 'Improving therefore, as connectivity envisioned in the Fan Zhai of China ASEAN Economic Investment Corporation, in would bring Asia Community the ADB Institute article, large welfare Blueprint, is to “The Benefits of Regional gains through “address Infrastructure Investment the development in Asia: A Quantitative increased divide” and spur Exploration,” bolsters this market access, regionwide growth. notion and estimates that reduced trade “developing Asia is likely costs, and more An infrastructure to reap welfare gains of boom in the region US$1,616.3 billion in 2020” efficient energy would be a boon for from annual investments production the development of totaling around US$800 and use' ASEAN memberbillion in infrastructure countries. According during the decade from 2010 ~ ADB study to “Infrastructure for to 2020. Much of ASEAN still a Seamless Asia,” an finds itself part and parcel of ADB paper on all of “developing Asia.” Asia but especially applicable to the ASEAN region, “improving connectivity in the At this time of global economic slowdown, region would bring Asia large welfare gains the importance of such an infrastructurethrough increased market access, reduced led development cannot be more evident. It trade costs, and more efficient energy could provide the much needed stimulus to production and use.” kick-start and sustain growth, if not in the rest of the world, then at the very least, in Think of an entire ASEAN region operating the region. as a single market, with no restrictions on goods and labor going in or out of national Funding a boom. Prior to the borders, thereby allowing a country to avail establishment of the Infrastructure of the same products and services available Fund, the big problem was in financing. in other countries within the region. The World Economic Forum previously identified bottlenecks that threaten Asia’s That infrastructure plays a critical role infrastructure spending. It estimated in economic development has long that Asia will require “more than US$8 been held as fact. In Infrastructure and trillion to upgrade infrastructure in the Growth: Empirical Evidence, Egert, next 10 years,” and that “while the region

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has the money, it is not being mobilized effectively.” For its part, the Internal Monetary Fund cautioned against a “buildup of large debts” and argued against government-directed lending. Instead, the multilateral donor institution encouraged banks to lend by loosening regulation, and promoted public-private partnerships as a recourse to government-owned and -operated projects. With the creation of the Infrastructure Fund, this financing problem has been greatly eased. Although its total lending commitment through to 2020 is only about US$4 billion, the fund is projected to leverage more than $13 billion in infrastructure financing by the end of the decade, with a projected 70% co-financing by ADB. That's potentially a lot of ports, roads and rails. Indonesia to be first to tap fund. According to the Indonesian news agency Antara, Indonesia will be the first country to tap the fund, in order to build one of six infrastructure projects per year that ASEAN member-countries have pledged to develop in the region. In that report, Indonesian Ambassador to ASEAN I Gede Ngurah Swajaya identified the project as the expansion of roll-on, roll-off (Ro-Ro) shipping lanes that connect Davao in the Philippines to Bitung in North Sulawesi, Indonesia. The shipping lanes will be further developed later to cover several ports in Malaysia, Brunei and Thailand, he said. According to the official, one of the priorities of the six infrastructure projects to be built starting in 2012 was that they

must interconnect maritime lanes and several ports in the region. Other projects which could be financed by the Fund are listed in the Master Plan on ASEAN Connectivity, including the following: • the Singapore-Kunming Rail Link transport infrastructure intended to link seven ASEAN member-states and China; • an ASEAN Broadband Corridor that would provide the infrastructure backbone to enable ICT services to all communities in ASEAN; • the Melaka-Pekanbaru Interconnection, a 600-megawatt, high-voltage, directcurrent interconnection between Peninsular Malaysia and Sumatra, Indonesia, and; • the West Kalimantan-Sarawak Interconnection, a 120-km, high-voltage, 275 kilovolt AC interconnection from Bengkayang Substation in West Kalimantan, Indonesia, to Mambong Substation in Sarawak, Malaysia. The Fund will provide additional boost to what may already be considerable infrastructure development in some of the countries in the ASEAN region. For instance, Singapore and Malaysia have often been cited as among those which have made sustained investments over the years in

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infrastructure. This sustained investment, as well as efficiency in operations, has allowed them to achieve considerable comparative advantage in infrastructure among ASEAN members. Other countries in the region have also made notably large public investments in infrastructure in recent years. The World Bank, in its Country Policy and Institutional Assessment, cites the cases of Thailand and Vietnam (as well as China), whose respective total infrastructure investment exceeds 7% of GDP, above the average 5-7% of GDP spent on infrastructure in fast-growing Asia. The Philippines falling behind. An advocacy paper by the Joint Foreign Chambers of the Philippines entitled, Arangkada Philippines 2010: A Business Perspective, cites the overall infrastructure rankings of ASEAN-6 countries according to data from the World Economic Forum’s Global Competitiveness Report. According to the paper, Singapore, Malaysia, and Thailand have been way ahead of the Philippines in the rankings, and Indonesia overtook the Philippines in 2010-2011. Only Vietnam, which was slightly behind the Philippines in 2008-2009, has fallen behind. What's more important than the rankings in each period, however, is the perceived deterioration in quality from 2008 to 2011. While five of the six countries saw their rankings deteriorate from 2008 to 2011, the Philippines' drop from 94th to 98th to 113th is exceeded only by Vietnam's decline from 97th to 111th to 123rd. In the case of the Philippines, the Fund can offer much-needed support to shore up what can only be viewed as inadequate publicworks spending in the face of considerable infrastructure requirements. Infrastructure inadequacy has often been identified as a big problem in the Philippines, with ADB’s Philippines: Critical Development Constraints citing it as a critical constraint to our economic growth, while the World

ASEAN: WHO lEADS IN THE RACE TO BUIlD?

Rank in overall infrastructure quality of selected ASEAN countries, Quality of overall infrastructure ranking, ASEAN-6, 2008-2010 2008-2010
Singapore Malaysia Thailand Indonesia Philippines Vietnam 0 20 40 60 80
3 2 2 19 27 27 41 46 90

2010-11 2009-10 2008-09

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96 96 113 123

98 94 97

111

100

120

140

Chart from WEF Global Competitiveness Reports; Note: Number of countries evaluated - 2008-2009 (134); 2009-10 (133); 2010-11 (139)

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TRAIlING THE NEIGHBORS Infrastructure spending, ASEAN-5, % GDP, 1980-2010 (annual average)
8.0% 6.0% 4.0% 2.0% 0.0%

Malaysia

Indonesia

Philippines

Singapore

Thailand

Chart from Joint Foreign Chambers of the Philippines, Arangkada Philippines 2010: A Business Perspective

Economic Forum’s Global Competitiveness Report finds it one of the “most problematic factors for doing business” in our country. Despite the acknowledged critical role of infrastructure in Philippine development, however, investments have generally fallen behind in this area. Total investments in infrastructure in the country, both public and private, have averaged about 2% of gross domestic product over the past three decades, from 1980-2010, as cited by the Arangkada paper. According to the World Bank, and as cited in their study, Philippines: Meeting Infrastructure Challenges, developing countries like the Philippines must spend about 5% of their GDP annually to adequately meet their development needs. The Infrastructure Fund and the Philippines. As a response to the oft-cited critical infrastructure needs of the country, the Philippine government has included infrastructure development among its priorities. In the Philippine Development Plan 2011-2016 (Chapter 5), the Aquino Administration’s centerpiece medium-

term development agenda, “accelerating infrastructure development,” is among key strategies envisioned to “promote inclusive growth” and reduce poverty. The development agenda identifies the need, for instance, to develop “an integrated multimodal logistics and transport system.” This integrated system should improve on existing RORO transport systems to ensure that international RORO ships can dock in our ports and ply our lanes. Another focus identified by the development agenda is the construction of new airports, as well as the enhancement of existing ones, especially in support of the campaign to develop the country’s tourism sector. A long-distance, high-speed, mass rail transit system, integrated with Metro Manila’s commuter rail system and extending to the north and south of Subic and Metro Manila, should also be constructed. To fund its programmed “accelerated infrastructure development”, the Philippine government has chosen to rely heavily on public-private partnerships (PPP video here). An implication of this is that public spending on infrastructure will continue to

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fall below 2% of GDP-- or 1.6% of projected GDP in the 2012 budget, to be exact. The rationale put forward is that government has little to spend while the private sector possesses both resources and required capability in spades. THE SHRINKING PUBlIC WORKS PURSE
Ratio to gross domestic product, and total level in billions of pesos

An asian infrastructure boom in the making

implementing its flagship PPP program: of the 10 priority projects initially announced in 2010 under PPP, so far only one (the Daang Hari-SLEX Link Road) has been bid out, with the bidding done at the tail-end of 2011. A report in the Asia Sentinel, a regional online publication, chronicled the infrastructure spending problems of the Aquino Administration detailing “bureaucracy, drift and leadership changes” that harmed the Philippine economy. Delays in government projects and anemic spending have been cited as the cause for the below than expected economic growth of the country in 2011. The Philippine government should line up for the Infrastructure Fund whenever any of its priority projects can qualify for the Fund’s use. It is encouraging to note that the aforementioned ASEAN RORO Network -- the system of interisland ports and lanes from Davao to Bitung in North Sulawesi, Indonesia -- is an initiative originally proposed by the Philippine government. Ports that form part of this network within the country will, hopefully, be built and enhanced alongside others financed by the Fund. More importantly, however, to take advantage of the opportunities presented by the Fund, the Philippine government must focus its efforts to get its infrastructure program going. It must avoid the delays that have in the past hampered the implementation of its infrastructure program. Recent pronouncements from the government say that it is ready to implement its infrastructure programs at the start of the year 2012. We certainly hope so, because the ASEAN Infrastructure Fund is providing an

Philippine Infrastructure Outlays, 2008-2012

146.80

180.08 165.01 145.00 182.21

200 180 160

1.9%

2.2%

140 1.8% 1.5% 120 1.6% 100
Outlays in %billions pesos of GDP INFRA LEVELS

Infrastructure Lags theGDP Infra Outlay as % Economy
2.5% 2.0% 1.5% 1.0%
Public works budget as

% of GDP

2008 2009 2010 2011 2012

Sources: DBM, Tables B5 of BESF 2011, 2010 and 2009

The government’s PPP website published a list of prospective PPP projects, giving us a clearer picture of the “integrated multimodal transport system” being cited in the development agenda. What is unclear, however, is whether all these projects will see the light of day within the next six years. Thus far, the present administration has had a lackluster record in terms of

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creditors, the European Union and the International Monetary Fund in a matter of days, according to a report by Bloomberg. One of the private creditors, Marathon Asset Management LP, stated that it does not expect Greece to make its 14.5 billion euro bond repayment by Mar. 20, but that it expects a new deal to be in place before that date. A primer on the Greece debt talks and an article on how the debt is affecting the citizens of Greece can be found on the BBC website. local option for medical insurance similar to Medicare. The MetLife Report on Early Boomers provides the demographics and other information about these retiring baby boomers.

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NTC has no power to set rates: telcos
The Philippines' two leading telcos both insisted that the National Telecommunications Commission (NTC) does not have the authority to set the specific rates that local firms can charge their subscribers. Smart Communications and Globe Telecoms were responding to the show-cause order by the NTC, in relation to its Memorandum Circular No. 02-10-2011. The said circular sought to bring down the interconnection charge for short message texting between two separate networks. The hearing for a possible cut in short message rates have earlier been rescheduled to resume on January 31.

Ayala Land to develop cultural hub in the Fort
Ayala Land Inc. is sinking P60 billion over the next 25 years into the development of a "first world" cultural hub dubbed as "High Street South," an eighthectare, three-block district to be located in Bonifacio Global City. Spearheading the project is the company's residential brand, Alveo Land. The Ayala group leads the project with the first of 18 planned residential towers, the Maridien, which is made up of 508 residential units to be turned over to buyers in 2017.

American retirees: The next boom for the Philippines
The retirement of about 10,000 baby boomers daily in the U.S. could spell a big business upswing for the Philippines, according to an Inquirer.net report. This trend is expected to continue for another 19 years and should be taken advantage of by the Philippine Retirement Authority by offering a

Greek debt talks: Back to the table
Greece may reach an agreement with the committee of 32 private

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TECHNOLOGY

It knows where you are, what you type — and more
By Pia Rufino

Is Your Phone Spying on You?

STRATEGY POINTS
Whether users know it or not, many smartphones can keep tabs on them, most likely through global positioning and other programs they use Applications can give firms more private info than users may wish. Read privacy agreements and settings carefully before letting apps access your data

With the sophistication, features and convenience of smartphones, more and more users are relying on them to store and process private data – SMS, cached e-mails, photos, Web sites visited, address books that connect to the user’s friends or family members, among others. But users should be warned: your private data might not be as private as you think. On November 28, 2011, Android developer Trevor Eckhart uploaded a video clip (complementing his prior Android Security Test) detailing how Carrier IQ, a program embedded in his HTC 3D Android phone, logs almost every text, key press and the URL of every website he visits. Carrier IQ

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is a California-based mobile intelligent solutions provider that, per its own running tally, has deployed “embedded analytics” in over 141 million handsets. [Editor's note: Apart from that running tally, Carrier IQ's site has not been updated since Dec. 12.] Eckhart claimed that the recording app, secretly buried in the operating system of the phone, is designed to track user’s activity and transmit the information to the carrier without the user’s consent. He also noted that just having this data cached on the phone raises a security risk, as malware or a malfunction could expose it.

Carrier IQ in local handsets. For its part, local carrier Smart said that while it used diagnostic tools, it has never used anything that resides on a consumer's phone.]

On Dec. 5, a week after Eckhart's video presentation, Dan Rosenberg, a security consultant with Virtual Security Research, said in his blog that based on his own deployment of Carrier IQ on a Samsung Epic 4G Touch. the data potentially being collected supports Carrier Eckhart video on Carrier IQ user data gathering IQ claims. According to his research, the controversy touched off by Eckhart was caused by Taiwan-based smartphone manufacturer HTC, who authored the code behind the debugging log that Eckhart discovered. Increased visibility needed regarding data collection. “Based on my knowledge of the software, claims that keystrokes, SMS bodies, email bodies, and other data of this nature are being collected are erroneous,” he wrote, but also said that, “to satisfy users, it’s important that there be increased visibility into what data is actually being collected on these devices.” He also wanted to make it clear that while he found “Carrier IQ implements a potentially valuable service designed to help improve user experience on cellular networks,” there were points that needed to be addressed, not necessarily by Carrier IQ but by the handset manufacturers and carriers who had Carrier IQ installed on mobile phones.

Carrier IQ just a diagnostic tool? In its defense, Carrier IQ in a press release denied Eckhart's claims that its software can be used for keylogging purposes and has insisted that claims the software was used for intrusive data gathering are misplaced. The software, explains the company, is actually a diagnostic tool that is designed to purely collect information that can help wireless carriers improve network and device performance. It monitors basic performance parameters of the mobile phone, including signal strength and battery usage. [As far as the Philippines is concerned, Gadgets magazine reported in December that local representatives of smartphone manufacturers RIM (Research in Motion), Nokia, and HTC denied the installation of

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Those points included the need for consumers to be able to opt out of data collection, the need for carriers to be more transparent about what data are being collected from users, and third-party oversight on the data being collected. by the researchers and others, in an FAQ (Frequently Asked Questions) page. It clarified that the location data were not of an iPhone, but of Wi-Fi hotspots and cell towers around an iPhone's current location, meant to help speed up the iPhone's

After the flood of snoop apps, it's raining lawsuits
On December 5, ComputerWorld reported that eight companies were named in a class-action lawsuit over the installation of Carrier IQ on mobile phones, which the publication said was at least the third class-action-related lawsuit filed since the controversy began in late November. The lawsuit alleges violations of the Federal Wiretap Act, the Stored Electronic Communications Act, and the Federal Computer Fraud and Abuse Act. On Dec. 16, Sprint disclosed that it had installed Carrier IQ software on 26 million handsets and had been using it since 2006, while AT&T said it had the software running on close to 900,000 devices, as reported in ComputerWorld that morning. Later that day, ComputerWorld reported that Sprint announced it would disable the software on its handsets, following the lead of Apple, which said it would remove the software from its iPhones.

Not the first controversy, just the latest. The Carrier IQ controversy is just the latest of a number of relatively recent stories about threats to smartphone users' privacy. In April, security researchers Pete Warden and Alasdair Allan discovered that Apple's iPhone and 3G iPad were regularly storing location and timestamp information in a hidden but otherwise unprotected and unencrypted file, as reported in Allan's blog. A week later, Apple responded publicly to concerns brought up

calculating its location in lieu of having to rely solely on GPS (Global Positioning System) satellite data. It denied that individual users could be tracked using this data, since the data sent to Apple was anonymized and encrypted. As for concerns that a year's worth of location data was being stored on an iPhone, it blamed that problem on a bug and said it was working on a fix, adding that it didn't think an iPhone needed to store more than seven days worth of such data. For concerns that the iPhone was still updating such data even after a user turned off their iPhone's Location Services, it also blamed that problem on a bug, which it promised to fix shortly. After the revelation broke over Apple location tracking, another researcher, Samy Kamkar, discovered that Android-powered

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smartphones were also tracking location data and transmitting the data to Google, as reported in the Huffington Post. That report cited a Google representative's response to another site – all location tracking was opt-in by the user, and the location data was anonymized and not traceable to a specific user. Their fairly quick response notwithstanding, Apple and Google still had to face a U.S. Senate subcommittee hearing in May to reiterate that they didn't track users' locations, and that users could easily opt out of anonymized data collection for location-based services. And that didn't stop senators from calling for the federal government to take stronger measures to address the privacy risks of smartphones, as reported in ComputerWorld. German politician sues his telecom. Before that, the New York Times reported in March about Malte Spitz, German politician and privacy advocate, suing his smartphone service provider Deutsche Telekom to reveal what data it had gathered on him. He learned that in a six-month period — from Aug 31, 2009, to Feb. 28, 2010 – Deutsche Telekom had recorded and saved his longitude and latitude coordinates more than 35,000 times. Spitz then took this information to Die Zeit, Germany's leading weekly, who then compiled a six-month map of Spitz's movements based on that information plus other information – Twitter feeds, blog posts, and websites – that was already available on the Internet.

Outsmarted by smartphone programs
In an extensive July ComputerWorld report on smartphone application privacy issues involving Android, RIM, and Apple, readers were reminded that smartphone apps can trace Web usage, look into contact lists, make phone calls without the user’s knowledge, track location and examine files, among others. Apps can also automatically send information such as location data to mobile ad networks. They can also gather the phone number and the unique ID number of each type of phone. The report also cited studies from different sources looking into smartphone apps. In June 2010, security vendor SMobile Systems found that 20% of Android apps allowed third parties (that is, companies other than the app vendors themselves) to get access to private or sensitive information. In addition, the report warned, 5% of the apps could make phone calls by themselves without user intervention, and 2% could send an SMS text message to a premium, for-pay number -- again without the user making the call. It cited joint research by Intel Labs, Penn State University, and Duke University that revealed 15 out of 30 Android apps analyzed sent geographic information to remote ad servers without users' knowledge. Some also sent the unique phone identifier to app vendors, in some cases, the actual phone number and serial number. This information enables app vendors and/or advertisers to create comprehensive profiles about you that can then be sold to others. The article also cited a Wall Street Journal December 17, 2010, investigation that found that 56 out of 101 popular iOS and Android apps transmitted the phone's unique device ID to other companies without users' awareness or consent, while 47 apps transmitted the phone's location in some way, and five sent age, gender and other personal details to outsiders. Even if the smartphone manufacturers and service providers cover themselves by allowing you to opt-in or opt-out of location services, when it comes to third-party apps, Preston Gralla, one of the ComputerWorld article's authors, asks smartphone users to consider: “Have you ever not downloaded an app based on what information it indicates it's going to harvest about you? What do those notices really mean?”

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Is your phone spying on you?

The controversy over smartphones Apart from the growing number of and privacy intrusion is not likely to smartphone users increasing the potential go away anytime soon. According to risk of large-scale privacy intrusion, the a Nov. 15 report from Gartner, an still relatively unregulated environment informationin which thirdtechnology party apps are With smartphone research and being introduced sales topping advisory company, – according to the half a billion smartphone sales afore-mentioned July to end users reached 2011 ComputerWorld a year and 115 million units article, TRUSTe and few controls in the third quarter Harris Interactive of 2011, up 42% recently studied the on the apps from the year top 340 free iOS and market, the before. Smartphones Android apps and controversy represent 26% of found that only 19% all mobile-phone of them included over spy apps sales. And in 2010, links to privacy won't go away Gardner predicted policies – almost that smartphones or ensures that the smart devices would individual privacy of outnumber computers by 2013 as the smartphone users will become one of most common device for accessing those concepts that is more honored in its the Internet. breach than its observance.

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Controversial cyborg rat tests target brain treatments
Israel's Tel Aviv University is working on a controversial project that has anti-vivisection campaigners calling it "grotesque." The project replaces rats’ brains with digital equipment to test whether swapping impaired brain tissue with a microchip— effectively making them cyborgs-will help people who have suffered strokes, or people afflicted with diseases like Parkinson's. Meanwhile, researchers at the Case Western Reserve University have created a way by which cyborg insects can be powered by their own digestive system, effectively eliminating the need for artificial batteries. is revolutionizing book publishing. Apple claimed school books in e-book form purchased through the company will be cheaper, more accessible and more easily updated.

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Wikipedia joins online shutdowns to protest U.S. anti-piracy bills
Wikipedia went offline to protest the anti-piracy laws being proposed in the U.S. Congress. Internet users who attempted to access the site were redirected to a black screen with the statement, “Imagine a world without free knowledge.” Sopastrike.com lists about 75,000 sites participated in the information blackout. The online protest appears to have generated significant results, with some U.S. Senators—a few of whom were initially co-sponsors of the anti-piracy bills—now withdrawing their support for the legislation. Interestingly, the Obama administration had said it would not support the bills, a few days before the protest.

Anti-piracy fight, round 2: U.S. shuts down Megaupload
Just one day after the massively orchestrated online protest against the U.S. anti-piracy bills, the U.S. Justice Department charged file-sharing site Megaupload with widespread online copyright infringement. The site has been shut down, and co-founders Kim Dotcom and Mathias Ortmann have been arrested, along with two other employees. Hacktivist group Anonymous retaliated by targeting and disabling 10 websites, including those of the U.S. Department of Justice, the Federal Bureau of Investigation, the Recording Industry Association of America, the Motion Picture Association of America, and the Universal Music Group.

Apple plans cheaper and easy-to-update e-textbooks for iPads
In what people are calling a move to digitally destroy textbook publishing as we know it, Apple announced its plans to give its users a new textbook experience for the iPad. With its new products-- iBooks 2, Textbooks and iBooks Author -- Apple said it

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• January 23-29, 2012