Biz Buzz: Raking it in

Every now and then, one will hear this or that tobacco firm complain about how cigarette smuggling remains rampant in the country despite a government crackdown, or about how sales are being affected by the two-step increase in excise taxes being imposed on this industry this year.

Listening to their complaints, the uninitiated would be led to think theirs is a troubled industry on the verge of death, and on the precipice of being wiped out by smugglers and high taxes.

But a closer examination will show otherwise.

For one, the shotgun marriage between the local unit of Japan Tobacco Inc. and Bulacan-based Mighty Corp. resulted in the former seeing its market share skyrocket from only 4 percent in 2016 to an estimated one quarter of the industry today.

More importantly for JTI, the forced sale of Mighty—engineered by the leadership of the Department of Finance—gave it a firmer footing that forced another rival, British American Tobacco, to withdraw completely from the local market.

But perhaps the biggest beneficiary is the country’s largest tobacco firm, Philip Morris-Fortune Tobacco Corp. Despite the company’s issues about smuggling and rising excise taxes, the numbers will show they’re actually raking it in.

Biz Buzz sources in the Department of Finance pointed out that PMFTC was, in fact, the single biggest beneficiary from the Duterte administration’s decision to impose a P40-billion fine on Mighty and force its sale to JTI.

How much did it benefit? Let’s jut say PMFTC’s net income jumped from only P3.62 billion from October 2016 to March 2017, to P7.64 billion during the same period a year later. That’s more than double. Not bad for a company in an industry that’s supposedly suffering from smuggling and high taxes. Not bad at all. —DAXIM L. LUCAS Wavering? Is President Duterte having second thoughts on pushing the shift to federalism?

This is the reading of economist Bernardo Villegas, a.k.a the “Prophet of Boom” who is himself against the proposal to embrace federalism. He believes it is “absolutely unnecessary” and “counterproductive.”

Citing his personal views— but admitting it might be colored by his optimistic nature— Villegas said Mr. Duterte’s once rock-solid stance on federalism seemed to be “softening.”

The economist said the President might only be heeding the sentiment of Filipinos, majority of whom do not share the view that there was a need to shift to a federalist form of government, based on recent polls.

Villegas also noted Mr. Duterte’s earlier comments that he was open to adopting the China-Hong Kong model instead—a system where Hong Kong, a for- mer British Crown colony, retained a high degree of autonomy.

“He’s leaving a door open that his idea of federalization is not going to happen,” Villegas said.

Villegas has said that a shift to federalism could only spell disaster for the Philippines, likely stoking hyperinflation and giving more powers than many local government units are prepared to handle.

Having said that, the economist is not opposed to charter change, particularly calling for the removal of the foreign ownership limit in key industries like utilities. Further liberalization is needed to attract more investments and catch up with Southeast Asian neighbors, he said.

Resignation threat

The third telco saga, which appears stalled in the selection process rules, is coming to a head.

And like any worthy saga, it’s infused with drama and high-stakes—the latest being the threat of resignation by

Eliseo Rio Jr., Acting Secretary of the Department of Information and Communications Technology (DICT).

Apparently being prevented from implementing one of his main tasks, Rio wants the oversight committee that is crafting the selection rules to finally decide on which terms of reference (TOR) to use this Friday.

On the table are two TORs— one backed by the DICT, which uses a combination of population coverage, internet speed and investments, otherwise known as the highest committed level of service (HCLoS) model and another by the Department of Finance, led by

Carlos Dominguez III, who wants a frequency auction.

The committee has two other members: Executive Secretary Salvador Medialdea and National Security Adviser Hermogenes Esperon. Believe it or not, the chances of a credible selection process aimed at breaking the PLDT Inc. and Globe Telecom duopoly rest in their hands.

Barring a scenario involving the direct intervention of President Duterte—he’s been mum on this issue in recent weeks—it comes down to how Medialdea and Esperon decide on Friday.

If they go for the HCLoS, then Rio stays. A vote for an auction and he will resign.

The oversight committee is a curious creation since the selection process is the responsibility of the DICT and the National Telecommunications Commission. Its other members may only assist in the crafting of the rules.

So why vote? More than anything, Rio’s planned vote on Friday speaks to the simple fact that not all cabinet secretaries carry the same level of influence. A seat on the President’s table doesn’t mean you have his ear.

One should not doubt Rio’s intention to leave. He resigned as NTC commissioner during the Arroyo administration when he was pressured by certain personalities to carry out tasks that went against his principles.

His potential departure also brings up a more interesting question: Who really can lead the DICT?

Recall that the DICT’s first secretary, Rodolfo Salalima, who had longtime ties with Globe as its top lawyer, resigned last September.

Salalima himself pointed to outside interference and possible corruption as his reasons for leaving. However, Mr. Duterte later suggested conflict-of-interest and that Salalima was dragging his feet on the entry of foreign telcos.

In the case of Rio, we might lose a DICT chief who is trying to bring in new competition in a transparent manner that is overwhelmingly supported by the public.

Both the DICT and DOF have lobbied respectively for the HCLoS format and auction models. Arguments have been made for either side, except this only leads to endless delays. And who benefits from delays? We say it’s time for action. —MIGUEL R. CAMUS X to ODX Technopreneur Nix Nolledo has stepped down as chief executive officer (CEO) of Xurpas Inc. to focus on, as its CEO, ODX Pte Ltd., a Singapore-based subsidiary of technology firm Xurpas that plans to raise as much as $100 million from a token sale that will fund the roll-out of free internet service in emerging markets.

Raymond Gerard Racaza, cofounder and president of Xurpas, will succeed Nolledo as CEO. Nolledo will remain Xurpas chair.

“ODX is a massive long-term opportunity for us, and the commitment to the project shown by the partners who have already signed on, is very strong validation of this,” Nolledo said. “We need all hands on deck to fully realize our plans, and this is why I need to dedicate 100 percent of my time to ODX.”

ODX intends to use blockchain technology to provide free Internet access to emerging market mobile consumers.

ODX has so far gained support from luminaries from the tech, telecommunications and crypto industries. These include: Brock Pierce, Bitcoin Foundation chair; Christian De Faria, former chair of Bharti Airtel International; Alexander Shulgin, known as the “Godfather of Russian Blockchain”; Randy Kaplan, co-founder of internet giant Akamai; as well as other major players like Pantera Capital, DNA, Wavemaker Genesis, Right Click Capital, and Strong Ventures.

Xurpas is in the process of launching a number of other blockchain projects that will complement its existing businesses: Alto, which connects games to the blockchain; Xonio, which offers a unique financial inclusion solution for digital goods in emerging markets; and All Care, which is an HR benefits platform allowing freelancers to avail of insurance, health and other benefits.

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