Business Outlook for 2008

The first half of 2008 has definitely brought a malady of concerns blowing away most equity markets into down trends as they digested the financial problems in the US economy, higher fuel prices and inflation. I think that a recovery from this ordeal would take a little time as it looks to be completing only the 3rd wave of a bearish drive in Elliot’s 5-wave bear principle.

Saying this, I would also build in a possible medium sized recovery played out by an expected wave 4 rally in an effort to ease up current oversold conditions.

World indices bear down and may take time to recoup
US stock trends have officially reached bearish territories after losing more than 20% of its value. This draws out heavier supply problems for the world’s largest market- this triggering a global sympathy that has yet to see its potential flows. This bearish flow will likely precipitate until a gradual U-type reversal is shown or until a fear-based selling capitulation materializes (usually seen in wave 5) to rub out overhanging supply. In between this a major rally is still seen on the backdrop of oversold levels.

Oil prices still riding high but showing overbought warnings.
One of the world’s pestilent problems is the striking price of Oil which has accelerated its trending advance this year and has not yet let up. In fact it has been climbing at about $13/ barrel per month since March and unless major correction comes to disrupt this course, Oil can find itself at $150 in July and closer to $200 before the end of the year. However, heavy overbought levels will likely call upon a major correction that may come to test its trendline lows current at $135- a break of this would signal a medium term corrective phase.

Inflation triggers upward adjustments in I-rates seen in the medium term
The rise in the prices of Oil and consequently materials and commodities has driven global inflation upwards, particularly with more pressure in developing economies. US Bond yields, which serve as a good leading indicator to interest rates, have turned up in April breaking a 9-month down trend and offering a medium scale rally. This I feel could be limited in threat and scope focused only into the medium term since the long term trend angle of yields (since the 90s) continue to point down. I would say however that a flattening in the large trend angle may be possible as it has reached its 5-year low cycle.

Cotto - Margarito: One for the Books

In probably one of the most stunning upsets this year, Antonio Margarito brought Miguel Cotto to his knees on a gruelling tenth round knockout. Every boxer has been trying to avoid Margarito and they have a good reason to do so, after his relentless attack against Cotto. Cotto won most of the rounds after giving Margarito his punishing left and right hooks to the body. But Margarito gave no signs of backing down. Instead, he pursued Miguel around the ring without giving signs of wearing down and while punishing Cotto with his own devasting hooks to the body.

Everyone got the shock of their lives when Cotto, bloodied from the punishment he received from Antonio, kneeled on the tenth round with Margarito still continuing the attack. The referee gave Cotto the eight count. But that was enough for Cotto, who kneeled once again after the barage of punches from Margarito.

Will we be seeing a rematch or a possible Margarito - Hopkins fight in the near future? I will bet on the latter, but a possible rematch may be better for Cotto, who needs to redeem himself as boxing's best pound for pound fighter.

This is a good year for boxing indeed.

Pacquiao versus Dela Hoya

Both camps have already expressed their intention to fight it out in one of boxing history's biggest fights ever since Ali fought Foreman. The only question now is when and at what weight.

De la Hoya (5'10") is naturally bigger and taller than Pacquiao (5'6") and this may just decide the turning point of Pacman's carreer. He has shown that he can take the punch of the 135ers but can a bloated Pacquiao fight at 147? Can he evade the longer arms of Oscar and can he muster the necessary speed and power to bring down the Golden Boy?

My view is, if the fight takes place this year, there will probably be no knockdowns as each boxer has shown their capacity to take a punch. The fight will most likely go the distance, which is better for the younger Pacquiao. Manny will win if Manny outpunches and outboxes Oscar. Dela Hoya's killer left hook and left straight will still pose a problem if Pacman does not use his agility and foot speed to get away from dangerous situations and angles. Both may slow down in the middle of the fight starting round 7 up to round 12, for Dela Hoya, because of his age, and for Pacquiao, because his body may not be used to fighting in higher weight classes. Pacquiao will have to bring the fight to Oscar and go inside while punishing Oscar with short upper cuts to the body and head. Pacquiao cannot afford to fight from a distance knowing Oscar's dangerous left jabs.

All in all, in terms of speed and power, I vote for Pacman's victory by unanimous decision. But, definitely, this is going to be one hell of a fight.

The Latent Patent: Why Intellectual Property (IP) Development in the Philippines is Lagging Behind

Situationer

Trudge along the corridors of Quiapo, Manila and you will notice that among the most visited stalls are those selling pirated CDs. It is quite sad that infringement of intellectual property seems to have been the rule in this country rather than the exception. It is sadder still that our country, renowned worldwide for the exceptional ingenuity, creativity and innovation of Filipinos, is becoming a dumping ground for pirated articles of all kinds. Everyday we see counterfeit DVDs, VCDs and CDs of movies, movies, computer software, etc. being sold like hot cakes. Not only are they exceptionally cheap, the video and sound quality of some of the copies are impressively often far better than the original.

Some say that piracy, as we know it today, is the inevitable product of advanced developments in information and communication technology within the past two decades. In one study, the practice of piracy has also been described as having the most efficient distribution system.

The distribution system of the people behind this industry is really something to marvel at. You can find movies, shown yesterday in Europe and the US of A, magically find their way immediately in our shores the next day. Our country’s logistics and supply chain industry can learn from whatever technique is being applied by the masterminds of this very organized (syndicate) industry.

What is most appalling, and funny, in all these is that while the selling of pirated products are happening right under their noses, many members of the police do not seem to mind. Selling of pirated items is happening at point blank and no one seems to notice or care even. We can see these stalls everywhere around Metro Manila, in malls, street corners, tiangges, sidewalks, etc.

This is one humongous stumbling block in any action plan to solve the problem of piracy. Catching and imprisoning those selling the prohibited articles would be just like nibbling at the tip of the iceberg. This problem, as most of us now know, is tightly knit with the problem of smuggling, other curse of the continuously increasing borderless world.

According to the Business Software Alliance (BSA), software piracy in the Asia-Pacific region cost manufacturers about $8 billion in 2004. Worldwide, losses due to software piracy were estimated at more than $32 million in that year.

Not only is the multi-media industry being severely affected, the overall competitiveness of the country is also taking a severe beating.

According to Intellectual Property Philippines (IP Phil), there is a need to increase local patent applications in order to drastically improve our image abroad as a country competent in technological innovation. We also need to increase patent registrants to increase the chance of our country being removed from the US watch list of IPR violators.

Piracy has worsened for the past years, which should have alerted us to take action to curb its slithering tail. In fact, according to International Intellectual Property Alliance, the growing piracy business has made the Philippines one of thirty-one countries that supposedly have a larger market for illegal software than for commercial software.

Solving this problem once and for all entails that we have enough valuable information on the concept of IP and why its development and use in our business can have a positive, long-term impact on our daily lives.

What is Intellectual Property?

It is amusing to know that those who are most knowledgeable on IP and those who mostly benefit from IP are the violators of IP rights.

The important thing to focus on, therefore, is empowering ourselves with the necessary tools to make all available knowledge, laws, and policies on IP work for us, the intended beneficiary.

It has always been government policy to promote and protect intellectual property. This policy was embedded both in the 1973 Constitution, which provides that “the exclusive right to inventions, writings and artistic creations shall be secured to inventors, authors, and artists for a limited period” and in the 1987 Constitution, which mandates that, the State shall protect intellectual property.

Moreover, the Philippines became a member of the World Intellectual Property Organization [WIPO] in 1980. The WIPO is a specialized agency of the United Nations, which is dedicated to developing a balanced and accessible international IP system, which recognizes and rewards creativity, stimulates innovation and contributes to economic development while safeguarding the public interest.

Our country also acceded to a number of significant multilateral international agreements and treaties for the protection and promotion of intellectual property rights, which include the following:

Convention Establishing the World Intellectual Property Organization [since 1980]
Paris Convention for the Protection of Industrial Property [since 1965]
Budapest Treaty on the International Recognition of the Deposit of Microorganisms for Purposes of Patent Procedure [since 1981]

Berne Convention for the Protection of Literary and Artistic Works [since 1951]
International Convention for the Protection of Performers, Producers of Phonographs and Broadcasting Organizations [since 1984] Agreement on Trade-Related Aspects of Intellectual Property Rights [TRIPS Agreement (from Chan Robles Law Office Website)

Moreover, government, through IP Phils,. is now closely studying the effects of acceding to the Madrid Protocol. According to Mr. Alan Datri, Senior Counsellor of the Office of the Assistant Director General of WIPO, the Madrid Protocol will provide a centralized acquisition and maintenance of trademark rights around the world through the filing of a single international application for a single international registration with effect in one or more designated Contracting Parties. This would mean that Filipino exporters would no longer need to register their trademarks separately in each country where they export their products. One international registration would have the effect of registration filed in all countries that acceded to the Madrid Protocol.

The presence of these laws should have discouraged all who intended to violate our IP rights. But why has it persisted?


WHY PIRACY PERSISTS

We all know that violation of IP is happening right under our noses, and we all know how to solve it, or at least everyone has a thing or two to discuss on how to end piracy, but why has this problem continued to hound us and our country’s drive to competitiveness?

Answering this question is like trying to solve smuggling or drug addiction. We all know the answers and solutions, but still some people come up with their own reasons why piracy persists.

One answer is that government lacks resources, and even the political will - to effectively eradicate or reduce piracy. Indeed, IP Phils., the primary body tasked with protecting IP, needs all the help in sustaining its drive to develop IP in the country.

Another is that we should learn to adapt a culture of distaste against everything pirated. Despite the fact that pirated CDs are cheaper, the bigger picture should discourage us in abhorring piracy altogether. It is a fact that this worldwide phenomenon is contributing to terrible loss of jobs for those working for legitimate music, movie, and software companies, and this causes industries related to them to slowly die.

We should also support government in adapting the international standards and best practices in customs procedures. Smuggling has been uncurbed, half-willed implementation of laws and policies on intellectual property, has allowed the proliferation of pirated articles and paraphernalia.

Moreover, a reason why there seem to be less support from the people themselves is that many are getting a good living buying and selling pirated media. What is appalling is that the distributors of pirated materials not only avoid the ambit of the BIR for the income they generate, they do not pay royalties to the creators of the said materials.


What PCCI is Doing

The PCCI has spearheaded the private sector drive to help in government’s information dissemination drive in promoting intellectual property development.

The Committee on Intellectual Property, headed by its Chairperson, Mr. Jesus Varela, was created to help instill awareness on the important role of IP in business development, trade and the flow of investment in the country. Mr. Varela said that the Committee seeks to promote more cooperation in the field of IP between government institutions and members of the private sector. The Committee, he said, also recognizes that IP advocacy and protection is a key factor for economic growth and advancement, especially of SMEs.

The main objective of the IP Committee is, first and foremost, to help members of the business sector appreciate and understand better the concept of intellectual property and the ways by which IP can be used as a valuable asset in business development. Moreover, the Committee aims to promote the protection of intellectual property in the country through cooperation with government, academe, and other important sectors of society.

The Committee hopes that, through the promotion of an IP culture, the business community will produce more inventors and innovators who will be encouraged to obtain, use and license IP rights and assets.

The IP Committee is now closely cooperating with IP Phils.’ information-dissemination drive to increase awareness of the importance of IP among stakeholders in the country.

It is worthy to note that the IP Philippines has created the Intellectual Property Research and Training Institute (IPRTI). The Institute will serve as the vehicle by which IP Philippines would respond to the country’s need for a higher level of IP awareness and expertise across sectors. With IPRTI in place, it is hoped that the IP system can be further strengthened through capability building in IP expertise and in advanced IP education and research.

Indeed, we should be relentless in enhancing our people’s innate talent for ingenuity, which is what Filipinos are very much known for. But each of us must do our part to advance IP awareness, which is the first step towards a very long journey of making IP protection a significant part of the Filipino culture.

PCCI is aware that this partnership with IP Phils. will go a long way in helping promote IP, not only among SMEs but, with the Filipino people, who are the real beneficiaries of the success of the adoption of a successful IP campaign.

SCRAP THE LATERAL ATTRITION LAW (LAL)

It was gut-wrenching to hear that the emperor in the Bureau of Customs (BOC) and his henchmen received a hefty sum of more than 400 million pesos just for simply doing their work. Not only is this practice full of loopholes, it is also very prone and open to abuse. Simply connive with the Department Secretary to lower the bureau’s revenue targets for a certain year and you will be seeing more millionaires in one of the country’s top agencies most perceived to be corrupt (together with BIR and the Public Works and Highways Department)

Moreover, the purpose of the Lateral Attrition Law is to encourage BIR and BOC employees to work hard so that the respective bureaus can exceed their revenue targets for the year, thereby contributing to the country’s growth and development. It was not the intention of the law to make government employees rich enough to build their own mansions in Mount Olympus. When asked during a Senate inquiry why he supposedly received more than 5 million reward, BOC Chief Napoleon Morales blurted, “It is legal.” But then, what is legal may not be necessarily moral.

The law should be scrapped for a variety of reasons. One, the agencies benefiting from the LAL are two of the most notoriously corrupt agencies in the country. The law would be better applied to those who really do something exemplary like the teachers, social and health workers, dedicated policemen and soldiers in the battlefield.

Also, public funds should be allocated for public purposes. Giving more than 400 million pesos to undeserving government officials is far from being a public purpose. It has served only to fatten the already bloated pockets of the BOC officials.

Furthermore, nationalism and love of country should be the primary motivation of members of the government work force, just like the motto “Mamamayan Muna, Hindi Mamaya Na” (Our First Priority Is Service to the Nation, Not Procrastination), and not monetary rewards.

Given these, the law should be repealed and the money given to the BOC officials should be returned to the public treasury.


You may email your comments to advocacydeparment@gmail.com or directly here in this blog.

PCCI bares 2-year plan under its new president

The Philippine Chamber of Commerce and Industry (PCCI), the country’s biggest and most influential business organization unleashed its 2-year plan under its new president, shipping and logistics magnate, Edgardo G. Lacson.

Lacson formally assumed office as PCCI’s 16th president last 01 July 2008.

In a press conference held to celebrate Lacson’s inauguration, PCCI bared key fundamental policy and sectoral initiatives it will pursue during the 2-year term of Lacson as its president.
Among the critical areas of interventions PCCI will champion include, the implementation of its Energy Roadmap which underscores the involvement of the private sector through PCCI in implementing the EPIRA Law, privatization of NAPOCOR’s assets, lowering of power generation, transmission and distribution charges and implementation of alternative and renewable energy programs and policies to mitigate the global energy crisis.

“Our energy advocacy is systematic to effect a win-win solution for both government and private sector on the energy sector. While PCCI remains supportive on the imposition of VAT on oil products, other measures such as new investments on power plants and investments in alternative and renewable energy resources remain as other important priorities in our energy agenda,” Lacson said.

In the area of Infrastructure Development, PCCI vowed to continue to monitor initiatives that implement President Arroyo’s SONA Commitments on Infrastructure Development around the country through its membership in the Pro-Performance Infrastructure Task Force.

“We note the immense participation we are generating from among our local chapters nationwide to validate the impact of the various infrastructure projects in countryside development. Likewise, the opening of NAIA 3 sends a clear signal on our direction to collaborate with government on key and meaningful projects that serve the interest of the greater public,” Lacson added.

PCCI also highlighted its support for the country’s participation in ASEAN economic integration and the subsequent FTAs with its dialogue partners, the ratification of Japan Philippines Economic Partnership Agreement (JPEPA) and Revised Kyoto Convention (RKC).

“These trade agreements are important in our effort to muster our competitiveness might in a global scale and broaden our investment perspectives and prospects for economic development. While we fully underscore the need for our county to maximize opportunities from these trade treaties, we also acknowledge that the business community must closely examine their negative effects and work towards reforms and adjustment measures that will address the need and plight of our micro, small and medium enterprises including the jobs and income that they support and provide,” Lacson stressed.

Lacson further re-affirmed PCCI’s role as the inevitable champion of the MSMEs. At the same time, he noted the great need for more business-led interventions to instill long term planning to address gaps in food production and maintain the prices of key and basic commodities.

“PCCI supports corporate farming as a way where private sector can provide sufficient food supply to their stakeholders especially in the labor sector. What is needed as well is for the private sector and government to finally work on specific programs that will encourage private sector investments to upgrade farm technologies and mechanization as well as promote specific products of interest to our food security. This can only be done through the creation of an enabling environment that is supported by market-driven policies provided for by the comprehensive agrarian reform law (CARL) and moratorium on the conversion of agricultural lands through an effective land use and zoning policy,” Lacson said.

On education, PCCI vowed to champion continuous educational reform and development through its program on addressing skills mismatch.

“Backed by the Presidential Task Force on Education, PCCI sees education through skills upgrading as another important component of our 2-year development plan supporting both government and the academe for gainful and entrepreneurial employment. We remain hopeful that through our projects on the ground in this area, we will be able to increase the hiring rate of the industry at the same time influence policy making and reform in the education sector in the country,” Lacson emphasized. Lacson further said that “What you will notice in our 2-year agenda, we are going back to ‘basics…’ Food, energy, infrastructure, education—these are fundamental to our everyday living. In the past, in our effort to move ahead and forward, some of these essentials may have been overlooked or somehow neglected. What we are emphasizing the need to effect a clear mindset for change and our vision for our country’s competitive edge; we need to make these basic needs work to the welfare of our stakeholders and our people. We are never too late in addressing the gaps that impede our nation’s development–we are just a little behind.”