Google: Big brother is watching you (The Brunei Times)

Published in the July 27, 2011 issue of The Brunei Times

Jennee Grace U Rubrico
BANDAR SERI BEGAWAN

SO YOU now have a Google+ account. Congratulations on being one of 18 million subscribers as of July 24 who got an invitation to the most exclusive social network party in ages.

Google which has had its share of flops since the launch of Gmail in 2004 is back on its game with its by-invitation-only strategy for Google+. Unlike the other social network, where anyone with an email address and Internet connection can sign up, Google+ is - for now, at least-restricted to the elite millions who have the power to decide if a hapless non-user should be given a pass to the party. Sigil of privacy
Never mind if, based on July 22 statistics from analysts, website Findpeopleonplus.com, most of the subscribers are engineers, software developers, web developers, programmers or other people who work with computers and the Internet. And never mind if Google itself tops the list of companies with the most number of employees signed up to the social network, at 9,704. According to Google, the social network which was rolled out on June 28 had been growing by two million subscribers per day until recently. Sooner or later, there's bound to be a demographic in which we mere mortals could belong.
Google+'s draw - apart from its exclusivity - is the control a user has over his account. Under the beta version, a user has sole control over what posts appear on one's wall - erm, stream. Should he wish to post incriminating photos of himself on his stream for everyone to see, that is his prerogative. His sister, who may derive pleasure in embarrassing him in front of his friends, will not have the same privilege. Not on his stream, at least.
There is also Circles, which has been touted as the sigil of privacy in a realm where it is thought to be non-existent. By assigning people to circles, users control who can see a particular post which is great, because people who may not be interested in knowing what book you've read recently would not have to know that you've just finished Bridge on the River Kwai.
But the real power of Circles is that it filters posts that come from others. This is important for a social network that doesn't require someone's consent to be included in someone else's network. If your ex has decided to put you in one of his circles in a malicious attempt to get you to read updates on his love life, his efforts will be in vain as long as you don't put him in any of your circles. He gets your public updates, and you get a notification that an update from him is waiting in your "incoming" stream. But you can always decide to ignore the notice. If this doesn't work for you, you can always block him, and neither of you would be getting the other's posts.
But while Google+ protects you from others, it does not protect you from Google itself. Like it or not, the social network is yet another platform from which the Internet giant could cull information about its users.
The thing about Google is that its services are integrated, and a user's information is shared by most of the platforms. Using Google's services is like giving the Internet giant permission to take your fingerprints and trace your activities. With all the data we have been feeding Google through Gmail, Blogger, YouTube, Chrome, Reader, Google Docs, Calendar, Buzz, and now Google+, it is not farfetched for a conspiracy theorist to think of it as the real world's equivalent of Eagle Eye's ARIIA, the omniscient, omnipotent super-computer tasked with gathering intelligence from all over the world.
Information on everyone
For all we know, Google has already gathered enough information on everyone to rule the world. But maybe not.
How does Google use data from users? "We may combine the information you submit under your account with information from other Google services or third parties in order to provide you with a better experience and to improve the quality of our services," it says in its terms of service.
For Google+, "we will record information about your activity such as posts you comment on and the other users with whom you interact in order to provide you and other users with a better experience on Google services".
It adds that information provided by others - such as people who put you in circles, or tag you in photos-are also collected to be used as aggregate statistics about Google+ activity and shared "with the public, our users, and partners, such as publishers, app developers, or connected sites".
Governments are aware that Google is sitting on a treasure trove of information and have been asking its help. Google complies.
"We receive requests from government agencies around the world to provide information about users of our services and products," it says, adding these "primarily cover requests in criminal matters".
Criminal investigation
"We can't always be sure that a request necessarily relates to a criminal investigation, however, so there are likely a small number of requests that fall outside of this category," it adds.
There have always been provisions in Google's terms of service that have caused discomfort among users; but resisting the Internet giant would be futile. Short of committing cyber hara-kiri, there is no way to avoid the omniscient Big Brother.
In any case, Google users seem to have already factored this in. Gmail users, especially, have had an earlier encounter with privacy issues - and have kept using the service since.
I console myself with the thought that having a virtual fingerprint is just like having a real one. Unless a need arises for that fingerprint to be located, it remains in the dark recesses of the storage rooms. So I convince myself: There is no need to be afraid.
Besides, with 18 million Google+ users and more Gmail subscribers, there are surely people with more colourful lives than mine who would occupy the time of Google, and that of the powers-that-be.
And if it comes down to it, cyber hara-kiri is always an option, and I can rest assured that Google+ won't retain my data. But it always bodes well to remember, before putting up a Google+ post: your parents may not see it, but Big Brother is watching.
The views are the writer's own and do not necessarily reflect those of The Brunei Times. The Brunei Times

Property bounce in the Philippines (Asia Times Online)

Written for and published by Asia Times Online on January 26, 2010. Click here for the original article. 
 
Property bounce in the Philippines
By Jennee Grace U Rubrico

MANILA - Philippine property is showing new signs of life after enduring falling rental rates and rising vacancies in 2009. As developers reactivate projects stalled with last year's global economic downturn, cranes are swinging again on the skylines of Manila and other metropolitan areas with the brightened economic outlook.

Stronger demand from overseas Filipino workers (OFWs), who sent back a projected US$15.8 billion in remittances from January to November last year, is expected to drive new residential developments. Meanwhile, resurgent demand from the buoyant business process outsourcing (BPO) industry is projected to fill current commercial office space vacancies and spur new building.
If so, it will mark a dramatic turnaround from last year's downcast trends. Real estate consultant CB Richard Ellis estimated average rental rates across the Metro Manila area slid 4.3% from the second to third quarter last year, while overall office vacancy rates were up 200 basis points to 12.8% over the same period. By year's end, rental rates had fallen 25%-30% off their mid-2008 peaks, property consultant Colliers International said.

Now, developers are tapping into local debt markets to finance optimistic new expansions. Ayala Land, a subsidiary of the country's largest conglomerate, has said it plans to issue 1 billion pesos (US$21.6 million) worth of retail bonds that will be dedicated to home financing schemes for buyers of its properties. Filinvest Land, another top residential and commercial developer, plans to raise 3 billion pesos in bonds in addition to last year's 5 billion pesos worth of issuances to meet its projects' capital requirements.

Megaworld Corp recently raised 5 billion pesos in bonds, the proceeds of which will be used for a newly acquired 8.3 hectare land plot for its Megaworld development in North Bonifacio, near Manila's central business district of Makati. Another developer, Robinsons Land Corp, raised 5 billion pesos in new capital through a retail bond offering last year.

Indications are that they are putting those funds to quick use. Statistics from the Housing and Land Use Regulatory Board (HLURB) showed a spike in property permit issues, which property developers need to market new real estate projects, at the end of 2009. Developers who stalled on projects in the first half of 2009 rushed to get sales permits before the year ended, with the number issued in November up 146% over the same month in 2008.

Retail space investors are also coming out of the doldrums. Mall developer SM Prime Holdings plans to build five new malls, adding to its stable of over 40 retail centers across the country. Ayala Land has unveiled a nationwide expansion plan to construct more BPO complexes, residential projects and retail developments.

A number of factors support the projected growth. Most notably, OFW foreign remittances are expected to strengthen with an improved global economic outlook. Augusto Santos, acting director general of the National Economic and Development Authority, estimated that remittances would likely grow by 10% this year. Despite the global economic downturn, OFW remittances were up 5% in the 11 months ending November 2009, he said.

Those resilient remittances are expected to buoy in particular the residential housing segment, of which many developers identify foreign-currency earning OFWs as their main target market. That optimism hasn't shown up yet in the statistics. While licenses issued by the HLURB for non-residential units grew sevenfold year-on-year in November, residential licenses fell by 22.8% over the same period.

Commercial developers exposed to the globally oriented BPO industry appear to be the safer bet for investors. Ramon Jose E Aguirre, head of research at Colliers International Philippines, estimates that growth in outsourcing firms alone will be enough to this year absorb half the oversupply in the office space market.

"Obviously there is a glut in office space supply, but at the end of this year we expect many empty spaces to be taken up - this means construction can resume despite the fact that there are still plenty of offices available in the market," he said.

Bubble watch
With property price bubbling up in China, South Korea and Taiwan, analysts are now looking for similar signs in Southeast Asia's fast-recovering economies. Regional analysts believe that Philippine property will outperform most Southeast Asian neighbors, and there are no signs yet of emerging price bubbles, they say.

Property prices in Singapore rose by 15.75% quarter-on-quarter in the third quarter of 2009. That's prompted concerns about possible property price bubbles, but so far the overheating situation in Southeast Asia seems unique to Singapore.

Elsewhere in the region, economies have experienced more tempered price rises due to gluts of supply. Business Monitor International notes that the Malaysian property sector is expected to recover from last year's downturn, but price rises will be tempered by lingering oversupply.

Thai property has been hampered by political concerns and a lack of buyers, although the state-run Thai News Agency reported recently that the property developer confidence index posted a record high of 57.8 in the fourth quarter of 2009.

"The relative success of the Philippines to lure outsourcing companies and the steady flow of OFW remittances to finance other property development products will set it apart from neighboring countries," projected Claro Cordero Jr, head of research and consulting for Jones Lang LaSalle Leechiu in Manila.
The sector still has a long way to go before rates return to 2008 peak levels. Average prime office space rental rates in Metro Manila currently hover around 800 pesos per square meter, down from 1,200 pesos (US$17) in mid-2008. Danilo A Antonio, president of local property consultancy firm Land Excel Consulting, said that heated competition would prevent real estate developers from hiking prices too rapidly.

The Philippine central bank has also downplayed any property bubble concerns, maintaining that recent rises in local property prices and easing vacancy rates are indicative of legitimate demand rather than speculation.

National elections scheduled for this May represent another wild card for the sector. The new incentive-laden Real Estate Investment Trust Act (REIT) "lapsed" into law in late December when President Gloria Macapagal-Arroyo failed to follow up a veto recommendation from the finance department linked to its concerns the act would have a negative impact on tax revenues.

According to Cordero, REIT-derived financial instruments will enhance private-sector participation in infrastructure projects and promote more foreign participation in construction activities. However, the REIT's implementing rules and regulations are expected to be drafted by the next government.

The property sector is expected to get a boost if Manuel Villar, a real estate magnate and senator at present running second in opinion polls to front-runner Benigno Aquino, emerges as winner in the presidential election. Industry players are keen to see whether the next government will approve tax incentives for completing projects that reduce the current housing backlog of 3.8 million units and if it will follow up on Arroyo's efforts to sell off blocks of idle property now owned by the military.

"A new government will definitely affect the direction of business in the next few years and this includes the real estate and construction industries," said Aguirre. "How will [a new government] react? The private sector will be closely watching the results."

Jennee Grace U Rubrico has been a journalist for over 10 years

(Copyright 2010 Asia Times Online (Holdings) Ltd. All rights reserved. Please contact us about sales, syndication and republishing.)

Multilevel marketing firms are here to stay (BusinessWorld)

Published in the November 7, 2007 issue of BusinessWorld

Jennee Grace U. Rubrico and Felipe F. Salvosa II Multilevel marketing firms are here to stay

Second of two parts
Veterans in the network sales industry believe the downfall of two high-flying multilevel marketing firms - First Quadrant Philippines Inc. and JC Martin Corp. - came following an order from the Trade department to revise their business plans. This took away cash rewards for recruiting more people into their sales networks, which was how the companies flourished in the first place.
But the two firms, or at least the owners, have made a comeback of sorts. The owners of First Quadrant have shifted to marketing "First Vita Plus" health drinks from Marikina-made shoes. JC Martin, meanwhile, has merged with another corporation, Spice Corp., to become JC Spice Corp., and continues to sell a variety of products.
Repeated requests by BusinessWorld for interviews or statements from First Vita Plus and JC Spice Corp. were not answered.
It is no secret that owners of both companies are related. Women in the management hail from the Tactacan shoe-making family of Marikina, and had been bent on reviving the moribund shoe industry through network marketing.
On the company website, First Vita Plus President Rhodora Tactacan-Tumpalan makes no qualms harking back to First Quadrant's initial success. "In the past, First Quadrant has provided you with necessity, convenience and luxury in the vast array of our consumer products. Through our efforts, the Marikina shoe industry was revitalized and to this day, our world-class products are showcased here and abroad," she states in a letter posted on the First Vita Plus site.
Julie Rose Tactacan-Defensor, who used to be First Quadrant's corporate secretary, is now treasurer of JC Spice. The JC Spice chair is Ma. Theresa D. Asuncion, sister of former environment secretary and losing senatorial candidate Michael T. Defensor, the husband of Julie Rose.
During First Quadrant's early years, Mr. Defensor was a prominent company endorser. In Congress, Mr. Defensor was a member of a group of greenhorns called the "Spice Boys," thus the inspiration for Spice Corp. and JC Spice.
Consumers now wiser
The Department of Trade and Industry observes that many new multilevel marketing and network sales firms have never really taken off following the 2005 crackdown.
Consumers have not only become wiser, they now have a broader set of choices, which include cheap goods imported from China.
"How can they compete when they have been overtaken by developments in retail marketing? Cheap imports have become competitors. People have made their choices," said lawyer Victorio Mario A. Dimagiba, director of the Trade department's Bureau of Trade Regulation and Consumer Protection.
There are so far no "derogatory" reports on First Vita Plus or JC Spice, he said. But complaints on other companies persist.
"This is really a cyclical business," Mr. Dimagiba when asked to comment on the re-emergence of the owners of First Quadrant and JC Martin. "It's easy to create a new corporation."
Forever Living Products Philippines, Inc. and other fellow members of the Direct Selling Association of the Philippines (DSAP) seem to be distancing themselves from such operations.
Pyramid sales firms are really doomed to fail, said Jurgen Gonzales, one of Forever Living's top distributors.
"This is what's being done normally. Most of them fold up in three to four years and then the same owners form a new business," he said.
In contrast, Mr. Gonzales pointed out that his company has been in the Philippines selling aloe vera products for 16 years.
Forever Living, he said, has stuck to its time-tested strategies in recruiting people and marketing products, which have been copied by other companies. "We still promise big income. It's reachable and achievable. But we have to work hard for it," he said.
For instance, distributors still show return checks from Forever Living as proof of earnings, and some recruits are still encouraged to leave their salaried jobs and dedicate their full time to sales. The tack fuelled the multilevel marketing craze a few years back.
New distributors are still required to buy a starter set of 27 products for more than P13,000, and sell them for P22,000. The difference is clean profit.
To endure in the sales business, a company must sell products that are consumable, he said. "If you sell durable goods, there will be no repeat orders," Mr. Gonzales said.
He was quick to add that the bulk of earnings do not come from recruiting people but from product sales. "The aloe vera products are really good, and their efficacy builds loyalty ... We have no competition when it comes to products," he said.
Questions to ask
The DSAP has come up with a litmus test for investors who are thinking of putting their money into networking firms. The eight-point test seeks to help investors differentiate between legitimate and pyramiding schemes.
The test asks the following questions:

• Is there a product?

• Are commissions paid on sale of products and not on registration/entry fees?

• Is the intent to sell a product, not a position?

• Is there no direct correlation between the number of recruits and compensation?

• If recruitment were to be stopped today, will the participants still make money?

• Is there a reasonable product return policy?

• Do products have fair market value?

• Is there a compelling reason to buy?

"If the answer to all the questions is YES, then the company being evaluated is a legitimate company. But if the answer is NO, then there is a high probability that it is a pyramid scam," the DSAP says on its website.
The DSAP groups companies such as Amway Philippines, L.L.C., Avon Cosmetics, Inc., Cosway Philippines, Inc., Filway Marketing, Inc., Gano Excel Philippines, Inc., GNLD International, Mary Kay Philippines, Inc., Nikken Philippines, Inc., Triumph International (Philippines), Inc., and Tupperware Philippines, Inc.
First Vita Plus and JC Spice are not members.
"People who were probably considering or even about to consider joining multilevel marketing companies obviously will now have an additional burden. People in the business know more or less which is legitimate and which is not, but of course the business is also predicated on getting new people who probably have no idea about the industry and in my opinion those were the people who were affected deeply by such negative publicity and experience in other networking marketing companies," DSAP President Bernardo Mercado said.
Also part of the DSAP's efforts is cleaning up its ranks.
"One way to prevent scams is to work within the organization, withour own people ... even in our organization we need to educate our own sales force," Mr. Mercado said.
The DSAP has also launched information campaigns with the Trade department and the Securities and Exchange Commission (SEC) and has worked with schools and other government agencies to conduct seminars on identifying pyramiding schemes.
The Trade department, for its part, has issued a memorandum detailing the characteristics of a pyramiding scheme. The document has been disseminated to regional offices.
Investor should stay alert
However, it remains the responsibility of the investor to scrutinize the company in which he or she plans to put money.
Hubert B. Guevara, the SEC's compliance and enforcement department director, said, "cammers are using new technology to advertise and propagate their schemes, but there are others who are not tech-savvy."
"People could still use multilevel marketing as a means of getting investments from the public. The general characteristics of what we've identified as possible descriptions of possible 'Ponzi' schemes do not know of any tools. It can be a traditional method or Internet-based. The bottom line is these schemes are illegal and the public should be made aware of these," he said.
As to what the future holds for multilevel marketing firms, DSAP director Enrico Garcia noted that network marketing is a marketing tool that is here to stay.
AIM marketing professor Jose Faustino believes network-based companies should recover, as strong brands continue to do well.
"Any multilevel marketing and direct-selling company that got affected was weak to begin with, so when the problem ensued, it added one more weakness to their brand," he said.
"As long as we have outstanding examples, the industry will survive."

'Pyramiding' fallout still taking its toll on multilevel marketing firms (BusinessWorld)

Published in the November 6, 2007 issue of BusinessWorld

'Pyramiding' fallout still taking its toll on multilevel marketing firms

Jennee Grace U. Rubrico with Felipe F. Salvosa II

First of two parts
Two years after network marketing companies came under intense scrutiny for promising quick money but allegedly leaving investors shortchanged, direct sellers and multilevel marketers are still trying to shake off the negative impressions the controversy left in its wake.

While bigger companies have managed to emerge relatively unscathed, others are still weighed down by questions of legitimacy and sustainability.

In 2005, the Trade department announced a probe of multilevel marketing firms suspected of pyramiding. In its 2004 annual report, the department said 37 companies were "invited" to a business or marketing plan presentation "to assist the department in determining the nature of their plans as well as their operations."

Pyramiding is defined by Republic Act 7394 or the Consumer Act as "sales devices whereby a person, upon condition that he makes an investment, is granted by the manufacturer or his representative a right to recruit for profit one or more additional persons who will be granted such right to recruit upon making similar investments."

The Direct Selling Association of the Philippines (DSAP), the industry group, defines pyramiding as a scheme where people are convinced to pay money for a chance to profit from the payments of others who join later.

In 2005, two high-profile multilevel marketing firms with strong political connections - First Quadrant Philippines Inc. and JC Martin Corp. - were investigated and monitored on charges that investors were earning not from the sale of products such as leather goods and clothing, but from recruiting more people to join their sales networks.

Also monitored for possible violations of the Consumer Act that year were Primanila Plans, Inc., M7D (Dollar Diamond), CPY Loan and Credit Corp., InosPhil Corp., Kabuhi International Marketing, Sophie Martin Philippines, Inc., Ugnayan Philippines Marketing System, Net-Taipan Philippines Inc., Philippine Rich International Marketing Co., XP3 World Corp., and DXN International Private Ltd.

The next year, however, the Trade department zeroed in on only two firms. In its 2005 annual report, the department said it had formally filed charges against First Quadrant and JC Martin. No mention was made of the other firms named in the 2004 report.

On March 14, 2005, the cases against JC Martin and First Quadrant were amicably settled, and the two firms were required to strike off pyramiding activities and incentives from their business plans. They were required to post a P150,000 bond to "assure" compliance with the Consumer Act.
The Trade department and the Securities and Exchange Commission (SEC) had been monitoring, as early as 2002, companies allegedly engaged in pyramiding and the sale of unregistered investment contracts.

"Pyramiding schemes and unregistered investment contracts erode consumers' and investors' confidence in the country," a 2002 agreement signed by the two agencies states.

The agreement provides that suspected pyramiding cases involving products be referred to the Trade department, while cases that do not involve the sale of products but require an investment of money in a common enterprise fall under the SEC's jurisdiction.

Jose Faustino, an Asian Institute of Management marketing professor, said the 2005 crackdown on JC Martin and First Quadrant eventually affected other network marketing firms because Filipino investors are "quite informed."

"He or she - usually a she - will hear about these fly-by-night organizations asking them to put down thousands of pesos for initial investments only to find out later that the basic product was deficient to begin with. Those stories proliferate not only through printed media but more so from AM radio, and they pick it up as soon as they hear it," he said.

The impact of the controversy seems to have been felt on two fronts - in the network marketing firms' bottom lines, as well as in their ability to recruit more investors.

In its heyday, Forever Living Products Philippines, Inc., sold almost P1.5 billion worth of health, beauty, and other products. This was in 2001, when the Philippine branch of the Scottsdale, Arizona manufacturer of aloe vera products, formed by Paranaque Rep. Roilo T. Golez, broke into the country's top 400 companies.

In 2005, Forever Living sales dwindled to P227.2 million, down from P351.8 million in 2004. The company's net loss for that year narrowed to P3.4 million from P3.8 million the prior year. Last year Forever Living's revenues continued to decline, at P157.95 million. Its net loss widened to P4.567 million.

Two of the company's top sales performers, spouses Jurgen and Mary Ann Gonzales, recalled the good old days when top-tier distributors were rewarded with hundreds of thousands, if not millions of pesos, in bonuses. But other networking firms such as First Quadrant emerged and promised even quicker money, poaching sales staff from Forever Living, they said.

Unlike First Quadrant, however, Forever Living has stayed on in the network sales sector, albeit with a smaller business and a leaner marketing force. Mr. Mendoza attributes this to the popularity of the company's aloe vera products.

"People are starting to come back," he told BusinessWorld.

The more established brands remain formidable. In its 2005 financial statement, Avon Cosmetics Inc., the biggest multilevel marketing firm in the country (accounting for 50% of total industry revenues), reported net sales of P8.628 billion, slightly down from P8.69 billion in the previous year. Net income was higher at P837.22 million from P781.93 million in 2004, as the company was buoyed by other income and cost cuts.

Sara Lee Direct Selling Philippines, Inc., (now Fuller Life Philippines, Inc.), posted net sales of P597.6 million and profits of P54.7 million for its fiscal year ending June 30, 2005. In the 2006 fiscal year, it posted stronger sales of P2.4 billion, and a higher net income of P155.5 million.

Two companies which went under the government probe saw their businesses shrink. First Quadrant reported sales of P401 million in 2005, down from P539.2 million in 2004. Profit fell to just P172,873 for the period, from P12.112 million in 2004. JC Martin, meanwhile, posted gross receipts of a mere P14.8 million in 2005 from P25.4 million in the previous year. At the height of the network marketing wars in 2005, JC Martin lost P3.3 million.

First Quadrant and JC Martin did not respond to requests for interviews.

Officials of the DSAP said the sluggish sales cannot be blamed solely on the negative publicity regarding multilevel marketing firms.

"Speaking of profitability, that's affected by many reasons. It could be internal - poor management, mismanagement, or wrong cost structure where you don't have a relevant product for the relevant market. Or you don't have a good understanding of the Philippine market. Invariably you will have a host of reasons why these companies are losing some of its key distributors to a competitor. Obviously these things have an impact on profitability," DSAP director Enrico Garcia said.

While some firms are having a hard time, the industry has been "growing" in terms of combined revenues, said Bernard Mercado, DSAP president and general manager of Mary Kay Cosmetics, Inc. "Overall, when you look at the industry, sales turnover is growing, but it's not as big as it should be. Our best estimate is 12% to 13%. But in terms of players, dumami rin (they are also increasing)," he said.

"My best guess there is we're sharing in a pie which is growing but not as fast as it should be," he added.

DSAP officials, however, admitted that following the JC Martin and First Quadrant probe, networking companies found it more difficult to recruit distributors. First Quadrant and JC Martin are not members of the industry group.

"The impact was felt most in the ability to recruit people into the business of network marketing. Insofar as that is concerned, yes, it's harder because you have an extra obstacle to hurdle," Mr. Garcia said.

"When you tell them this is network marketing, they're not going to have a big smile and embrace it because they must have heard something from somebody or they have had their own experience ... But sadly, a lot of people don't know what they're saying no to," Mr. Garcia, who is also the managing director of Nikken Philippines, Inc., added.

Forever Living's Mr. Mendoza agreed, saying "You need to do a lot of explanation (sic) nowadays."
But recruitment is becoming less of a concern, at least among the 26 DSAP member-firms.
"Generally, in the association, the companies have increased recruitment. This is a significant thing. We would not be able to recruit more now if we are still saddled by that negative perception," Nice Cruz, DSAP treasurer, said.

It has helped, DSAP officials said, that measures have been put in place to make it easier to catch scammers hiding behind the multilevel marketing strategy. "The association has done a lot of work. There's existing literature on how to help consumers do their due diligence on network marketing companies they want to affiliate themselves with," Mr. Mercado said.

"I just want to say that it really is the same principle as caveat emptor - buyer beware. You are looking into a business, it is your responsibility to do the due diligence. Access to information that helps you make that decision is where I feel the direct selling association has done its part."

Makati Med’s P1-B debt restructuring approved (BusinessWorld)

Published in the May 10, 2007 issue of BusinessWorld

 

BY JENNEE GRACE U. RUBRICO, Sub-Editor

Makati Med’s P1-B debt restructuring approved

Following its rosy financial performance in 2006, the Medical Doctors Inc., the operator of Makati Medical Center, has secured the approval of creditors for the restructuring of some P1 billion in debts.

Makati Med Finance Director Carlito Soliman said in an interview yesterday that the restructuring agreement was signed by the hospital and its creditors on Friday last week.
The signing of the agreement comes two years after the company — which posted a 14-fold increase in its net income in 2006 — asked creditors to extend the maturities of its obligations due to cash flow constraints.
Mr. Soliman said that under the restructuring agreement, the maturities of the company’s short-term and long-term obligations were extended up to eight years. For the first three years, the company will need to make only interest payments. Payment of the principal loan amount will start on the fourth year and will be spread over five years.
"Everything’s going the way it’s planned," Mr. Soliman said.
Medical Doctors operates, manages, and owns Makati Med. It also wholly owns the Remedios T. Romualdez Memorial Schools, Inc. and holds a 60% stake in Computerized Imaging Institute Inc., which maintains a tomography center.
The firm earlier tapped ATR-Kim Eng Capital Partners Inc. to put in place a business plan to address its cash flow constraints.
The company obtained the loans from 1998 to 2004 for additional working capital, as well as for the expansion and upgrading of medical equipment, audited financial statements show.
Of the P370.248 million in short-term obligations, P190 million was secured from Land Bank of the Philippines; P156.65 million was from the Rizal Commercial Banking Corp.; and P23.598 million was from Security Bank and Trust Co.
Meanwhile, of the firm’s long term obligations totaling about P770.586 million, P288.226 million came from the Development Bank of the Philippines, the firm’s biggest creditor. RCBC also has a long-term exposure amounting to P56.25 million. Other long-term creditors are Citibank Savings Inc., with an exposure of P96.649 million, the Medical Docotrs Inc. Retirement Fund, which lent P23.5 million; the Social Security System, which lent P21.05 million, and Deutsche Investitions-Und Entwicklungsgesellshaft mbH, which has an exposure of P284.902 million.
The signing of the restructuring agreement came after Medical Doctors posted a 1,360% surge in its net income last year on controlled costs and non-recurring income.
In its financial report, which was audited by Isla Lipana & Co., Medical Doctors said it posted a net income of P223.121 million last year from P15.279 million in 2005. Although net revenues — derived from the operations of the hospital and the school — were just up 6% P2.475 billion from P2.320 billion in 2005, administrative expenses went down 27% to P353.38 million from P488.597 million in 2005, allowing the firm to record a 414.7% growth in operating profits to P438.745 million from P85.244 million.
"We were able to save on operational cost efficiencies," Mr. Soliman said.
He declined to specify particular measures that the company implemented, saying only that the approach was "across the board."
In the notes accompanying the financial statements, Medical Doctors also said it was able to improve on its financials after it made gains of P1.67 million from the disposal of property and equipment.
Also contributory was the reversal of a P20.67 million provision the company made in 2005 for unusued medical equipment, the notes to the financial statements show.
"In 2005, certain medical equipment was determined by the parent company’s management to be for repair and have not been used for operation.... In 2006, the parent company recorded a reversal of impairment charges on certain medical equipment previously identified as impaired. These pieces of equipment underwent significant repairs and were brought back to good working conditions," Medical Doctors said.
The company also posted smaller losses on write-offs for medical equipment, to P3.997 million from P42.275 million the previous year.
The company’s profit before income tax was at P293.65 million, a reversal from a loss of P7.431 million the previous year.
The firm’s assets increased to P4.859 billion in 2006 from about P4.533 billion in 2005, mainly due to an increase in its cash, receivables, and inventories.
With the strong bottom line, Medical Doctors’ deficit — the accumulation of its losses in the past — was reduced to P133.803 million from P360.716 million.
Mr. Soliman said that the company was optimistic that the deficit would be wiped out in no time.
He noted that occupancy of the hospital went up and that for the first quarter of this year, the firm posted an unaudited net income of P65 million after tax expenses.
"We’re looking at gross revenues of P218 million for April. We’re expecting a net income of P80 million for the four months ending April. That’s not too far off [from the 2006 deficit]," he said.
Sought for comment, KMPG chairman Roberto G. Manabat also said that Medical Doctors could wipe out the deficit this year just from its operations.
"It easy to erase a deficit of P133 million, assuming that the level of expenses is maintained and there is a growth in revenues in the company’s forecast," Mr. Manabat, the former General Accountant of the Securities and Exchange Commission, said.
He added that with the entry of the group of Philippine Long Distance Telephone Co. chairman Manuel V. Pangilinan, "the financial institutions would react positively" to the firm.
Medical Doctors is selling P750 million worth of convertible shares with an option to increase this by an additional P150 million. The securities are currently being offered to existing shareholders, but will later be offered to the Pangilinan group.
The group is reportedly interested in getting at least P600 million worth of shares. As of end-2006, Medical Doctors’ biggest shareholders were: Associated Sugar Inc., with a 5.23% stake; San Miguel Corp., with a 4.31% stake; Raul G. Fores, with a 4.21% stake; Julieta Ledesma, with 2.46%; and Remedios Suntay, with 2.42%.

Necessary complications (BusinessWorld)

Published in New Accounting Standards Credibility Through Transparency (A BusinessWorld Special Report, August 2006)

BY JENNEE GRACE U. RUBRICO, Senior Reporter and JEFFREY O. VALISNO, Reporter

Necessary complications

From the start, government regulators had been aware of the inherent difficulties in adopting new accounting rules. Hence, both the Securities and Exchange Commission (SEC) and the Bangko Sentral ng Pilipinas (BSP) chose to implement the 40-plus new rules in batches, starting with the least complicated standards as early as five years ago.

“If companies had problems complying with the earlier rules, they would sure find the last batch of rules more complicated,” SEC consultant Roberto G. Manabat had said in an earlier interview.
True enough, some firms had found it more difficult than others to apply the new standards.
Asian Institute of Management professor Larry Tan cited pre-need firms as examples, saying the rules that govern either the insurance industry or the pension industry may not be applicable to pre-need.
“The pre-need industry is unique to the Philippines and the IAS provisions are not for the industry. Are they going to have to come up with a Philippine Accounting standard just for that [industry]?” he said.

And some rules turned out to be more troublesome than others. Here are samples

Accountants said that of the new accounting standards, IAS 39, which deals with recognition and measurement of financial instruments, required the most drastic changes.

“IAS 39 deals with both assets and liabilities. The change in the rules is that, at the time you acquire the financial instrument, you have to make clear already what your intention is for the instrument,” Mr. Manabat said.

For instance, if a company purchases government or corporate bonds, it is required at the outset to say if it will be holding the financial instruments to maturity, make them available for sale or and loss.”

How these bonds are categorized, Mr. Manabat said, is the basis of how they will be included in the financial statements.

Instruments that are classified as available for sale are measured at fair value — the price of an instrument which both the buyer and the seller find reasonable — and are included in the equity portion  of the financial statement; the instruments would be recorded as cost if their fair value cannot be reliably measured.

 Instruments that are classified as held at fair value through profit and loss, meanwhile, are measured at fair value
and are included in the profit and loss portion of the financials of a company. They are recorded as cost if the fair value cannot be reliably ascertained.

Financial instruments classified as loans and receivables are measured at amortized cost. The same measurement
is used for instruments that are classified as being held to maturity, with the difference between its face value and its cost being amortized over the remaining term of the instrument.

If bonds categorized as held to maturity are used for trading, Mr. Manabat said, companies will be penalized. “Even if not all the bonds that are categorized as held to maturity are reclassified, all the bonds under the classification will be tainted. They will also be reclassified as available for sale,” he said.

Moreover, reclassification will ban the company from using the “held to maturity” category for two years.

Mr. Manabat said financial instruments have been classified this way to prevent abuses on the part of the companies which would put the instruments in whichever category would be favorable for them.

“Measuring at fair value would keep on changing the value of the financial instruments, so many people want to classify the bonds as held to maturity. But now, once you designate, you can no longer keep on changing categories. This was done because many companies have abused this [flexibility],” he said.

Besides the classification of financial instruments, IAS 39 also touches on hedging as well as the measurement of derivative products.

IAS 32 basically requires companies to fully disclose all monetary transactions, and the risks that come with the use of such financial instruments.

Application of IAS 32 and 39 has proven to be very difficult, especially for mining and pre-need companies due to varying interpretations of these standards.
Following the decision of the Supreme Court in 2004 allowing foreign firms to have full ownership in mining firms, the Arroyo administration has been counting on mining to drive economic growth.

While the aim of reporting financial statements on current prices is to promote greater transparency, mining companies have complained that the implementation of the IAS rules might present an opposite picture of their bottom lines.

Since mining firms forge contracts at present based on what they think would be future prices of the minerals that they still have to retrieve, implementing an accounting standard that mandates the use of current prices may be impractical.

For example, if contracts were made on the assumption that prices would be high in the future, and if those prices fall short of projections, the mining company would have to take a loss.

This, despite the fact prices might have “fallen” due to higher-than-projected production.
Another accounting rule that is expected to have made a significant impact on the financials of companies is IAS 19, which governs employee benefits. Under IAS 19, companies must fully finance future benefits due to employees.

Before, companies did not need to disclose in detail how much they allot for mandatory retirement benefits, for example.

Mr. Manabat said IAS 19 requires companies to get the fair value of benefits they committed to their employees.

“The companies are required to book the present value of those promises, based on their experience. For instance, if the employees last for 20 years, this will be booked over 20 years.

“There are a lot of factors — morbidity, turnover, increases in salary. It depends on all of those. These are projected and then the present value is determined,” he said.

He said this standard will weigh heavily on companies because the “past service liability” — a company’s liability which covers the time the trust fund had not yet been formed — used to be amortized over the estimated service life of employees.

“Now, this is no longer the case. You have to include this already in the trust fund asset,” he said.

He added, however, that a five-year transition period has been given wherein companies will be allowed to amortize the past service liability over five years.

“This will mitigate the impact on the profit and loss. Still, if the amortization is from 20 to five years, you’re talking of billions,” he said.

Still another rule governs how companies report the effects of foreign currency exchange rate fluctuations. IAS 21 mandates that impact of foreign exchange changes should be reported immediately in the company’s current operations.

Previous to the rule, companies could spread this cost over a certain period.

For instance, the peso ended at P52.835 to the dollar in 2005, from the P54 levels the previous year. IAS 21 requires companies which imported equipment when the peso was weaker to immediately report the purchase as a loss in their financial statements.

IAS 40 governs investment property, or the properties like land or buildings that a company uses to earn rentals, or for capital appreciation. It does not include properties for the use of the owner, like building that the company owns and occupies. Under the old rule, properties were not segregated on their purpose for the company.

This rule became problematic when it gave companies the option to valu investment property based on either cost (when the property was acquired), or at current prices.

IAS 40 requires companies to be consistent once they decide which method they use to value their investment properties. The option to choose became a concern for pre-need firms, for instance, since variations on how they report their investment properties made it more complicated for one to be compared to its competitor.

“One of the key features of the [new accounting] standards is the overwhelming amount of disclosure requirements.

This has made financial reporting a complex process,” BSP Governor Amando M. Tetangco, Jr. acknowledged in an interview.

“However, looking at the upside of it, these disclosure requirements will empower the stakeholders in making relevant decisions.”

Philips pushes for smart card use in mobiles (BusinessWorld)

Published in the August 15, 2006 issue of BusinessWorld

News

BY JENNEE GRACE U. RUBRICO, Senior Reporter

Philips pushes for smart card use in mobiles

Philips Philippines, the local unit of Dutch firm Royal Philips Electronics, is pushing for the use of the radio frequency identification device (RFID) technology in mobile phone applications.
In a press conference held for the company’s 50th anniversary celebration recently, company officials said that RF1ID can be used for contactless phone applications, including bills payments.
RFID is used for "smart cards," or chips that process transactions, services, and identification without swiping or any form of contact. It is currently being used by universities as an all-around identification card, by public transport systems abroad, and by credit card companies.
Philips Philippines, which has Philips Semiconductors Philippines, Inc. as part of its group, is a center for excellence in RFID. Philips is celebrating its 50th anniversary in the country, while Philips Semiconductors is celebrating is 25^th.
"We are talking with the telecommunications companies right now for this so that instead of having to press keys for the transactions, like what is being done right now through G-cash, we can do it without contact,’" Philips Semiconductors Philippines general manager Jun Sta. Ana told BusinessWorld.
While bills payments can now be done through mobile phones, the current system still requires the use of the keypad for the payment process, he said.
The RFID will do away with this, he added.
The technology, to be called "near field communications," will be made available to all mobile phone companies that are interested in using it, Mr. Sta. Ana said.
"This [technology] will be integrated within the year. We’re promoting it with various telecommunications companies," he said.
Med Mateo, Philips Electronics and Lighting, Inc. president, also told reporters the group continues to push other uses for RFID, including its use for public transport, particularly for the Metro Rail Transit and Light Rail transit systems.
The technology is being used in Hong Kong’s Octopus card and in Singapore’s transportation access pass card for its mass transport system, among others.
Mr. Mateo said Philips continues to push for the use of smart cards in the proposed National ID system.
BusinessWorld earlier reported that Philips was in talks with the government for the use of smart cards for the national ID. The proposal for a single ID, however, has been met with opposition.
Officials said that Philips Semiconductors sees new RFID applications as one of the strongest drivers for growth going forward.
Philips Semiconductors Philippines, the biggest contributor among all the semiconductors units in Asia-Pacific, posted $1 billion in export sales last year. The firm expects to grow sales by 20% to 25% this year.
Other growth opportunities for the semiconductors group are power management units, or power chargers for mobile phones and audio players; telecommunications infrastructure including hardware used for cellsites; and automotive products, including sensors for anti-lock breaking systems.
For Philips Electronics and Lighting, meanwhile, growth opportunities are seen in street lighting and city beautification, mobile phones including third generation or 3G units which will be launched next year, plasma television, audio players, and medical devices.

SM spending P975M to expand two malls (BusinessWorld)

Published in the October 28, 2005 issue of BusinessWorld

Today’s Headlines

BY JENNEE GRACE U. RUBRICO, Senior Reporter

SM spending P975M to expand two malls

The SM group of companies is spending almost a billion pesos to expand two malls.

A group insider told BusinessWorld the expansion of SM City North Edsa in Quezon City and SM Supercenter Sucat in Parañaque has a tag of around P975 million.
"The funds will be raised through internally generated cash," the source said.
The two new buildings will be opened next year, with construction costs at P13,000 per square meter.
For SM North, one of the biggest malls of the group, the company will add another 50,000-square meter building.
The mall, which was opened in 1985 and located at North Avenue and EDSA, has a land area of 16.1 hectares and a current gross floor area of 275,419 square meters. Its anchor tenants are the SM Department Store, SM Cinemas, Super Sale Club, SM Food Court, SM Supermarket, SM Bowling Lanes.
SM Sucat, meanwhile, will add a second building which will have a gross area of 25,000 square meters.
The mall stands on a 6.5-hectare property along A. Santos Ave. and currently has a total floor area of 66,150 square meters.
SM Hypermarket, SM Cinemas, SM Food Court are the anchor stores.
The company source said the new buildings will likely be used as mall space rather than call centers. He also said talks with locators have begun, but added that the tenant mix has yet to be finalized.
The new space in the two malls will form part of the additional shopping space SM is planning to build next year. SM is also set to open four malls in 2006 -the 60-hectare SM Mall of Asia and much smaller malls in Sta. Rosa, Laguna, Lipa, Batangas, and Clark.
Yesterday, SM also opened its 21st store, the 61,000-square meter SM Supercenter Valenzuela. Another SM mall, the 48,000-square meter SM Supercenter in Molino, Cavite, will also be opened before yearend.
Company officials said there are no plans to close any SM outlets, even though some of the malls -- particularly the one in Bacoor and the soon to be opened branch in Molino -- are near each other.
SM’s mall developer and operator, publicly listed SM Prime Holdings Inc., posted a net income of P2.41 billion in the first half, up from P2.23 billion in the same period last year, due mainly to rental income from leases in the malls and food courts. Revenues, meanwhile, rose to P5.19 billion from P4.92 billion last year.

Phinma keen to bid for Tiwi-Makban plant (BusinessWorld)

Published in the October 24, 2005 issue of BusinessWorld

Corporate News

BY JENNEE GRACE U. RUBRICO, Senior Reporter

Phinma keen to bid for Tiwi-Makban plant

The Phinma Group wants to acquire some of the geothermal assets of the National Power Corp. (Napocor) and is set to bid for the 700-megawatt Tiwi-Makban geothermal power plant.
In a talk with reporters, Phinma President Ramon R. Del Rosario, Jr. said the group is "seriously looking" at bidding for the plant, which will be the first geothermal asset Napocor will bid out.
Bidding has been slated for Dec. 8.
"We’re seriously looking at Tiwi-Makban... We like geothermal. It’s indigenous, it’s somewhat replenishable," Mr. Del Rosario said.
He said it will be the whole Phinma group that will bid for the asset, and the company is working on getting consortium partners for the undertaking. "We will have to get partners for this, it’s so big," he said.
He declined to name the parties that the company is in talks with.
He said the group may use the P1 billion it set aside from retained earnings for the acquisition.
"It’s omnibus. It’s available for whatever the group decides to get into," he said.
Mr. Del Rosario said that should Phinma win the bid for the asset, running the plant will become its main business.
He said winning the bid will also allow Phinma to raise equity.
"We want to continue investing and investing somewhat aggressively so when the opportunity comes we will go into capital raising but we think it’s unrealistic to do it until we are able to show a good story. Only if we are able to acquire a good power generating asset then that would probably be a good time to do it especially if we have a good consortium with us and the story is something that the market will find exciting," he said.
Phinma, through its subsidiary Trans-Asia Power Corp., operates two power plants that produce 53.4 megawatts of power. The company is looking to expand its operations in the power sector through the purchase of the Napocor assets.
Mr. Del Rosario said the company is still not keen on expanding through the construction of new power plants. "We have no plans [to do this], especially when there are these opportunities to acquire. The time you spend building a plant is three years, even more. That’s a period when we have no cash flows, that’s very, very costly. We don’t have the resources to do something like that," he said