It’s called the South CHINA Sea for a reason

fiery crossTHE decades-long territorial and diplomatic dispute over control of the South China Sea is an issue that is never far from the public’s awareness in the Philippines, and has again emerged as an above-the-fold topic of conversation with the recent “revelation” that China has just about completed work on seven new, impressive-looking military bases in the Spratly Islands. The issue is alarming to Filipinos for several reasons, not the least of which is that the complicated tangle of conflicting claims to the vital maritime territory is very difficult to understand. The extent of the work China has done on its new installations, however, now makes it easy to explain the dispute to people here:

You lost. The South China Sea, at least that part of it subject to conflicting claims by China and the Philippines, now clearly belongs to the former. No cute protests in front of the Chinese Embassy, no whimpering references to “international law,” no impotent threats of force are going to get it back. The arbitral ruling based on an international convention that neither China nor the Philippines fully accepted from the very beginning is not worth the paper it’s printed on, and discussing the matter through “bilateral consultation mechanisms” is utterly pointless, as any discussion must logically proceed from the starting point that China owns the sea and the Philippines doesn’t, since China took the pragmatic step to operationalize its claim and the Philippines didn’t.

And why not? Why would China even entertain the subject at this point? Even a casual reading of history quickly reveals that at no time, ever, did a victor who completely outwitted and outmaneuvered a foe surrender the gains because the loser’s feelings were hurt.

And boy, did China outmaneuver the Philippines on this one. Regardless of how one might feel about China, what it has accomplished is impressive from a strategic and diplomatic perspective. In terms of maritime disputes, the conflict with the Philippines is only one of four that China is actively engaged in; the others are with Vietnam over the Paracel Islands and other areas of the sea farther west, Japan over the Senkaku Islands in the East China Sea, and Taiwan, which has a claim to parts of both the East China Sea and the South China Sea in addition to the rest of its problematic relationship with the mainland. In recent years, China has aggressively prodded each of these four rivals, but it is only in the area contested with the Philippines that it has decided to dispense with any pretense of flexibility and establish a permanent presence.

The reason why is that when it comes to Japan, Taiwan, and Vietnam, prodding too aggressively – at least for now – risks a legitimate military response. There is a significant American military presence in Japan, but even on its own, Japan has at times in the past several years demonstrated it won’t back away from a fight. Even though China officially considers Taiwan a province that has temporarily gone astray, it sensibly recognizes that the margin between “maintaining effective pressure” and “things getting violently out of hand” is razor thin, and tries to calibrate its strategy accordingly. Vietnam has none of the external support enjoyed by Japan and Taiwan, but Vietnam for centuries has demonstrated an outsized ability to kick China’s ass. That may not actually be the case any longer, but China seems to realize that a) Vietnam clearly doesn’t know that, or doesn’t care, and b) in any incident that escalates into gunfire (which the Vietnamese will probably start), international sentiment towards the South China Sea issue is going to make a noble underdog of the smaller country.

Compared to those three rivals, the Philippines is about as threatening as a bowl of room-temperature tapioca, from the Chinese point of view. The country’s military forces are feeble, and heavy economic dependence on China means the Philippine leadership is extremely diffident when it comes to wielding such weapons as it does have. Furthermore, despite what the people of the Philippines think of themselves, the country does not have much of an international profile, and is unlikely to attract the same level of sympathetic attention as any of the other three rival countries. And all of these factors are aggravated by the Philippines’ apparent inability to act with any semblance of national unity, and not like a banana republic.

Thus for China, the path of least resistance to asserting its sovereign claim over the South China Sea is through the Philippines – or more specifically, through the Spratly Islands. Although it may have been a bit of gamble on China’s part that it would be able to complete its work undisturbed, it paid off. Even if the Philippines wakes up and realizes that the way the other rivals to Chinese ambitions have kept the same thing from happening to them is to display a bit of martial fortitude, it’s too late; China’s new island fortifications probably wouldn’t stand up to the US Seventh Fleet (which, in case anyone here is still wondering, is not coming to your rescue), but they are certainly well-equipped enough to swat away anything the Philippines could throw at them without anyone even breaking a sweat.

So what now? The Duterte administration’s apparent confusion over how to address the situation – vacillating between conciliation and gentle saber-rattling – seems to be borne out of the uncomfortable realization that, as the government in power when the South China Sea was irretrievably lost, it will be blamed for it. But it’s not really Duterte’s fault, and he and his officials are probably doing the best anyone could expect from what few options were left to them by more than a quarter century of foreign policy idiocy. Blame, at any rate, is practically irrelevant at this point; sharing a sea border with China seems to be the new normal for the Philippines, and finding a way to live with that would be a far better use of the time that will inevitably be wasted in otherwise futile chatter and “hearings in aid of legislation.”

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The song remains the same at the BoC

duterte-car-crush-2IN a completely unoriginal display of bureaucratic muscle-flexing, the Bureau of Customs last week drove a bulldozer over a couple dozen confiscated luxury cars at the Port of Manila (similar festivities were also held in Davao and Cebu) to “send a message” to would-be smugglers that their efforts to take advantage of the Philippines’ sieve-like borders are in vain, or at least will be, once BoC head Isidro Lapeña “cleans up” the chronically corrupt agency.

While a fairly impressive collection of vehicles (about P61 million worth, according to the BoC) was destroyed, suspiciously missing from the smash-fest were a few extremely high-end cars, including a McLaren, two Lamborghinis, and a Ferrari. Lapeña later explained that those were part of a batch of 22 cars that are still “under litigation,” which makes sense (the consignees have apparently appealed the BoC’s decision to confiscate them), if only he hadn’t exuberantly announced to everyone before the February 6 activities that they would be included.

That rather silly mistake on Lapeña’s part tended to undermine the whole “message” the exercise intended to send, and it led to suspicions that the BoC was being selective in its enforcement efforts, which in turn implies that the Bureau and certain nefarious parties who know how to work the system would eventually profit from it. That is probably not the case, and Lapeña’s explanation was probably honest; Customs seizures involve a legal process, wherein the consignees or owners of goods deemed illicit do get a chance to make their case.

That Lapeña didn’t think to explain that at least in simple terms beforehand suggests that he will be no more successful at “cleaning up Customs” than any of the other Commissioners that have passed through the Bureau’s revolving door in the past 15 years or so. Explaining how the BoC and its processes work might lead to better public appreciation of whatever legitimate efforts are being applied to improve its performance and credibility. Instead, Lapeña – and by extension, his boss – opted for the same tired “hey, look, we’re actually doing something” display that has been a part of the bureaucratic repertoire for years: Make of show of “getting tough on smuggling,” make it something that looks good on TV and impresses the peons,

furniture
To be fair to the BoC chief, giving every appearance of being mere window-dressing despite desperately wanting to be taken seriously is not a cross he has to bear alone in this administration.

and then it’s back to business as usual, which no one will realize until the next big scandal blows up.

There is nothing wrong with destroying smuggled cars; Duterte’s practical reason for ordering the BoC to dispose of them in spectacular fashion – that auctioning them off risked putting the contraband into the hands of its intended recipients anyway – was sensible. And besides, subjecting that fine collection of automobiles to the Philippines’ badly designed and poorly maintained roads, overcrowded as they are with appallingly bad drivers, would be a mortal affront to the engineering and design skill and effort that went into their manufacture.

But as a signal of sincere intentions to reform the government’s most corrupt agency, the car-crushing event was an utter failure; Lapeña signaled instead that he means to somehow obtain a better result while still following the same futile script as his many predecessors, which means he will just as surely fail. He is already Duterte’s second BoC chief, and almost certainly won’t be the last; Duterte’s immediate predecessor Bobo the Simpleminded had four, and Gloria Arroyo appointed six in her nine years in office.

The record of failure of would-be “reformers” when it comes to the BoC might suggest that the institution is irredeemable, but one would also assume that President Duterte and whoever he appoints to attempt to clean up the mess would not willingly accept that, and the people of the Philippines certainly should not. But if the BoC is going to undergo a meaningful transformation, the leadership is going to have to approach the problem in a radically different way, one that unfortunately could very well impinge on ordinary citizens in some uncomfortable ways.

While P61 million in smuggled automobiles sounds impressive, it pales in comparison to the volume of other technically illicit goods that pour into the country on a daily basis. Automotive parts, for instance, are an enormous market; the vast majority the country’s jeepneys and the so-called “owner type” scratch-built vehicles on the country’s roads are rolling around on engines and transmissions that were bought as scrap elsewhere, assessed Philippine customs duties appropriate for garbage, and then miraculously resurrected as functioning consumer goods. The same is true of virtually every item found in the country’s now-ubiquitous “Japan Surplus” stores. Every tiangge and second-rate mall in the Philippines is filled with a huge variety of other kinds of smuggled goods, some brought in through the many loopholes a good operator knows how to exploit, and some completely clandestine.

Plugging all those leaks, however, is an enormous challenge; the BoC has always been fairly candid about acknowledging the leaks exist, but has consistently and probably truthfully pleaded helplessness to do much to stop them due to shortages in manpower and resources. What is left unsaid is that addressing the larger problem is an unattractive option because of the disruption it would cause; thousands of small businesses would die, and a large amount of affordable consumer goods would disappear. By contrast, focusing instead on the occasional publicity-worthy seizure hurts almost no one.

Draining the Bureau of Custom’s swamp can be done. But so far, even under the carefully created tough-talking atmosphere of the Duterte administration, a Customs chief and management team with the cojones to actually do it has yet to emerge.

And just like that, space is suddenly cool again

Heavy Metal
Who knew? Heavy Metal was not just the most awesome magazine of the late 70s-early 80s, it was PROPHECY.

WE needed that. America needed that. The entire generation of us who grew up in the Apollo Era and have wondered ever since how the stunning technological promise of that age fizzled away into a legacy that was lame and uninspiring by comparison needed that.

Right now (with one particularly gorgeous exception) Elon Musk is the person in the world I’d most like to have dinner with.

Dude shot his frickin’ car into orbit around the Sun.

On Tuesday, Musk’s SpaceX finally launched its long-delayed Falcon Heavy rocket – at the moment, the world’s most powerful launch vehicle – on its first test flight. While the flight was actually not a complete success, it was close enough. More than that, it was an absolute tour de force in showmanship and public relations.

From a commercial standpoint, SpaceX probably doesn’t really need much in the way of sentimental public support; the company launched 18 of its Falcon 9 rockets for various customers last year, and will probably take away the market leadership of Europe’s Arianespace this year. But there are more significant reasons why the uber-cool show it put on this week was important.

Even though NASA has had some spectacular achievements since the brief, exciting years of the Moon landings – it has, among other things, sent a space probe beyond the Solar System, landed on and sent back video from the surface of one of Saturn’s moons, visited Pluto, and positively littered the surface of Mars with little robot cars – it seemed to have lost its ability to inspire. Space became boring. Even the Space Shuttle, which was an amazing piece of technology, was somehow boring. Yes, it was all very well that we were exploring the Solar System, and could routinely send people into space in a reusable ship, but there was no dash, no thrill to it – little to inspire anyone but diehard science buffs to pay rapt attention to what was being done, and accept it as absolutely vital to the betterment of the species that it be done.

It was different in the Apollo Era; the whole endeavor combined a certain hip élan with a sense of urgency, and made ordinary people feel something. It probably helped that there was clear rival in the equally energetic (but far less successful, although they had their moments) Soviet Union, and it certainly helped that the weapon of choice to take on the challenge of space in general and walking all over the Moon like we owned the place in particular was the biggest damn rocket anyone has ever seen. Since then, we’ve been treated to smaller and more economical missions. “Remote exploration.” Oh look, some guy is growing ferns in zero-gravity on the space station. That’s so cute. And so utterly forgettable. Whatever happened to the square-jawed, crewcut studs who’d put down their drink, throw on a jacket, climb into a tin can no bigger than a phone booth on top a 36-story tall monster with all the fires of hell coming out of the back end of it, and go practice golf on the Moon?

They faded away, until Elon Musk and the several hundred screaming geniuses (the sheer joy of the SpaceX staff at the successful launch and flight of the product of their hard work was infectious) who work for him brought their spirit back all at once on Tuesday. The Falcon Heavy’s reusable boosters sticking a perfectly synchronized landing was an almost unbelievable sight, until everyone saw this:

last-starman
One way ticket to midnight.

When people are inspired, riveted by a display of technology such as SpaceX put on the other day, things change for the better. A kid somewhere won’t be able to get the image of “Starman” wheeling through the Universe out of his head, and goes on to become a gifted engineer. Researchers at a university somewhere suddenly realize that building and sending their own probe into space is actually feasible. A poor country with lousy internet service sees getting its own satellite into orbit as a legitimate possibility. Entrepreneurs see the success of another private company in space, and begin thinking of ways to join the party – which eventually leads to many of the challenges of deep-space exploration and colonization being solved.

Elon Musk and SpaceX gave us back a possible future many in my generation felt bureaucracy and budget constraints and ignorant politics had taken away after the last man left the Moon. The future may yet disappoint us; but being able to feel, at least for a little while, that maybe, just maybe, it might not, is a blessing in otherwise dreary times.

In PH politics, Amateur Hour never ends

sparks-amateur-hour-island-9HERE in the Philippines, the one absolutely true thing that can be said of virtually every political controversy is that it clearly demonstrates that no individual or body in any position of authority has any idea what the hell they’re doing, and should probably stop.

A recent dispute that erupted between President Rodrigo Duterte on one side and the Office of the Ombudsman and Supreme Court on the other is a perfect example of just comprehensively dysfunction is institutionalized here.

Last week, Duterte ordered the dismissal of Deputy Ombudsman Arthur Carandang, in response to the latter’s having claimed that he and the Office of the Ombudsman had received records from the Anti-Money Laundering Council showing that the Duterte family had in excess of P1 billion in undisclosed bank deposits. The anti-administration media picked up the story and ran with it, offering as “evidence” a screenshot of an Excel spreadsheet detailing the Duterte clan’s supposed ill-gotten wealth. The AMLC, however, quickly denied ever providing any records to Carandang or the Ombudsman’s office, and Carandang, while stubbornly sticking to his story, failed to produce any documents to back it.

Accordingly, Duterte ordered Carandang fired, which he has authority to do under the Ombudsman Law. The law gives the President the prerogative to remove from office for an impeachable offense any official below the Ombudsman herself, after “due process.”

No one really questioned the “due process” part of the whole issue, but Ombudsman Conchita Carpio-Morales refused to comply with Duterte’s order, declaring it an abuse of power on his part and citing a 2014 Supreme Court ruling that rejected as unconstitutional then-President BS Aquino 3rd’s attempt to fire a Deputy Ombudsman. The Supreme Court sided with Morales by way of spokesman Theodore Te, who sallied forth to declare the 2014 ruling against Aquino “final and executory” and not subject to change, implying that any review of Duterte’s dismissal of Deputy Ombudsman Carandang would have exactly the same result.

Sorting out the stupid

There is an astonishing amount of bad faith, managerial clumsiness, and sheer incompetence involved in this one relatively minor issue, and it is not easy to distill it into a form that might inform better performance in the future. Let’s start with the chief culprit in the entire mess.

In his position as a Deputy Ombudsman, Carandang (who was appointed by Aquino) serves a role similar to that of a special prosecutor; under ordinary circumstances, he would likely be investigating allegations against individual government officials, or a specific issue involving officials or agencies. In that position, he should have little to no public presence whatsoever, as that could prejudice any case he was working on. Even if he was in possession of legitimate documentary evidence suggesting financial misdeeds by the President or his family, to announce that publicly is incredibly stupid, and enough to get him fired; if his story is utter bullshit – as appears to be the case – then it is a malicious political slander that should not only get him fired, but brought up on charges as well.

That his superior Morales would even consider defending him is incredible, but that simply illustrates the degree to which the Office of the Ombudsman, which should be and is intended to be (but not actually designed to be) an apolitical body, has been turned into a partisan tool. For that former president Aquino is largely to blame, although that it did not happen sooner than his regrettable term is attributable more to his predecessors’ forbearance rather than any original thought on his part, because the Ombudsman Law is fundamentally flawed. Giving the president appointive powers over the body that is supposed to serve as the watchdog against government corruption and malfeasance almost guarantees that the party in power will simply use it as cover; Aquino – or rather, those who did his thinking for him – were simply the first to be so crassly obvious about it.

“Forbearance” is not a word that often applies to Duterte, either, but it’s something he should have made a rare exercise in this instance. To be sure, once Carandang went public with his “revelation,” he signed his own pink slip; legitimate information or not, he went well beyond the bounds of propriety that apply to his office, and the law clearly gives Duterte authority to remove him. This is one case, however, in which a little more political sophistication would be in order. For one thing, Carandang’s allegations were directed at Duterte personally, so his reaction, technically justified though it may have been, automatically looks like a heavy-handed use of power for personal ends. That is not to say he should have just ignored the matter. Given the at least hypothetical importance of the Office of the Ombudsman as an institution Carandang’s action was egregious enough to demand a formal response, even though as a matter of practical reality it appears to be nothing more than another utterly retarded attempt by Duterte’s Liberal Party enemies to make him look bad.

What he should have done, given that Aquino appointee and embedded protector Morales has also proven to be a thorn in his side, is put the onus for disciplining her errant deputy on the Ombudsman. Announcing, for instance, that he was not going to exercise his legal authority in this particular case out of respect for the constitutional nature of the Ombudsman’s office, but that he was rather going to ask her to rule on a formal complaint against Carandang would have completely handcuffed Morales and probably forced Carandang out within hours. Unless she is a complete idiot, she would have no choice but to act, since the alternative would be her facing impeachment on a virtually ironclad charge of dereliction of duty.

And finally there is the Supreme Court, which through its excessively talkative spokesman Ted Te has tried to preemptively rule on the inevitable challenge to Duterte’s order. Contrary to Te’s baffling assertion that the SC’s previous ruling against Aquino in a similar case somehow constitutes Scripture, the Court did not invalidate the President’s authority under the Ombudsman Law. While the Court did rule Aquino’s action unconstitutional in 2014, it did not find the law itself was unconstitutional; only his application of it. Given the circumstances of the Carandang case, it would logically rule differently this time, although like every other institution in the country it, too, has been terminally infected by political partisanship, so the rational result may not be the eventual outcome.

Here again is another example of the lack of professional depth and grace that characterizes Philippine political institutions. Anywhere else, the principle that a court speaks through its decisions is taken for granted; if the Supreme Court even needs a spokesperson at all, it is only for mundane necessities such as announcing the issuance of decisions, schedules, or personnel changes. But this country, which spent four centuries under a king and a couple decades under a dictator, has yet to learn the difference between the words “personality” and “institution,” so the Court’s dispatching a blabbermouth to discuss its thoughts on television seems completely normal. As long as that is so, the Philippines will continue to be baffled as to why the results of its political life are so unsatisfying.

Will cryptocurrency survive its apocalypse?

FOR the past six weeks, we have been witnessing the steady destruction of the dream of cryptocurrency, and perhaps the only reason I and many other like-minded minor prophets have been circumspect in offering a well-deserved “I told you so” is that the nature of the crypto collapse is in some ways as novel as its meteoric rise.

Although the collapse has not – fortunately – rattled the world economy as we feared it might, that the crash is in progress is unquestionable. Bitcoin has lost nearly half its value since its mid-December peak; there have been signs of life, but these have been at best a series of dead cat bounces in a trend that is distinctly and steeply downward. Every other indicator is pointing in the same grim direction as well; daily transaction volumes have dropped to less than half their peak levels, market capitalization has declined by about one-third (it is propped up to some extent for Bitcoin and most other cryptocurrencies by the constant generation of new coins), and in a particularly telling sign, the price inflation for most cryptos has leveled off, indicating that demand has stagnated.

So far, the crash has not been driven by a single enormous killing blow to the market, but a near-continuous series of unfortunate events. Some have been initiated by government regulators; although the authorities are still clearly trying to wrap their heads around the concept of cryptocurrency – the BSP here, for example, has yet to produce even a general cogent policy outlook towards it – they have obviously decided it is something that should be curbed one way or another. South Korea, the world’s biggest crypto market, has eliminated anonymous trading (wiping out a fundamental part of cryptocurrency’s value proposition), prohibited trading by minors (which puts a major dent in the domestic market), and banned trading by foreigners. China has already taken steps to restrict trading, and Russia has indicated it is also considering similar moves, introducing legislation this week that provides for a broad range of regulations. In the US, the SEC has stopped approvals of cryptocurrency funds, and closed a loophole with the recent tax overhaul that will now make all cryptocurrency transactions taxable.

And of course, there have been the scandals. Last week, Japan’s largest (or so they say) cryptocurrency exchange, Coincheck, lost 58 billion yen (about $530 million) in NEM coins to hackers, largely due to carelessness; the coins were stored in a so-called “hot wallet,” which is connected to the internet, rather than in an isolated “cold wallet.” The company, which said it may need to seek financial assistance to cover the losses, said it would refund about $400 million to investors.

Concerns have also been growing since the middle of last year about the Tether cryptocurrency managed by the Bitfinex exchange. Tether was intended as a digital bridge between fiat and cryptocurrencies; supposedly backed on a near one-to-one basis by the US dollar, the value of Tether has soared (it gained about $100 million in July-August last year), leading many to assume, probably correctly, that it has been grossly inflated. So far the company has refused to produce a long-promised audit, and recently cut ties with its auditor. The major problem with Tether, as analysts have discovered, is that it definitely moves the Bitcoin price, as well as other major cryptos; one researcher was able to connect about half of Bitcoin’s price gains to the issuance of new Tethers. It has only been due to the general regulatory confusion (Bitfinex is based in the UK) that the exchange and its partners have been able to keep outsiders from looking in its books. Eventually it will lose that battle, and when it does, if the suspicions are correct, the negative impact on Bitcoin and other crypto prices, which are already reeling from other bad news, is estimated to be anywhere from 30 to 80 percent.

Other scandals have been more straightforward scams, something critics of cryptocurrencies have repeatedly warned their loosely controlled nature encourages. Earlier this month, a crypto called Bitconnect became virtually worthless overnight after it shut down its platform; thousands of investors lost everything in what was clearly a garden-variety Ponzi scheme. Even the relatively limited market in the Philippines has not been immune to crypto-shenanigans. Skeezy local businessman Joseph Calata apparently tried to use it to make an end-run around being delisted (for non-disclosure of material information) from the Philippine Stock Exchange, prompting the SEC to step in and order him to cease and desist; but not before he managed to sell about P165 million worth of the dubious “Krops” digital token.

Where regulators have neglected to set guidelines, it seems the financial industry itself  is exercising a rare self-policing. After initially showing a great deal of interest in digital currency, the banking industry has clearly changed its view; Nordea, Scandinavia’s biggest banking group, recently banned all 31,000 of its employees from dealing in cryptocurrencies. Other big banks such as Bank of America Merrill Lynch and Deutschebank have also imposed various degrees of restrictions to limit their exposure to what Nordea’s CEO scorns as “an absurd joke” of an asset class.

The conclusion to all of this seems to be that reality is now demonstrating what many have suspected all along: That as “decentralized currency” Bitcoin and all the cryptocurrencies that followed it represent the wrong answer to a question no one was really asking in the first place, and as standalone securities, they do not in their current guise represent any more meaningful value than lottery tickets, and perhaps even less. Even so, there is reason to be encouraged by their demise, because in a sense it removes a major distraction from the potential of the underlying blockchain technology.

Some possible applications are already being explored. Initial coin offerings, or ICOs, while having been unhelpfully swept up in the crypto mania to this point, could very well offer a sound alternative to traditional stocks and bonds for companies and investors, with some further refinement. Ripple, whose coin now rivals Bitcoin in market value, is putting most of its efforts into using blockchain technology to develop a more secure cross-border payment transfer system for banks and businesses. And finally Maersk, the world’s largest shipping company, recently signed an agreement with IBM for development of a blockchain-based system that could be applied to tracking shipping containers; the company moves about 12 million containers per year, so if it can make this work, it could potentially revolutionize the entire industry.

This is how new technology works: Sometimes specific examples of it turn out to be duds, but with enough imagination and effort, the underlying science finds applications that can change the world. The cryptocurrency “revolution” was started and has been driven up to this point by the same sort of perspective that leads one to study botany to learn how to grow better weed. Its current crash is a sign that the concept is maturing; as uncomfortable as current events may be for the millions who thought they’d get rich the easy way from it, the rest of us should probably rejoice.

Justifiable Mediacide?

THE storm of protest over the Securities and Exchange Commission’s (SEC) shutdown of the soon-to-be (pending the outcome of the de rigeur desperate court appeals) former online news site Rappler rages on in the local social and conventional media, and probably will continue to do so for at least a few more days, but there is little sign it will change the outcome one whit. Nonetheless, there is some value in discussing it, if only in the probably over-optimistic hope that all concerned — media and the public alike — will learn something from it.
The most strident voices decrying the government’s move are those howling that President Rodrigo Duterte is attempting to stifle criticism by curtailing press freedom; since these voices emanate from heads who have connections to various foreign news outlets, this is the general tone of what is being reported overseas.

This argument, although largely an appeal to emotion, is also basically correct. Duterte has made no bones about his personal irritation towards unfavorable media coverage, complaining about it in much the same fashion as his immediate predecessor. The SEC, both formally as part of its January 11 ruling against Rappler and in subsequent public comments, has confirmed that the investigation into Rappler’s ownership structure began with a request from Solicitor General Jose Calida, a solicitation that, while not actually improper, was a bit out of the normal scope of the SG’s job.

Anyone who spends any amount of time in the media jungle in this country quickly learns how this game is played. Officials and institutions who are the targets of unfavorable reporting or opinion do not like being targeted, and will respond in whatever way they think necessary and feasible to stop or discredit the unwanted attention. In my four-plus years of wallowing in this bog, I faced a serious backlash from various targets probably half a dozen times, and discovered that the formula I carried into the effort when I started — make sure I’m right, make sure I have evidence, and make sure the manner in which I conduct myself as a journalist is honest — was sufficient protection.

For all their experience in this media ecosystem, the people at Rappler were surprisingly naive about the way things work, and left themselves wide open to retaliation. As many observers have noted, openly contriving to hide the illegal level of foreign ownership of the organization was pure management stupidity, because it handed the government a perfectly legitimate reason to shut them down. Any appeal to the sanctity of “press freedom” thus has no credibility; claiming the protection of the law while brazenly flouting it in another respect in order to carry out the activity to be protected is the height of irrational arrogance.

Perhaps dimly sensing that disconnect, the Rappler advocacy has raised a couple of new arguments acknowledging that perhaps the SEC had a point with its ruling. The first, which was aired by Maria Ressa herself, is that the action taken against Rappler now, after having let the organization create and maintain its unusual ownership arrangement for an extended period of time, amounts to persecution. While there is a legitimate reason to question why the SEC did not do its job sooner and apparently had to be prodded into action by the Solicitor General, that regulatory failure and Rappler’s violating the regulations are mutually exclusive issues; lack of enforcement of the law does not confer the privilege to violate it.

The second argument is that the SEC’s penalty — revocation of the license to operate of Rappler and its parent company Rappler Holdings Corp. — is disproportionate to the violation, particularly in light of the importance of “press freedom.” This argument is specious in several respects. As I understand the SEC’s function and powers (any legal minds who are better-informed are by all means welcome to jump in here), the Commission does have a considerable amount of latitude in levying penalties on erring businesses, but there are some prescriptions. An intentional violation of the law or securities regulations is grounds for, at the very least, revocation of the business’s license; the SEC has the prerogative to impose a lesser penalty, but then must justify — in a manner that will hold up in court, if it comes to that — why some degree of leniency is appropriate. That is virtually impossible for the SEC to do in cases where the erring firm does not acknowledge its culpability and express a willingness to take necessary steps to bring itself back into compliance, which is the case here. Even now, more than a year after the issue became the subject of an investigation — ample time, one would think, to try to work out a more satisfying conclusion — Rappler is still insisting it did nothing wrong, or at least nothing that others haven’t also been allowed to do.

As far as the appeal to “press freedom” as a mitigating factor, it is one that the SEC can completely ignore, and in fact should, since making a judgment of that sort is well beyond its mandate. Determining whether the constitutional guarantee of “press freedom” has been in any way violated by the SEC’s carrying out its regulatory and bureaucratic responsibilities falls within the purview of the courts; if the SEC were to base its decision on that in any way, it would be overstepping its authority.

Even so, none of this might have happened, or might not have come to the drastic conclusion it did, if Rappler itself had showed any understanding and respect for the “press freedom” it is now grasping at for its salvation. From reporting an inflated figure of the number of people killed in Duterte’s “drug war” — and then stubbornly sticking to the figure without offering any supporting data, even after several other media outlets pointed out it was the result of a basic math error — to claiming, again without any evidence whatsoever, that the tragic attack at the Resorts World casino was the work of ISIS terrorists, Rappler’s output has too often been dubious.

Of course, media freedom for responsible and honest practitioners is vital for a healthy, productive society, and it ought to be vigorously defended. The Duterte administration should be warned that having taken the action against Rappler, no matter how justified, any appearance of a broader anti-media campaign will be instantly detected and fiercely challenged. But provided its elimination is not actually the start of a trend of institutional persecution of the media, given the poor example Rappler set both as a journalistic entity and as business, media freedom might actually be better served by its removal.

Rappler’s Troubling Demise

good jobON Monday, the Securities and Exchange Commission (SEC) lowered the boom on the controversial online news organization Rappler, revoking the license to operate of both the news site and its parent company Rappler Holdings Corp. for violations of the constitutional proscription against foreign ownership of Philippine media businesses.

In its 29-page ruling dated January 11, the SEC said that Rappler had sought to circumvent the ownership restrictions by issuing nearly 20 million Philippine Depositary Receipts (PDRs) to eBay founder Pierre Omidyar and another foreign entity, North Base Media, effectively giving the outsiders control of the “social network news” organization.

Rappler has argued, and will undoubtedly argue again in its inevitable appeal to the courts that a PDR does not confer any ownership, but as the SEC ruling points out, ownership privileges (such as the requirement that Rappler confer with the PDR holders on certain management decisions) were specifically attached to the arrangement. Even if they were not, under International Accounting Standards (it’s IAS 32.16, if any of you playing along at home feel like looking it up), PDRs are considered equity instruments.

The SEC decision was the result of a lengthy investigation begun in December 2016 at the behest of Solicitor General Jose Calida. Although Calida of course has not said as much, it is widely assumed that his prodding the SEC to look into Rappler’s ownership arrangement was an official reaction to Rappler’s aggressive and at times reckless criticism of the Duterte administration, as well as its equally unapologetic favorable bias towards the discredited Liberal Party of former president BS Aquino 3rd.

Reactions to the SEC decision have been predictable; the media community has largely joined the opposition in condemning the government’s move as an attempt to stifle press freedom, while Duterte supporters have been equally obnoxious in gloating over Rappler and its annoying chief Maria Ressa being taken down a couple pegs.

In a Facebook post on Monday evening, respected Manila Standard columnist and radio host Jojo Robles made a sensible observation about the controversy:

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Therein lies the rub; if left alone, Rappler would have almost certainly folded within a year or two. Never profitable, the badly-managed Ressa brainchild was evidently struggling for fresh funding, even resorting to soliciting public donations in recent months, an effort that earned an embarrassingly lukewarm response.

Most of its failure as a going concern can probably be laid at the feet of Ressa herself. At one time one of the noteworthy media personalities in the country, Ressa left ABS-CBN under a cloud of controversy and then turned what was a novel, risky, but potentially game-changing business model into a personal pulpit. Rather than creating a new kind of news organization, she and a few like-minded partners simply created a sophisticated collective blog.

There is actually nothing wrong with that, but it puts one into an entirely different ecosystem than mainstream media, which Ressa, for all her aspirational crowing about “taking back the social media,” obviously never understood. Unlike the mainstream media, where one can get by, at least in a financial sense, on reputation and access, social media success or failure is entirely dependent on content. On the one hand, it can be liberating; the pretension of objectivity the mainstream stubbornly clings to as though anyone is still fooled by it can be discarded. On the other hand, it holds one to a paradoxically higher critical and creative standard; bias alone does not confer credibility beyond a narrow, unthinking audience.

That is where Ressa and Co. fell apart. Rappler could have been a smart, consequential voice of dissent, the sort those who it opposes are obliged to respect and respond to thoughtfully, but the organization ruined its opportunity with sloppy work. That haphazard approach apparently applied to its management as well, and in reading the SEC decision, the overwhelming impression is that never has the old saying “those who live in glass houses shouldn’t throw stones” had a better real-life example.

Nevertheless, the end of Rappler should be regarded not with smug approval but with alarm, no matter what one’s political leanings may be. The government may say that it is simply enforcing the law, but unless it continues beyond Rappler to legally hold to account the many Philippine businesses – media and otherwise – who openly flout foreign ownership restrictions through the use of the PDR loophole, then it will be very hard to believe that its move against Rappler is anything but a heavy-handed silencing of dissent, regardless of how inept and annoying that dissent may have been.

Beyond that, the Rappler controversy highlights a couple of larger issues the country would do well to discuss and resolve, beginning with the question of to what degree foreign ownership restrictions are actually a benefit in an increasingly borderless world. With respect to the country’s media, the fact that it can spawn something as craptastic as Rappler in the first place suggests the answer might be no.