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Good governance is good economics

By Cesar V. Purisima. Philippine Daily Inquirer

4:46 am | Wednesday, May 21st, 2014
As policymakers and business leaders gather in Manila
this week for the World Economic Forum on East Asia,
the talk will inevitably turn to growth.
Sustaining economic growth has become harder for
Asian policymakers as interest rates in the developed
world rise on signs of recovery. After years of easy
credit, emerging markets will have to compete for funds
to fuel development, and woo investors with
fundamentals and structural reforms.
Reforms have the power to alter a countrys economic
destiny. This is why they inspire confidence from
markets, businesses and citizens. To see how reforms
can change perception and reality, one may look at the
Since assuming office in 2010, President Aquino has
turned around a country from being the sick man of
Asia to an economic comeback story. He undertook
reforms that economists have been urging and politicians
shirking (from). These include the Sin Tax Law that
raised the levy on alcohol and tobacco products, and
spurred the revamp of commonplace procedures.Our
reforms have been rewarded.
Rating upgrade
Gross domestic product grew by 7.2 percent in 2013, the
fastest in the Asean (Association of Southeast Asian
Nations) region, notwithstanding natural calamities,
including Super Typhoon Yolanda (international name:
Haiyan) that is said to be one of the strongest ever
Moreover, the Philippines received investment grades
from Fitch, Standard & Poors and Moodys in 2013,
lowering the countrys borrowing costs and allowing us
to redirect funds for social services and infrastructure.
The Philippines earned another rating upgrade this
month from S&P, which showed the reforms will endure
beyond President Aquinos term.
A powerful force
Our efforts have boosted the countrys ranks in global
surveys. Its rank jumped 26 places in the World
Economic Forums Global Competitiveness Index since
2010, and 30 places in the International Finance
Corp.s Doing Business Index in 2013.
Despite our gains, much remains to be done both at the
national and Asean levels. In the remaining years of our
term, the Aquino administration will intensify efforts at
reform by opening up more sectors to foreign
investments, rationalizing tax incentives and
institutionalizing transparency.
Those who doubt our commitment should take note of
the unpopular enactment of the reproductive health bill
and the amendment of the Sin Tax Law.
Across Asean, we must integrate our economies in a way
that simplifies rules and lowers the cost of doing
business. With our young populations and growing
economies, we have the potential to become a powerful
force for liberalization. However, we need reforms.
Without those, growth is fleeting. For too long, many
politicians have avoided unpopular reforms. But our
citizens deserve better.
Reward for telling truth
The Aquino administrations electoral success and
approval ratings are proof that voters listen to, and
reward, politicians who tell the truth. This is as true in
the rest of the Asean as it is in the Philippines.
The good news is that reforms are not rocket science.
We are well-aware what needs to be done. Good
governance is good economics. Just look at the


Philippine Daily Inquirer
12:12 am | Tuesday, June 10th, 2014

Calls to lower the income tax rates on ordinary workers
have again been sounded in Congress, all seeking to
unburden those who have to give as much as a third of
their salaries to the government.
Rep. Rodrigo Abellanosa (2nd district, Cebu City) filed
last week House Bill No. 4372, which seeks to
drastically reduce the income tax of individuals to 15
percent from the current 32 percent. He argued that his
proposal would translate to higher take-home pay for
income earners that, in turn, would help them cope with
the ever-increasing costs of living. Eventually, this
would make local employment more attractive and help
curb the migration of Filipino workers to seek
opportunities abroad.
Abellanosas bill is the third such measure filed in the
House this year. Last March, Rep. Magtanggol
Gunigundo (2nd district, Valenzuela City) filed HB
4099, which seeks to reduce individual and corporate
income tax rates to 15 percent from the current 32
percent and 30 percent, respectively. Gunigundo said his
proposal would reduce the number of Filipinos who do
not pay taxes as lower tax rates would mean higher
compliance levels. He cited another advantage of having
a 15-percent income tax rate: the stimulating effect it
would have on the economy, by providing individual
taxpayers with more after-tax or disposable income. This
income, he said, could either be saved or spent on
services or goods subject to the value-added tax, which
could somehow offset the revenue loss that the
government would have to shoulder from the lower
income tax rate.

Last April, Rep. Angelina Tan (4th district, Quezon)
filed HB 4278, which also seeks to reduce the income
tax rate on individuals to 15 percent. She argued that
aside from helping the workforce cope with inflation and
the higher costs of living, it was necessary so the
Philippines can fully benefit from the integration of the
economies of the Association of Southeast Asian
Nations (Asean) in 2015. In the Senate, Sen. Juan
Edgardo Angara is pushing for the passage of a less
drastic bill that seeks to reduce the individual income tax
rate to 25 percent by 2017. He suggested that the
reduction be spread over a three-year period starting in
2015, to soften the revenue impact of the lower tax rates.
As expected, the Bureau of Internal Revenue is against
all these bills. At one House hearing, finance officials
argued that the government would lose much-needed
revenue if the bills would be passed. The BIR also
reiterated during the hearing that it would oppose any
measure that would result in revenue loss. But there are
arguments to be made for lowering the tax rates on
ordinary workers. For one, as Angara noted, the
Philippines has the third-highest individual income tax
rate in Asean (after Thailands 37 percent and Vietnams
35 percent). The highest tax rate of Cambodia is 20
percent; Burma (Myanmar), 20 percent; Singapore, 20
percent; Laos, 24 percent; Malaysia, 26 percent, and
Indonesia, 30 percent.
Perhaps a more important reason for giving ordinary
taxpayers a tax break now is so the government can help
the workforce keep up with the ever-increasing costs of
basic goods and services. Inflation in May, as reported
last week by the Philippine Statistics Authority, rose to
its highest in 30 months. The prices of essential goods
and services have constantly been on the rise, yet there
has been no significant increase in wages in the past
several years. Reducing the income tax rates on
individuals is one sure way of helping ordinary workers
keep up with the costs of living.
Its also time for Congress to revisit tax rates
considering that the last time the legislature reviewed
these was in 1977. Since then, consumer prices have
significantly increased, eroding the earnings of
taxpayers, particularly salaried workers.
The BIR has estimated that it stood to lose about P34
billion if lower tax rates were to be implemented until
2017. Gunigundo suggested another way of looking at it:
as a P34-billion gain for taxpayers that would translate
to additional disposable income of P34 billion for
salaried workers.
And, of course, all these proposals to provide relief to an
overtaxed working class would be less of an issue today
if only our taxes did not end up lining the pockets of
corrupt officials.

Aquino: Japan vows better study on
Metro Manila subway system

By Louis Bacani ( | Updated June 25, 2014
- 3:07pm

MANILA, Philippines Japan has promised to
conduct a more comprehensive study on the
feasibility of building a subway system in Metro
Manila, President Benigno Aquino III said late
Tuesday night.
In his arrival statement after his visit in Japan,
Aquino said he thanked Prime Minister Shinzo Abe
for the studies conducted by the Japan International
Cooperation Agency (JICA) that aim to improve the
transportation systems in Metro Manila and in
nearby areas.
"Dagdag pa rito, nangako ang Japan na gumawa ng
mas detalyadong pag-aaral para tukuyin kung
posible ang isang subway system para sa kalakhang
Maynila," Aquino said.
"Naniniwala po tayo na ang matibay na
imprastruktura ay sandigan ng mas malakas na
ekonomiya," the President also said.
Aquino's statement comes after the JICA released
earlier this month a transport infrastructure roadmap
for Metro Manila, Bulacan, Rizal, Cavite and
Laguna, as requested by the National Economic
Development Authority
The roadmap includes preliminary studies for a
subway project in the said areas and for a new
project on the Ninoy Aquino International Airport
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"We will consider the possibility of further
assistance for the Subway and New NAIA, which
we believe Japanese technologies can be utilized,"
JICA Philippines Chief Representative Noriaki
Niwa said.
The Department of Transportation and
Communications (DOTC) unveiled last March
major railway projects including the proposed
P135-billion project to build an underground mass
rail service between the Makati central business
district and Pasay City.
The project is a proposed 20-kilometer loop that
would consist 16 kilometers of tunnel and four
kilometers of elevated railway especially in the
reclaimed area in Pasay City.
It would consist of 11 stations consisting of five
underground, four interchanges and two elevated.

Price of garlic hits P400 per kilo

( | Updated June 26, 2014 - 12:45pm

MANILA, Philippines - The price of garlic
continues to soar, hitting up to P400 per kilo on
The culinary staple hit P400 per kilo at the
Commonwealth Market in Quezon City, while
prices in other markets range from P200 to P300 per
Producers earlier said they are planning to increase
production of garlic to fight against the sharp
increase in prices.
Agriculture Secretary Alcala said the state agency is
investigating the possibility of hoarding which
drives the prices up.
Other commodities saw their prices rising as well,
with NFA rice adding up to P4 per kilo.
The price of chicken added up to P30 per kilo while
the price of pork cost up to P200 per kilo. The price
of fish, meanwhile, remained unchanged.

Palace: Gains vs smuggling resulted in
price surge

By Delon Porcalla (The Philippine Star) | Updated June
20, 2014 - 12:00am

MANILA, Philippines - Malacaang believes the
governments unrelenting efforts against smuggling and
the congestion of shipping containers in the port of
Manila led to the surge in prices of basic commodities.
Presidential Communications Operations Office
Secretary Herminio Coloma Jr. yesterday told reporters
this was the finding of the National Price Coordinating
Council (NPCC) of the Department of Trade and
Industry (DTI), which has been monitoring the prices of
basic commodities.
This was also partly the reason why pork prices have
increased as well, he said.As to poultry products, he said
this was due to the summer season and the Palace
expects prices to stabilize in a months time.
President Aquino directed concerned Cabinet members
yesterday to focus on providing a stable supply of prime
commodities in the market to protect the interest of
Aquino issued the directive in the aftermath of the surge
in prices of rice, garlic, ginger, pork, chicken and milk,
among others.
The NPCC convened Wednesday seeking to provide a
solution to the problem.Coloma said the NPCC directed
the National Food Authority (NFA) to double its efforts
in going after unscrupulous businessmen creating an
artificial shortage of rice even if there is more than
enough supply in the market.
The NPCC is made up of the DTI and the departments of
Agriculture, Health, Environment and Natural
Resources, Interior and Local Government,
Transportation and Communications, Justice and
Energy, the National Economic and Development
Authority and representatives of the consumers,
agricultural producers, trading and manufacturing
Mass action: Militant workers will hold a mass action
today to dramatize their protest against the governments
inaction to bring down the prices of essential
commodities.Workers belonging to Kilusang Mayo Uno
(KMU) will stage a picket at the Nepa-Q Mart in
Quezon City.
Members of the Koalisyon ng Progresibo ng
Makabayang Manggagawa at Mamamayan (KPMM)
also aired frustration over the governments
unpreparedness for the El Nio phenomenon and its
impact on the prices of agricultural products.
KPMM spokesman Sammy Malunes alleged that Aquino
has done essentially nothing to help Filipinos address the
rising prices of basic products.
Food security is under serious threat, and food prices
including rice prices will go on reaching for the sky, but
Aquino and his government remain essentially
unprepared, he said.Malunes alleged that some
members of the Aquino administration are involved in
rice smuggling and cartel operations.
It is the height of irony that while the Philippines is an
agricultural country, a rice-producing country, it
continues to import rice at exorbitant prices. On the
other hand, locally grown rice is being left to rot in the
warehouses of rice cartels who bought the rice from
impoverished farmers at unjust and insultingly low
prices, he said.
House inquiry
Meanwhile, the House of Representatives will
investigate the continued smuggling of rice into the
country amid the increase in retail prices of the staple.
The inquiry will also cover rice importation. A
resolution, authored by Cagayan de Oro City Rep. Rufus
Rodriguez, prompted the inquiry. Separately, party-list
group Bayan Muna called for a probe on rice
In his resolution, Rodriguez said the Department of
Agriculture and the NFA claim that under the law, the
NFA is the only entity allowed to import rice into the
country, and that all rice import shipments by any
individual or corporation are illegal unless covered by
NFA permits.
In view of this contention, he said the NFA has asked the
Bureau of Customs to file smuggling charges against
five importers that recently brought in a total of 243,000
bags of rice through the port of Davao City. With Jess
Diaz, Mayen Jaymalin

PH now on Britains list of priority

By Amy R. RemoPhilippine Daily Inquirer
9:27 am | Thursday, June 19th, 2014

MANILA, PhilippinesThe United Kingdom has
placed the Philippines on its list of priority
markets for trading and investments, as it considers
the country to be a strategic gateway for British
companies hoping to gain entry or expand
operations in Southeast Asia.
UK Trade Envoy to the Philippines George
Freeman MP said in a briefing on Wednesday that,
due to the countrys strong economic growth, good
governance and skilled English-speaking labor
force, the Philippines could serve as a
natural launchpad for British companies where
they could set up their regional headquarters.
The Philippines is a major trading partner,
Freeman said. We want to bring more companies
to the Philippine economy as it develops.
The UK move to further diversify its markets
outside of Europe was due to the slow growth and
the banking crisis on the continent, he said. The UK
will continue its trade with Europe, but the
emerging countriesone of which is the
Philippinespresent huge opportunities in the
fields of agriculture, energy, medicine, professional
services and luxury goods.
On his first visit to the Philippines, Freeman was
accompanied by five British energy companies
seeking investment opportunities and partnerships
with local players.
Proof of the UKs strong confidence in the local
economy is the establishment of a new British
Business Centre, which will be managed by the
British Chamber of Commerce in the Philippines.
The facility in particular will help small and
medium sized enterprises (SMEs) in the UK to
expand their operations in emerging countries like
the Philippines. Big British corporations may
establish their positions in the Philippines more
quickly than SMEs, which make up 90 percent of
registered businesses in the UK, Freeman said.
There are over 200 British firms operating in the
country. Lord Stephen Green of Hurstpierpoint,
former UK Minister of State for Trade and
Investment, earlier said that they would double
trade and investment links between the UK and the
Philippines in five years time.


Philippine Daily Inquirer
12:30 am | Tuesday, March 25th, 2014

If theres one thing that the Aquino administration can
be proud of, its the remarkable economic growth of 7.2
percent and 6.8 percent in 2012 and 2013, respectively.
But if theres one thing that should keep it from
bragging, its the fact that this prosperity has yet to be
felt by those who need it most.
The inroads in terms of economic development cannot
be denied. The Philippines got three investment-grade
ratings in 2013 because of the governments success in
keeping its fiscal house in order. Then there was the
passage of higher taxes on alcohol and tobacco products,
despite stiff lobbying. Another major accomplishment
was in improving the ease of doing business in the
country by cutting not only red tape but also the time
needed for entrepreneurs to set up their businesses. The
Philippines was the most improved last year in the
World Banks annual Ease of Doing Business report,
jumping 30 slots to 103rd place.
Still, much needs to be done. Unemployment remained
high at 7.5 percent as of Januaryjust marginally better
than the 8 percent at the end of the previous
administration. President Aquinos flagship public-
private partnership infrastructure program launched in
2010 is another disappointment. Only one projecta 4-
kilometer, P2-billion toll roadhas been successfully
bid out (aside from the classroom projects that Congress
is threatening to investigate). Bigger ones such as the
P17.5-billion redevelopment of the Mactan Cebu
International Airport and the P60-billion Light Rail
Transit line 1 extension are mired in legal and technical
The Presidents vaunted influence on Congress did not
seem to work as far as key economic measures were
concerned. In 2010, he announced in his first State of
the Nation Address (Sona) a package of economic
reforms, including the rationalization of fiscal
incentives, amendments to the Build-Operate-Transfer
Law, and passage of legislation on antitrust and national
land use. Today, the bills rationalizing fiscal incentives
and on land use remain pending in Congress. Proposed
amendments to the BOT Law are also pending, and
several versions of the antitrust bill, aimed at restraining
monopolies, are still languishing.
In his 2011 Sona, the President touched on the energy
sector, boasting that the construction of a new power
plant for the Luzon grid could lead to lower power rates
by 2014. This did not happen. In fact, Manila Electric
Co. sought controversial rate hikes for December 2013
and January 2014. The furor generated by this move led
to investigations and the eventual recomputation of the
rate increases.
In 2012, infrastructure was part of the Presidents Sona:
new airports in Bohol, Legazpi and Laguindinganall
to be completed by the end of his term. He also promised
the repair of structural defects of Naia Terminal 3 by
2013, as well as the completion of the LRT Line 1
Cavite extension project and two new NLEx-SLEx
connector roads by 2015. While the upgraded airport in
Laguindingan opened in 2013, the completion of new
airports in Legazpi and Bohol is not expected until 2017.
Naia 3s original contractor, Japans Takenaka, started
work to remedy the structural defects in the facility only
last year; work on San Miguels portion of the connector
road began just this year; and Metro Pacific Investments
Corp. has yet to start work on its own connector road.
Among industries, it is in the mining sector where
government action has been missing. In 2010, the
government extracted P145 billion in income from
mining but only P13.4 billion (or 9 percent) went to the
national treasury. These natural resources are yours. It
shouldnt happen that all thats left to you is a tip after
theyre extracted, the President told the Filipino people
in his Sona in 2012. But to date, not one lawmaker has
filed a bill that will change the tax regime for the local
mining industry.
The President just needs to look back at the promises
that he made to the nation over the last four years and
direct his economic managers and allies in Congress to
work more than double-time to translate those promises
into action. They should focus on job-generating and
poverty-alleviating projects, mostly in infrastructure,
agriculture, mining and tourism.
The investment-grade ratings and all the other statistics
touted as proof of a resurgent economy mean nothing if
a quarter of the population remains mired in poverty and
millions are without jobs.

Debt relief

Philippine Daily Inquirer
12:12 am | Tuesday, April 22nd, 2014

Debt condonation is something a government avoids
because of its repercussions on a countrys financial and
economic wellbeing. A country that expresses even the
slightest hint of a request for debt condonation worries
the international lending community.
However, an appeal two weeks ago by an independent
expert tasked by the United Nations to monitor the
effects of foreign debt on the enjoyment of human rights
is worth looking into. Cephas Lumina, the UN
independent expert, had voiced concern that the
Philippines post-typhoon reconstruction efforts could be
undermined by its heavy debt load. Independent experts
are not UN staff and are appointed by the UN Human
Rights Council with an honorary title to examine and
report back on a countrys situation.
While noting the international support given the
Philippines in the aftermath of Supertyphoon Yolanda,
Lumina pointed out that the country needed about $22
million a day to service its foreign debts. While around
$3 billion has left the country to serve its debt since the
typhoon struck [in November 2013], the country has
received so far only $417 million [from] international
and private donors, [or] about half of the total relief
requested, the expert added. To date, the World Bank
has provided a $500-million support loan and a $480-
million loan for rebuilding infrastructure and social
services, and the Asian Development Bank has made
available nearly $900 million in assistance. But these
were mostly in the form of new loans, with only $23
million given in the form of grants. Loans for
reconstruction cannot generate returns to allow the debt
to be paid as these are spent only to rebuild damaged
This led to Luminas appeal to international creditors to
cancel part of the Philippines debt and provide aid
instead of new loans. The expert highlighted the
importance of canceling debt to ensure the Philippines
recovery from the devastation caused by Yolanda.
Believed to be the most powerful storm ever to hit land,
it displaced more than four million people, destroyed
half a million houses, and had a catastrophic impact on
the regions infrastructure, hospitals, schools and public
services. The cost of damage was estimated at $12
A plea for a cancellation of part of the Philippines
foreign debt was actually made in December 2013, when
the Jubilee Debt Campaign, the local Freedom from
Debt Coalition, the Jubilee South (Asia) and the
Christian Aid launched a petition addressed to official
lenders. These nongovernment organizations had earlier
launched the global jubilee movement to cancel
developing-country debts, resulting in the condonation
of $130 billion worth of obligations mainly of poor
African countries. The Philippines was excluded from
the scheme because it was deemed too rich for debt
relief by the International Monetary Fund and the World
In their petition, the NGOs noted that the impact of a
burgeoning foreign debt burden had been devastating for
the Filipino people, with public services such as health
and education persistently getting inadequate funding.
They argued that while an estimated 16 million Filipinos
were malnourished and living in poverty, more than 20
percent of government revenue, or almost as much as
funding for health and education combined, was being
spent annually for foreign debt service.
This was what Sarah-Jayne Clifton, director of the
Jubilee Debt Campaign, had to say: The
Philippinesurgently needs funding for relief and
reconstruction efforts, as well as to adapt to the
unavoidable impacts of climate change and support
communities who live in areas that are beyond
adaptation. International lenders should put life before
debt and cancel the Philippines foreign debt obligations
as a matter of urgency.
While the Philippines is classified as a lower-middle-
income country and is disqualified from international
debt relief programs, there should be exemptions such as
when extreme disasters wreak havoc. Such was the case
when Yolanda ravaged the Visayas late last year. The
fact that a fourth of the Philippine population lives in
povertya figure enlarged by people displaced by
Yolandais also worth considering. Add to this the fact
that for 2014 alone, the Philippines has to pay $8.8
billion in debt service, money that could otherwise be
spent on basic social services.

Build back better

Philippine Daily Inquirer
12:42 am | Tuesday, June 24th, 2014

The Aquino administration is set to submit to Congress
next month its national budget proposal for 2015. At
P2.6 trillion, it is 15-percent higher than last years
P2.26 trillion. According to Budget Secretary Florencio
Abad, the proposal could have been submitted much
earlier if not for this thing called build back better.
Obviously, he was referring to the reconstruction of
areas devastated last year by Supertyphoon Yolanda
(international name: Haiyan) and other calamities. We
have to induce resiliency in a way, for vulnerable areas
to adjust their designs so that they can take on Yolanda-
like eventualities, and that means an increase in their
costs of change in design, Abad explained.
The spending will be mostly in infrastructure, which is
targeted to receive P587 billion, a substantial increase
from this years P400 billion. The government is
planning to increase this to P800 billion in 2016, the last
year of the Aquino presidency. The aim is to boost the
infrastructure budget from 3 percent of the economy (as
measured by the gross domestic product or GDP) to 4.2
percent in 2015 and to 5 percent by 2016, a level that
economists believe is comfortable enough to meet the
requirements of a growing economy.
Build back better is an Aquino slogan crafted in the
2014 budget after the country experienced one tragedy
after another in the latter part of 2013: the MNLF siege
in Zamboanga City, the earthquake in Bohol and the
devastation of Yolanda in the Visayas. The calamities
triggered an inflow of funding mainly for rehabilitation
and reconstruction. In fact, in the 2014 national budget,
Congress appropriated bigger allocations for calamities
(P13 billion), rehabilitation and reconstruction program
(P20 billion), and reconstruction projects under the
governments unprogrammed fund (P80 billion).
Congress also passed a P14.6-billion supplemental
budget and extended the validity of the rehabilitation and
reconstruction funds under the 2013 budget to this year.
Under President Aquinos build back better campaign,
devastated communities must be rebuilt to a much better
state than they were in before the calamities to avoid the
vicious cycle of destruction and reconstruction:
Permanent and resilient housing would have to be built
in safer zones, and infrastructure would have to be made
However, a recent briefing by the International Red
Cross indicated that people in areas ruined by Yolanda
were going back to their destroyed properties. Early this
month, nearly seven months after tsunami-like waves
caused by Yolanda swept away homes and lives,
Philippine Red Cross chair Richard Gordon reported that
some families in disaster-stricken Tacloban City were
back in a danger zone. In a recent visit to Tacloban City,
he said, he saw newly rebuilt houses on the coast of
Barangay 69, supposedly a designated no-build zone
under the governments build back better program.
Gordon noted, in particular, that makeshift houses were
back in the section of the city where Yolandas deadly
storm surge pushed ships to shore.
Earlier, there was also the complaint of rehabilitation
czar Panfilo Lacson about uncooperative Cabinet
secretaries frustrating efforts to speed up the rebuilding
process. The slow pace of rehabilitation could be one
reason why affected residents are going back to the no-
build areas.
We are not new to the wastage of taxpayer money
earmarked for infrastructure, going back to previous
regimes. We have heard too often of overpriced and
substandard highways, airports, school buildings, and
many other exploited projects.
President Aquinos Daang Matuwid campaign to
stamp out corruption may have instilled fear among
many government personnel. However, it has also
delayed the approval and funding of many vital
infrastructure projects. Build back better should not go
the way of Daang Matuwid, which has caused a lot of
undue delays.
Build back better should focus not only on damaged
schools in areas devastated by Yolanda, but also on
thousands of other substandard schools that could be
destroyed by even the weakest of typhoons. Build back
better should turn out roads that dont need to be
repaired after every rainy season, and drainage systems
that dont get clogged up even when it rains hard. Build
back better should mean building back everything
better this time.
Build back better ought to be not just another slogan.