UST GenSan site development in full swing

January 7, 2019 | 8:35 pm

SITE DEVELOPMENT for the University of Santo Tomas (UST) in Barangay Ligaya, General Santos City is still ongoing, with start of operations expected by 2021. Phase 1 of the construction in the eight-hectare campus, being undertaken by contractor AIMM Builder and Construction Supply, includes site grading, road works and utilities, and buildings and laboratories for the initial programs. UST-GenSan will initially offer its flagship programs in Health and Sciences, Business and Accountancy, Arts and Humanities, Engineering and Technology, Tourism and Hospitality Management, and Pharmacy and Pharmaceutical Science. “The opening of UST in Mindanao is its contribution to the dream of an integrated and globally competitive Mindanao,” UST Rector Fr. Herminio V. Dagohoy, O.P. said during last year’s groundbreaking ceremony. “This administration supports the proposed UST-GenSan campus and I envision this project to further move us towards the equality education that the residents of this city deserves,” GenSan Mayor Ronnel C. Rivera said. — Carmencita A. Carillo

Nation at a Glance — (01/08/19)

January 7, 2019 | 8:35 pm

News stories from across the nation. Visit www.bworldonline.com (section: The Nation) to read more national and regional news from the Philippines.

Nonprofit groups in watchdog’s sights

January 7, 2019 | 12:32 am

By Melissa Luz T. Lopez
Senior Reporter
NONPROFIT OUTFITS in the Philippines have become channels for funds from illegal activities, the Anti-Money Laundering Council (AMLC) said in a report, citing over P600 billion worth of transactions involving corruption and fraud over the past five years.
There is a “medium” threat for non-profit organizations (NPO) in being used for money laundering (ML) and terrorist financing activities, the AMLC said in its risk assessment done last year.
“The assessment showed that the sub-set of NPOs exploited for ML are service type NPOs particularly those involved in charitable, agricultural, educational and livelihood activities largely located in the NCR (National Capital Region),” the report read, as published on the AMLC website over the weekend.
The “medium” classification means that there are “moderate controls in place” and regulation and supervision are generally effective, although there remains “some degree of abuse” in the sector.
The AMLC looked into suspicious transaction reports (STRs) submitted by banks involving NPOs, charities, schools and foundations from 2012 to 2017, which yielded 7,518 reports on transactions worth P625.68 billion.
The bulk of these funds went through banks, which filed the corresponding reports to the AMLC to alert the regulator about unusual or unjustified sums of cash that are channelled to or through non-profit groups.
“Majority of the identified NPOs are involved in agricultural (36%), charitable (19%), livelihood (19%) and educational (18%) activities/programs, accounting for 92%,” the AMLC noted.
Bulk of the amounts in question came from the pork barrel scam unearthed in 2013, which reportedly saw lawmakers transfer government funds to bogus nongovernment organizations to implement ghost projects for farming and livelihood to obtain kickbacks in the process.
“It is estimated that 21 nongovernment organizations, which were incorporated by JLN, were used as dummies to funnel about P420 million government funds in favor of JLN and the legislators,” the report read, referring to businesswoman Janet Lim-Napoles who is currently detained for multiple counts of plunder and graft.
Investment scams were the second major source of illicit funds for NPOs, particularly a large-scale Ponzi scheme in southern Philippines back in 2013. Other crimes said to use these entities included swindling and qualified theft, the AMLC said, noting that members of boards of trustees used or transferred NPO funds to their personal accounts.
Nine STRs worth P50.25 million were filed involving NPO accounts possibly used for terrorist financing arrangements, although their participation was largely “unconfirmed” as these reports were filed on the basis of intelligence information alone, the AMLC clarified. Threat for terrorist financing through these groups was rated as “high low.”
One confirmed incident was in 2006, when a group tied to Osama Bin Laden used the International Islamic Relief Organization based in Saudi Arabia to extend funding to terrorist groups in the Philippines.
Overall, the AMLC said that many groups remain compliant with standards set by authorities. “Various control mechanisms are present in 58-92% of the surveyed NPOs, with 69% having know-your-donor procedures, and 83% having know-your-beneficiaries procedure.”
The AMLC added that while safeguards and controls are in place, there is a need to get unregistered organizations covered by such regulations in order to tighten the watch on this sector.

Central bank readies new rules to manage credit risks better

January 7, 2019 | 12:31 am

THE CENTRAL BANK plans to roll out more rules to manage credit risks, a senior official said, explaining that the new regulations will enable banks to be more flexible in pricing loans for retail clients.
Bangko Sentral ng Pilipinas (BSP) Deputy Governor Chuchi G. Fonacier said that monetary authorities are preparing “enhancements” on current standards for operational risk management this year.
“We will also be issuing guidelines on risk-based approach to pricing to help ensure that the exposures of BSFIs (BSP-supervised financial institutions) to risks associated with lending/financing activities are adequately compensated,” Ms. Fonacier said in a recent e-mail interview.
“The adoption of risk-based pricing framework, particularly for consumer loans, would help differentiate risks among bank borrowers, allowing those with good credit quality/standing to enjoy lower interest rate.”
Currently, banks impose higher borrowing rates for retail creditors, considering this segment riskier than big businesses.
Benchmark interest rates have risen by 175 basis points (bp) following five consecutive rate hikes fired off by the BSP in 2018 to rein in inflation. In turn, this has pushed market yields higher by 98.7 bp as of October, as banks passed on the higher cost of money to the public.
Also on the table are additional guidelines which are designed to improve the ability of banks to weather potential shocks which could affect their image and, ultimately, their operations.
“Two key reforms in this area include the issuance of standards on model risk management and reputational risk management,” Ms. Fonacier added.
These changes will accompany the implementation of the international Basel 3 framework effective Jan. 1 this year, consisting of prudential measures meant to better ensure solid footing for big lenders.
These steps guarantee that banks will not fold even during a funding crunch, using lessons learned from the 2008 Global Financial Crisis. Back then, excessive lending led to massive credit defaults, which then triggered the collapse of big banks and caused recession worldwide.
The planned reforms will also ensure that banks can stay intact despite incidents that could deal a blow to their reputation.
Ms. Fonacier noted that monetary authorities are also “currently reviewing” Basel 3 standards in place to make sure that these remain attuned to the needs of Philippine lenders. These include capital-based requirements for improved resilience to potential losses, a standardized approach to credit and counterparty credit risk, operation risk and capital floors and amendments to the regulatory framework for domestic systemically important banks. — Melissa Luz T. Lopez

Peso faces new threat as Duterte gears up for poll

January 7, 2019 | 12:30 am

AS IF FALLING for six straight years wasn’t enough, the Philippine peso is now facing an additional threat: a midterm election that may compound concerns about its economy.
As the nation gears up for polls due in May, political uncertainties may pose an added source of pressure to those stemming from its long-running deficits.
With risk appetite likely to remain fragile due to fears of a global slowdown, traders may drive the peso back below the 13-year low set in October.
“The overarching downside risks will probably emanate from risk-off sentiment refocusing worries on high inflation and twin-deficit risks,” said Vishnu Varathan, head of economics and strategy at Mizuho Bank Ltd. in Singapore.
“Political risks could also creep back in, and those will add to the headwinds for the peso.”
The peso will drop about 2.5% to P54 per dollar by year-end, making it the third-worst currency in the region after the Indonesian rupiah and Thai baht, according to Bloomberg surveys of analysts. It closed at P52.51 on Friday.
The peso has been undermined by local politics more than once in the past. The currency sank almost four percent in 2003 as an attempted coup and corruption scandals hurt then president Gloria M. Arroyo. Current President Rodrigo R. Duterte’s approval rating is far higher, but given the unfavorable external backdrop, investors may choose to avoid Philippine assets for now.
As the Federal Reserve weighs further interest-rate hikes and US-China frictions spur concern over the outlook for global trade, money managers are likely to remain wary of investing in nations that depend on capital inflows to finance fiscal and current-account deficits.
The central bank predicts the current-account deficit will widen to 2.3% of gross domestic product in 2019, the most in 18 years. The budget balance was negative P39.1 billion ($745 million) in November, having been in deficit for seven straight months.
Traders will be watching November trade figures due Jan. 10 to get a better picture of the outlook. The nation will report a deficit of $1.99 billion, versus the record shortfall of $4.21 billion in October, according to a Bloomberg survey.
WANING POPULARITY
This year’s election will be a referendum on Mr. Duterte, after his popularity has been sapped by quickening inflation that eroded consumers’ purchasing power.
About 18,000 national and local posts, including half the 24 Senate seats and about 300 House of Representatives slots will be contested. Most lawmakers identify themselves as allies of Mr. Duterte’s party but the president needs the approval of both chambers to pass legislation if he wants to enact changes such as the tax reform he pushed through earlier to help fund an infrastructure plan of at least 8 trillion pesos.
“The peso is stabilizing but still vulnerable to weakness,” said Jonathan Ravelas, chief market strategist at BDO Unibank, Inc. in Manila. “Sentiment is cautiously optimistic as the economic indicators remain a mixed bag.” — Bloomberg

How did regions fare in terms of inflation?

January 7, 2019 | 12:30 am

Iloilo farmers betting on carabao milk market

January 7, 2019 | 12:06 am

By Emme Rose S. Santiagudo
Correspondent
ILOILO CITY — The Department of Agriculture (DA) is seeking to develop the dairy industry in Iloilo province, using milk from the native carabao.
Dr. Eric P. Palacpac, head of the Knowledge Management Division of the Philippine Carabao Center (PCC), said Iloilo is ideal because of its carabao population.
“What’s good in Iloilo is that you are one island with many neighboring provinces. Iloilo has actually one of the densest populations of carabaos. It’s a matter of just upgrading the carabaos,” Mr. Palacpac said during a dairy production training event in December.
He said there are about 200,000 carabaos in Iloilo out of the total 2.8 million nationwide.
PCC Regional Center Director Arn D. Granda said the center been encouraging farmers not to sell their carabaos, particularly the females, for meat supply and instead tap them for dairy production.
“Farmers can earn extra income from the female carabaos,” Mr. Granda said during the graduation exercises of Karbawan: School on the Air on Dairy Buffalo Production in Leon, Iloilo on last Dec. 20.
Mr. Granada noted that demand in the Western Visayas cannot currently be met by supply.
“We have the market but we cannot produce the volume. We have water, we have time, we have grass so we need to divert our unproductive human resources to productive village economic activity,” he said.
A native carabao can produce one liter (L) of milk per day, while a crossbred buffalo up to five per day, and a purebred as much as eight.
Mr. Granada also said that value-added products can be made from milk such as ice cream, cheese, and pastillas; a local delicacy.
The PCC is also rolling out infrastructure support for carabao milk producers.
Mr. Granada said the PCC is finalizing an agreement with the Leon government and the Leon Farmer’s Dairy Association for the expansion of a center for trading, processing, and retail sales.
“Once finished, a pasalubong center with processing area will rise in the auction center of Leon and it will be operated by farmers and backed up by PCC and the local government unit,” Mr. Granada said.

Local airlines bullish for 2019 as oil prices drop

January 7, 2019 | 12:06 am

By Denise A. Valdez
Reporter
LOCAL AIRLINES are keeping a positive outlook for 2019, after the industry suffered last year when jet fuel prices soared.
Officials of Philippine Airlines (PAL), Cebu Pacific and Philippines AirAsia said they are bullish this year, as they expect a decrease in the price of aviation fuel and a rise in the number of domestic and international tourists.
PAL Corporate Communications Vice-President Jose E. L. Perez de Tagle told reporters in a Dec. 10 chance interview the company is seeing “continued growth” in 2019.
“We see increasing tourism. China is a big potential. Now that we cover Western Europe and the east coast of North America, that will all add to our being connected and that really helps push growth,” he said.
Since 2017, PAL has recorded losses due to fuel expenses, fleet expansion, increased frequencies and new routes. But Mr. Perez de Tagle is “cautiously watchful and hopeful” the flag carrier will return to profitability soon.
“When the fuel prices went up, it was the number one thing. And it coincided with our investment in all the refleeting and so on. So sana [hopefully] we can overcome all that,” he said.
As of Dec. 28, the International Air Transport Association (IATA) said jet fuel price has gone down 16.3% to $67.49 per barrel versus a year ago. It said the global airline industry is expected to book a net profit of $35.5 billion in 2019.
“We had expected that rising costs would weaken profitability in 2019. But the sharp fall in oil prices and solid GDP growth projections have provided a buffer,” IATA Director General and Chief Executive Officer Alexandre de Juniac said in the statement last month.
Cebu Pacific Vice-President for Commercial Planning Alexander G. Lao said the Gokongwei-led budget carrier is looking to grow the number of passengers in the low teens (below 15%) this year.
“We’re sort of excited because this is the first time in a while that we’re going to grow back to double digits again. So we’re a bit more bullish,” he told reporters on Dec. 10.
Mr. Lao noted the 22-million passenger target in 2018 represents a single-digit growth from in 2017.
For 2019, he said Cebu Pacific is looking at its hub in Clark to fuel its double-digit growth.
“We think Clark has a lot of potential… So far ‘yung nakikita namin sa Clark-Davao, medyo healthy ‘yung load factor which is a good surprise [We’re seeing a healthy load factor in the Clark-Davao route, which is a good surprise]… I think the aviation industry continues to be healthy,” Mr. Lao said, adding Cebu Pacific is expecting to take deliveries of a number of jets in 2019.
Philippines AirAsia President and Chief Executive Officer Dexter M. Comendador said the budget carrier is also expecting an improvement this year.
“Keeping the same price, it would be a lot better. And hopefully not any more major airports will close,” he said.
Of the three airlines, only AirAsia refused to collect a fuel surcharge last year despite initially filing an application to do so with the Civil Aeronautics Board.
Mr. Comendador said the company does not intend to implement a surcharge anytime soon.
“We survived the worst. Pababa naman na ‘yung price ng fuel [The price of jet fuel is going down anyway]… We saw and we tested through our research. If we raise the price by adding fuel surcharge, our loads will drop. Because our market is very price sensitive,” he said.
Mr. Comendador said the company was able to record an average load factor of 83% to 84% as of mid-December.
One of Philippines AirAsia’s plans in 2019 is to conduct an initial public offering and list in the stock exchange.

As China cuts back on iPhones, LVMH handbags could be next

January 7, 2019 | 12:06 am

AFTER Apple Inc.’s shock profit warning, investors were quick to make the connection: if Chinese consumers are cutting back on iPhones, Louis Vuitton handbags could be next.
Apple’s sales revision cascaded through global markets, hitting suppliers and rivals, but also a raft of luxury-goods companies that rely on the same clientele that likes to splurge on Apple’s latest products. Hong Kong-listed Prada SpA, Gucci-parent Kering SA, LVMH Moet Hennessy Louis Vuitton, Burberry Group Plc and Richemont, the parent of jeweler Cartier, all declined in the wake of Apple’s shortfall.
“It’s going to become significantly more challenging to do well in China because the market is tightening up,” said David Roth, chief executive of WPP Plc’s “The Store” global retail practice. “This is a challenging signal that people need to button down and understand China better and prepare.”
Apple cut its quarterly revenue outlook to $84 billion from as much as $93 billion, blaming it in part on a pullback in demand within China. That set off warning bells throughout the luxury industry, as Chinese consumers account for about 30% of the $1 trillion in luxury-goods spending worldwide, according to Euromonitor International.
Prada dropped as much as 3.6% in Hong Kong on Friday. In Europe on Thursday, Kering SA fell 5.5%, while LVMH dropped 3.8% and Burberry tumbled 5.9%.
DEMAND DENTED
For years, companies from LVMH to Tiffany & Co. have targeted China’s wealthy tourists, who sought out pricey handbags, jewelry, and other luxury items while on vacation in Paris to Dubai. Investors are worried that sliding yuan, China’s trade war-hit economy, and a government crackdown on overseas purchases could dent demand.
Richemont, which lost 2.8%, has already been feeling the heat. The Swiss watch and jewelry-goods maker signaled in November that Chinese sales growth has slowed.
Others have maintained a more bullish tone, with both LVMH and Kering citing robust China sales in October and saying they welcome as shift to domestic sales.
A key test for retailers will come with China’s celebration of the Year of the Pig, which begins on Feb. 5. The week-long Chinese New Year holiday is traditionally a major occasion for shoppers from China to splurge. About two-thirds of those sales take place outside the country as tourists open their wallets while traveling abroad, taking advantage of better selection and cheaper prices than available at home.
DOMESTIC SHIFT
But with the US trade war weighing on China’s stocks and currency, and President Xi Jinping’s government trying to bolster a faltering economy, more mainlanders are choosing to do their shopping inside China rather than on overseas trips.
“There’s clearly a shift that has started to happen in the consumption pattern: Chinese people are buying more in China,” said Pascal Martin, a partner in Hong Kong with OC&C Strategy Consultants.
Taxes on imported clothing, which had been as high as 25%, are now just 7.1%. A recent crackdown by Chinese officials on travelers returning home with undeclared goods is also encouraging local consumption.
The gap between Chinese overseas and domestic spending on luxury is shrinking and a 50/50 balance is “in sight,” according to an HSBC report last month.
Companies are scrambling to adjust, opening more stores in China or partnering with local online outlets such as Alibaba Group Holding Ltd.’s Tmall. Ermenegildo Zegna, which has stores in 35 Chinese cities, in December opened a flagship store on Tmall Luxury Pavilion, following a similar move by Italian fashion house Valentino in November.
“It’s much healthier to have Chinese consumers consuming your product in their own country, in terms of repeat business and loyalty,” said Thibaud Andre, research director at Daxue Consulting.
RETAILERS’ HEADACHE
The change in consumption patterns is creating headaches for retailers like Tiffany, which has long counted on Chinese shoppers going to Fifth Avenue or Rodeo Drive. In November, Tiffany reported weaker-than-expected sales and highlighted a “clear pattern” of Chinese shoppers cutting back on spending when they’re overseas. Sales in China itself, however, remained strong.
The shift to more domestic purchases will also create more intense rivalry this year as more foreign players vie for consumers’ money in China, according the Bloomberg Intelligence analyst Catherine Lim. She added that the growth prospects on the mainland still remain attractive relative to other countries.
One of the key strategies the companies have is to focus on tech-savvy millennials and the younger Generation Z. The sub-group of shoppers is expected to make up 55% of total global personal luxury goods purchases by 2025, a Bain & Co. report said in November.
Retailers and investors are watching to see whether that spending holds up.
“Luxury brands still benefit from a formidable capacity to recruit new consumers in China,” HSBC analysts led by Erwan Rambourg said in the December note, but “while managers are preparing for a moderation of growth, most investors we met with in Hong Kong have more dire predictions.” — Bloomberg

WB to raise rural incomes halfway to target

January 7, 2019 | 12:05 am

THE World Bank (WB) said its assistance to farmers and fisherfolk in the Philippines has increased their income by 15% over four years, or halfway to the 30% target of income growth by 2021.
In an implementation and status report, the bank said that the Philippine Rural Development Project has also increased the income of beneficiaries involved in enterprise development by 27% at end of 2018, since the project began in 2014.
“Progress towards meeting the PDO (project development objective) continuous to be satisfactory. Assessments of project impacts indicate increases in real household income, increase in value of marketed output, reduction in input and output hauling costs, increases in farmed area, increase in production volume, reduction in travel time from farm to market, increase in traffic density, and increase in school attendance,” the World Bank said.
“Additional outcomes being realized via the country-wide institutionalization and acceptance of provincial commodity investment plans as a technically-based planning platform for convergence between programs of the DA (Department of Agriculture), LGUs (local government units), and other national government agencies.”
The project aims to increase rural incomes and enhance farm and fishery productivity in the targeted areas by supporting smallholders and fisherfolk to increase their marketable surpluses, and their access to markets.
The project has four components, which includes $19.27 million in support for local and national-level planning, $669.13 million in infrastructure development, $136.94 million in enterprise development, and $57.49 million in project implementation support.
Since 2014, the project yielded a 21.5% increase in the value of the annual marketed output, about half the 41% target set for the end of 2021.
The World Bank said that farmers reached with agricultural assets or services stood at 773,968, exceeding the 600,000 target. — Elijah Joseph C. Tubayan

Stock index seen reaching 8,400 level this year

January 7, 2019 | 12:05 am

By Arra B. Francia
Reporter
PHILSTOCKS FINANCIAL, Inc. sees the local bourse finishing the year within the 7,750 to 8,400 level, on expectations of higher spending due to the election season, improved corporate earnings, sustained economic growth, and lower inflation amid global headwinds.
The brokerage house said investors should keep a balanced view on the movements of the Philippine Stock Exchange (PSE) this year, citing how too much optimism in 2018 resulted to a more than 12% drop, while the cautiousness that prevailed in 2017 in turn provided the market with returns of about 25%.
“So for 2019… foremost among the narratives that we think will become a major thread of conversation is the midterm elections in May. Almost everyone is expecting that during an election year, the market goes up significantly,” Philstocks Research Head Justino B. Calaycay, Jr. said in a presentation of the company’s 2019 forecast in Pasig City last Friday.
Philstocks said that the PSE index (PSEi) posted an average 11.38% annual increase during the midterm elections since 2006, albeit lower than the 18.01% average on presidential election years. The counters for mining and oil and services also outperformed the benchmark index, soaring by an average of 23.9% and 17.86%, respectively, during years when a midterm election was held.
The company also noted that investors usually become more bullish on consumer retail, media entities, transportation, as well as communication firms.
With the election season in mind, Philstocks advised investors to bet on different sectors for each quarter. It favored financial, property, and industrial stocks for the first quarter, while dropping financials to make way for holding firms in the second. For the third to fourth quarter, the company switches to the services and mining and oil indices.
Aside from the elections, investors should keep an eye on slowing inflation. Foreign funds were on exit mode last year as foreign investors feared that accelerating inflation would drag down economic growth.
“For the supply side, we already saw that our agriculture problem has been solved because of the trade liberalization programs…unfortunately, we still have the oil to deal with, the production cut, as well as the second round of the excise taxes,” Philstocks Research Associate Jhapet Louis O. Tantiangco explained.
Mr. Tantiangco, however, expects the full impact of the Bangko Sentral ng Pilipinas’ rate hikes to kick in during the second to third quarter of 2019. The brokerage then forecasts inflation to fall within a 4.5-5.5% range.
On the corporate side, Philstocks projects PSEi-member companies to generate an average of 10-15% earnings growth. This considers the temporary boost in disposable income due to the midterm elections, hampered by higher fuel costs and higher borrowing costs.
The 2019 projection is higher than the 6.53% average bottomline growth of PSEi firms in the first nine months of 2018, and a 16.29% average increase in revenues for the same period.
“There will be many influences on the market, and at the end of the day we have to balance them and measure which ones are more important,” Mr. Calaycay said.

First PUMA Select in the Philippines now open

January 7, 2019 | 12:05 am

THE streetwear scene in the Philippines got a new player with the recent opening of the first PUMA Select standalone store in the country.
Located at the upper ground floor of the Uptown Mall in Bonifacio Global City in Taguig, the PUMA Select store showcases the brand’s newest products, including its exclusive collaborations with a number of high-profile names from the world of sports and entertainment.
The store officially opened its doors on Dec. 8 where shoppers got to see and grab a hold of a number of PUMA Select’s signature pieces such as the PUMA x XO Tactical, and the PUMA Fenty Avid from the Rihanna Collection.
Also available were favorites that include the PUMA Sued e Bow, PUMA x XO Tsugi Shinsei Caviar and the PUMA x Poggy, which are inspired by traditional and contemporary Japanese styles.

PUMA 2 — The first PUMA Select standalone in the country opened on Dec. 8 at the upper ground floor of Uptown Mall in BGC in Taguig.

The people behind the store in the country said the opening of PUMA Select was timely as they recognize the burgeoning streetwear scene in the Philippines and look to enhance it some more.
The store also serves, they said, to highlight how the “cat” brand has evolved in its seven decades of existence — building on its standing as a pioneer in sports and athletic wear by fusing performance with culture and fashion by revisiting its rich history and innovating to develop premium streetwear.
In recent years, the brand has seen itself churning out well-received athletic fashion wear with collaborations with renowned designers and brands such as Jeff Staple, Fenty, STAMPD, The Weeknd, Ken Lagerfeld and more.
To learn more about the store and what it offers, follow PUMA Select on Instagram (@puma.select.ph) for updates. — Michael Angelo S. Murillo