Home Blog Page 10090

China Bank looking to build branches in ‘rapidly urbanizing’ provinces this year

CHINA BANKING Corp. (China Bank) is eyeing to penetrate developing parts of the country with as it continues to expand its branch network this year.
In a text message, China Bank Head of Corporate Planning and Investor Relations Alexander C. Escucha said the Sy-led lender is still identifying areas with “high growth potential” as it plans to put up more branches this year.
“While 60% of the country’s [gross domestic product] is still in the [National Capital Region], there [are] many rapidly urbanizing areas in the provinces that are attractive,” Mr. Escucha said last week.
For this year, China Bank plans to open 23 branches using the licenses it obtained from its earlier acquisition of Planters Development Bank (Plantersbank), which will expire this year.
In 2014, China Bank took over the management and operations of Plantersbank, acquiring it for P1.86 billion.
Mr. Escucha added that China Bank will be focusing on “getting the new branches to break even” and pursuing its digital initiatives.
Last year, China Bank slowed its branch expansion as it concentrated on ramping up its digital banking channel as well as improving its infrastructure.
China Bank and its thrift banking arm China Bank Savings have a total network of 620 branches.
China Bank, the seventh-largest commercial bank in the country in asset terms, recorded a P5.56-billion net income for the first nine months of 2018, 2.1% lower than the P5.68 billion logged in the comparable 2017 period, as it was bogged down by lower non-interest revenues despite booking higher loans.
China Bank shares stood at P27.45 apiece on Wednesday, up by 35 centavos or 1.29%. — Karl Angelo N. Vidal

When three hens get together, expect wine to flow


THREE HENS are going to try to get your tongue buzzing and your lips moving with a wine brand called, well, Three Hens.
In a launch last month, BusinessWorld met up with the Llamas sisters, Jenny and Monica — both of whom use their married name, Garcia, though their husbands are unrelated — along with their business partner, Margie Sadhwani, in Makati for a hazy wine lunch at The Picasso Residences’ Pablo Bistro in Makati which served as the brand’s official launch.
Three Hens currently has two varieties: a white and a red. Both carry a denominacion de origen (DO) from Spain’s La Mancha region, plains that have the distinction of being Europe’s largest single demarcated DO region (as well as serving as the setting for Don Quixote). Monica Llamas-Garcia quoted My Fair Lady’s song “The Rain in Spain” (“The rain in Spain stays mainly in the plain”) to explain why they chose the region to create their wines. “It produces really good quality wines,” she said, which it owes to the climate and altitude.
The white, an airen, is slightly acidic, with a metallic edge. It went well with crisp, thin-crust pizza, and made a spicy paella even more lively. It’s perfect as a food wine. As for the red (a blend of merlot, syrah, and tempranillo), it is rich and has a well-rounded finish, and gives depth to the same pairings. This reporter’s notes said “Ay!” upon tasting the red.
As a Philippine brand, it’s easy to assume that it simply relabels and rebottles the Spanish product, but Monica shook her head. “We are working directly with the winery.” Her sister said that they helped develop the wine’s tasting profile through “months and months of e-mails.”
“We couldn’t call it a DO from La Mancha if it wasn’t bottled [there],” said Monica. Her sister, meanwhile said that the taste profile they longed to develop was “relatable, accessible, but with a twist.”
“We wanted people to enjoy it all the time,” she said.
Now, Spanish wines are famously temperamental, and not always easy to pair with food, and could be a little complex. The secret, according to elder sister Monica, was selecting wines that were a bit younger; their fruitiness allowing them to blend with food more. This age also makes the wines less complex, pairing it well with food and good times.
Jenny said that they started the brand because they have “a love of hanging out together, being with each other, and drinking wine.”
Her sister said, “I think it’s really capturing that experience in a bottle.
While Jenny works as a property developer, her sister Monica is connected to Don Papa Rum — her husband serves as Managing Director for Asia Pacific for that company, while she works as its Brand Director while wine and spirits share a category but differ in discipline, Monica still credits her experience in the business. “It’s a lot of experience with on-premise accounts such as restaurants and bars. There’s a lot of learning to get [from] there: what they’re looking for.”
Since the Philippines is not a wine-producing country, it’s easy to turn one’s nose up at a bottle that’s developed by Filipino minds. Asked how they combat the stereotype, Jenny said in jest, “Because we’re so cute!” On a serious note, however, Monica Llamas-Garcia said that Filipino palates are growing up. “With a more discerning public, it’s not necessarily ‘Filipino? Is it quality?’.” They’d be like, ‘Okay, is it a good brand? Do they deliver on the promise?’ And if they do, great.”
The wines are available in select supermarkets, and online through boozy.ph. — Joseph L. Garcia

AgriNurture to sell P500M worth of shares to China-based businessmen

AGRINURTURE, Inc. (ANI) on Wednesday said it plans to sell over 27 million primary shares worth P500.60 million to two businessmen engaged in construction and real estate in China.
In a disclosure to the stock exchange, the listed agri-trading company said its board approved the issuance and listing of up to 21.53 million primary shares at P18.16 each to Chaohua Xia. Mr. Xia is the general manager of Jiangsu Lunyiang Construction Ltd. in Jiangsu, China.
ANI said another 6.030 million shares, priced at P18.16 each, will be issued to Jiecheng Li, a businessman engaged in property management in Guangzhou, China.
In a text message to BusinessWorld, ANI President, CEO and Chairman Antonio L. Tiu said the proceeds from the share issuance will be used for working capital, particularly for its rice importation business.
Last September, ANI signed a $1-billion exclusive deal with Vietnam Southern Food Corp. to import 2 million metric tons (MT) of rice to the Philippines.
ANI’s Mr. Tiu is also the president and CEO of another listed firm Philippine Infradev Holdings, Inc. (formerly known as IRC Properties, Inc.).
Infradev and its Chinese partners Greenland Holdings Group, Jiangsu Provincial Construction Group Co. Ltd., Holdings Ltd., and China Harbour Engineering Company Ltd. were awarded the original proponent status for the construction and development of $3.7-billion Makati subway project.
Meanwhile, ANI said its board of directors has approved the amendment of its terms and conditions on stock rights offering where every existing shareholder of five shares will be entitled to one stock rights share, with the offer price of P1.
ANI reported a P21.37-million net income attributable to the parent during the first nine months of 2018, 40% up from P15.3 million a year ago. This was driven by a 113% rise in consolidated sale of goods to P1.55 billion during the January to September period. — Reicelene Joy N. Ignacio

No Uber or Airbnb in South Korea: Red tape, risk-aversion hobble start-ups

SEOUL — When Choi Ba-da pitched his car-sharing firm Luxi to Hyundai Motor officials in 2017, he told them there would be no future for South Korea’s top automaker if it failed to embrace emerging technologies.
His pitch worked: Hyundai agreed to buy a 12% stake in Luxi for $5 million, its first investment in a car-sharing firm as it joined rivals in the race for new-age transportation.
But about six months later, Hyundai sold its stake after thousands of angry taxi drivers, worried about their jobs, threatened to boycott Hyundai cars, Choi told Reuters. Hyundai officials say they were also wary of laws limiting car sharing in South Korea.
Hyundai’s breakup with Luxi illustrates how rigid regulations, strong labor unions and a risk-averse culture among South Korea’s giant family run conglomerates, or chaebol, have hindered the growth of start-ups in Asia’s fourth-largest economy.
President Moon Jae-in’s administration says the country’s decades-old growth model, powered by a handful of large exporters such as Hyundai and Samsung, has reached its limit in the face of Chinese competition and rising labor costs.
To offset slowing growth in sectors such as autos, ships and chips, it created a new ministry for start-ups last year and has boosted funding to cultivate new technologies.
But the government has been too slow to remove cumbersome regulations for start-ups, wary of upending the country’s economic order or upsetting powerful labor unions, according to interviews with a dozen entrepreneurs, investors and executives.
That has left South Korea surprisingly resistant to disruptive technologies despite its tech-savvy image, they say.
“After agonizing, Hyundai officials told me that they had to go slow with the service, before eventually pulling out,” Choi told Reuters. “But how on earth can a start-up go slow?”
In a statement to Reuters, Hyundai said it sold its stake in Luxi as the investment “did not fit a business model the company pursued,” without elaborating.
Hyundai’s chief innovation officer Youngcho Chi also said South Korean restrictions on ride-sharing to unspecified “commuting hours” as one reason and said the automaker had concluded that Luxi was not going to work out.
Instead, Hyundai pumped $275 million into Singaporean ride-hailing firm Grab this year.
MOST START-UPS ILLEGAL
Hyundai and Samsung say they invest in both local and overseas start-ups.
Close to the company’s headquarters, South Korean start-ups are easier to communicate with, Hyundai said. Samsung told Reuters it has been running a startup support program for five years to raise local entrepreneurs.
Still, some say chaebol are moving too slowly.
“The Korean success has been built on a fast-follower strategy, but Chinese rivals are catching up very fast,” said Hwang Sungjae, a co-founder of Fluenty, a South Korean artificial intelligence startup acquired by Samsung Electronics last year. “Companies now have no choice but to innovate and work with start-ups, but they are not investing quickly enough.”
“I think Korean companies are at a great risk of falling behind.”
Regulations are another challenge.
South Korean laws would entirely or partially block about 70% of the world’s top 100 startups by investment size from bringing their services to the country, according to joint research by Google Campus Seoul and the Asan Nanum Foundation. Those include giants Airbnb, Uber, and China’s Ant Financial.
In February, top South Korean mobile messaging operator Kakao Corp. bought Luxi for $25 million, but it remains stymied by carpooling regulations, and has yet to launch amid fierce protests from taxi drivers.
One protesting taxi driver set himself on fire and died last week, and unionized drivers say they plan a huge rally this week.
Kakao said it pushed back the launch schedule of its carpool service in the wake of the suicide.
South Korea’s transport ministry declined to comment.
Regulations also prohibit venture capital funds from investing in financial, real estate, accommodation and restaurant sectors in South Korea.
The government has proposed a new law to lift those restrictions, but a senior government official acknowledged it would be neither easy nor quick. “The bottom line is that we have to move toward innovation, but it takes a lot of time and is a difficult process to mediate existing interests,” the government official at the Ministry of SMEs and Start-ups told Reuters.
“Realistically, we can’t simply ignore existing interests. There’s no clear answer.”
He declined to be named due to the sensitivity of the matter.
‘ARE YOU DREAMING?’
Many Korean ventures are focused on applications that would only apply locally, making them a hard sell for global companies, a Samsung Electronics executive told Reuters, asking not to be named as he was not authorized to speak to media.
Since 2016, Samsung Electronics has acquired minority stakes in nine startups, only one based in South Korea, according to corporate research firm CEO Score.
Hyundai Motor has invested a total 85 billion won ($75.11 million) worth of minority stakes in 15 foreign startups over the last three years, compared to 28 billion won spent on five local ventures over the same period, CEO Score said.
San Francisco-based venture fund 500 Start-ups, one of the early investors in Grab, said it had looked at Korean ride-sharing firms for a possible investment, but decided against it because of legal restrictions. “The regulatory environment hasn’t been favorable to the investors like us,” Jeffrey Lim, who heads 500 Startups’s Korea office, told Reuters.
There were, however, Korean industries offering interesting opportunities, such as pop music, online games, and cosmetics, Lim said.
500 Start-ups has invested 6.5 billion won in 30 South Korean firms since 2015, including radio app Spoon which is now available in Southeast Asia and Japan.
Other established foreign rivals have also backed South Korean start-ups despite the challenges.
Japan’s Softbank has invested in more than 20 tech companies in South Korea since 2012, according to venture capital data provider CB Insights, including a $2 billion stake in online retailer Coupang in November.
South Korean start-up Viva Republica, which operates money transfer app Toss, last week raised $80 million from US investors including Kleiner Perkins and Ribbit Fund, valuing it at $1.2 billion.
Korean conglomerates’ tendency to avoid risk and shun outside partnerships makes them slower than foreign rivals to adapt to fast changing technologies, said Rhee Moo-weon, a management professor at Seoul-based Yonsei University, who advises Samsung, Hyundai and the South Korean government.
In 2003, Samsung missed the opportunity to acquire the then small maker of the Android smartphone operating system, just two weeks before Google bought it for $50 million plus incentives, according to a 2013 book by Fred Vogelstein “Dogfight: How Apple and Google Went to War and Started a Revolution.”
When Android creator Andy Rubin pitched his firm to Samsung, a Samsung executive told him, “Are you dreaming? You and what army are going to go and create this? You have six people. Are you high?,” according to the book.
Samsung said it could not confirm the content of the book.
THINK OUTSIDE KOREA
As cash-rich conglomerates remain reluctant buyers, only 3% of South Korean startups were able to recoup their investments through trade sales in 2017, according to the Korean Venture Capital Association.
That leaves IPOs as one of a few exit options, but it takes about 12 years for South Korean startups to go pubic — “an eternity” compared to Silicon Valley where it typically takes six to seven years, according to consulting firm McKinsey & Co.
Only last year, South Korea introduced the so-called “Tesla listing rule” which allows loss-making startups to list on its junior, tech heavy Kosdaq market. It’s named after the US electric carmaker that remains loss-making eight years after going public in 2010, but is worth $63 billion.
So far, only e-commerce platform Cafe24 Corp. has used the Tesla rule to go public. Since its February listing, its shares have risen 25 percent.
South Korean entrepreneurs say there is a long way to go.
“Government officials are trying to meet every stakeholder’s demands in a way that doesn’t lead to a solution,” said Seo Seung-woo, a professor and entrepreneur who moved his self-driving start-up to Silicon Valley last year.
“I say, don’t think about doing a start-up in South Korea. Think outside Korea.” — Reuters

RBI allows debt revamp

INDIA’S central bank will permit lenders to restructure stressed loans to small companies, breaking from a five-year-old policy of eschewing sweeping corporate debt overhauls.
The Reserve Bank of India (RBI) will allow one-time restructuring of loans to micro, small and medium-sized companies that are in default, the regulator said in a statement on Tuesday. To be eligible for the program, the loan should not exceed 250 million rupees ($3.6 million), according to the statement.
The latest directive is new central bank Governor Shaktikanta Das’s first big policy move and yields to the government’s call to provide relief to small firms, many of which are still suffering from Prime Minister Narendra Modi’s 2016 cash-ban program. As much as 1.3 trillion rupees ($18.7 billion) of loans made to small firms are stressed, according to data from SBICAP Securities Ltd.
“The biggest concern with such forbearance packages is the risk that such schemes could end up vitiating the repayment culture of honest MSME borrowers by encouraging defaults,” ASV Krishnan, vice president at SBICAP Securities, said in a note on Wednesday. Still, the RBI’s precondition for borrowers will “disincentivize any incremental non-repayment or defaults by existing standard borrowers,” he said.
In Tuesday’s notice, the Reserve Bank asked lenders to set aside an additional 5% for the debt that will be revamped under the program. Banks will have to make an extra provision of 50 billion rupees, said Anil Gupta, vice president, at ICRA Ltd., the Indian unit of Moody’s Investors Service.
Previous governors including Raghuram Rajan and Urjit Patel have shunned loan revamp programs.
The move was praised by Swaminathan Gurumurthy, a chartered accountant and a key advocate of easier rules for small companies on the central bank’s board. Gurumurthy, who is associated with the economic wing of Rashtriya Swayamsevak Sangh — the ideological parent of Modi’s Bharatiya Janata Party — is a champion of the small traders who are BJP’s key voting bloc.
State-run banks under the Reserve Bank’s Prompt Corrective Action framework sanction will benefit from the move, according to Kotak Institutional Equities. Still, the brokerage said the timing of the move came as a surprise.
The bad-loan ratio in India’s banking industry fell in September for the first time since 2015, with the central bank predicting it may drop further. The industry’s gross bad-loan ratio is expected to fall to 10.3% by March from 10.8% in September, the Reserve Bank said in its Financial Stability Report on Monday.
“Lenders usually step back lending when the early warning indicators suggest rising trends of deterioration,” Kotak said in a report to clients on Wednesday. “However, the last available data suggests that lenders have been quite comfortable and growing this portfolio at a healthy pace.” — Bloomberg

Bringing sake culture to the Philippines

RAYMOND JOSEPH, the youngest of the four Joseph brothers running the country’s pioneering wine and spirits importer and distribution company, Philippine Wine Merchants (PWM), is the only Filipino I know that is a real sake sommelier. Raymond has been frequenting Japan since 2009 to learn more about sake since PWM took on the distribution of Gekkeikan Sake Company Limited — one of Japan’s oldest (founded in 1637), and perhaps the largest, sake company in the world, from Fushimi district, Kyoto prefecture. Raymond even underwent a rigid two week “Sake Sommelier Apprenticeship” crash course from Gekkeikan over eight years ago, and has been attending sake courses from different prefectures to further hone his knowledge. This is Raymond’s passion now, and with PWM as his vehicle, Raymond is dead set on bringing sake culture to the Philippines.
SAKE ON THE RISE
As reported by The Drinks Business (the global leading drinks trade publication), sake exports in 2017 hit a record high of 23.5 million liters, up a huge 19% from the previous year; 2016 was the first year that sake export went over the 20 million liter mark. Sake exports have been on the rise since 2006, and the increase can be directly attributed to the growing number of restaurants serving Japanese cuisine opening outside of Japan. Sake is the truly indigenous Japanese drink that best accompanies Japanese food, and, as Japanese cuisine become more and more popular, so too does sake. The US, South Korea, and China are the biggest sake export markets.
Raymond Joseph and PWM see the opportunity to bring in more sake brands to educate people here, especially since appreciation of sake in the country is really at the infancy stage. PWM even has its own Japanese expat, the very affable Hiroaki Shibahara, to help in the sake portfolio buildup. Most of the focus of Raymond will be on the Tokutei Meisho-Shu, the higher quality graded and classified sake, as against the Futsushu or generic table sake.
The learning curve for sake could be similar to that of wine. Back in the day, Filipinos only referred to wines as red, white, or sparkling, but after the import liberalization of wine during the 1980s, which precipitated our wine drinking culture, which led to the abundance of brand choices and growing distribution reach, Filipinos now know how to ask for Bordeaux, Chianti, Rioja, and Champagnes, or, if they prefer to ask by varietal, Cabernet Sauvignon, Merlot, Chardonnay, or what have you. Soon, we should hear more Filipinos asking for Honjozo, Junmai, Ginjo, or Daiginjo when ordering sake.
REGIONAL SAKES
Unlike wines, sake does not really have AOC or appellation classifications, even if almost all of Japan’s 47 prefectures have sake breweries, varying in size and production capacities. The biggest ones are from Hyogo, Kyoto, Niigata, Akita, and Fukushima prefectures. The two main ingredients in sake-making are rice and water. Sakamai is what the rice variety is called, and while there are several to choose from, the undisputed king of sake rice is the Yamada Nishiki Rice, primarily harvested in Hyogo, Okayama, and Fukuoka. Other sakamais used in popular sakes are Omachi, Miyama Nishiki, Gohyakumangoku, Oseto, and, for more boutique sake styles, the Dewa Sansan and Kame no O from the Yamagata and Niigita prefectures.
While the rice gives the inherent flavors, the rice polishing ratio is what adds refinement and concentration to the resultant sake. The lower the percentage of original rice size left after the polishing, supposedly the better, and, obviously, the more expensive. This is where we apply the term junmai — which means pure rice sake. Basic Junmai is at least 70% rice polished ratio, Junmai Ginjo is at least 60%, and the top of the line Junmai Daiginjo is at least 50%. The Junmai Daiginjo is what Raymond compared to Grand Cru in wines.
At a recent Sake Dinner held at everyone’s favorite Japanese restaurant, Inagiku of Shangri-La Makati, Raymond brought out an impressive 10 different premium sakes from nine Japanese breweries, coming from eight Japanese prefectures, to show the varying styles and even regionality of sakes. The sakes were served in wine glasses, as Raymond wanted the sakes’ nose and aromatics to be more appreciated. This is not a surprise as I have heard of a “Sake in Wine Glass” award held annually in Japan. Given the different sakamais and the distinctive regional qualities of this beverage, sake does have more wine-like qualities than any other alcoholic beverage in the world.
MORE TO COME FROM PWM
PWM already distributes some of the most recognized commercial sakes: Gekkeikan, Hakkaisan, and, more recently, Dassai. On top of this, Raymond and Hiroaki are still acquiring more, with a conscious lookout for high character sakes from other prefectures.
In the Grand Wine Experience on Nov. 16, 2018, all Grand Wine patrons got a preview of PWM’s growing sake portfolio. And, as Raymond announced at the Sake Dinner, by Jan. 7 select Ralph stores will already have sake bars, with several sakes to be poured by the glass, using the Le Verre de Vin wine preservation system to keep each sake fresh.
Of the amazing depth of the selection tasted during the Sake Dinner, the one brand that stands out is the Tatenokawa brand, a boutique brewery from the Yamagata prefecture. We had two precious Tatenokawa Junmai Daiginjo sakes that evening, a 33% rice polished ratio and an even dearer 18% rice polished ratio. Tatenokawa, as Raymond revealed, is the only sake brewery in Japan that can make sake using only 1% rice polished ratio — incredible but true.
I had an amazing time trying all the sakes. My top three favorites of the evening were: Kozaemon Junmai Ginjo made from Dewa Sansan rice, “very deep nose, lavender, crisp acid and long finish”; Tamanohikari Junmai Daiginjo made from Bizen Omachi rice, “alluring nose, almonds, coconut pandan, with very silky finish”; and the Tatenokawa Junmai Daiginjo, also made from Dewa Sansan rice with a 33% rice polished ratio, “uncanny Fuji apple nose, very fragrant, supple texture and a luscious sweet aftertaste.”
While I was listening intently to Hiroaki talking about each of the sake style, I realized I really need to drink more sake to hone my palate. I can also see why Raymond Joseph, a wine aficionado, is now very engrossed in sake. It is time to visit your nearest Ralph store to get first hand sensory education on the different sakes available in the market.
Happy New Year to all!
 
The author is a member of the UK-based Circle of Wine Writers. For comments, inquiries, wine event coverage, and other wine-related concerns, e-mail the author at protegeinc@yahoo.com. He is also on Twitter at twitter.com/sherwinlao.

How PSEi member stocks performed — January 2, 2019

Here’s a quick glance at how PSEi stocks fared on Wednesday, January 2, 2019.
psei010319
 
Philippine Stock Exchange’s most active stocks by value turnover — December 28, 2018-January 2, 2019
pseiactive010319

Inflation could drop below 4% by Q2 — ING

By Melissa Luz T. Lopez
Senior Reporter
DECEMBER inflation likely slid further, with ING Bank expecting the rate to drop below 4% by the second quarter, allowing the central bank to undo last year’s rate hikes.
ING Bank NV Manila senior economist Nicholas Antonio T. Mapa said he expects December inflation to come in at 5.5%, another marked drop from 6% in November.
This compares to the 5.2-6% forecast range given by the Bangko Sentral ng Pilipinas (BSP) for the month, and is lower than the 5.7% median estimate from BusinessWorld’s monthly poll.
The Philippine Statistics Authority will report official inflation data on Friday. If the ING forecast pans out, December will be the second month of receding inflation, after the indicator peaked in October at 6.7%.
Mr. Mapa said the slowdown in price increases is bound to sustain its decline.
“With the rice tariffication law all but waiting President Duterte’s signature and oil prices sliding to levels last seen in mid-2017, risks to the inflation outlook appear now more tilted to the downside although upward pressure looms with possible extreme weather conditions with El Niño forecast in the first half of 2019 while surprise OPEC supply cuts can cause crude oil’s recent plunge to reverse,” Mr. Mapa said in a market report published yesterday.
Expected to be signed into law is a bill that would remove import restrictions for rice, allowing the private sector to directly bring in the commodity more freely subject to a 35% tariff. Economic managers expect the entry of cheap rice from overseas to reduce the price of the staple by as much as P7 per kilogram.
On the other hand, world crude prices have been declining following one-year highs breached in October, a trend that is expected to be sustained early this year.
“With these supply-side oriented bottlenecks mitigated or removed, we can expect inflation pressures to dissipate quickly and the overall headline print to slide in 2019, barring any return of these supply issues,” he added.
Analysts have said that lower food and fuel prices will support lower inflation readings, but may be partly offset by a seasonal spike in selected goods due to stronger demand over the holiday season.
Inflation has averaged 5.2% as of end-November, matching the full-year 2018 estimate given by the BSP and shooting past the 2-4% target range. However, authorities are confident that inflation will ease to 3.2% this year.
Mr. Mapa said a sustained inflation downtrend will provide room for the central bank to ease reserve requirements for lenders and to slowly undo the 175 basis-point (bp) rate hikes it implemented last year.
Policy makers raised rates to the current 4.25-5.25% range to rein in inflation expectations, at a time when prices touched nine-year highs.
“Should inflation continue to trend lower and move within target as early as 2Q 2019, the BSP could move to unwind some of its aggressive hike cycle to help buttress forecasted slower GDP (gross domestic product) growth for the year,” the bank economist said.
Mr. Mapa is betting that the BSP will reduce bank reserves by another one percentage point in the first quarter, followed by a 25bp reduction in the key rate between April-June.

House committee to start probe into DBM, Sorsogon contracts

THE House Rules Committee will start on Thursday its investigation into the Department of Budget and Management (DBM) in relation to the award of certain infrastructure contracts in Sorsogon.
House Majority Leader Rolando G. Andaya, Jr. said the probe is expected to also uncover the involvement of other government offices and agencies.
“A lot will be revealed tomorrow. C. T. Leoncio is just a starting point,” Mr. Andaya told BusinessWorld in a phone message, Wednesday, referring to a construction firm that allegedly won many contracts improperly.
“This will spill over to other departments and other funding sources; in all of which DBM plays a key role.”
The investigation centers on the P325 million worth of flood mitigation projects in the proposed 2019 National Budget which were allocated to Casiguran, Sorsogon.
They include the Himaoyon Flood Control project (P75 million); the Lungib Seawall and Embankment (P80 million); the Somal-ot Seawall and Embankment (P100 million); the Cagpagol River Control project (P45 million); and the Suji River Control project (P25 million).
Mr. Andaya questioned the propriety of awarding the projects in light of Budget Secretary Benjamin E. Diokno’s family connections to the province’s Hamor family, a member of which is Mayor of Casiguran.
Mr. Diokno, meanwhile, said he will not be attending the investigation. “As far as I know, I have not received an invitation. I’m still abroad. DBM’s regional director was invited,” he told BusinessWorld in a phone message Wednesday.
The Committee will also look into the infrastructure projects awarded to Bulacan-based sole proprietorship C. T. Leoncio Construction and Trading.
Mr. Andaya said the panel has identified joint venture agreements between C. T. Leoncio and Hamor-owned Aremar Construction Corp. — Charmaine A. Tadalan

Mindanao power supply adequate for expected investments — Alsons

DEMAND for power in Mindanao has grown significantly in the past five to six years, with the current power reserves considered adequate to support new investment in the main southern island, an official with Alsons Consolidated Resources, Inc. said.
“Mindanao is now blessed with adequate capacity. We have enough reserves and I think this bodes well for the entry of more investments into Mindanao. And we’ve seen this in some of the places where we operate,” Joseph C. Nocos, vice-president for business development at Alson’s power group, told reporters.
The company is Mindanao’s first and most experienced independent power producer. It currently operates four power facilities on the island with a total generating capacity of 363 megawatts (MW) serving Cagayan de Oro, Davao, Iligan, General Santos and Zamboanga.
“In General Santos the peak demand for power has grown from 105 MW in 2011 to roughly around 160 MW [in 2018]. So that’s a 50 to 55-MW increase over the last seven years, which is really a testament to the strong growth of power demand in Mindanao,” Mr. Nocos said.
“The same is true in Zamboanga City where five years ago the peak demand was something like 85 to 90 MW. Today Zamboanga is peaking at around 120 MW,” he added.
Alsons is also entering the renewable energy market through run-of-river hydroelectric power projects with a total potential capacity of more than 145 MW in Negros Occidental, Sarangani, Davao Oriental, Zamboanga del Norte, the two Agusan provinces, and Surigao del Sur.
For now, demand for power comes mostly from the commercial sector, Mr. Nocos said although the company expects the industrial sector to further boost the island’s energy requirement.
“One of these places is Cagayan de Oro where there’s at least one steel plant that is expected to come into operation within the next couple of years. This should drive the demand for power some more in Cagayan de Oro,” he said.
“So in key cities like GenSan, Zamboanga, Cagayan de Oro, Davao and also in the smaller cities like Butuan and Iligan, we’ve seen the demand for electricity peaking up, especially with the entry of the new capacities,” Mr. Nocos added.
Based on data from the Department of Energy (DoE), the Mindanao grid has a total installed capacity of 3,747 MW. In the first half of last year, a total of 202.4 MW was added to the Mindanao grid.
From 2018 to 2019, the southern island’s grid is expected to have a total additional capacity of around 868 MW from committed projects.
“Especially with the government’s ‘Build, Build, Build’ program, we expect that more investments will come into Mindanao and the adequate supply of power in Mindanao will help support this growth initiative of the government,” Mr. Nocos said.
DoE Assistant Secretary Redentor E. Delola has said that Mindanao’s peak demand could hit 2,200 MW in 2019, or up 10% compared with the 2,000 MW in 2018. It is also forecast to register the biggest growth in power demand.
The island is expected to have excess capacity of 1,400 MW in 2019, he added. — Victor V. Saulon

Southeast Asian cities vulnerable to floods, higher sea levels — OECD

FOUR major Southeast Asian cities are at risk for an expected rise in sea levels amid their current inability to manage flooding, the Organization for Economic Cooperation and Development (OECD) said.
According to OECD Green Growth Studies, which evaluated Bangkok, Bandung, Indonesia, the northern Vietnamese port city of Hai Phong, the Iskandar region of Johor in the south of Peninsular Malaysia, and Cebu, all except Bandung were vulnerable over the long-term to both rising sea levels and ocean storm surges, as well as localized flooding emanating from intense rainstorms.
Asia suffers disproportionately from losses caused by natural disasters, the OECD said. Between 1980 and 2017, loss of life from various disasters exceeded 1.2 million, or 71% of the total global loss of life, while financial losses were reckoned at $1.69 trillion, or nearly 40% of the global total, the OECD said.
The 2011 floods that hit Bangkok and other parts of Thailand, a key manufacturing hub for the auto industry, are reported to have been among the costliest natural disasters since the 1980s. The 2011 flood resulted in losses to the global supply chain of $44.2 billion.
The study found that disaster prevention and response planning were inadequate in all five cities.
Among the faults found were the absence of comprehensive hazard assessment and mapping, putting low-income communities at risk in times of disaster.
The study found that Cebu was the most advanced among the five cities.
In the Philippines, Disaster Management Plans are mandatory under the Disaster Risk Reduction Management Act or Republic Act No. 10121, and enabling laws also ensure that sufficient financial resources are allocated to local government units to implement disaster risk reduction programs.
However, the OECD said implementation at the city level is a challenge. Among 13 local government units in the Cebu area, only one has completed disaster risk reduction management plans.
The OECD added that land use policies in the five case study cities do not always take into account disaster risk management, which has resulted in continued urban development in flood-prone areas.
It said in Bandung, residents continue to settle and build in flood-prone areas, increasing the city’s exposure to further flooding risk.
In Hai Phong, the conversion of rice fields upstream of the northern branch of the Red River watershed for commercial and residential use has significantly reduced rainwater retention and placed additional demands on Hai Phong’s stormwater drainage system.
Meanwhile, in Cebu, the Roadmap for Sustainable Urban Development, developed by the Metro Cebu Development and Coordinating Board and the Japan International Cooperation Agency, have proposed “urban limits” that will restrict land use in zones at risk of flooding or landslide in order to avoid exposing infrastructure, businesses, and people unnecessarily to risk.
The next step is to translate the “urban limits” into legally-binding comprehensive land use plans and zoning ordinances at each local government unit in Metro Cebu.
The study also noted that Cebu needs to invest in ensuring water supply for disasters. The rise of sea levels and continuous groundwater over-extraction continues, compromising the supply of fresh water.
The OECD also recommended that the five cities develop a disaster risk financing mechanism and promote the use of information and communication technologies. — Vince Angelo C. Ferreras

CAVITEx sees traffic growing 5%-6% in 2019

THE CONCESSION holder of the Manila-Cavite Expressway (CAVITEx) said it is expecting use of the toll road to grow 5-6% this year with the opening of Phase 1 of an enhancement program in Parañaque City.
Cavitex Infrastructure Corp. (CIC) President and General Manager Roberto V. Bontia told reporters on Dec. 21 that 2018 vehicular traffic on CAVITEx grew 8% to an average of almost 160,000 cars daily.
“Traffic growth (for 2019 will be) roughly 5% to 6%. But that also assumes that there will be a] rate adjustment… If the rate adjustments don’t happen, it will be very difficult to achieve,” Mr. Bontia said.
CIC applied with the Toll Regulatory Board (TRB) last year for a 20-centavo per kilometer add-on toll rate at CAVITEx for the Phase 1 of its enhancements, which covers the widening of lanes and construction of a left-turn facility at the Marina flyover.
The enhancements were inaugurated on Dec. 18, and will lead to a P1 toll fee adjustment to P25 if the TRB approves CIC’s petition.
Mr. Bontia said that in 2018, revenue growth from CAVITEx was purely dependent on traffic growth because there was no toll adjustment.
He added that customers are very sensitive to fuel prices, and expects a favorable outcome for the company if crude oil prices keep going down.
“When the country’s economy is positive, generally the traffic follows… But the moment gasoline prices rise, it will depress traffic,” Mr. Bontia said.
CIC is part of Metro Pacific Tollways Corp., the tollways unit of Metro Pacific Investments Corp. (MPIC).
MPIC is one of three Philippine units of Hong Kong-based First Pacific Co. Ltd., others being PLDT, Inc. and Philex Mining Corp. Hastings Holdings, Inc., a unit of PLDT Beneficial Trust Fund subsidiary MediaQuest Holdings, Inc., has an interest in BusinessWorld through the Philippine Star Group, which it controls. — Denise A. Valdez