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Shell sets P4-B capex for 2019

PILIPINAS Shell Petroleum Corp. (PSPC) is setting aside P4 billion for capital expenditures next year, with its retail business cornering the biggest share of the budget, its top official said.
“For PSPC, our capex remains consistent at P4 billion,” said Cesar G. Romero, the company’s president and chief executive officer, in a media briefing on Wednesday.
“So tatlong taon na kaming nasa P4 billion (So we’ve been consistent at P4 billion for three years now),” he added.
Mr. Romero said the retail segment gets the biggest share of the capital outlay, as the company continues to expand its network of gas stations.
“P2 billion goes to retail to build 50 to 70 stations and then P1 billion for the refinery, [and] P1 billion for supply,” Mr. Romero said.
“One of the things we promised is predictability and consistency. So hopefully, whatever it is we said we are able to demonstrate that we continue to deliver on that,” he said.
Mr. Romero said PSPC is on track to deliver between 50 and 70 new stations this year, while closing 15 to 20 stations that have been bypassed by the road network.
“Project Barako, the bitumen project, is serving customers so nakapag-deliver na kami as of last August,” he said.
“We’re hoping we will hit 1,100 by end of the year. But at the end of the day what we’re really watching out for is our market share. It remains consistent at around 33% in retail. Not bad for a 1,000 site network. Compare that with some of our competitors who have 2,500 [stations] and they only have 35% market share,” Mr. Romero said.
In 2018, PSPC has earmarked a capex of P4.289 billion to cover the year’s outlay for its retail as well as its manufacturing and supply businesses.
In March this year, the company disclosed its target capital expenditure for 2019 and 2020 at P3.903 billion and P4.196 billion, respectively.
Capital expenditures for retail principally relate to the planned establishment of new retail service stations, the company had said.
Of this year’s outlay, up to P2.636 billion had been allocated for retail, and P1.653 billion for manufacturing and supply. — Victor V. Saulon

PHL employer health care cost growth rising faster than region

EMPLOYER-PROVIDED health care benefits in the Philippines are expected to grow at an higher rate relative to the Asia-Pacific average next year, Willis Towers Watson said.
In its 2019 Global Medical Trends Survey, the consultancy said health care benefits provided by businesses in the Asia Pacific are expected to grow 7.8%. However, the Philippines, along with China, India, and Malaysia, will post cost growth of more than 10%.
Growth in health care benefit costs in the Philippines is expected to accelerate to 11.5% in 2019 from 10.3% in 2018.
“Insurers blame the high cost of medical technology and the overuse and overprescribing of services as the major cost-driving factors, and caution that soaring hospital/inpatient and pharmacy costs will become significant factors over the next five years,” Willis Towers Watson said in a statement on Thursday.
In the Asia Pacific, 60% of insurers say that high cost of medical technology has been a driving factor in health care benefits costs. On the other hand, 37% cite employers’ profit motive.
It is also reported that eight in ten insurers in the study or 83% also said a big cost-driving factor is “overuse of care due to medical practitioners recommending too many services.” A little over half of insurers or 53% say that employees seek out unnecessary care benefits.
Meanwhile, the cost trend in the Philippines was running higher than even the record inflation of 6.7% in September and October. Medical inflation is “roughly four percentage points higher than CPI.”
Willis Towers Watson Head of Health and Benefits, Philippines Susan La Chica said in a statement on Thursday, “To better control costs, many employers are taking a close look at how they design and deliver health care benefits. There are also fundamental concerns over how medical treatment is being provided and consumed, and the cost implications of innovative future treatments, all of which can fuel sharp cost increases down the road.”
She added that while traditional cost management programs are still choices used by insurers and employers, other innovative methods are also being looked into.
“Insurers and employers are also looking closely at telemedicine, second medical opinion services and other innovative design programs that can help to control costs and meet the needs of their employees to help them make smarter health decisions,” Ms. La Chica said. — Gillian M. Cortez

First Gen still seeking more partners for LNG terminal

FIRST GEN Corp. has not ended its search for partners for its planned liquefied natural gas (LNG) terminal after the signing of a joint development agreement (JDA) with Tokyo Gas Co., Ltd., a company official said.
“It has always been our plan to bring in third-party investors. It’s just that this is the first. We’ve been in discussion with many different potential partners. We’ve been in discussion with Tokyo Gas for a long time and it’s only now we’ve worked out all of the issues between us,” Jonathan C. Russel, First Gen executive vice-president, said in a chance interview.
First Gen signed on Wednesday a JDA with Tokyo Gas to pursue the joint development of an LNG terminal at the Lopez-led company’s Batangas Clean Energy Complex.
“Between us — both Tokyo Gas and First Gen — we’re actually hopeful that we will bring in additional investors, other people that bring different skills to the table,” Mr. Russel said.
First Gen operates gas-powered plants in Luzon, namely: the 1,000-megawatt (MW) Santa Rita power plant, the 500-MW San Lorenzo power plant, the 414-MW San Gabriel power plant and the 97-MW Avion power plant.
“We have 2,000 MW of existing capacity that we own. There’s another 1,200 MW potentially from Ilijan. And then we’re looking at further expansion, potentially another 1,000 MW. So between those, and depending [on whether] they run at baseload or midmerit, we’re looking at probably an initial supply of 3 going up to 5 million tons per annum (MTPA),” he said.
Mr. Russel estimated the total investment in the LNG terminal to reach between $700 million to $1 billion. He said equity funding will come from First Gen, Tokyo Gas and “hopefully” from other partners.
“The financing depends on how the project is ultimately structured. So we still got work to do to finalize the entire structure, but our intention is to bring in a mixture of international and local banks to finance the project,” Mr. Russel said.
The First Gen-Tokyo Gas deal comes after recent pronouncements from the government describing LNG as vital to ensuring the country’s energy security once the Malampaya gas field, which fuels the company’s plants, is depleted.
Tokyo Gas will take a 20% participating interest in the LNG project and provide support in development work to achieve a final investment decision. Upon reaching that decision under the JDA, the parties will enter into a definitive agreement to proceed with the construction of the project, First Gen said.
Mr. Russel said First Gen continues to look for partners with “experience in developing LNG, experience in developing similar projects, additional skills that we might not have.”
He said a number of foreign companies had expressed “considerable interest in working with us in the Philippines and so we need to focus on those discussions.”
For the LNG terminal, First Gen is looking at supplying to both existing and future power plants, “but also hopefully other power markets outside of Luzon and even non-power markets.”
“We’re installing the ability to fill up trucks loaded with LNG which can transport even within Luzon, for example to the industrial parks. And then also you can use smaller vessels to transport to Visayas and Mindanao. That’s quite exciting,” Mr. Russel added. — Victor V. Saulon

Forget Hollywood, watch Russian films

By Susan Claire Agbayani

A RUSSIAN language poster for Battle for Sevastopol

THE Cold War lasted for 45 years, and ended in 1990. Throughout those years, the portrayal of the former Union of Soviet Socialist Republics by Hollywood affected the mind-sets of not just two generations, but the progeny of these generations as well.
Twenty-eight years later comes a chance to learn more about Russia thanks to the first-ever Russian Film Week in the Philippines. A wide variety of Russian movies are being screened free of charge at SM Megamall and SM Mall of Asia with 6 p.m. and 8 p.m. screenings until tomorrow, Dec. 8.
It’s interesting to note that of four of the seven films are based on true stories. Perhaps the most interesting is Aleksey Uchitel’s biographical historical drama Mathilde. Set in the twilight of Imperial Russia, the film tackles the life of prima ballerina Matilda Kshesinskaya who became the mistress of not just one or two, but three grand dukes including the then-future Tsar Nicholas II.
Nikolay Khomeriki’s action/adventure/drama Lekodol, or The Icebreaker is based on the story of the ship Mikhail Somov which — after a collision — was trapped in ice and forced to drift near the coast of Antarctica for more than four months in 1985.
In Klim Shipenko’s historical action drama, Salyut-7, the space craft loses contact with its space station, and cosmonauts Vladimir Dzhanibekov and Viktor Savinykh “dock with the empty, frozen craft, and bring her back to life,” according to a synopsis from IMDB.
OF LOVE AND WAR
The Sergey Mokritskiy-megged festival opening film Battle for Sevastopol is a biographical romance drama set at Sevastopol, Ukraine during World War II. It is about Lyudmila Pavlichenko, who is touted as the most successful female sniper in history, her loves, and her friendship with former United States First Lady Eleanor Roosevelt.
“This movie is about love and how difficult it was for the heroine to love during these terrible years of the war,” said director Mokritskiy during a speech at the opening rites of the filmfest at Cinematheque Manila. “Twenty-six million Russians died in (the Second World) War; much more than the losses of the United States and Britain. Not a single family (did not) suffer some kind of loss because of this war,” he said through an interpreter.
“War…is not the best environment for love. But love must prevail even under crazy, terrible, awful conditions of war. That’s the main message of the film,” said Russian Ambassador Igor Khovaev told BusinessWorld.
The Cold War between the United States and other Western powers on the one hand, and the USSR and Soviet bloc countries on the other, started in 1945, and yet the friendship between Pavlichenko and Roosevelt lasted to the end of their lives.
“True, real love and friendship shouldn’t depend on politics. They should be above any, all political contradictions and differences. At that time, the relationship between the Soviet Union and the United States was very complicated. So the relations were full of troubles, very deep, very serious, very dangerous contradictions. But despite all those challenges, despite all those disputes, friendship, love would prevail. It was a friendship forever,” Mr. Khovaev said.
“My biggest hope and dream is that (these films) will help Filipinos understand Russia and Russian people better, thereby opening up new horizons for our partnership and friendship,” he said.
Although she was abroad during the festival opening, Film Development Council of the Philippines (FDCP) Chair and CEO Mary Liza Dino relayed this message: “The FDCP strongly believes in the film’s capacity to transcend cultural barriers. Through our film cultural exchange program, we proudly partner with embassies and cultural organizations in providing platforms for foreign films to be showcased in the country. Film festivals such as this provide opportunities for our local audience to be exposed to a wide variety of foreign films from different parts of the world.”
Other films being shown at the festival are: A Rough Draft, a fantasy about a video game designer also directed by Mokritskiy; Emilis Velyvis’ action/adventure/fantasy Night Watchmen; and Aleksey Mizgirev’s adventure drama The Duelist, about a former army veteran who settles duels for aristocrats in 19th century Imperial Russia).
To be shown tonight are Night Watchmen, 6 p.m., and Mathilde, 8 p.m. at SM Megamall; and Icebreaker, 6 p.m., and Duelist, 8 p.m. at MOA.
To be screened tomorrow, Dec. 8, are Salyut 7, 6 p.m., and A Rough Draft, 8 p.m., at SM Megamall; and Battle for Sevastopol, 6 p.m., and Night Watchmen, 8 p.m., at MOA.

Lazada Philippines to expand partnerships with brands, MSMEs

LAZADA Philippines is planning to expand its partnerships not just with traditional brands, but with micro, small and medium enterprises (MSMEs), as aims to keep its lead in the increasingly competitive e-commerce market.
“We grew very fast the entire year and we have aggressive plans for next year. We are really convinced that Philippines will converge with other markets in e-commerce penetration and we will definitely be the main player here,” Carlos Otermin Barrera, chief operating officer of Lazada (Philippines), told BusinessWorld in an interview at the company’s office in Bonifacio Global City on Nov. 28.
He estimated the percentage of online retail sales in the Philippines is around 2% of the total retail market, which is “very low” compared to China or United States which is around 25%.
“There’s definitely a lot of room for growth. It’s higher in the metro areas because people are more Internet savvy or they normally used to shopping online. But we’re also seeing some regions, provinces where Lazada is big because they don’t have many choices,” Mr. Barrera said.
For next year, Lazada aims to increase the number of brands under LazMall. Launched in September this year, LazMall has over a thousand brands including The SM Store, Robinsons Appliances, Samsung, Huawei, MAC, L’Oreal, Maybelline and Unilever.
“We will increase number of brands, number of participants. We are quite confident of the value we are bringing into the market,” he said.
Mr. Barrera attributed LazMall’s success to the fact that Filipinos value authenticity and quality when shopping online.
“We wanted to set this up as the standard for the branded (online) mall experience. It has very good promises — better returns, next day delivery, 100% guarantee. We work with the main principals of the brand so they also give us lots of exclusive items,” he said.
Lazada, which is majority owned by Chinese e-commerce giant Alibaba, is also looking to expand its local marketplace with particular focus on micro, small and medium enterprises (MSMEs). At present, there are around 20,000 Philippines-based MSMEs on Lazada.
The company has partnered with the government, particularly the Department of Trade and Industry, to help MSMEs enter the e-commerce market.
“One of the reasons why we are so successful is we’re getting more and more businesses online. We believe Lazada is the biggest opportunity. Even if you have small store in the province, just by going on Lazada, you will get nationwide reach,” Mr. Barrera said. “We are very convinced that in a country like the Philippines with over a million SMEs, we will be in the hundreds of thousands very soon.”
Lazada also plans to introduce new tools on its website to serve its customers better and help their sellers’ businesses grow.
CHALLENGES
Despite stellar growth, Lazada still faces challenges, mainly in payments, logistics and trust. Mr. Barrera said the company has invested heavily in payments and logistics.
“Our logistics is definitely the best in the Philippines and we continue growing our footprint. We recently opened our Davao warehouse and we continue opening our logistics centers, hubs. For payments, we have the Lazada Wallet and partnerships,” he said.
To address trust issues, Lazada has rules on the sale of counterfeit items on the platform, as well as refunds and returns.
“The way our site works is we give more traffic to the authentic, verified, strong sellers… In fact, we recently started selling cars for the first time in the Philippines. It makes you realize the barriers are reducing since people trust Lazada to buy a car, a big investment,” Mr. Barrera said, referring to the sale of Mini Cooper S Monte Carlo Edition cars during Lazada’s 11.11 event.
Lazada was criticized by many customers when it stopped offering free shipping for orders in Metro Manila last July. Instead of standard free shipping, stores and sellers were allowed to set the minimum spend requirement for shipping discounts.
“When you look at the items and our distribution, what we do now is as a platform is we also want sellers to differentiate themselves and to do better service. Today we have over 30-40% of our items with free shipping shouldered by the seller. But also what we did thanks to that is reduced the customer shipping fees across the Philippines. Yes, it was a bit of bad PR that free shipping was gone but in reality, a lot of our sellers are offering free shipping on their own,” Mr. Barrera said.
He noted many Lazada customers now consolidate their orders to take advantage of free or discounted shipping offers by the sellers.
This month, Lazada also lowered its shipping fees around the country, even for bulky items.
LAST BIG SALE
Coming off the success of the 11.11 sale, Lazada is holding another sale event called 12.12. Unlike the one-day 11.11 event, the 12.12 event runs from Dec. 10 to 12.
“We focus on all the relevant themes mostly for Christmas. The theme is ‘Shop with heart’ for your family, your friends. It has a lot of gifting mechanics, specific baskets, lots of beauty products. It’s our biggest sale of the year in the Philippines. December is the main month here,” Mr. Barrera said.
He noted the 12.12 sale offers a wider number of deals and products, mostly under the grocery, fashion, beauty and personal care categories.
Lazada is committed to ensuring that products ordered during the 12.12 event will be delivered before Christmas, except if the item is shipped from abroad.
Despite increasing competition from other e-commerce platforms such as Shopee and Zalora, Lazada is still upbeat on its prospects next year.
“There are some competitors but we are also happy that the e-commerce market is growing. We are very confident in our business model… Other platforms are more of a C2C (customer-to-customer), secondhand item marketplace… We are the platform of the top brands and the top sellers,” Mr. Barrera said. — Cathy Rose A. Garcia

Drake is Spotify’s Most Streamed Artist of 2018

WHILE Canadian rapper Drake was the most streamed artist of 2018 globally on Spotify, in the Philippines, LANY took the top spot.
Filipinos were also listening to Moira dela Torre, Ed Sheeran, BTS, and Maroon 5.
Drake, with 8.2 billion streams in 2018 alone, is Spotify’s most-streamed artist in the history of the service. Rounding out the Top 5 list of Most Streamed Artists in the world are (in order): Post Malone, XXXTENTACION, J Balvin, and last year’s most streamed artist Ed Sheeran.
When it comes to Spotify’s most-streamed female artist, Ariana Grande, with 48 million-plus monthly listeners, took the top spot, followed by Dua Lipa, Cardi B, Taylor Swift and Camila Cabello.
The Top 5 Most-Streamed Groups (with the caveat that the group has to have three or more members) were, inorder, Imagine Dragons, BTS, Maroon 5, Migos, and Coldplay which was 2017’s most-streamed group.
Hip-hop continued to dominate Spotify’s charts in 2018, but last year’s surge in Latin music continued its growth. Apart from that, EMO Rap and Lo-Fi Beats were two genres that grew the most in 2018.
Drake’s “God’s Plan” was the Most-Streamed Track followed by “SAD!” by XXXTENTACION, “rockstar” by Post Malone (feat. 21 Savage), “Psycho,” also by Post Malone (feat. Ty Dolla $ign), and Drake again with “In My Feelings.”
Drake topped a list yet again, with Scorpion as the Most-Streamed Album. This was followed by Post Malone’s beerbongs & bentleys, XXXTENTACION’s ?, Dua Lipa eponymous album; and Ed Sheeran’s ÷, which happened to be the top album in 2017.
When it came to the Most-Followed Playlists in the world, the Top 5 were: Today’s Top Hits, RapCaviar, ¡Viva Latino!, Baila Reggaeton, and Songs to Sing in the Car.
Spotify was launched in Sweden in 2008 and now has about 35 million songs available on its free streaming service. It has 180 million users (83 million of whom are subscribers to the premium services), across 65 markets.

MBC says security of tenure law must respect businesses’ rights

MAKATI Business Club (MBC) Chairman Edgar O. Chua called for the rights of management to be respected as the government urges legislators to pass the Security of Tenure (SoT) Bill.
In an interview with BusinessWorld earlier this week, Mr. Chua said that the government should not only focus on workers’ security of tenure but also the operations of businesses.
“The law should not make it so difficult and allow a company flexibility. (Legislators need to find) the right balance between protecting workers with also protecting the right of companies to be able to hire and fire for proper cause,” he said.
In September, President Rodrigo R. Duterte certified the SoT Bill as urgent, requesting its immediate passage by the Senate.
The bill passed on third and final reading at the House of Representatives while the Senate is still in the process of interpellation.
Mr. Chua said that while the organization will not give an official position on the bill especially while it remains pending at the Senate, the government should be looking to enforce current laws that already prohibit illegal contracting arrangements such as endo or “end of contract” employment terms.
“The problem is enforcement. We have too many laws but the real problem in our country is enforcement,” Mr. Chua said.
Labor groups have called for the total abolition of contracting activity, to which Mr. Chua said that eradicating contractualization, which include legitimate contracting activities, will cause problems for businesses and ultimately affect employment overall.
“In today’s work where it’s very dynamic and very fluid, it makes it very difficult for a company to adjust (if we abolish legitimate contracting activities),” he said. — Gillian M. Cortez

Delay in PEZA approvals hampers BPO sector expansion

EXPANSION of the business process outsourcing (BPO) sector next year may be hampered by the continued delay of the Philippine Economic Zone Authority (PEZA) in approving applications, according to Colliers International Philippines.
The real estate property consultancy noted in a statement that only six PEZA applications have been approved in the first nine months of 2018, with no approvals seen in the fourth quarter.
Since President Rodrigo R. Duterte started his term in 2016, only 36 out of 78 PEZA IT Center and Park applications have been approved, or an approval rate of 46%. The most number of approvals were seen in the fourth quarter of 2017 at 11 PEZA applications, which prompted an increase in take up of office spaces in 2018.
“Colliers believes that a major reason why office demand from outsourcing firms picked up in 2018 is the accelerated PEZA proclamation of office spaces in 2017 which are now about 70% occupied,” the company said.
PEZA-accredited buildings include Megaworld Corp.’s McKinley Hill, Filinvest Land, Inc.’s Northgate Cyberzone, Robinsons Land Corp.’s Bridgetowne, and Ayala Land, Inc.’s Vertis North, among others.
“Colliers encourages the government to expedite the approval of PEZA applications. We believe that a couple of applications can still be approved before the end of the year, which should contribute to a stronger pre-leasing of office space due to be completed in 2019 and 2020,” it said.
As of the third quarter of 2018, there are 821,742.31 square meters (sq.m.) of office spaces with pending PEZA applications in the country, 637,630 sq.m. of which are in Metro Manila. Provincial sites with pending PEZA applications include Bataan, Benguet, Cavite, Cebu, Davao del Sur, Iloilo, Laguna, and Negros Occidental.
Next year, about 41% of the buildings to be completed have already been granted PEZA accreditation.
The proclamation of more PEZA buildings could further ease fears of the enactment of the second package of the tax reform law, or the Tax Reform for Attracting Better and High-Quality Opportunities (TRABAHO), which diminishes tax incentives given to PEZA locators.
Colliers noted that a number of BPO firms have already adapted a wait-and-see stance due to the TRABAHO bill.
The BPO sector contributed the largest share of Metro Manila office space transactions in the first nine months of 2018, at 42% of the total 1.14 million sq.m.
While the BPO sector has been the primary driver for office demand in the previous years, Colliers encouraged developers to start targeting traditional and non-BPO firms that have been expanding in Metro Manila, citing the country’s strong economic growth.
“The country’s economic managers are expecting a GDP growth of 6% to 6.5% this year and 7% to 8% from 2019 to 2022 and a strong macroeconomic backdrop should support the expansion of these businesses. This should eventually compel firms to occupy larger office space,” Colliers Director for Office Spaces Dom Frederick Andaya said in the same statement. — Arra B. Francia

U2, Coldplay top Forbes list of highest-paid musicians

LOS ANGELES — Irish rock band U2 topped the 2018 Forbes magazine list of the highest-paid musicians on Tuesday thanks in part to the group’s successful Joshua Tree world tour celebrating their classic 1987 album.
That tour helped the band collect $118 million in pre-tax earnings from June 1, 2017 to June 1, 2018, the magazine said. The performances featured well-known hits from The Joshua Tree album including “Where the Streets Have No Name,” “With or Without You” and “I Still Haven’t Found What I’m Looking For.”
The band’s earnings also included revenue from a new tour, Experience + Innocence.
British band Coldplay finished second on the Forbes list with $115.5 million, mostly from its A Head Full Of Dreams tour.
Billions of streams helped 27-year-old British singer Ed Sheeran finish third with $110 million. He was followed by Bruno Mars with $100 million, and Katy Perry with $83 million. — Reuters

China’s Didi announces reorganization plan to address safety after two deaths

SHANGHAI — Chinese ride-hailing firm Didi Chuxing on Wednesday announced a reorganization plan aimed at improving safety on its platform, as it works to address public and government concerns raised after the murders of two of its users.
In a post on its official WeChat account, the company said it would create two positions at the top of its leadership structure — a chief safety officer reporting to Chief Executive Cheng Wei, and a chief information security officer reporting to Chief Technology Officer Bob Zhang.
“Safety is the number one priority for our users. The committee members responsible for safety will promote and implement safety reform work, invest in online and offline resources, and thoroughly improve our standards for safety,” the company said, attributing the comment to both Mr. Cheng and Didi President Jean Liu.
Didi has been the subject of a public backlash since a 20-year-old woman from the eastern city of Wenzhou was raped and killed by one of its drivers in August, about three months after another Didi user was murdered.
Last week, the Ministry of Transport called the ride-hailing firm “out of control” and criticized its management and background check procedures.
In its WeChat post, the firm also said it will consolidate some of its ride-hailing divisions — each responsible for different services — to form a single business unit in which it would invest to improve compliance and services standards.
It said it would similarly move its bike rental, designated driver and public transportation units into a single entity. — Reuters

ING sees cuts in key rates, reserve requirements

By Melissa Luz T. Lopez, Senior Reporter
SLOWER GROWTH and tighter liquidity will prompt the central bank to stop its tightening cycle, a global bank said, expecting cuts in interest rates as well as bank reserves in 2019.
Nicholas Antonio T. Mapa, senior economist at ING Bank NV-Manila, said he expects the Bangko Sentral ng Pilipinas (BSP) to reduce key rates by 50 basis points (bp) next year plus a 200-bp cut in the reserve requirement ratio (RRR).
Broken down, Mr. Mapa sees a 25-bp rate cut within the second and fourth quarter. Meanwhile, 100-bp cuts in bank reserves are expected in the first quarter and in the third quarter.
However, the bank economist said there are three conditions that need to be met before these adjustments are enforced.
“Possibly by the second quarter, we can see them (BSP) cut the policy rates and on top of it, reserve requirement mainly on three premises: first, inflation has to slow back to within target,” Mr. Mapa said in a media roundtable session yesterday in Makati City.
“We’d also like to see the Fed[eral Reserve] dot plots more dovish than they are right now and lastly, growth is expected to slow down so maybe this gives the BSP a leeway to give the economy a much-needed break.”
The BSP has fired off five consecutive rate hikes since May worth a total of 175 bps, the latest of which a “proactive” move to temper inflation expectations going into 2019. Now, rates range from 4.25-5.25%, with the 4.75% benchmark the highest in nine years.
The series of increases are meant to rein in price pressures, which have been consistently climbing since January until a sharp fall recorded last month.
Inflation has so far averaged 5.2% this year versus the original 2-4% target band, although economic managers said the rate will consistently decline going into 2019.
Higher interest rates are viewed as a growth risk coupled with faster prices increases for basic goods which dampen consumer spending.
Already, household spending has been decelerating so far this year, with growth easing to 5.2% in the third quarter from 5.9% logged in the April-June period.
Mr. Mapa said they expect inflation to ease to 3-3.1% next year, which should “invigorate” business spending and restore some purchasing power among retail shoppers.
These are expected to help stoke the economy, with overall growth expected to ease to 6.1% in 2019 coming from a 6.2% forecast this year. Gross domestic product (GDP) growth has averaged 6.3% as of end-September.
Growth is seen to slump to 5.9% this quarter, which if realized will slump from 6.1% logged in July-September and will be the slowest pace in over three years. This trend is expected to be carried over through the first half of 2019, as a boost from election spending could be cancelled out by a five-month ban on government projects ahead of the May 2019 polls.
“Basically we see growth possibly struggling in the first half (of next year)…,” Mr. Mapa said. “High rates and growth just don’t mix.”
Meanwhile, fresh RRR cuts are projected next year in line with BSP Governor Nestor A. Espenilla, Jr.’s long-term goal of bringing the reserve level down to single digits. The RRR is currently at 18%, down from 20% previously after two cuts which took effect earlier this year. Reducing the mandated bank reserves will free up cash, letting lenders deploy more funds for lending and investments.
Some respite is expected from robust government spending, which has been driving GDP expansion. However, Mr. Mapa said the delayed passage of the 2019 national budget — which is still pending at the Senate just days before the year starts — could push back state disbursements including high-impact infrastructure projects.
“Because consumption is hampered to some extent by higher interest rates and high inflation, we’re counting on government spending to buttress the rest of the economy. If the delay happens, then we can see a subsequent delay in spending,” he added.
Going into 2019, exports are expected to remain a drag while the peso is seen to depreciate further to P54.45 against the greenback as concerns on a wider trade gap weigh down sentiment towards the currency.
The Duterte administration is targeting GDP growth at 6.5-7% this year and at a faster 7-8% in 2019.

Court recalls arrest warrants vs Alliance Select execs

ALLIANCE Select Foods International, Inc. said the warrants of arrest against its incumbent officials have been recalled, after a Pasig court upheld that these violated their right to due process.
In a court ruling penned Nov. 20, Branch 70 of the Pasig City Metropolitan Trial Court ordered that the warrants of arrest dated July 11 be quashed or recalled against Alliance Select President and Chief Executive Officer Raymond K.H. See, Chairman Antonio C. Pacis, and former company officials George Sycip and Jonathan Y. Dee.
The court said the warrants were issued prematurely and in denial of the defendants’ right to a full preliminary investigation by the Department of Justice (DoJ) in determining probable cause.
The warrants of arrest were issued in relation to inspection charges filed by Singaporean shareholder Hedy S.C. Yap-Chua, who requested for an inspection of the company’s books and records.
Ms. Yap-Chua questioned Strong Oak, Inc.’s P563-million private placement in Alliance Select back in 2014, which effectively diluted Singaporeans’ holdings to 24.52% from 34.4%.
She then said that the company’s refusal to open up their books constitutes a violation of Sections 74 and 75 in relation to Section 144 of the Corporation Code.
Section 74 of the Corporation Code states that “every corporation shall keep and carefully preserve at its principal office a record of all business transactions…,” while Section 75 details the rights of any stockholder or member of the company to be granted access to records such as their latest financial statement.
Alongside the recall of the warrants, the Pasig Court also ruled that the cases against Alliance Select officials be returned to the DoJ through its state prosecutors, so that it may complete the preliminary investigation and resolve pending motions for reconsideration.
“The DoJ through the state prosecutors concerned is hereby directed to make a report of its proceedings not later than the expiration of the period here allotted and to inform the court within a period of five days from notice as to the time and date when it received this order,” according to the ruling.
In a statement, Mr. See said that he is happy with the court’s decision “because the rule of law has been upheld.”
Alliance Select is a homegrown firm that engages in tuna processing, canning, and the export of canned tuna products to international markets such as Europe, North America, Asia, Africa, South America, and the Middle East.
The company booked a net income attributable to the parent of $3.23 million in the first nine months of 2018, 680% higher than the $414.33 million it posted in the same period a year ago. This followed a 39% increase in gross revenues to $74.15 million.
Shares in Alliance Select were flat at P1.02 each at the stock exchange on Thursday. — Arra B. Francia

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