JG Summit’s P30-B bonds secure PRS Aaa rating

November 28, 2018 | 12:07 am

LOCAL DEBT watcher Philippine Ratings Services Corp. (Philratings) maintained its PRS Aaa rating for JG Summit Holdings, Inc.’s (JGSHI) P30-billion bonds.
In a statement issued Tuesday, Philratings said the Gokongwei-led holding firm’s obligations are of the highest quality with minimal credit risk. This means that JG Summit has an “extremely strong” capacity to meet its financial commitments.
Philratings also assigned a stable outlook for the rating, which indicates this will likely be maintained in the next 12 months.
“The rating reflects JG Summit’s strong liquidity, its sound capitalization structure, the solid market position of its core businesses, and its well-experienced shareholders and management. The rating also considers the continued positive outlook for the domestic economy, which is expected to benefit the industries of JGSHI’s core businesses,” according to Philratings.
The debt watcher called JG Summit’s liquidity level healthy, with a ratio of 1.0x by end-September. The company’s cash and cash equivalents and short-term available-for-sale investments also stood at P66.4 billion, which could cover its short-term debt of P59.1 billion.
The company further has P24.5 billion worth of long-term bonds set to mature next year that will be refinanced.
“In addition to its strong internal cash generation, external liquidity is available to the Group through its credit facilities with domestic and international financial institutions. Historically, fund-raising exercises of the Group, via debt or equity, have been successful,” Philratings said.
JG Summit holds the Gokongwei group’s investments in food and beverage through Universal Robina Corp. (URC), property development through Robinsons Land Corp. (RLC), airline operations through Cebu Air, Inc., JG Summit Petrochemicals Corp., and Robinsons Bank.
URC is considered a strong market player in the country, with investments in Thailand, Vietnam, Australia, and New Zealand.
Meanwhile, Cebu Air operates low-budget carrier Cebu Pacific, which estimated its market share at 53% in the second quarter of 2018, compared to Philippine Airlines’ 29% and Air Asia’s 16%.
Philratings further described RLC as the second largest mall operator in the country with 49 malls covering a gross leasable area of 1.4 million square meters.
The listed conglomerate booked an attributable profit of P14.80 billion in the first nine months of 2018, 30% lower year-on-year as the weakness of the peso weighed on its petrochemicals, food, and airline units.
Revenues meanwhile went up by seven percent to P217.52 billion.
“Going forward, the JG Summit Group is expected to benefit from the country’s consumption-driven economy, while its diversified portfolio of businesses mitigates risks due to market volatility and rapid industry changes,” Philratings said.
Shares in JG Summit rose 0.31% or 15 centavos to close at P48.15 each at the stock exchange on Tuesday. — Arra B. Francia

Special economic zones for creative industry sought

November 28, 2018 | 12:06 am

By Janina S. Lim
Reporter
THE Creative Economic Council of the Philippines (CECP) wants creative industry clusters to be designated as special economic zones to allow companies to benefit from fiscal incentives.
At Tuesday’s Arangkada forum held in Makati City, CECP Founder and President Paolo A. Mercado said the group is pushing for the identification of creative clusters as special economic zones (SEZs) as part of its road map.
The CECP is targeting to have one to five creative cluster SEZs established between 2016 to 2020; five to 10 from 2020 to 2025; and over 10 by 2030.
At present, Philippine Economic Zone Authority has not identified any creative industry cluster as an SEZ. The identification of SEZs is a government strategy to attract investments in high priority sectors.
Under the SEZ Act of 1994, an SEZ refers to selected areas “with highly developed or which have the potential to be developed into agri-industrial, industrial, tourist, recreational, commercial, banking, investment and financial centers whose metes and bounds are fixed or delimited by Presidential Proclamations.”
Creative economy sectors such as arts and culture (books, crafts, film, music, etc.); design (architecture, fashion, and toys); media (advertising, press, television and radio); and innovation (research and development and software) were not mentioned.
Current ecozone locators enjoy an exemption from national and local taxes and licenses in lieu of a payment of a 5% tax on its gross income; additional deduction for training expenses, among other incentives provided by other laws.
In a separate interview, Mr. Mercado said the group will take a look at the pending Tax Reform for Attracting Better and Higher-Quality Opportunities (TRABAHO) bill, which modifies the current incentive program.
The CECP also pushed for the creation of an agency that will focus on spurring the growth of the industry.
“Even without the agency the road map will still be possible but slower. An agency can act as an accelerator in defining for example the incentive packages specific to the creative sector and making it a one-stop application, facilitating those things,” Mr. Mercado added.
CECP’s push was backed by the Joint Foreign Chambers of the Philippines (JFC) who, in a November 10 issued policy brief tackling creative Industries, noted that such an agency “could follow a similar path” by the National Commission for Culture and the Arts.
On incentives, the JFC recommended government “to encourage and incentivize the development of creative hubs and creative clusters as places for incubation, production, education, and research and development.”
The policy brief, distributed at the forum yesterday, cited creative clusters in cities like Makati, which is a hub for majority of the local advertising firms and production houses.
Another is Quezon City which is tagged as home to both film and television industries.
“A PEZA or BOI (Board of Investments) incentivized cluster for Advertising Production would make sense in Makati, while a Film Production and Development Center would be welcome in Quezon City,” read the policy brief.
During a briefing at the end of the forum, Canadian Chamber of Commerce of the Philippines Julian H. Payne said a key takeaway in the forum is the need to globalize creative talent in the Philippines.
“You need partners outside you. Most of the creatives are covered by foreign investment restrictions like professions, or the media, or cultural industries, and therefore if you really want to globalize your creative industries, you have to globalize your connections in international investments, you’re going to have to ease those restrictions to accomplishment it,” Mr. Payne said.
But before looking at the future growth it intends to achieve, the Philippine creative industries should first measure its current status, the JFC recommended, as no reliable and consistent data has been produced to evaluate the growth of the creative industries.
“There is need for priority funding for updated and consistent measurement of the value generated by creative industries,” the group said, adding that such move should involve the Philippine Statistics Authority (PSA) “so that reliable data can be obtained on local levels for each sector.”
The World Intellectual Property Organization (WIPO) data which Mr. Mercado cited dates back to 2010. It showed that creative industries contributed $65 billion or 7% to the country’s GDP.
The industry also generated 530,000 jobs, excluding the freelancers which today are estimated at around 1.5 million.

Giving credit: the government and the country’s agriculture sector

November 28, 2018 | 12:06 am

By Marissa Mae M. Ramos
Weather conditions may be unfavorable, crops may fail.
These factors increase the risk profile of farmers (and fisher folks), which, with their tendencies to not have enough collateral, make farming a risky business for banks.
This is a concern considering that last year, the agriculture sector only managed to contribute 8.5% to the country’s economic output while absorbing a quarter of the country’s labor force. While these are lower compared to 2016, they remain a huge part of the country’s economic growth engine.
The contribution of agriculture to the Philippine gross domestic product (GDP) has been gradually declining over the years, but that does not mean the government has abandoned the sector.
GOVERNMENT INTERVENTION
In recent years, the Department of Agriculture (DA) has revitalized national concern for the gradually shrinking sector. Projects were introduced through the efforts of the national government and global organizations like the World Bank.
Last year, DA with its attached agency the Agricultural Credit Policy Council (ACPC), launched the Production Loan Easy Access (PLEA) program to serve small scale farmers and fisher folks with cooperative banks, rural banks, cooperatives and non-government organizations (NGOs) acting as lending conduits.
PLEA covers 81 provinces as of this writing. Under this program, loans need not be collateralized in addition to terms of repayment that can vary depending on the project of the borrower. Eligible borrowers can apply for a loan amounting as much as P50,000 for short term crops/commodities and P150,000 for high value crops and long gestating crops.
“Most DA programs channel credit funds to conduits as mandated under the Agriculture & Fisheries Modernization Act (Republic Act 8435)… This is mostly brought about by the government’s bad/costly experience with lending programs in the 1970s and 1980s, which had huge amount of loan defaults,” DA Undersecretary for High-Value Crops and Rural Credit Evelyn G. Laviña said.
“Further, direct loans from the government is prone to politicization and is often seen by borrowers as dole out instead of loan. By experience, this is costly because the government would have to shoulder both operational costs as well as the high default rate.”
Other programs of the DA include the Survival and Recovery (SURE) Loan Assistance and the Agricultural Competitiveness Enhance Fund (ACEF) Lending Program. The former was implemented with partner conduits that target calamity-affected farmers and fisher folks whereas ACEF had the Land Bank of the Philippines (LANDBANK) as a credit facility serving the agri-fishery sector in procurement of necessary equipment. The latter was extended to 2022 from 2015 under Republic Act 10848.
The SURE assistance program can give survival assistance grant up to P10,000 per borrower or recovery assistance loan up to P25,000 per borrower at 0% interest payable for up to three years.
Meanwhile, up to 80% of the ACEF is for financing, providing up to P5 million per project for cooperatives and P1 million for small farmers. The remaining 20% of the fund is for research and development grants.
Ms. Laviña added that the government can wring the “existing systems and networks” of lending conduits by tapping them as middlemen in providing credit assistance to farmers and fisher folks.
“Farmer borrowers also benefit from this arrangement in terms of lower costs of transactions (mainly transportation and time) in availing loan as conduits are usually their cooperatives /organizations or the nearest rural and cooperative bank,” she said.
Average monthly repayment rates for PLEA and SURE clocks in at 97% and 100%, respectively, as detailed by Ms. Laviña. High repayment rates of credit programs like PLEA and SURE shows how lack of collateral can deprive farmers and fisher folks a decent access to financial resources.
Signed last August, RA 11057 or the Personal Property Security Act aims to link this gap in enabling farmers and fisher folks to apply for a loan without land titles as collateral.
The legislation expands acceptable collaterals for different loan applications from land or real estate to other personal properties and movable assets. For instance, farmers can now use farming equipment, produce, warehouse receipts, and accounts receivables as collateral.
On the other hand, Union Bank of the Philippines (UnionBank) Chief Economist Ruben Carlo O. Asuncion reasoned, “[a]lthough there are case studies that show high loan repayments in developing economies, loan repayment in the agriculture sector are a challenge. This is why very few formal banking institutions are involved in agriculture sector financing.”

BSP’S DYNAMIC
Agri-agra
As a regulatory body, the Bangko Sentral ng Pilipinas (BSP) has been backing proposals to amend the Agri-Agra Reform Credit Act of 2009 (Republic Act 10000), which mandates banks to allot at least 10% of total loanable funds for agrarian reform beneficiaries (ARBs) and 15% for farmers and fisherfolk.
Among such proposals were those from the Agri-Fisheries Alliance, which include lumping the agri-agra lending provisions into a 25%-blanket requirement for lending to agriculture, which they said will provide more leeway for banks to help out the sector.
Albeit lending by the banks to the sector was 26% higher than what was granted as of June 2017, total lending to the sector settled to roughly half the required amounts during the period.
Non-compliance to the Agri-Agra Reform Credit Act subjects the bank to administrative sanctions and penalties imposed by the BSP. Almost a decade after its enactment, only rural and cooperative banks have kept to managed in meeting the quota.
As observed last quarter from BSP data, rural and cooperative banks had shelled out 35.64% of their total loanable funds or P26.65 billion of P74.76 billion as compliance to the law while thrift banks only lent 8.1% and universal and commercial banks had granted 13.6% to the sector.
“Agri-agra compliance rates might show a declining trend, but this does not necessarily mean there is lack of interest from the banks to invest in the agriculture sector,” Pia Bernadette Roman-Tayag, Head of BSP Financial Consumer Protection Department and Inclusive Finance Advocacy Office, stated.
“Absorptive capacity of the sector [can] be a limiting factor, where growth of the banking system’s total loanable fund significantly outpaces the sector’s growth. Hence, even when total exposure to the [agriculture] sector has increased by 26% in terms of absolute amounts (from P500.79 billion in June 2017 to P629.98 billion in June 2018), compliance rates fell during the same period.”
BSP collects 10% of the penalties charged to non- or under-complying firms for administrative expenses. The remaining 90% were shared equally among the Philippine Crop Insurance Corporation (PCIC) and the Agricultural Guarantee Fund Pool Program (AGFP).
According to Ms. Laviña, AGFP and PCIC includes the penalties received to their existing fund which had accumulated to P3.5 billion for both agencies. The AGFP covers 85% guarantee to private financial institutions against default risks of farmers while PCIC gives insurance protection to farmers against certain type of damages and losses to their agricultural assets.
“Since AGFP and PCIC insurance guarantees repayment of agricultural loans, they are considered substitute to collaterals as they lower risks by ensuring that loans will be paid even if there is no asset for forfeiture in the event of a default,” she mentioned.
For his part, University of the Philippines Los Baños (UPLB) Associate Professor and Agricultural Economist Prudenciano U. Gordoncillo saw that, “the penalty [clause] is insignificant and [banks] earn more on the alternative compliance, like buying government securities.”
Meanwhile, UnionBank’s Mr. Asuncion promotes partnership between banks and financial technology (fintech) companies in the country as a better substitute for penalties.
“Banks can provide the financial might and fintechs can contribute their agile response and familiarity dealing with agriculture institutional clients and farmers. Innovation should be in the forefront and help financing work for agriculture,” he said.
Other means
With direct lending proving to be a challenge, there are indirect ways to which banks can lend to the agriculture sector.
For one, banks can alternatively invest in bonds issued by government-run LANDBANK and Development Bank of the Philippines (DBP). Another is to lend for infrastructures that will benefit the sector; or invest in preferred shares of stock in rural financial institutions or shares of stock of the PCIC; and lend or invest to projects under Agro-Industry Modernization Credit and Financing Program (AMCFP) of RA 8435 or the Agriculture and Fisheries Modernization Act (AFMA) of 1997.
In an interview, Ms. Tayag of BSP, said that the central bank is aware of the reluctance of the banking system in serving the agricultural sector.
“We have to recognize that banks inability and disinclination to lend to the agri[culture] sector stem from a number of factors, which make serving the sector high risk or high cost. The goal therefore is not simply to enforce mandatory lending, but to address the fundamental issues that disincentivize banks from going into agriculture lending,” she said.
“The goal is to make mandatory credit quotas eventually unnecessary, with the sector’s financing requirements being adequately met by market players who are strategically positioned to do so.”
BSP, according to Ms. Tayag, had remarked in their joint review presented to the Senate Committee on Agriculture in October 2017 the need for “supportive legal frameworks (e.g. warehouse receipt system), high-quality agriculture database, index-based crop insurance, and organizational capacity of farmer based organizations” to further the effects of the regulation.
Ms. Tayag had also previously expressed intentions of the BSP to utilize technology in “address[-ing] the high transaction cost of serving the agriculture sector.”
“The BSP issued a package of policies for digital financial inclusion which are particularly relevant and designed for rural communities and small value transactors, such as farmers and fisherfolk.”
Earlier this year, BSP already partnered with FINTQnologies Corp. (FINTQ) of PLDT Group’s Voyager Innovations, Inc. to introduce a digital platform called Accelerated Growth and Rural Inclusion (AGRI) together with the DA and the Rural Bankers Association of the Philippines (RBAP), among others.
AGRI expects to connect local producers to its consumers by providing a virtual marketplace for their produce and for financial services offered by several public agencies and private organizations. Platforms like AGRI simplifies the flow of market information for all agricultural players involved.
Traction of private ventures to value chain applications such as AGRI aids to fix not only the logistical shortcomings in the agricultural sector, but also the information asymmetry between farmers and their buyers.
Value chain explores each activity a commodity undergoes before used by its final target consumers. Inefficiencies or gaps in the production, marketing, or distribution process of a good are exposed in this way. Thus, the weakest link along the sequence of activities can be noticed and possibly solved through a direct intervention.
Companies in the private sector use value chain analysis in seeking its competitive advantage over its opponents, whereas the state can adopt it to pursue for a better-organized provision of its services, particularly to the marginalized.
In 2016, BSP jumped to the movement and released Circular 908, also called Agricultural Value Chain Financing Framework. The handbill outlines lending program features and regulatory incentives for companies who wants to participate in agricultural value chain financing.
The circular mentioned additional credit products that can be offered through this framework aside from traditional loans offered by banks. Financial bodies can provide trade-receivables finance in which banks directly lend the working capital to the farmer’s supplier based on its repayment history to his/her suki.
Aside from trade receivables, factoring and warehouse receipts were also available. Factoring allows an enterprise to sell “contracts of sales of goods” at a discounted price to a financial institution that will receive the entire sales revenue once the contracts matured while warehouse receipts can be used by the farmer as a collateral to the bank.
Warehouse receipts are issued by officers of the warehouse to certify how much of a commodity a farmer has stored in their facility. Issuance of warehouse receipts are not new to the Philippine agricultural sector. The quedan system is a similar scheme being carried out by the Sugar Regulatory Administration (SRA) on sugarcanes allowing them to allocate certain portion of sugar to the local market or for a foreign market.
BSP’s Ms. Tayag added that involvement of financial institutions in this area “increase the productivity and business sustainability of value chain actors which encourage banks to develop appropriate products to support the financing needs of all the actors along the chain, including smallholders.”
“Organized value chains are able to address key risk factors such as lack of reliable information about the farmers, unstable markets and income sources that are typical deterrents for banks… Through value chains, banks can directly extend loans to farmers more confidently using the farmers’ business relationship with the institutional buyers or suppliers as a form of soft collateral,” she stated.
Creditworthiness appears to be redefined with a new lens of looking at how farmers/borrowers can repay their finances. From what was usually perceived to be assets and stable flow of income as basis, creditworthiness became synonymous to trustworthiness. Soft collateral became a test of character for the farmers if they can deliver to their word.
The BSP had also incorporated in Circular 908 some incentives for financial institutions interested to participate in the agricultural value chain financing. First, amounts lent through the framework were calculated as direct or alternative compliance to the mandatory quota of RA 10000.
Second, parties who were engaged in the chain were granted additional 25% in Single Borrower’s Limit (SBL) as per previous BSP Circular 425 of 2004, though, the incentive is still up for review within three years of involvement. The SBL was a ceiling imposed by BSP where amount of loans, credit accommodations and guarantees of a bank shall not exceed 25% of its net worth.
Though promising, the BSP stresses the need for the bulletin to have auxiliary policies to fully realize the benefits of the framework.
“As contemplated in Circular 908, value chain financing must be supported by well-defined policies and analysis which inform the bank’s entry point in the value chain and the financing products to be provided, among others,” Ms. Tayag said.
Likewise, BSP plans to introduce a “pilot value chain financing ecosystem bringing together selected value chains,” select government agencies for support services, and a financial institution.
“Ultimately, the pilot can serve as basis for the development of a national roadmap for AVCF to ensure effective coordination and convergence of government and private sector initiatives.”
KEEPING UP
The consciousness of a public-private partnership as a necessity in delivering large-scale developmental programs is not new to the Philippine society. However, the need for their cooperation is certainly pressing now more than ever.
UPLB’s Mr. Gordoncillo and UnionBank’s Mr. Asuncion both called for support in the development of agriculture.
“The role of agriculture is very significant even in developed economies. It is even more critical in developing economies like the Philippines because of the sector’s role in terms of food supply, employment, raw materials, and exports among others,” said UPLB’s Mr. Gordoncillo.
UnionBank’s Mr. Asuncion was of the same assessment: “In advanced economies, agriculture sectors receive huge subsidies to support expansion and growth. These economies understand the crucial part of agriculture output to economic development.”
“In fact, mere minimal positive annual growth increments from agriculture will make a huge difference for all of GDP growth in the Philippines. Thus, it is very important to support agriculture development.”

Silence and simplicity in Manila Notes

November 28, 2018 | 12:06 am

SILENCE, slowness, and finesse are characteristics that are typical in Japanese films and plays. Manila Notes — an adaptation of the play Tokyo Notes — won’t be any different.
Translated into Filipino by playwright Rody Vera, Manila Notes is about the ordinary conversations between lovers, friends, and family members, set in an art museum lobby in Manila amid an ongoing war in Europe. The story doesn’t have a historical background because it is just imagined and is designed to happen some time in the future.
The play is an adaptation of Oriza Hirata’s Tokyo Notes, which he also directed.
Unlike the typical drama and spectacle the Filipino audience is used to seeing on screen and on stage, Manila Notes instead celebrates simplicity, comfortable silence, and muted confrontations.
MANY TRANSLATIONS
Tokyo Notes has been translated to more than 15 languages, with the play’s name changed to the location it is performed in so aside from Manila Notes, there is a Seoul Notes, Taipei Notes, and Bangkok Notes.
Mr. Hirata, who was present at the press conference on Nov. 13, said Mr. Vera’s translation was the best version — even better than his, he said in Japanese.
Mr. Hirata hopes that Manila Notes will contribute to our culture and arts. He said he’s looking forward to working with Filipino talents in creating “a brand new type of theater practice.”
He said more artists should aim to create plays and works that challenge and compliment the audiences’ intelligence; something that will make them think.
Mr. Vera, Mr. Hirata, and the 20 actors in the cast of Manila Notes have been having discussions, collaborations, rehearsals, and workshops in preparation for the play’s opening on Nov. 30.
Mr. Vera’s challenge was to find the layers of meanings in the text and to adapt the nuances to the local setting. He said: “It’s an imaginary Tokyo somewhere in the future, but it’s not like a science fiction setting — it’s very today, but, at the same time, there are very small clues that will tell you that it has not happened before, it has no historical basis, and it must have been something that happen or that might happen in the future.”
The Filipino playwright went to the Metropolitan Museum of Manila, the quietest place he has been here and the closest to Tokyo Notes’ version, and tinkered there, “because you know that when you go to the National Museum, it’s like going to Divisoria,” he said, with a laugh.
SIMPLE DESIGN
True to Japanese aesthetics, the set design — a simple museum lobby with two benches — was a collaboration between Japanese set designer Itaru Sugiyama and some Filipino theater students and practitioners.
The entire production is a collaboration between the Japan Foundation in Manila and Tanghalang Pilipino.
Manila Notes will run at the Cultural Center of the Philippines’ Little Theater from Nov. 30 to Dec. 16.
While the play is in Filipino, there will be English subtitles on the Nov. 30 and Dec. 2 performances.
The 20 actors in the cast are a mix of thespians from PETA, universities, and current members or alumna of Tanghalang Pilipino: Meann Espinosa, Mayen Estañero, Dennis Marasigan, Gie Onida, Ian Segarra, J-Mee Katanyag, Neomi Gonzales, Wenah Nagales, Kathlyn Castillo, Randy Villarama, Elle Velasco, Jonathan Tadioan, Marco Viaña, Lhorvie Nuevo, Antonette Go, Joshua Tayco, Manol Nellas, Micah Musa, Manuel Tinio, and Manjean Faldas.
For ticket reservations, group sales, sponsorships, and special performances, contact Juan Marco Lorenzo at 0999-884-3821 or Lorelei Celestino at 0915-607-2275 or 832-1125 local 1620/1621. Tickets are also available at TicketWorld online and at the CCP Box Office. — Nickky Faustine P. de Guzman

Senate questions 3rd player rollout milestones

November 28, 2018 | 12:06 am

SENATORS on Tuesday questioned the capability of the provisional third player, Mislatel Consortium, to deliver services committed to the National Telecommunications Commission (NTC).
In its bid, Mislatel committed to provide an average minimum broadband speed of 27 Megabits per second (Mbps) in its first year of operations and 55 Mbps on its second. The consortium also pledged to have a population coverage of 37% in its first year and 84% coverage over a five-year period.
During the second Senate hearing on the third telco selection process, Senator Francis G. Escudero said it takes a longer time to set up the infrastructure needed by Mislatel to fulfill its commitment for a 37% coverage in the first year of its operations.
“I know for a fact that it takes about 18 months, more or less, if you’re lucky, to put up a tower…. It takes that long to get local permit, negotiate with the owner of the land, whether sale or lease, come up with a final amount… How are you going to carry out the 37%?” he said.
Senator Grace S. Poe-Llamanzares, chair of the Senate comittee on public services, also pointed out that it took Smart Communications, Inc. and Globe Telecom, Inc. 20 years to reach current Internet speeds.
In response, Udenna Group Vice-President for Corporate Affairs Adel A. Tamano expressed confidence that Mislatel would fulfill its commitment with the backing of its partners and the innovative technology being brought in.
“We’re not entering this without a clear business plan and a clear roll out plan… On the roll-out, it is very true that these are very aggressive numbers. But we believe that we can achieve this. If we didn’t, we would not have submitted our roll-out plan or our bid,” he said during the hearing.
“Yes, 18 months may be, in the past, the time needed to set up these facilities but with the proper partners, we have the motivation to really comply,” he added, noting that the consortium is looking for partners that have a backbone the consortium can leverage.
As for its broadband speed commitments, Mr. Tamano said the consortium has ”the latest technologies” including plans to bring in a fifth-generation (5G) home broadband service at the same time China is rolling out its own network.
“We are not burdened by obsolete technology. We will be bringing in new technology, the latest innovative technologies. In fact, we want to put in 5G. We are in talks that perhaps the 5G five-year roll-out in China will be (implemented) at the same time in the Philippines,” he said.
National security concerns were also raised during the hearing due to the presence of a foreign entity in the winning consortium.
The government declared the Mislatel Group of China Telecommunicatons Corp., Dennis A. Uy’s Udenna Corp. and Chelsea Logistics Holdings Corp., as well as Mindanao Islamic Telephone Company, Inc. (Mislatel) as the telecom industry’s third player.
National Security Adviser Hermogenes C. Esperon, Jr., who also sits on the oversight committee on the selection of the third player, said the National Intelligence Coordinating Agency (NICA) will perform a background check on the Mislatel consortium during the 90-day evaluation period.
Department of Information and Communications Technology (DICT) Acting Secretary Eliseo M. Rio, Jr. added that safeguards are also in place to ensure the protection of the third player’s customer data.
He said the third player would have to comply as well with the current practice, observed by Globe Telecom, Inc. and Smart Communications, Inc. to conduct a third-party cyber-security audit.
“Mislatel consortium will have to do the same, a third-party that will assure the government and the people that their network will never be used or will never be the source of national security breaches,” he said.
Hastings Holdings, Inc., a unit of PLDT Beneficial Trust Fund subsidiary MediaQuest Holdings, Inc., has a majority stake in BusinessWorld through the Philippine Star Group, which it controls. — Camille A. Aguinaldo

Pork supply seen adequate for holidays, oversupply possible

November 28, 2018 | 12:06 am

PORK PRODUCERS said Tuesday that the supply of pork will be sufficient, with the possibility of oversupply, during the yearend holidays, despite an import ban in force against various countries due to African Swine Fever (ASF).
In an interview, Nicanor M. Briones, vice-president for Luzon of the Pork Producers Federations of the Philippines, Inc. (ProPork) and former Representative of the Agricultural Sector Alliance of the Philippines (AGAP) Party-list said: “Many piggeries are expanding because business has been good in the past two years, so I think we will have enough supply.
Mr. Briones said pork prices are currently falling, indicating oversupply conditions.
“Compared with last year’s price which was about P135 per kilo… now it’s P120-P125. For backyard growers it’s P115. Any lower and growers won’t be making money. The reason it’s falling even though it’s nearly December is excess supply. If there were any shortage the price would rise easily by P10 back to around P135,” Mr. Briones said.
Mr. Briones noted that imports of pork from the US and Canada are continuing, offsetting the impact of the import ban on product from China, Latvia, Poland, Romania, Russia, and Ukraine due to ASF.
He said domestic pork producers are looking forward to a demand pickup due to the holidays and after that, the elections.
“The holidays are approaching and so are the elections. People will have a lot of money because of the campaign spending. We can see it starting now,” Mr. Briones said.
“The supply is guaranteed, judging by farmgate prices. For commercial farms, the price is P120 to P125, for backyard farms it’s P115 per kilo,” Mr. Briones said.
He said that imported pork accounts for 11% to 12% of total supply.
The Department of Agriculture (DA), together with the Department of Trade and Industry (DTI) has started imposing a suggested retail price (SRP) on pork which may change weekly upon review. The SRP for pork is additional P70 to the farmgate price. — Reicelene Joy N. Ignacio

Masters of art the focus in Manila Hotel’s new gallery

November 28, 2018 | 12:05 am

A WORK of colorful chaos, a memento of places travelled, and beauty as seen through an evolving image of a woman’s face are just some of the artworks on view at Manila Hotel’s newly opened Art Gallery.
Titled The Masters, the gallery’s inaugural exhibit features works by Hermes Alegre, Ross Capili, Salvador Ching, Fil Dela Cruz, Edgar Doctor, Raul Isidro, Raul Lebajo, and Mario De Rivera.
Upon entering the gallery’s hallway, Fil Dela Cruz’s painting of a fairy, titled Diwata: Perlas, greets guests with the woman’s eyes looking in their direction. According to the artist, he has been working on it since the 1980s after a stay in Mindanao. Mr. Dela Cruz said that the image evolved from the original face of a woman from an indigenous community, into that of a goddess, and, finally, into a fairy.
Mr. Dela Cruz said that the painting’s counterpart, Diwata: Punla, which is displayed at the far end of the hallway, is a “sleeping” image of the former artwork. “One is sleeping, the other one is wide awake. It is a symbol of night and day,” he said. The image representing day also symbolizes water given the image of a pearl as its right eye, while the other symbolizes land as seen from the plants surrounding the image.
“It is not about who, it is about how and why. My idea is to portray beauty,” he told BusinessWorld.
For Mario De Rivera, his work Between Diu and Makassar is very personal. He recalls his childhood through the images of places he has been to and the people he met while living for a year in China as a young man.
“I was working in Beijing for a while and the culture gets into you,” he said.
The painting — done on a folding screen-shaped canvas — depicts mountain landscapes and characters from his Chinese grandfather’s children stories.
Hermes Alegre and Mario De Rivera collaborated on Palayupuy, creating an image of nature and man.
Mr. Alegre, who focused on painting the female images in the piece, said that the artwork turned out to be what they thought of despite their refraining from communicating. “Mario saw what I saw. The image that I saw in my head was what came out. The image he was thinking of was what I painted,” Mr. Alegre told BusinessWorld in a mixture of English and Filipino.

*Made in the Philippines* by Salvador Ching

“I don’t start on a blank canvas. Many do that. I don’t,” he said. “Lalagyan ko siya ng kalat para tulungan niya ako mag-isip, kasi kung blank ang hirap mag-isip. Wala kang makita (I put a mess into it [referring to an initial scatter of paint he makes on the canvas] to help me think, because if it is blank, it is hard to think. You don’t see anything).”
Mr. Alegre also revealed that the artwork is unfinished, pointing to nude-colored area where an arm of a woman should have been defined. “’Yun yung masayang part. Natapos kami bago kami tumigil (That was the best part. We finished even before we stopped).”
BETTER LATE THAN NEVER
Manila Hotel’s Art Gallery was established to showcase Filipino culture and heritage.
“We always had this vision to have more attachment to culture and arts and try to promote the local artists, both world-renowned and young, but we just did not know where to put it,” Chris J. Orta, Manila Hotel’s resident manager, told BusinessWorld at the launch last week, adding that it took a year to finally open a gallery space in the hotel.
It was the artists who decided which of their works to include at the exhibit.
“We got the opportunity to be introduced to these artists and they helped collaborate with the idea (of opening the gallery),” Mr. Orta said.
After its inaugural exhibition, the Art Gallery will continue to showcase artworks from celebrated and emerging Filipino artists.
“We are a Filipino hotel and we want to portray that heritage,” he said.
The Masters will be on view until March 30, 2019 at the Art Gallery by the Manila Hotel, located at the hotel’s ground floor. — Michelle Anne P. Soliman

BIR projecting over 20 million will use electronic tax filing in 2018

November 28, 2018 | 12:05 am

THE BUREAU of Internal Revenue (BIR) expects more than 20 million taxpayers to file their taxes through its electronic platform this year.
BIR Commissioner Caesar R. Dulay in a speech during a handover ceremony for the Facilitating Public Investment (FPI) project yesterday, thanked the United States Agency for International Development (USAID) for its technical assistance in establishing the government’s electronic tax filing and payments system.
“You have seen how the FPI project has improved and enhanced our electronic filing and payments system. Now from 1.5 million filers in 2013, it has increased considerably about 19 million in 2017. Filers as of the first four months (of 2018) reached 7.5 million,” Mr. Dulay said.
“So for this year we expect to have about 20-23 million tax filers all because of the enhanced e-filing and e-BIR registration forms with the help of our development partners,” he added.
The FPI is a five-year, $15.3-million project that began in 2013, with the objective of addressing to tax collection inefficiencies, minimizing tax evasion, and eliminating public spending bottlenecks.
“With the hope that your support will continue, that efficient tax administration in BIR will lead to more public and private investments in the Philippines,” said Mr. Dulay.
USAID Tax Administration head Admir Zajmovic meanwhile said in his speech: “Our recommendations would be to please continue to build a central database, please continue to work on implementing risk management and utilize risk-based audit selection, simplify tax filing requirements and make it simple for taxpayers.”
“With all of that to be able to achieve your goals which are attaining collection targets, improve taxpayer satisfaction, and strengthen good governance within the agency,” he added.
The BIR collected P1.61 trillion in the 10 months to October, up 12% from a year earlier.
This is equivalent to 78.96% of the P2.039-trillion 2018 target. — Elijah Joseph C. Tubayan

Nickel Asia to buy back up to P1.5B of its shares

November 28, 2018 | 12:05 am

LISTED mining company Nickel Asia Corporation on Tuesday said its board of directors approved the plan to buy back up to P1.5 billion worth of shares in the next two years.
“Given the current weakness of the market, now is an opportune time for the company to repurchase its own shares, which has been exceedingly undervalued,” Martin Antonio G. Zamora, president of Nickel Asia, said in a statement.
“The objectives of the buyback program are to enhance shareholder value and to manifest confidence in the company’s inherent value and long-term prospects,” he added.
The share buyback program will start on Dec. 3, 2018, and will end on Dec. 2, 2020. The total number of shares to be repurchased has not been determined yet as it would depend on the share price.
Nickel Asia reported its attributable net income rose 35% to P3.54 billion for the first nine months of 2018.
Shares in Nickel Asia closed at P2.20 per piece on Tuesday, up by 4.27%. — Reicelene Joy N. Ignacio

Rice imports must avoid harvest window under new planting schedule

November 28, 2018 | 12:05 am

THE Department of Agriculture (DA) needs to announce a clear schedule for its proposed new crop timetable to facilitate the timing of imports, according to a former administrator of the National Food Authority (NFA).
Romeo G. David, who was NFA Administrator during the Ramos administration, said in a text message: “I have no problem imposing 35% tariff on imported rice but a very strict import or landing window must be clear and imposed, accountabilities identified, penalties spelled out subject to periodic updating. The Secretary of the DA should (also) be tasked to announce the cropping schedule with a clear date before each cropping season to allow the setting of the import window.”
The current import regime seeks to avoid synchronizing the arrival of rice imports with the harvest, in order not to depress the prices farmers obtain for their produce. The DA has since proposed altering the rice planting calendar to minimize the chances of destructive typhoons transiting through key rice growing provinces during critical periods of the crop’s development.
The rice tariffication bill aims to remove quantitative restrictions on rice importation, but applies a 35% tariff on shipments by the private sector from countries within the Association of Southeast Asian Nations (ASEAN), and a 50% tariff for non-ASEAN member countries.
“Anything arriving that falls outside the window must be immediately confiscated in favor of government without question (with responsibility and risk with the importer) to be added to government inventory for use in calamity relief. The illegally imported rice must be accounted for and released by Customs and delivered to NFA immediately for warehousing and management in trust for the government,” Mr. David said.
He added: “A portion of taxes collected must be committed to continuous updating of economic data (area-specific production and consumption including prices of inputs, transport, and retail prices) on rice, corn and grain to help farmers and government make informed decision towards improving farm family income.”
Mr. David said that the NFA or the Department of Trade and Industry (DTI) should facilitate the registration of import applications and certificates that the volumes are within the consumption ceiling for the period to avoid oversupply. He said that to avoid corruption, this should be done electronically.
The rice tariffication bill which has been approved by the bicameral conference committee has yet to be signed by President Rodrigo R. Duterte.
Herculano C. Co, Jr., president of the Philippine Confederation of Grains Association (PCGA), said that the rice industry is a sunset industry, given the lack of support from the government for the farmers.
“This is a sunset industry. Give it two years, this industry will be gone,” Mr. Co said at a briefing on Food Supply for the Holidays organized by the Philippine Agricultural Journalists (PAJ) on Tuesday.
“If the palay (unmilled rice) falls below the support price, that is the time the NFA comes in. This time it will be different with private sector imports, which will depress prices, and that is a problem. Can the farmers match that price without government support?” Mr. Co said.
Mr. Co said that the tariff which is supposed to be used for the Rice Competitiveness and Enhancement Fund (RCEF) has no clear provisions on how this will be distributed to the farmers. — Reicelene Joy N. Ignacio

Funding the farmers: crowdfunding as an option

November 28, 2018 | 12:05 am

By Jochebed B. Gonzales
Senior Researcher
WITH the agriculture sector being perceived as high-risk, finding a source of funding is a tall order for farmers, more so when they have little or no assets to pledge as collateral. This leads them to borrow money from informal lenders at predatory rates, which makes them susceptible to a cycle of poverty that would last generations.
Fortunately, there is an alternative: crowdfunding.
Crowdfunding makes use of online channels to raise fresh capital from willing donors or lenders, who buy into the business pitch or goal presented by the proponent.
In the agriculture sector, there are two known platforms: those from Cropital Enterprises Corp. and FarmOn Agri-Community Corp., who hope to change this notion on agriculture as a risky venture.
“If you look at the perspective of Cropital, the problem we’re really trying to solve is ‘how do we minimize the risks in lending to farmers?’” said Ruel T. Amparo, chief executive officer (CEO) and founder of Cropital.
“It is the problem of big institutions like banks because they perceive [agriculture] as having very high administrative costs with high risks and low returns.”
Cropital serves as a platform that allow registered individual lenders to lend directly to at least one farmer at lower interests compared to informal lenders who usually charge a minimum 20% after harvest season.
“It is a loan,” Mr. Amparo said. “Basically, there is direct relationship between you and the farmer you are lending money to.”
Now on its third year, Cropital has funded around P34 million in loans, according to Mr. Amparo. Based on its website, an investor gets a fixed return of 3.5% in four to six months for short-term funding.
Meanwhile, FarmOn’s approach is providing a “package of technology” to each farmer from planting season to post-harvest after which investors and farmers split profits through a 50-50 sharing.
Presently, FarmOn caters to thousands of farmers of around 20,000 hectares of land in Cagayan Valley, said Teodulo O. Otoman II, CEO and founder of FarmOn. Investors finance a farmer’s inputs which are products provided by FarmOn.
“The number one problem of farmers in Cagayan Valley is [the need for] capital. Second, most of the parents convince their children to study hard and look for other jobs besides farming… We want to show them that there’s money in farming. It’s a business,” said Mr. Otoman.
“We have technologies to make the job easier. It’s more of an awareness program, a movement to show that there’s future in farming.”
Other than the P250 registration fee and P300 notary fee, Mr. Otoman said their platform does not collect fees from investors and farmers.
The online platform is just 10% of FarmOn’s operations, Mr. Otoman said, while the other 90% are activities done “offline” such as providing farmers inputs and farming equipment such as reapers, tractors, rice mills, and post-harvest facilities.
“FarmOn’s profits come from its own products and services — seeds, fertilizers, chemicals, reaper, tractor, trucking, etc.” Mr. Otoman said. “We get our income in the same way as other rice-processing companies and facilities get theirs.”
FILLING THE GAP
Rather than a threat, some players in the banking sector see crowdfunding platforms as an alternative to financing the needs of farmers that some banks cannot provide.
“Crowdfunding platforms can fill a credit gap in the sector by bridging farmers and small agri-enterprises to the wider investing and lending public — providing an alternative to bank financing,” said Pia Bernadette Roman-Tayag, managing director and head of Financial Consumer Protection Department and Inclusive Finance Advocacy Office at the Bangko Sentral ng Pilipinas (BSP).
For Bank of the Philippine Islands (BPI) head of corporate credit products Eric Roberto M. Luchangco: “Crowdfunding institutions complement the agricultural financing sector by helping the ‘unbankable’ scale of their business and eventually become ‘bankable.’”
Raymundo C. Roxas, president of Rizal MicroBank — A Thrift Bank of Rizal Commercial Banking Corp., shared the same view, but cited the need for supervision among crowdfunders to prevent abuse.
“Somehow they’re contributing to some things, like answering a gap. Crowdfunding is a good concept because it responds to the financial requirements of sectors who have difficulty in addressing their capital requirements. But I still believe there needs to be someone to provide oversight,” he said.
“The issue is, who are the people behind? Do they have the business skills to really take care of these investments that will pass through their platform? Now there’s direction to regulate them especially if they are bordering or venturing into what formal financial institutions do which is highly regulated.”
BSP’s Ms. Tayag concurred: “Investor protection is a key consideration in crowdfunding. Investors need to be adequately informed of the risks and recourse mechanisms, and to be screened for suitability.”
“As the intermediary, regulating the platform providers for investor protection and anti-money
laundering duties would be a natural course of action, especially as the crowdfunding market significantly expands,” she added.
In November last year, the Securities and Exchange Commission released a draft memorandum circular providing rules and regulations for crowdfunding. The draft rules limit the amount to be raised by an issuer to P10 million. The amount sold to an investor “across all issuers” is also capped at P50,000. A waiver must be signed by the investor should he intend to exceed the P50,000 limit requirement.
WHY NOT THE BANKS?
Banking institutions are mandated by the Agri-Agra Law to allocate at least 15% of their loanable funds to the agriculture sector and another 10% for agrarian reform beneficiaries (ARBs).
But the banking industry in general often underperforms in this regard.
Based on data from the BSP, total loanable funds generated in the banking sector has reached P4.605 trillion as of June 2018, but loans to the agriculture sector only amounted P584.928 billion, equivalent to 12.7% of the industry’s total loan portfolio versus the 15% requirement.
Lending to the ARBs was far worse as compliance rate in the entire industry was reported at 1% (P45.052 billion) against the 10% (P460.533 billion) required.
“In terms of ‘other agricultural loans,’ Rizal MicroBank is over compliant because it is our market. However, our cost to serving this market is equivalent to 90% of our gross revenue,” Mr. Roxas said as he described hours of trekking by his team to reach their target clients.
Mr. Roxas also cited a study made by the bank wherein only those who own at least two hectares of land were likely able to pay back their borrowings.
“Whether it’s palay or corn, a farmer needs at least two to three hectares of land to generate income or to be able to pay his loans. And that is barring unforeseen events such as typhoons…,” he explained.
“It’s a function of the challenges of serving that kind of market.”
Meanwhile, BPI’s Mr. Luchangco showed more optimism for the agriculture sector than the ARB segment.
“We believe that full compliance with the agri component is possible because a wide scope of sectors in the supply chain, from producers to traders, are qualified…,” he said.
“Full compliance with the agra component continues to be a challenge, as there is a restriction to ARBs. Most ARBs operate informally and would not pass the bank’s credit criteria.”
Mr. Luchangco also noted the “bit of mismatch” between 25% Agri-Agra compliance rate and the agriculture sector’s contribution to economic output which stood at 8.5% last year.
BSP’s Ms. Tayag admitted that “not all banks are equipped” to lend to the agriculture sector which “requires a certain level of expertise and focus.”
“Most of the big banks have not developed — and have not invested in developing — the required capabilities to aggressively pursue the agri-agra sector, given that they have a different strategic positioning and may not find the sector promising in light of the challenges,” she said.
RECEPTION
“I can say the banks are concerned with our presence,” said Cropital’s Mr. Amparo. “[But] at the end of the day, we’re aiming for collaborations and partnerships.”
He said Cropital’s focus is “devising a scheme that will allow individual and institutional lenders to lend directly to individual farmers.”
“In the long run, what we see is more of a partnership between banks and Cropital in serving the needs of the farmers,” Mr. Amparo said.
There were also reactions coming particularly from informal lenders and rural banks, explained FarmOn’s Mr. Otoman. “But we are trying explain to them that we are not into competition. What they provide is money. Ours are the needs of the farmers,” he said.
Currently, FarmOn is dealing with individual investors. When asked on the possibility of working with institutions, Mr. Otoman said: “We do not accommodate yet. There are so many farmers who wanted to join the program. There are so many investors who wanted to invest. But we limit it to our capacity of 20,000 hectares for now.”
Rizal MicroBank’s Mr. Roxas acknowledged the disruption brought about by crowdfunding platforms while also citing the importance of adapting to modernization.
“As a banker, [I] do not look at them as direct competitor because their business model is a lot different than ours. In a way, they’re disrupting, but disruption is inevitable when it comes to business.”
Crowdfunding or not, Mr. Roxas said that banks have to adapt in an ever competitive business landscape.
“To bring down the cost of serving this market, it’s high time that banks and financial institutions like us should really look into digital and technological innovations,” he said.
“What we’ve realized, if we are going to do it the traditional way by putting up branches, it will exhaust all our resources. In the plan that we have, we are always on the lookout for Fintech companies whom we can partner with, whom we can use their platforms to reach out our target market without necessarily building a branch.

Beethoven reinvented with the MSO

November 28, 2018 | 12:04 am

LUDWIG VAN BEETHOVEN is loved for the emotional depth of his music. His iconic “Moonlight Sonata” has been a window to peer into his loneliest moments, allowing people to share in his sorrows. His ninth symphony, Ode to Joy, lifts the human spirit to great heights with themes of triumphant joy in brotherhood with man and fellowship with God.
On Nov. 30, 8 p.m., at the Meralco Theater, the Manila Symphony Orchestra (MSO) will celebrate this beloved composer’s music with Beethoven Redux.
The MSO will be playing music by and inspired by Beethoven. Among these is “Par Clemenza pour Clement,” a “diptych after Beethoven’s Violin Concerto” made by Filipino composer Jeffrey Ching. Mr. Ching describes it as mostly made out of “solo cadenzas that are really mini-fantasias on Beethoven’s themes, but quoted and combined in unexpected ways. These are punctuated by fragments of Beethoven’s original orchestration which appear in the wrong order.”

Indonesian-German violin virtuoso Iskandar Widjaja, described as “a force of nature,” will be performing Jeffrey Ching’s “*Par Clemenza pour Clement*,” a “diptych after Beethoven’s *Violin Concerto*.”

Mr. Ching studied in Harvard, Cambridge, and London, and now resides in Berlin. He represented the Philippines in three cultural delegations to China, was 1998 TOYM Awardee in Music, and in 2003 was the first composer to receive the Jose Rizal Award for Excellence from the Philippine president. He is currently working on three new operas.
For this concert, the MSO will be led by Singaporean conductor Darrell Ang. Mr. Ang has been Artistic Director and Chief Conductor of the Sichuan Orchestra of China since December 2016 and is a regular guest conductor at the Mariinsky Theatre. He studied conducting in St. Petersburg with Leonid Korchmar and continued at Yale with Shinik Hahm. He took all three top awards at the 50^th Besançon International Young Conductors’ Competition leading to the Music Directorship of the Orchestre Symphonique de Bretagne (2012-2015).
Mr. Ching’s music is to be played by Iskandar Widjaja, an Indonesian-German violin virtuoso. Mr. Widjaja has performed with internationally renowned ensembles in Germany, Switzerland, China, Australia, and Austria. His personality and energy are aptly summed up by The Strad: “Iskandar Widjaja, a true force of nature.” Mr. Ching fondly describes Mr. Widjaja: “He combines absolute technical mastery and interpretive depth with a pop star’s stage persona that is entirely of our own time.”
Beethoven Redux will be held on Nov. 30, 8 p.m., at The Meralco Theater, Ortigas Ave. cor. Meralco Ave., Pasig City. Tickets are available at TicketWorld, (https://tinyurl.com/MSOBeethovenRedux or 891-9999). For group and other special discounts, call the MSO office at 523-5712 or e-mail marketing@manilasymphony.com. — Gideon Isidro

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