How PSEi member stocks performed — October 3, 2018
Here’s a quick glance at how PSEi stocks fared on Wednesday, October 3, 2018.
Philippine Stock Exchange’s most active stocks by value turnover — October 3, 2018
‘Serious’ query from Vodafone about 3rd player auction — Diokno
THE UK’s Vodafone Group PLC has discussed with the government the possibility of participating in the selection process for the telecommunications industry’s so-called “third player,” Budget Secretary Benjamin E. Diokno said following a visit to London.
“While I was in the UK, I was able to meet various members of British business, education and government sectors in hopes of securing investment and partnerships for the Philippines. Some highlights of the meetings include the possibility of Vodafone entering as our third telecommunications player,” Mr. Diokno said at a briefing in Mandaluyong on Wednesday.
“We went to their headquarters and we had discussion on our interest to introduce a third party to the duopolistic market, and that we’re welcoming proposals,” he added.
Mr. Diokno said that Vodafone hasn’t made its interest official, saying that he has “no idea” whether the company will submit bid documents when the window opens on Nov. 7.
“But they appear interested,” he said, because they were “asking serious questions.”
He said Vodafone’s main concern was reputational. “They don’t want to get involved in shady deals… so they want to make sure that everything is on the level,” Mr. Diokno said.
“They’re doing their due diligence, and they’ll probably find out if it’s worth their while to participate, that’s the usual stance of businessmen,” he added.
Mr. Diokno said to attract major investors, the government is banking on the amendment of the Public Service Act, which seeks to remove telecommunications from the list of industries classified as public utilities, thereby exempting the sector from the 40% foreign ownership cap.
“If they want to come in, they want to come in a big way,” he added.
Mr. Diokno also told Vodafone that the President signed Ease of Doing Business legislation that calls for shorter processing times for government transactions. The government is also due to issue its first Foreign Investment Negative List (FINL) which is expected to broadly liberalize foreign ownership limits in various industries.
“They raised serious questions about the ease of doing business. The FINL that was also discussed. That has been submitted for some quite some time, but we’ll keep the pressure because that’s really needed, the negative list, that’s important,” Mr. Diokno said.
Based on the guidelines provided by the Department of Information and Communications Technology and the National Telecommunications Commission, the third player will be selected according to the highest committed level of service in terms of population coverage (weighted at 40% in the selection points system), minimum average broadband speed (25%), and capital and operational expenditure (35%).
The government expects the third player to be selected before Christmas.
Foreign companies that have expressed interest include China Telecom, South Korea’s KT Corp. and LG Uplus Corp., Vietnam’s Viettel Telecom, Norway’s Telenor Group, and unidentified US and Japanese firms.
Philippine companies that are positioning as prospective joint venture partners include Philippine Telegraph and Telephone Corp.; NOW Corp.; Converge ICT Solutions, Inc.; Transpacific Broadband Group International, Inc.; EasyCall Communications Philippines, Inc. and TierOne Communications International, Inc.
Economic managers and other officials were in London last week to brief prospective investors.
He said the road show was “very successful,” as over 300 executives attended the event, far more than the 180 expected. — Elijah Joseph C. Tubayan
Boracay to reopen with only few businesses deemed compliant
ONLY a small portion of businesses on Boracay Island are deemed compliant with environmental and accreditation requirements just weeks before the resort island returns to operation on Oct. 26 in a so-called “soft opening.”
Department of Interior and Local Government (DILG) Officer-in-Charge Eduardo M. Año said in a news conference that Boracay, which was closed down for six months in April, has 454 businesses, including hotels and restaurants, with only 225 deemed having achieved various compliance milestones.
Specifically, Mr. Año said only 71 establishments have complied with the Department of Environment and Natural Resources(DENR) order to establish their own sewage treatment plants.
Meanwhile, the Department of Tourism has only accredited 25 hotels and resorts that have complied with various DILG and DENR permits and clearances.
Mr. Año expects more establishments are currently in the process of meeting the requirements.
He added that there will be a dry run on Oct. 15.
During a recent Cabinet meeting, DENR undersecretary Sherwin S. Rigor said among the policy guidelines approved is an overall capacity of 19,000 visitors at any given time.
Mr. Año added that such a cap can be exceeded by just one of the island’s signature events, such as LaBoracay, timed in previous years for Labor Day on May 1.
He added that such crowding levels will no longer be allowed.
Asked about proposals to relocate some residents of the island, Mr. Año told BusinessWorld that housing sites are currently being evaluated on Panay island for informal settlers occupying forest land.
“We have found relocation areas and plan to gradually transfer them” to the Aklan towns of Nabas and Ibajay, as well as portions of Malay that are on Panay. He added that the transfers will await the construction of housing by the National Housing Authority. — Vince Angelo C. Ferreras
Trade department evaluating caps on margin for agricultural goods
THE Department of Trade and Industry (DTI) said it may recommend to President Rodrigo R. Duterte a cap on the margins that can be earned on the sale of certain agricultural commodities.
Trade Secretary Ramon M. Lopez said the cap will be based on farmgate prices — the cost to acquire the produce from farmers — and will fluctuate depending on the movement of farmgate prices.
“We know the farmgate price (so) we should (have) a cap on margins at retail.. In a way you’re imposing a price cap, but it’s a moving price cap,” Mr. Lopez told reporters on the sidelines of an event in Taguig City.
Mr. Lopez emphasized that the proposed price ranges will be adjusted as often as weekly, to keep in step with farmgate prices.
He was responding to questions about the progress of government measures to bring down retail prices.
Mr. Lopez said the margin cap has been proposed to economic managers who will discussed the matter within the week.
The DTI said it is fine-tuning the proposal with the Department of Agriculture, which has its own set of suggested retail prices for farm goods.
He added that the DTI will have to verify whether Mr. Duterte Administrative Order 13 allows capping of profit margins.
AO 13 only authorizes the streamlining of the import process for agricultural commodities.
Margin caps are also not authorized under Republic Act 7581 or the Price Act of 1992.
Laban Konsyumer, Inc. President Victorio Mario A. Dimagiba, a lawyer, said the proposal has “no basis” in law.
“The (Price Act) sets criteria and that should be observed,” Mr. Dimagiba, also a former DTI undersecretary, said in a mobile message on Wednesday.
Mr. Dimagiba said he prefers price ceilings.
Under the law, a price ceiling can be imposed in case of calamities, emergencies, or a finding of “artificial or unreasonable” price increases, on orders from the President, acting on the recommendation of the National Price Coordinating Council chaired by the DTI.
The DTI has expressed reluctance to resort to price ceilings due to the possibility that suppliers might withdraw their goods from the market if they cannot realize profits from their sales.
Mr. Lopez believes that inflation, which hit 6.4% in August, is driven by supply issues.
On rice, the DTI has proposed that private traders be allowed to import rice in exchange for a commitment to sell the grain at P38 per kilogram at retail for grades of rice commonly purchased by low-income consumers.
According to the Philippine Statistics Authority, the price of well-milled rice averaged P48.93 per kg in the second week of September, up 15.73% from a year earlier and up 1.1% from a week earlier.
Regular-milled rice retail prices rose 20.26% year-on-year and 0.97% week-on-week to P45.71 per kg. — Janina C. Lim
ECoP backs legislation focused on productivity, not 14th month pay
THE Employers Confederation of the Philippines (ECoP) said it hopes legislators will consider skills training and other productivity-focused measures instead of a proposal to grant 14th month pay to workers.
Robert F. Maronilla, a member of the organization’s board of governors, said at a hearing at the House of Representatives that while the 14th month pay bill’s explanatory note describes the extra month’s pay as a means of motivating employees, “ECoP believes that it is better for the workers to work harder first before we incentivize them.”
The House Committee on Labor and Employment was discussing House Bill 402, “An Act Requiring All Employers to Pay their Employees 14th Month Pay” and House Bill 8095, “An Act Mandating 14th Month Pay for All Employees in the Government and Private Sector Regardless of Status of Employment.”
KABAYAN Partylist Representative and author of HB 8095 Ron P. Salo said in introducing the bill that 14th month pay “aims to incentivize and motivate all employees to work harder and increase productivity.”
Cebu City 2nd District Rep. Rodrigo A. Abellanosa, introducing HB 402, said incentive schemes have been “proven” to motivate workers into being more efficient.
“Such additional structured incentives may be expected to translate to more effective personnel and efficient operations,” he said.
ECoP maintains that a more long-term solution to boost productivity is to focus on the workers’ “skills, training, and education,” Mr. Maronilla said.
According to HB 402, the 13th month pay currently mandated by law is to be released on or before the end of June with 14th month pay to be disbursed on or before December. HB 8095 proposes the release of 13th month pay by May 31 and 14th month pay by Nov. 30.
The current deadline for 13th month pay for private employees under Presidential Decree No. 85 is Dec. 24 annually.
Government employees are paid a midyear bonus in May, equivalent to an additional months’ salary. The bonus is authorized by Executive Order 201 signed in 2016 by President Benigno Simeon C. Aquino III. — Gillian M. Cortez
NFA Council approves three rice importations at 2-week intervals
THE National Food Authority (NFA) Council has decided to authorize private-sector imports of 750,000 metric tons (MT) of rice in three batches of 250,000 MT each, arriving every two weeks starting Nov. 30.
“Based on the instruction of the NFA Council instead of G2G (government-to-government deals), we will divide the 750,000 metric tons into three. An initial importation of 250,000 MT will be followed two weeks after by another 250,000, then two weeks after another 250,000,” NFA Spokesperson Rex C. Estoperez told reporters in a chance interview at the PICC on Wednesday.
According to Mr. Estoperez, bidding for the first shipment will be on Oct. 18, with subsequent auctions every two weeks after.
He said the main issue is the ability to deliver the shipments, with the first of the deadlines on Nov. 30. This means the imports will “spill over until next year, but that can be part of our beginning inventory for 2019.”
The target for NFA domestic procurement is 389,000 MT next year, he added.
Agriculture Secretary Emmanuel F. Piñol has said that the NFA Council provided standby authority to import 1 million MT of rice for 2019.
Former Agriculture Secretary William D. Dar said a 1 million MT import level is “normal” but the timing and ports of entry for the shipments need to be planned in detail.
“The shipments need to be planned by month and by port. It should not be all in Metro Manila. Metro Manila is always a key area but there are deficit areas in other parts of the country,” Mr. Dar added. — Reicelene Joy N. Ignacio
House signals plan to add P20 billion to Agri dep’t budget for 2019, Piñol claims
AGRICULTURE SECRETARY Emmanuel F. Piñol said on Wednesday that key legislators have signalled their intention to raise the Department of Agriculture’s 2019 budget by about P20 billion, amid concern in the House about the adequacy of its proposed budget of P55 billion.
At a briefing after the first day of the Municipal and City Cluster-Wide Food Security Summits held at the Philippine International Convention Center in Pasay City, Mr. Piñol said: “The good news is last night, Speaker Gloria Macapagal Arroyo mentioned at the budget hearing that (legislators) are not happy with the P55 billion DA budget and they are working for an increase of the budget.”
Mr. Piñol added that Rep. Jose Maria Clemente S. Salceda (Albay 2nd District) also told him of the House’s intent to increase the DA’s budget as a means of stabilizing food prices.
He said Mr. Salceda “told me that they are expecting additional budget for the DA because they are not happy with the P55 billion especially (because) food prices (are an) indicator of economic stability.”
“They mentioned a P20 billion” budget increase, Mr. Piñol said, adding that funds worth P10 billion raised from rice tariffs may be included.
Pending rice tariffication legislation aims to allow private firms to import rice more freely from Southeast Asian trading partners, but at a 35% tariff, which will help fund measures to make the rice industry more competitive.
Mr. Piñol added that the food security summits will require mayors nationwide to present their respective food security plans, which will help the DA estimate spending levels to increase productivity and to determine which parts of the country have deficits n specific commodities.
The schedule of the summits is as follows: Regions 1, 2, 3 and CAR (Oct. 2-3); Regions 4A, 4B, and 5 (Oct. 3-4); Regions 6, 7 and 8 (Oct. 8-9); and Regions 9, 10, 11, 12, 13 and ARMM (Oct. 4-5).
Mr. Piñol also committed to help fund 1 kilometer of farm-to-market roads for each municipality participating in the summits. The first day of the first summit was attended by 96 mayors. — Reicelene Joy N. Ignacio
Satellite project-tracking scheme issues first report
ABOUT 88.2% of road projects connecting to seaports and airports scheduled for this year have entered the construction stage, based on the government’s satellite and geo-tagging project-tracking system.
The Department of Budget and Management’s (DBM) Digital Imaging for Monitoring and Evaluation system, or Project DIME, released its first progress report yesterday after being launched in March.
“As of Aug. 30, the program has reported an 88.2% movement of projects equivalent to 105 projects out of 119 total projects already ongoing, including 11 seaport projects already completed,” Budget Secretary Benjamin E. Diokno in a media briefing on Wednesday.
The road projects are worth P6.2 billion, and are implemented by the Department of Public Works and Highways (DPWH).
“However there are projects that we noticed that even if budgets are allocated, some have not started. We’re following up, with the help of our regions, following up such projects. We’re asking who the contractors are, asking why they’re delayed,” Budget Undersecretary Lilia C. Guillermo said.
Project DIME aims to improve the monitoring of projects, especially those in far-flung areas, by using satellite technology.
“Some so-called ghost projects (with) claims of completed (have) actually not started. So through this system we can say goodbye to ghost projects,” Mr. Diokno said.
Mr. Diokno said the DBM can only track a limited number of projects under the system, including 13 big-ticket programs, or one large-scale project per government agency.
“We’re at the early stage of monitoring. The mere fact that line agencies know that we’re monitoring them, I think they’ll be on their toes,” said Mr. Diokno.
He said that he aims to increase the number of monitored projects every year, as the task is delegated to regional offices.
“You cannot expect us to monitor all projects, 100% coverage is not possible given limited resource but we selected high-value projects,” Mr. Diokno said.
The monitored roads include the P23-million BOMEDCO Transloading Road at Medellin, Cebu, and the P65.8 million New Ibajay-Mabini-Sandoval access road to Taytay Airport in Palawan. — Elijah Joseph C. Tubayan
Finance department queried on fuel excise suspension plans
SENATOR Paolo Benigno A. Aquino IV asked the government how it intends to carry out the suspension of the fuel excise tax if the average Dubai crude oil benchmark remains at $80 or above in the next three months.
In a speech invoking legislative privilege on Wednesday, Mr. Aquino noted that the provision in Republic Act No. 10963 or the Tax Reform Acceleration and Inclusion (TRAIN) law requires the Department of Finance (DoF) to review and to make a recommendation, based on the assessment of the Development Budget Coordinating Committee (DBCC), to either implement or suspend the increase of fuel excise tax when oil prices breach targets.
“The question: when will they conduct the review? What will be the basis of this group to the possible suspension to the incoming increase of excise tax on petroleum products?” he said.
“The Senate must call on the DoF to issue clear guidelines, timelines, rules and regulations on how to suspend the upcoming increases on the excise taxes on petroleum products,” he added.
The TRAIN law imposes excise taxes on gasoline and diesel of P7 per liter and P2.50 per liter, respectively. Starting Jan. 1, 2019, gasoline excise tax will rise to P9 while diesel excise will increase to P4.50. The law also contains a suspension provision if the average Dubai crude benchmark is at or exceeds $80 per barrel for three months prior to the scheduled excise tax increase.
Mr. Aquino said the tax reform law should have provided the automatic suspension of the excise taxes instead of providing conditions that the DoF should review before issuing its recommendation.
“For us lawmakers and for me who suggested this safeguard, the suspension of the scheduled increase should have been automatic” once the conditions were met, he said.
“What is tragic is if we reach the price that was stated in the law, but due to the lack of review or lack of recommendation by the administration, the suspension of the scheduled increase of this excise tax will not go through,” he added. — Camille A. Aguinaldo
DPWH to open Tacloban bypass road in Q3 2019
THE Department of Public Works and Highways (DPWH) said a bypass road in Tacloban City is now expected to open in August 2019, after delays to its original completion date of April 2017.
In a statement on Wednesday, the DPWH said the P1.183-billion project is in the last two phases of construction.
“Construction works for the four-lane road implemented in the first three phases has been completed last year while the fourth and fifth phases are up for completion in August 2019,” it said.
The 8.23-kilometer road is expected to benefit some 1,000 motorists a day by cutting travel time along the Maharlika Highway to 30 minutes from 90.
“The project will improve the accessibility of the road network and increase the development potential of the region,” it said.
Last year, DPWH Secretary Mark A. Villar said the Tacloban bypass road “will ease traffic congestion of the city proper and will provide an alternate route traversing Barangays Abucay, Apitong and Caibaan.” — Denise A. Valdez
When rules are not enough
Black’s Law Dictionary defines a corporation’s by-laws as “regulations, ordinances, or rules enacted by a private corporation for its own government.”
The late Justice Emilio Gancayco of the Supreme Court (G.R. No. 91478, Feb. 7, 1991) elucidated the concept by saying, “The by-laws of a corporation are its own private laws which substantially have the same effect as the laws of the corporation. They are in effect, written, into the charter. In this sense they become part of the fundamental law of the corporation with which the corporation and its directors and officers must comply.”
Having said this, by-law provisions are a guide to how a corporation runs its internal affairs. In general, they provide a guide on the subscription of shares, conduct of meetings, powers of the Board of Directors, appointment of officers, amendments, etc. As long as the rules are embodied in the by-laws, a corporation can act in the manner and within the formalities prescribed under such rules.
But if a change in the rules is required, how do we proceed in amending a corporation’s by-laws?
Section 48 of the Corporation Code (Code) outlines the procedure in introducing amendments to by-laws. It prescribes the manner of amendment consisting of the conduct of the meeting, quorum requirement, and minimum stockholder votes for an amendments to be valid and binding. It also mentions the effectivity of the by-law amendment which is when the Securities and Exchange Commission (SEC) issues a Certificate of Amendment of By-Laws.
While the provisions of the Code may have captured the steps in amending the by-laws, the SEC had the occasion to discuss in a legal opinion why Section 48 of the Code is not enough to enforce an amendment to a corporation’s by-laws.
In an opinion dated April 20, the Office of the General Counsel (OGC) of the SEC resolved the issue of whether a corporation can delegate to its board the power to amend or repeal its by-laws. The question arose from a proposed amendment to a corporation’s by-laws which delegates to its board the authority to amend or repeal its own by-laws. The opinion requested from the SEC was based on the provisions of Section of 48 of the Code, with the relevant provision quoted below:
“… The owners of two-thirds (2/3) of the outstanding capital stock or two-thirds (2/3) of the members in a non-stock corporation may delegate to the board of directors or trustees the power to amend or repeal any by-laws or adopt new by-laws.”
Citing previous SEC Opinions, the OGC explained that the delegation to the board of the power to amend or repeal by-laws or adopt new by-laws should not be embodied in the by-laws alone, but must be supported by a resolution adopted by 2/3 of the subscribed capital stock of the corporation. The rationale for this is that the vested authority is only temporary in nature. At any time, stockholders may decide to revoke the delegated power by a majority vote in a meeting called for this purpose.
If the power is provided in the by-laws, the authority may have been revoked already, but may still appear therein until the corresponding amendment is made and filed with the SEC. Considering the length of time since the authority was granted by the stockholders, it is unlikely that the alleged delegated authority of the board will remain effective then.
The OGC added that what is not allowed in the by-law amendment is the simple inclusion of the very provision on the delegated power. Merely lifting the provisions of Section 48 of the Code and adopting it in the by-laws is not sufficient to comply with the requirement. Actual delegation must be embodied in a resolution, i.e. 2/3 of the stockholders must explicitly vote to delegate to the board the power to amend or repeal the by-laws.
In the case at hand, the corporation failed to satisfy the requirement since it merely lifted Section 48 of the Corporation Code on the power of its stockholders to delegate the authority to amend or repeal, without complying with the resolution requirement. To operationalize the delegation requirement, owners of at least two-thirds (2/3) of the outstanding capital stock must pass the appropriate resolution in a stockholder’s meeting. The resolution may spell out the extent or limits of the delegated authority, including when it expires or becomes ‘functus officio.’
While the Code and the by-laws itself have explicitly outlined the rules to amend a corporation’s by-laws, the shareholders as owners of the corporation will still have the final say. Delegation of the stockholder’s authority should be considered more of an exception from the regular course of corporate procedures. Hence, the legal requirements must be construed strictly against delegation of authority.
The views or opinions expressed in this article are solely those of the author and do not necessarily represent those of Isla Lipana & Co. The content is for general information purposes only, and should not be used as a substitute for specific advice.
Larissa C. Dalistan-Levosada is a senior manager at the Tax Services Department of Isla Lipana & Co., the Philippine member firm of the PwC network.
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larissa.c.dalistan@ph.pwc.com