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Analysts remain selective on bank stocks

By Marissa Mae M. Ramos
Researcher

ANALYSTS remain selective on bank stocks amid mixed earnings performance and the differing impacts of loosening monetary policy and ongoing trade tensions on their bottom lines.

The barometer Philippine Stock Exchange index (PSEi) traded sideways in the second quarter, gaining almost one percent in the second quarter, slower than the 6.1% growth posted in the first quarter. This was, however, a turnaround from the 9.9% slump recorded the previous year.

In the second quarter, the financials sub-index declined by 2.4% versus a one-percent loss in the previous quarter and the 15% drop in the second quarter of last year.

The decline in the financials counter reflected the performances of the listed banks’ share prices with more than half registering quarter-on-quarter declines. Metropolitan Bank & Trust Co. (MBT) had the largest decline in its share price during the quarter at 10.83%, followed closely by the Philippine National Bank (PNB) at 10.41%.

Other listed banks that saw their share prices decline include the Bank of the Philippine Islands (BPI, -6.77%); East West Banking Corp. (EW, -4.44%); Philippine Business Bank (PBB, -3.91%); Security Bank Corp. (SECB, -1.73%), Asia United Bank (AUB, -0.43%), and Philippine Bank of Communications (PBC, -0.23%).

On the other hand, Rizal Commercial Banking Corp. (RCB) led gainers with a 5.24% climb in its share price, followed by those of BDO Unibank, Inc. (BDO, 4.63%); Philippine Trust Co. (PTC, 4.45%); China Banking Corp. (CHIB, 2.23%); Union Bank of the Philippines (UBP, 0.66%); and Philippine Savings Bank (PSB, 0.35%).

“The main drivers that drove not just the banking stocks, but also the performance of the banks would be the stance of the BSP (Bangko Sentral ng Pilipinas) and the interest rates in counter balancing other economic data points to consider such as GDP (gross domestic product) and inflation,” said Philstocks Financial, Inc. Client Engagement Officer and Research Associate Piper Chaucer E. Tan in an e-mail.

Mr. Tan, who regarded the first-half of the year as a “mixed bag” for the banking sector and the stock market in general, also cited the ongoing trade tensions between the US and China as a constant “offshore catalyst [trickling] down to the bank stocks and to the stock market” that could potentially trigger a global economic recession.

The second quarter saw the BSP cutting policy rates by 25 basis points (bps) as expected following the decelerating headline inflation trend. Likewise, the reserve requirement ratio (RRR) of universal and commercial banks (U/KBs) were trimmed by 200 bps in mid-May.

Meanwhile, the tit-for-tat trade war between the US and China had been ongoing for more than a year. Apart from some momentary respites, it has yet to see any new developments that would suggest a resolution of trade tensions between the two economic superpowers.

Despite these headwinds, banks managed to perform well on the aggregate. BSP data showed the country’s U/KBs booking a cumulative P100.615-billion net income, 30% higher than the P77.364-billion accumulated earnings at the end of the second quarter last year.

Net interest margin (NIM) — the ratio that measures banks’ efficiency in investing their funds by dividing annualized net interest income (NII) to average earning assets — improved to 3.38% in the second quarter from 3.29% in the first quarter of the year and 3.11% in the second quarter of 2018.

Mandarin Securities Corp. Research Analyst Zoren Philip A. Musngi said that SECB stood out among listed banks in the second quarter, citing a “significantly better” 32% year-on-year gain in its net income.

“However, we will still look into succeeding quarters to see if it is indeed a sustainable recovery or just a one-off [gain],” Mr. Musngi said.

Regina Capital Development Corp. Equity Analyst Rens V. Cruz II said PBB and AUB “surprised to the upside” with their net income gains of 96.46% and 89.38% during the period. On the other hand, he pointed to PNB’s 47.98% decline, which “completely breaks the momentum established in the first quarter.”

For China Bank Securities Corp. Senior Research Associate Rastine Mackie D. Mercado, BDO stood out last quarter.

“Of the index banks, BDO reported the highest growth in net income at 53.3% in the first half of 2019. This was driven both by higher NII and non-interest income,” Mr. Mercado said in an e-mail.

“Moreover, BDO’s CASA (current account and savings account) as a percentage of total deposits was at 70.3% in the first half, the highest among the index banking stocks. Trading gains of the bank over the period also normalized, reversing losses incurred in the first half.”

Raul P. Ruiz, first vice-president and head of research at RCBC Securities, Inc., likewise pointed to BDO’s upside.

“Prices of bank stocks under [our coverage] were generally flat to lower in the second quarter with the exception of BDO,” he said.

“[The] [u]nderperformance may have been due to idea… that bank NIMs will fall because of the BSP’s looser monetary policy. However, BDO’s share price increased probably because of the idea that, having the most deposits, it would benefit the most from the BSP’s plan to cut the reserve requirement all the way to 10% in the next few years,” Mr. Ruiz said.

Mr. Ruiz likewise noted PNB’s “above-industry loan and deposit growth rates.”

Apart from the policy rate cut last quarter, the BSP ruled another quarter point trim on benchmark interest rates in its fifth policy meeting earlier this month with hints of another 25-basis point cut before yearend. BSP Governor Benjamin E. Diokno likewise threw in the possibility of an additional RRR cut as early as next month.

OUTLOOK
Similar to last quarter’s performance, prospects for the third quarter were mixed among the analysts interviewed.

“From the third quarter onwards, banks’ earnings growth will be more subdued as the impact of the BSP’s overnight rate cuts will start to be reflected in banks’ asset yields and NIMs,” RCBC Securities’ Mr. Ruiz said.

Regina Capital’s Mr. Cruz was of a similar view, but noted that this should “not yet be significant enough” to cause a year on year slowdown in banks’ net interest incomes.

“On the other hand, the RRR cut will likely only affect the relatively smaller banks, as most of their deposit base are sourced from wholesale and fixed deposits. The bigger banks will continue to incur higher cost of funds since they have higher exposure to CASA deposits,” Mr. Cruz said.

Likewise, Philstocks’ Mr. Tan said that there will be “some slight slowdown” in banks’ earnings as the third quarter is considered historically the weakest quarter of the year.

Nevertheless, Mr. Tan remains “strongly positive” with the banking sector given the positive earnings results in some of the listed banks, adding that its current price-to-book ratio (P/B) of 0.939 times is less than its five-year average P/B ratio of 1.26 times.

“[W]e think that banks will catch up to its average, and this is pretty cheap that investors should really look into if they want to bargain-hunt stocks with cheap valuations and solid fundamentals,” Mr. Tan said.

Mandarin Securities’ Mr. Musngi was likewise upbeat on listed banks: “We are maintaining our positive outlook on bank stocks, particularly the larger/diversified ones,” he said.

“Even though the economic environment remains uncertain, we are still optimistic banks would weather through and show year-over-year growth as they manage their risks/exposures. Bank stock valuations are quite attractive relative to other industries and to historical averages.”

Joylin F. Telagen, research head at IB Gimenez Securities, Inc., said that the global economic situation will remain the main factor that would affect the stock performance of listed banks and the stock market in general.

“I expect that banks’ core business operation will continue to post double-digit growth while non-interest [income] especially trading operation might still be a challenge on the third [quarter] until end of the year,” Ms. Telagen said.

For First Resources Management and Securities Corp. Officer in Charge of Trading and Research Charlene Ericka P. Reyes: “We expect that banks would be able to sustain their earnings growth momentum buoyed by the strong growth in net interest income, accounting for mid-teens loan growth and the continued improvement in net interest margin this year,” she said.

“The non-interest income business of banks may also support their earnings growth for the year driven by the expansion of banks’ non-core business segments, particularly in fee-based income and insurance premiums,” she added.

On bank stocks, China Bank Securities’ Mr. Mercado is “selectively bullish.”

“We would continue to prioritize banks with negative repricing gaps as this ensures that the risk to their NIMs would be minimal,” said Mr. Mercado.

“Individually, the listed banks under the financial index are currently trading below their respective three-year average P/Bs, which may also be indicative of some upside to specific issues.”

On the other hand, Regina Capital’s Mr. Cruz said that the banking sector “is gradually shifting to a neutral stance” for the second half.

“For starters, valuations have spiked since the start of 2019. Secondly, the impressive performance of banks in [the first half of 2019] is already a closed chapter… [with the third and fourth quarters] present different factors to consider — including the 50-bp policy rate cut made in May and August, and the continued liquidity crunch, among others,” Mr. Cruz said.

For RCBC Securities’ Mr. Ruiz: “I’m generally neutral on banks because NIM expansion since at least last year may end due to the BSP’s interest rate cuts.”

Arts & Culture (08/28/19)

What Lies Within: Centre of the Centre

THE Museum of Contemporary Art and Design (MCAD) of the De La Salle-College of Saint Benilde is set to explore speculative and alluring spaces with What Lies Within: Centre of the Centre. The exhibit will feature four artists all of whom will be showing their work in the Philippines for the first time: Mel O’Callaghan (Australia), Laurent Grasso (France), Suzanne Treister (United Kingdom) and Pamela Rosenkranz (Switzerland). Their works encompass all manner of inquiry and examination of contemporary life. The exhibit opens on Sept. 5, at the MCAD, De La Salle-College of Saint Benilde School of Design and Arts Campus, Dominga St., Malate, Manila.

Conversations on Curation

UNDER KWAGO’S publishing and curatorial platform Comma, Roy Voragen and Czyka Tumaliuan started Curator’s Lab to provide a collaborative space to question, investigate, discover and test different approaches to making, showing, experiencing and evaluating exhibitions. On Aug. 29, at De La Salle-College of Saint Benilde, Curator’s Lab will hold a forum, Conversations on Curation, discussing the role curators play in contemporary art. The forum aims to understand the curator’s thought processes and creativity, and how these are transformed and translated into exhibitions and ongoing discourses. “Curator’s Lab is an open-ended inquiry about curatorial practices within the context of contemporary art. We are very thankful for MCAD and DLS-CSB for giving our first gathering a home,” Curators Lab co-founder Tumaliuan said. The speakers are Joselina Cruz, Patrick Flores, Tony Godfrey, and Mayumi Hirano who work in institutions and independently to see diverse viewpoints on curating. “The forum is a good way to bring together artists, curators, and those who are curious about the practice to exchange thoughts and learn from one another,” said Voragen, co-founder of Curators Lab. The forum will be held from 8-11 p.m., with the talks at 8:45 p.m., Joselina Cruz; 9:10 p.m., Patrick Flores; 9:35 p.m., Tony Godfrey; and 10 p.m., Mayumi Hirano, followed by a Q&A at 10:20 p.m. To join, sign-up at http://bit.ly/rsvpcuratorslab. There is a door fee of P500 (students) and P750. The forum will be held at The Loop, 12th floor, SDA Bldg., DLS-CSB, Pablo Ocampo St., Malate, Manila.

‘In Harmony with Nature’

THE Metropolitan Museum of Manila launches “In Harmony with Nature,” an art residency in partnership with the Bank of China, and the Chinese Culture and Art Association. This project engages 10 artists from the Philippines and China to participate in a continuous dialogue on current perspectives through a brief residency of historically and culturally significant places that would juxtapose similarities and nuances of people, place and art expressions. This exchange project will culminate with two group exhibitions in both China and the Philippines with corresponding public programs. The participating artists for this residency project are Manuel Baldemor, Norberto Carating, Rico Lascano, Jonahmar Salvosa, Phyllis Zaballero, Bukuk Chai, Zhixin Cai, Jie Ding, Ping Hao, and She Liu.

West Gallery exhibitions

THE WEST GALLERY has several exhibitions which are ongoing until Sept. 21. At Gallery 1 is Arturo Sanchez, Jr.’s Monuments and the Desire for Immortality; at Gallery 2 is Riel Jaramillo Hilario’s Phenomenology of Magical Thinking; at Gallery 3 is a group exhibit, Working Condition, featuring works by Pope Bacay, Indy Paredes, and Miguel Puyat; and at Gallery 4 is WIPO: This Way. West Gallery is at 48 West Ave., Quezon City.

Jackstones creates property management firm

JACKSTONES, Inc. (formerly NextStage, Inc.) is forming a property management company.

In a disclosure to the stock exchange Tuesday, the Tanenglian-led firm said its board of directors approved last week the plan to incorporate Jackstones Property and Consultancy Services Corp.

The wholly owned subsidiary, it said, will have an initial capitalization of P10 million.

“[It] would serve as a property management company for Jackstones,” the disclosure said.

Jackstones serves as the holding company for projects, property ventures, businesses and assets primarily based in Southeast Asia. Before it was renamed in 2014 from NextStage, Inc., the company was focused on the technology sector.

Established in 1964 as Pacific Cement Co., Jackstones went from managing a cement-related business to handling electronics to becoming the holding firm that it is today.

Ketton Holdings, Inc. of Chairman Mariano Chua Tanenglian came in as investor in Jackstones in 2014, acquiring 70% of the company’s outstanding shares.

Before that, Jackstones’ corporate assets included shares in technology firms Mondex Philippines, Inc.; Technology Support Services, Inc.; Infinit-E Asia, Inc. and Mondex Protector Philippines, Inc.

In the six months ending June, the listed company posted a net loss of P3.19 million, expanding from P2.56-million loss in the same period last year.

In a regulatory filing, Jackstones said the Philippine Stock Exchange lifted the suspension on the trading of its shares in July after being suspended in June 2013.

Shares in Jackstones added P0.02 apiece or 0.65% to close at P3.09 each on Tuesday. — Denise A. Valdez

How PSEi member stocks performed — August 27, 2019

Here’s a quick glance at how PSEi stocks fared on Tuesday, August 27, 2019.

 

Slow RCEF distribution seen hindering farmers

SENATOR Cynthia A. Villar on Tuesday warned against the slow disbursement of the Rice Competitiveness Enhancement Fund (RCEF), a component of the Rice Tariffication Law that seeks to upgrade farmers’ competitiveness.

“If we do not give RCEF a chance to be fully implemented and deliver on its promise to improve the competitiveness of our agriculture sector, I don’t think we can ever make it,’’ Ms. Villar said in a statement.

“In this age of liberalization, our farmers will continue to fear competition because they were not given the chance to improve their ways.”

The committee on agriculture and food with the committees on finance, trade, commerce and entrepreneurship on Wednesday will continue its inquiry on the implementation of the Rice Tariffication Law, or Republic Act No. 11203.

The law calls for RCEF to receive P10 billion a year for the next six years from tariffs collected on liberalized rice imports. The funds will be used to expand farm mechanization and increase farmers’ access to financing, inputs and technical know-how

Ms. Villar said of the first P5 billion released for RCEF, only P1 billion has been credited to farmers.

“Now that Philippine authorities can no longer limit the entry of imported rice, we impose tariffs and collect the amount to spend for programs that will help improve our farmers’ productivity and profitability under the Rice Competitiveness Enhancement Fund (RCEF),” Ms. Villar said.

Ms. Villar also pointed out the Rice Tariffication Law helps meet the Philippines’ 1995 commitment to the World Trade Organization, to do away with quantitative restrictions on rice imports.

“We were under a QR system for 22 years. To my mind, we were given more than enough time to improve but we did not improve. Our farmers and fisherfolk continue to suffer in poverty while smugglers and cartels continue to enrich themselves,” Ms. Villar said. — Charmaine A. Tadalan

Passive income tax bill hurdles House panel

THE BILL simplifying the tax regime for financial investors made it past committee evaluation at the House of Representatives Tuesday.

The House Ways and Means committee approved House Bill No. 304, or the proposed Passive Income and Financial Intermediary Tax Act, (PIFITA) which makes up the fourth package of the government’s comprehensive tax reform program (CTRP).

The panel invoked Rule 10 Section 48 of House rules that allows priority bills that bagged third- and final-reading approval in the preceding Congress to “be disposed of” without public hearings.

“In the previous congress, we had a very long deliberation on this… and now may we now move for the approval of House Bill 304, which is the same as we approved on third and final reading in the 17th congress, subject to minimal amendments and effectivity clause,” said Nueva Ecija 1st district Rep. Estrellita B. Suansing, who is the committee’s vice-chairperson.

The bill proposes a unified 15% income tax rate on interest, dividend, and capital gains from the current range of zero to 30%.

Package 4 of the CTRP also proposes the reduction of the stock transaction tax from 0.6% to 0.1% and the removal of the initial public offering tax.

The measure also seeks to reduce the 12% value added tax to 2% premium tax on health insurance organizations, pension and pre-need insurance.

Among the key amendments in the bill is the exemption from document stamp tax (DST) of non-monetary documents like diplomas, transcripts of records, and other school certifications.

Also exempted from DST are the Oath of Office for barangays, Good Moral Standing Certificates required from the Professional Regulation Commission, affidavits, proxies, Certificates of No Marriage Record, baptismal certificates, and marriage license certificates.

Recently, two CTRP packages were fast-tracked for plenary discussion.

Package 2+ which increases excise taxes on alcohol products and e-cigarettes made it past third and final reading at the House last week.

Meanwhile, Package 2 or the Corporate Income Tax and Incentives Reform Act is in line for second reading. — Vince Angelo C. Ferreras

House panels approve bill easing restrictions on foreign professionals

THE HOUSE committees on Economic Affairs and Trade and Industry have approved a bill which seeks to remove restrictions on foreigners practicing their professions in the Philippines.

Three bills that propose to amend Republic Act No. 7042, or the Foreign Investments Act (FIA) of 1991, were filed in the 18th Congress. However, the version by Tarlac 2nd district Rep. Victor A. Yap or House Bill 300 will be elevated to the plenary for second reading.

“So the bill in the 17th Congress has only slight differences, but the three bills we have now are all the same, so we are basically approving the same version…there were no amendments in any of the bills,” House Economic Affairs committee chair Rep. Sharon S. Garin said Tuesday.

According to the bill’s explanatory note, the measure seeks to reduce to 15 from the present 50 direct local hires as the minimum employment requirement for small- and medium-sized enterprises.

“While the FIA (Foreign Investments Act) allows foreign investors to establish small and medium-sized enterprises with a minimum paid-in capital of $100,000, a small and medium sized enterprise cannot sustain a labor force of 50 employees,” said Mr. Yap in his bill.

The key provision in the bill is the exclusion of the “practice of professions” from the coverage of FIA.

“By allowing foreign professionals to practice in the Philippines, they would be able to bring in technology and know-how from abroad, and help create jobs for locals by attracting businesses that require highly skilled professionals in the country,” according to the bill.

A statement by the Joint Foreign Chambers of the Philippines dated Aug. 22 declared support for the removal of restrictions on foreign professionals.

“Having more foreign professionals practicing in the Philippines can bring new skills, ideas, connections, and integration into global networks of service providers, and support sunrise sectors including creative industries, R&D, medical travel, and retirement,” according to the statement.

However, the Professional Regulation Commission (PRC) said it supports the continued exercise of “national control” over the professions.

“While we understand the intent of the proposed amendment, the PRC is of the view that the practice of professions is still a partially nationalized activity… To remove it absolutely from the Negative List may not be be transparent on the limitation to professional practice by foreigners, and may engender the impression that there exists no restriction at all to their practice,” PRC said in its position paper. — Vince Angelo C. Ferreras

ERC, DoE seeking to harmonize competitive selection rules

THE Energy Regulatory Commission (ERC) has asked the Department of Energy (DoE) for its comment on the draft guidelines for the competitive selection process (CSP) and whether its proposed rules do not contravene the circular earlier issued by the policy-maker.

In a chance interview on Tuesday, ERC Chairperson and Chief Executive Officer Agnes VST Devanadera said the draft guidelines will have stricter provisions, including the blacklisting of power generating companies that failed to deliver on their contractual obligations.

She said she had sat down with Energy Secretary Alfonso G. Cusi asking for his formal letter stating that the draft guidelines do not go against the DoE circular. She said his clearance had been given verbally during their meeting.

The DoE circular is DC 2018-02-0003, which adopted and prescribed the policy for the CSP process in the procurement by the distribution utilities of power supply agreements for their captive market. It was issued in February 2018.

The ERC guidelines have gone through several public consultations but before the issuance, the Supreme Court in May this year ruled that all PSAs forged after June 30, 2015 should undergo a CSP to arrive at the least-cost power for consumers.

The ERC then asked the court to reconsider its decision, but the move was later denied.

Ms. Devanadera said the ERC would also “seriously” look into the composition of the third-party bids and awards committee of the CSP process, which one legislator said might end up coming from the recommended experts of distribution utilities, thus defeating the purpose of having an independent entity during the bidding.

“Ang ginawa namin, hindi na namin siyempre dinagdagan kung ano man ang nasa DoE (What we did is, we did not of course added to what was already in the DoE circular),” she said, adding that the ERC guidelines are more “detailed.”

She also said that the blacklisting of generating companies that failed to deliver supply because of power outages is within the power of the ERC for violators of its rules.

She said she had talked with DoE officials on Tuesday when the House of Representatives heard the budget of the two agencies for 2020.

ERC Commissioner Catherine P. Maceda described the proposed guidelines as “very rigorous.”

“Wala namang conflict [with the DoE circular]. It’s just that, it’s more rigorous,” she said. “It offers very detailed CSP framework.”

Mr. Maceda said the ERC would issue the guidelines as soon as the DoE says that there is no conflict with its circular. — Victor V. Saulon

PCA looking for suitable public land to expand coconut planting

THE Philippine Coconut Authority said it is seeking suitable public land for the expanded planting of coconut trees.

“What we want (is) an inventory of public land where we can plant coconut… (and set up) a registry of coconut trees,” Gonzalo T. Duque, PCA administrator, told reporters.

Data from the Philippine Statistics Authority (PSA) noted that coconut production in the first quarter of the year was slightly up 0.2% to 3.31 million metric tons (MT), year-on-year.

The top coconut producer was Davao Region, which contributed 14.4% to total production. It is followed by Zamboanga Peninsula (13.6%), and Northern Mindanao (12.9%).

“We need virgin coconut plants. We have been looking at the Visayas and Mindanao, and forgetting about Luzon… In three or six years, there will be enough trees,” he said.

Expanded coconut production, he said, might allow the country to take advantage of a European Union ban on palm oil use in biofuels, citing the deforestation caused by palm oil plantations.

The Philippines currently has an oversupply of palm oil from Malaysia and Indonesia, which has adversely affected the coconut industry.

The Department of Agriculture estimates that exports of palm oil to the Philippines by Indonesia and Malaysia have increased by 100% over the last three years.

Mr. Duque said the PCA will push for intercropping coffee and cacao in coconut farms, as well as raising livestock to raise farmer incomes.

“I think many farmers will convert to planting coconut trees given the right incentives. While waiting for their coconuts to bear fruits, they can have some other plants… so that they may earn every season,” he said.

Agriculture Secretary William D. Dar and Senator Cynthia A. Villar have backed intercropping.

Ms. Villar said coffee and cacao have the potential for raising farmers’ incomes by about $200 per month.

Mr. Dar said that he hopes to involve the private sector more with farmers, so both could work together in growing the coconut industry. — Vincent Mariel P. Galang

DoLE’s SoT bill draft still awaiting input from economic team

THE Department of Labor and Employment (DoLE) said it is still consulting economic managers and the business sector on its draft security of tenure (SoT) bill, further delaying its scheduled submission to Congress this month.

Assistant Labor Secretary Benjo Santos M. Benavidez told BusinessWorld Tuesday that DoLE still needs to send its draft to the National Economic Development Authority (NEDA), Department of Trade and Industry (DTI), and Department of Finance (DoF) for comment. He noted that the economic team’s input is vital if the new measure is to avoid being vetoed like the previous SoT bill.

“We have yet to get inputs from other government agencies: NEDA, DTI, and DoF,” he said, to ensure that the government has a unified view on how to proceed with the new bill.

On July 26, President Rodrigo R. Duterte vetoed Senate Bill 1826. Creating an SoT law was a campaign promise of Mr. Duterte when he ran for president in 2016.

DoLE had submitted a letter of support for the earlier bill before the president’s veto, with DTI as a co-signatory. Also before the veto, NEDA stated that Senate Bill 1826 needs to be “tweaked” in order to allow flexibility for employers in hiring. NEDA also added that passing the bill could weaken investments. DoF backed the statement issued by NEDA.

Senator Emmanuel Joel J. Villanueva on July 29 refiled the same bill during the opening of the 18th Congress. His father, Cibac party-list Rep. Eddie C. Villanueva, filed the House version of the bill on Aug. 5.

Labor Secretary Silvestre H. Bello III said earlier this month that Malacañang ordered DoLE to create its own version of the bill, which he hoped will be submitted to Congress by the end of August. Mr. Benavidez said it is likely submission will be pushed back to next month.

“We want to make sure the one we will submit will be one that has the support of all the executive departments,” he said. — Gillian M. Cortez

DoE tells budget hearing it is not ruling out nuclear power

The reactor inside the Bataan Nuclear Power Plant — BW FILE PHOTO

THE Energy secretary said Tuesday that his department is not ruling out the use of nuclear power “as an option,” days after his officials announced that a survey firm has been tapped to examine Filipino attitudes on the energy source.

“We are pushing for nuclear as an option,” Department of Energy (DoE) Secretary Alfonso G. Cusi told legislators during a hearing at the House of Representatives to discuss the department’s budget.

Mr. Cusi was responding to a question on the share of coal energy in the country’s generating capacity mix, for which he has been firm in saying that the department has a “technology-neutral” policy in approving applications to build new power plants.

During the hearing, he also said that the DoE will approve new coal-fired power plant projects if needed, despite the country’s pledge before the international community to reduce its greenhouse gas emission by 70% by 2030 relative to business-as-usual.

“If we need it, I will [approve]. If it’s not needed I won’t,” Mr. Cusi said, a response one legislator called “evasive.”

He said the country remains “poor” in energy security and accessibility, even as it leads in environmental sustainability.

“We have adopted this technology-neutral policy,” he told the panel.

He said coal still serves a purpose for the country’s baseload requirements, or the sustained 24/7 power supply. He added that emissions do not come mainly from power plants, citing the transport sector also as a contributor.

In 2018, of the country’s 21,241 megawatts of installed energy capacity, coal power plants accounted for 39%, followed by renewable energy with 31%.

Natural gas and oil-based plants trailed with a share of 16% and 14%, respectively.

Earlier this month, Energy officials said the DoE commissioned the Social Weather Stations polling organization to conduct a perception survey on nuclear energy, the result of which will be vetted by Cabinet secretaries ahead of its presentation to the Office of the President.

“We are undergoing assessment on what to do with Bataan Nuclear Power Plant, and we have submitted our proposed national policy to the Office of the President. We are waiting for that and once it is approved, we will be able to determine what to do,” Mr. Cusi told the panel.

The DoE is proposing a 2020 budget of P2.3 billion, of which P500 million will go to the government’s total electrification program in partnership with the National Electrification Administration and National Power Corp.

“Our budgetary request will support plans and programs that will help ensure the security of our country’s energy future, increase access to energy services and technologies, further uphold consumer welfare, and facilitate the efficient implementation of new energy policies such as the Energy Efficiency and Conservation Act, the Murang Kuryente Act, and the Energy Virtual One-Stop Shop Act,” Mr. Cusi said in his opening statement.

Of DoE’s proposed budget, P1.14 billion or almost 50% is for maintenance and other operating expenses; P521 million or 23% for capital outlays; P580 million or 25% for personal services; and P52 million or 2% for retirement and life insurance premiums. — Victor V. Saulon

Tax incentives law seen bringing ‘rapid’ FDI growth

THE SECOND PACKAGE of the tax reform program will lift uncertainty over incentives and reverse the slump in foreign direct investment (FDI), a bank economist said Tuesday.

“Very crucial is the TRABAHO bill because the problem with being left in dark about what the final incentives or absence of incentives is going to look like,” Bank of the Philippine Islands lead economist Emilio S. Neri, Jr. said during an economic forum in Manila Tuesday.

He was referring to the name of one of the tax reform bills — Tax Reform for Attracting Better and High-Quality Opportunities (TRABAHO) — that did not pass the previous Congress. It was refiled this year under a new name, the proposed Comprehensive Income Tax and Incentive Rationalization (CITIRA) act.

The bill seeks to eventually reduce the corporate tax rate to 20% from 30% currently and introduce changes to the incentives regime.

“The sooner the bill is passed into law, I think, the less uncertainty about foreign investment in the Philippines. It’s also good for the tax effort…,” BPI’s Mr. Neri said.

“If that is put in place, the FDI in the Philippines will start growing at a rapid pace.

FDI net inflows in May was the smallest in more than four years, dropping 85.1% to $242 million from $1.625 billion a year earlier.

In the year to date, FDI net inflows amounted to $3.145 billion, down 37.1% from a year earlier. The indicator is coming off a record $10.256 billion in 2017, which fell off by 4.4% last year.

The central bank projects net FDI to hit about $10.2 billion this year.

“As far as the country is concerned, we just need to open up the economy. We have too many restrictions,” Socioeconomic Planning Secretary Ernesto M. Pernia said at the same forum.

As the foreign investors wait for the passage of the bill, Bangko Sentral ng Pilipinas (BSP) Governor Bejamin E. Diokno said he is confident that the bill will become a law before the year ends.

“Foreign investors will always be wait-and-see… because of the TRABAHO bill… Once we get this approved I’m sure foreign investment will be coming in. Incentives really don’t matter. They are looking at profitability. Incentives come and go except in our case, incentives are perpetual,” he said.

“I’m confident that that bill will be resolved before the end of the year. The window of opportunity is six months to one year,” Mr. Diokno said. — Mark T. Amoguis

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