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Going digital ‘critical’ for banks’ financial inclusion push

THE DIGITAL transformation of financial institutions in the country is “critical” in the industry-wide push to include more Filipinos into the formal financial system amid an opportunity in its large population connected to the internet, a partner from McKinsey & Co. said.

On the sidelines of a forum organized by human capital solutions provider Viventis, McKinsey partner Mayven Naicker said it is “critically” important for banks and other financial firms in the country to digitally transform to tap more potential clients who are unbanked or underserved.

“There’s a huge gap in bringing millions and millions of people into the formal financial services. And we know from what we see elsewhere in the world that there’s a huge benefit in the economy and also to the individuals when you bring them into the formal financial system,” Mr. Naicker said in an interview following his speech during the “Banking 4.0: Developing the New Innovation Blueprint for Success” forum held yesterday.

Through technology, financial firms will be able to access people in remote parts of the country as well offer banking services at par with those offered to lenders’ usual clients, he said.

“There’s less room to be exploited by payday lenders or informal financial service providers. People become more savvy in how they manage their own finances.”

According to the latest Financial Inclusion Survey conducted by the Bangko Sentral ng Pilipinas in 2017, only 22.6%, or some 15.8 million Filipino adults, maintain a formal bank accounts. The unbanked cited lack of money and lack of need to have an account as the main reasons.

Mr. Naicker said there is a big opportunity for banks to expand their digital footprint given the huge number of Filipinos connected to the internet versus the small banking penetration in the country.

Currently, he said, banks have already launched some form of digital transformation as some lenders started to offer services through mobile and online platforms, while international players have entered the country as all-digital banks.

However, the McKinsey partner said local financial firms are still dealing with a learning curve in their digital transformation journeys.

“A lot of activities are happening, but I don’t think it translating into very clear and tangible outcomes for the banks themselves,” Mr. Naicker said.

“I don’t think anyone can say they have improved cost efficiency by X amount… I don’t see the customer experience dramatically improved. But I think it’s part of the learning curve.”

To address pain points, Mr. Naicker said industry players must develop a clear road map with explicit link to business outcomes and be obsessive about the customer journey among others.

“It’s a fundamental question of how do you re-scale existing workforce and also upscale young people to play these different roles. Data science, customer experience design — there’s a huge demand for these skills,” he added. — Karl Angelo N. Vidal

TV networks both claim ratings lead in March

MEDIA giants ABS-CBN Corp. and GMA Network, Inc. both continued to claim dominance in television ratings in March, citing different measurement providers.

ABS-CBN said on Wednesday it gained 47% average audience share last month to beat GMA’s 30%, based on data from Kantar Media.

Kanta Media, according to ABS-CBN, gathers its data from a survey of 2,610 urban and rural households across the Philippines.

GMA, on the other hand, said it had 36.4% average total day people audience share in the National Urban Television Audience Measurement (NUTAM) from March 1 to 27, with findings from March 24 to 27 based on overnight data. This is higher than its rival’s 35.5%, based on data from Nielsen TV Audience Measurement.

By location, ABS-CBN said its rating in March reached 44% in Metro Manila, almost double GMA’s 24%. In Mega Manila, it likewise outscored its rival with 38% against 30%.

The Lopez-led company said it dominated the country’s three main islands, with an average audience share of 41% in Luzon versus GMA’s 33%; 57% in Visayas compared to GMA’s 23%; and 56% in Mindanao against GMA’s 25%.

But in its own statement, GMA said it trumped the Urban Luzon market with an average audience share of 39.8% to beat ABS-CBN’s 30%. In Mega Manila, the network also claimed the lead with a rating of 41.6% against its rival’s 27.1%.

In terms of time slots, ABS-CBN again said it led the ratings across- the-board with an average audience share of 50% for prime time (6 p.m. to 12 a.m.) against GMA’s 30%. In the morning block (6 a.m. to 12 p.m.), it said it had 38% share versus GMA’s 28%. In the noon time block (12 p.m. to 3 p.m.), ABS-CBN scored 48% to beat GMA’s 29%. And in the afternoon block (3 p.m. to 6 p.m.), it had 49% against GMA’s 30%.

On the other hand, GMA said Nielsen data found it leading two time slots: the morning block with 32% rating versus ABS-CBN’s 29.2%, and the evening block with 38.4% against ABS-CBN’s 37.1%.

They also both said their shows were among the top programs in the month of March. ABS-CBN said its “FPJ’s Ang Probinsyano” was the number one show with a prime time rating of 42.2%, whereas GMA said its “Kapuso Mo, Jessica Soho (KMJS)” was the number one show, without giving the details. — Denise A. Valdez

Saint-Julien’s Proudest

DOMAINE de Leoville from the Saint-Julien appellation of Bordeaux was not only one of the oldest wine estates in Medoc, but it also used to be its largest estate way back in the 18th century with over 200 hectares of prime vineyards. By 1826, part of the estate was purchased by Hugh Barton, which gave birth to Chateau Leoville Barton. And by 1840, the estate was further split into Chateau Leoville Las-Cases and Chateau Leoville Poyferre. All these three Leoville estates made the still much revered Medoc Bordeaux Official Wine Classification of 1855. All three were classified as Deuxièmes Crus (Second Growths) — just a notch below the First Growths.

The largest of the Leoville estates is Chateau Leoville Las Cases with around 98 hectares and is under the ownership of the Delon family. The second Leoville estate is Chateau Leoville Poyferre with roughly 60 hectares and is under the Cuvelier family. The third and smallest of the Leoville estates is Chateau Leoville Barton with 47 hectares and is still being managed by the same Barton family. Chateau Leoville Las Cases has been the most prestigious of the three Leoville estates, with prices easily double to triple those of the other two Leoville wines.

AN ENTHRALLING VISIT TO CHATEAU LEOVILLE LAS CASES
The image of the label of the grand vin of Chateau Leoville Las Cases of a lion atop a concrete gate is actually the structure that greets visitors to the chateau. The vineyards of Leoville Las Cases border those of Pauillac where their illustrious neighbor to the north is no less than Chateau Latour. While all the original Leoville vineyards were already demarcated to their respective Leoville owners, the buildings and parking area inherited from the previous ownership remained very much intact, and weirdly crosses both Chateau Leoville Las Cases and Chateau Leoville Poyferre properties.

Chateau Leoville Barton on the other hand, owns only vineyards from the former Domaine de Leoville parcel and does not have its wine-making facilities in the Leoville estate. Instead, it is being made and cellared at nearby Chateau Langoa Barton, a Troisième Cru (Third Growth) also from the Saint-Julien appellation owned by the same Barton family.

When we arrived for a visit at Las Cases, we basically parked in the common parking area for both Chateau Leoville Las Cases and Chateau Leoville Poyferre. Chateau Leoville Las Cases is the crown jewel of Domaines Delon, the wine company of the Delon family — which includes Chateau Potensac of Medoc appellation and Chateau Nenin from the right bank Pomerol appellation. We were welcomed at the chateau by Domaines Delon managing director Pierre Graffeuille and market manager for Asia, Florent Genty.

Leo of “Leoville” is symbolized by the lion, and the beautiful backyard garden of this chateau has a fountain with four lions as its centerpiece. The first place we visited at the chateau was the fermentation room, where you can see pretty much the traditional and the modern. There were the temperature-controlled wooden vats, stainless steel vats, and even a concrete fermentation structure.

There was also the somehow controversial reverse osmosis machine. Chateau Leoville Las Cases is known for (though critics would say notorious for) being unbashful in their use of reverse osmosis to draw out excess water for better wine concentration, especially on very wet vintages, and it has served the Las Cases wines well as evidenced by their long lived wines. But being a bit rebellious is not surprising for this chateau as back in 1988, Leoville Las Cases did the unthinkable and withdrew from the Conseil des Grands Crus Classes (despite being a Second Growth) and refused to participate in any of their events, though the chateau remained classified because of the prevailing French wine law.

From the wine-making facilities, we went to the main building. While its facade showed its authentic past, upon entering the main door, the mundane exterior transformed into glamour and charm. From the paintings that ornament the walls, the antique pieces, to the chandeliers, everything was so harmonious that the inside looked like it popped out of an interior design magazine.

The dining area where we were very fortunate to be invited for a “wine lunch” was luxurious in all the details including shiny crockery and cutlery. This “wine lunch” was absolutely my best lunch of all time — nothing comes remotely close. The food was not only amazing, the wines we had throughout the multiple course meal were seemingly impossible to duplicate, and, of course, we had the privilege of dining with both Messrs. Graffeuille and Genty. The wine lineup we had followed this sequence: Champagne Delamotte blanc de blanc 1999, Coche-Dury Grand Cru Corton-Charlamagne 1995, Chateau Nenin 2005, Chateau Pontesac 2003, Clos du Marquis 2000, Chateau Leoville Las Cases 1996, Chateau Leoville Las Cases 1989, and Sorrel Hermitage 1990.

CLOS DU MARQUIS IS NOT CHATEAU LAS CASES SECOND WINE
Clos du Marquis may have been one of the earliest recorded second label from a Grand Cru Classe chateau, as this wine was first released in 1902 (117 years ago), as the other label and cheaper alternative to the grand vin Leoville Las Cases. Clos du Marquis was ahead of even the Pavillon Rouge of Chateau Margaux which was first released in 1908. Chateau Margaux, however, may have started the second wine concept, when, prior to the Pavillon Rouge name, the other wine of Chateau Margaux was simply labeled as “Chateau Margaux 2nd wine” — and this was being sold way before the 20th century.

Clos du Marquis, as Mr. Graffeuille would insist, is never really viewed as the second wine of Chateau Leoville Las Cases. It is considered as its own unique wine brand, as it comes from vineyard parcels distinct from those of Las Cases, and the vineyards have their own different soil, subsoil, and qualities. In fact, most recently, with the 2015 vintage, Clos du Marquis has its own second wine too, the La Petite Marquise. While both Leoville Las Cases and Clos du Marquis wines are made from majority cabernet sauvignon, Leoville Las Cases normally contains more cabernet franc and the Clos du Marquis more merlot. The official second wine of Leoville Las Cases started with the 2007 vintage, under Le Petit Lion du Marquis de Las Cases label.

CUSTOMARY TASTING NOTES
For this column, I included only my tasting notes on the four Chateau Leoville Las Cases vintages and the two Clos du Marquis vintages, all enjoyed during a visit this February in Bordeaux. All the wines were tasted at Chateau Leoville Las Cases in Saint-Julien, with the exeption of the Leoville Las Cases 1945 vintage, which was drunk over dinner at Chateau Kirwan in Margaux.

• Clos du Marquis 2014: “fragrant on the nose, with lots of ripe berries, lavender, herbs and eucalyptus, very fresh yet already approachable, silky body with very soft tannins”

• Clos du Marquis 2000: “more complex nose with vanilla, cedar, blackcurrant, supple body with nice grainy bitter-sweet tannins, acid is lively and well intertwined, and finish is long and grapey”

• Chateau Leoville Las Cases 2014: “big and bold flavors, a lot of very ripe fruits, peppercorn, mushrooms, the sweet oak starting to surface after more swirling, full-bodied, powerful on the mouth but with good acid backbone, long, deep and flavorful; still a baby, but amazing potential awaits more years of aging”

• Chateau Leoville Las Cases 1996: “still fresh, more subtle on the nose, some earth, meat, raisins, vanilla, supple on the palate, ripe with nice juiciness, incredibly delicious, with nice persistence of berries and oak on a long finish”

• Chateau Leoville Las Cases 1989: “a lot of finesse on the nose, with aromas of blackcurrant, blueberries and violets, the wine on the palate is still quite luscious, very flavorful with nice juicy notes, long with lingering peppery and licorice finish; a 30-year gem that can still keep for years”

• Chateau Leoville Las Cases 1945: (in half bottle care of Yann Schyler of Chateau Kirwan): “this wine smells and looks like a wine 30 to 40 years younger than its vintage, nose has raspberries, mint and violets, on palate there is still freshness, though tannins have thinned out a bit, and texture towards light-medium, but this is a wine closing in on 75 years old, and it is still happening, with a finish that is raisiny and still delectable”

Chateau Leoville Las Cases has built a loyal fan base because of its style of wine that is powerful yet elegant, full-bodied, and meant for long-term aging. Even if the chateau wanted out of Conseil des Grands Crus Classes, Chateau Leoville Las Cases will forever be Saint-Julien’s proudest, and all the chateaux around this appellation are better off because of this.

The author has been a member of the Federation Internationale des Journalists et Ecrivains du Vin et des Spiritueux or FIJEV since 2010. For comments, inquiries, wine event coverage, and other wine-related concerns, e-mail the author at protegeinc@yahoo.com. He is also on Twitter at twitter.com/sherwinlao.

Credit swings defy fundamentals, point to risks ahead for markets

FOR INVESTORS trying to make sense of recent extreme moves in the global credit market, bad news: The roller coaster may go on.

The long-feared liquidity menace is well and truly here, and it’s overshadowing more prosaic factors like low default rates and corporate earnings when turbulence in the $13 trillion market erupts, according to new research from UBS Group AG.

“Dizzying” moves of late have been driven by rapidly rising and falling liquidity, strategists at the bank argued this week. These are symptoms of a herd mentality that’s exacerbating every selloff and rally, and the problem is particularly acute for junk-rated debt, they said.

A glance at bid-ask spreads — that’s the difference between prices dealers quote to buy and sell — helps explain the thinking. It’s one way to measure liquidity conditions, which are notoriously difficult to track.

The average bid-ask spread for non-government debt on the Bloomberg Barclays Global High Yield Index surged in the final three months of 2018, corresponding with the worst quarter for junk bonds since the oil crash in 2015. The spread has narrowed significantly since the turn of the year as the asset class enjoyed the best quarter in seven years.

The fluctuating spreads could, of course, be a result of the market turmoil. But crucially they and the price moves also occurred against a backdrop of relatively steady fundamentals. Companies in developed markets defaulted at a rate of 1.6% in 2018, according to Moody’s Investors Service. That compares with 2.3% in the prior year.

“Credit investors have been left somewhat scarred by the whipsaw in prices, with clients indicating market moves have been dysfunctional,” UBS strategists including Stephen Caprio wrote. “The worrying aspect of these spread moves is that they are somewhat divorced from the underlying fundamentals that the market is trying to price.”

Regardless of the historically low default rates, investors have for years been preparing for liquidity drama. They’ve piled into index derivatives that are easier to sell than single-name corporate notes in a downturn.

Those exit risks were flagged by Deutsche Bank AG strategists on Tuesday. Even against the backdrop of “manageable” defaults, panicky investors could trigger a credit-market meltdown on a scale topped only by the financial crisis or Depression, they wrote in a note to clients.

“When the cycle turns, the desire to protect returns will send credit investors fleeing to the exit in a market that has no ability to warehouse the risk,” strategists including Jim Reid wrote. “We think this next negative spread cycle could easily be the third-most severe on record.” — Bloomberg

When it comes to disclosing sponsors, your Google Assistant may be mute

SAN FRANCISCO — On stage at an investor conference last month, Google’s Chief Business Officer Philipp Schindler identified a vexing challenge for the company’s most prized app: its virtual assistant.

Responding to user searches out loud through Google Assistant is not ideal for generating revenue, Schindler suggested.

When results are visible, not merely oral, “you have room for advertising, of course,” said Schindler, whose company grosses an estimated $70 billion annually through ads above search results.

The Alphabet Inc. company declined to elaborate on Schindler’s remarks. But Google’s conundrum is one facing several big tech companies whose users increasingly seek help from voice-enabled speakers and gadgets: how to deliver greater convenience while still generating the ad revenue that traditionally has funded free searches.

The question is most acute for Google, which holds the world’s biggest search advertising business.

So far, consumers generally get a brief answer from virtual assistants without the disturbance of ads. And tech companies have not shown how they would include the “Sponsored” or “Ad” disclaimers that regulators in the United States and elsewhere require with paid-for search results.

One Google Assistant feature already is close to violating disclosure rules, according to five advertising attorneys contacted by Reuters. Google contends it is in compliance. The feature recommends plumbers and other local home service providers without disclosing that the results draw from a curated database mainly composed of companies that joined a Google marketing program.

“It’s not a completely clean recommendation,” said Michelle Cohen, an attorney with expertise in marketing rules at Ifrah Law in Washington, D.C. “If there’s a financial commitment, you’re supposed to disclose it.”

Conversing with assistants is routine for millions of people globally, whether on bedside alarm clocks, car audio systems or even high-end headphones. More than 1 billion such devices have Google Assistant, 100 million Amazon.com Inc’s Alexa and at least 1 billion Apple Inc’s Siri, according to the companies and estimates.

Regulators avoid stifling new technologies, said Richard Lawson, partner at Manatt, Phelps & Phillips and former consumer protection director in Florida’s attorney general’s office. But he said, authorities will still ask, “How do you convey meaningful disclosures?”

At the conference, Schindler said ads on Google Assistant would be more “interesting” when responses are shown on a nearby screen, like a TV, smartphone, laptop or smart speaker with a display.

“Then we’re exactly in the world that we deeply understand,” Schindler said, with moneymaking options “very similar” to traditional search.

NEW SEARCH TECHNOLOGIES
The Federal Trade Commission (FTC), which regulates deceptive business practices in the United States, has long required search engines to inform users in a “noticeable and understandable” fashion when results are connected to financial relationships. That is why consumers see “Ad” or “Sponsored” labels next to the first few Google results on screens.

New search services that “talk” to consumers are not exempt from “the long-standing principle of making advertising distinguishable,” the FTC said in letters to Google and other companies in 2013.

Google users have come to expect results from any relevant source on the web, except when using specialized tools like Google News or Google Flights that have a narrowed set of sources.

In 2017, Google Assistant adopted a specialty tool, Local Services, which offers only vetted businesses when US users search for domestic help such as plumbers and locksmiths.

Results come from a marketing program, known as Google Guarantee, in which members are licensed, insured and clear of legal issues, according to Google. It refunds consumers up to $2,000 if members botch a job.

Membership is free, but businesses need it to buy Local Services search ads from Google. And guaranteed businesses largely do buy those for queries like “plumber,” Reuters found.

Google gets paid when users contact providers through the ads, which are labeled “Sponsored” on Google.com. But when Google Assistant responds to “plumber” queries with the same “Google Guaranteed” options, the assistant does not offer any disclaimer or further explanation.

The advertising attorneys said users should be informed that Google Assistant results, even if not paid for, stem from a filtered database in which many businesses landed because they wanted to buy ads.

In some cities, Google Assistant includes businesses vetted by partner search services HomeAdvisor and Porch. It does not mention that those services charge some businesses for customer leads.

But Google Assistant’s “Sponsored” label does not link to additional information. On smart speakers, the assistant reads only the lowest price without naming an airline.

It says nothing about sponsors. — Reuters

How PSEi member stocks performed — April 3, 2019

Here’s a quick glance at how PSEi stocks fared on Wednesday, April 3, 2019.

 

Asian development outlook 2019

Asian development outlook 2019

Maynilad welcomes concession contract review

MAYNILAD Water Services, Inc. is open to any state review of its concession agreement after the president’s spokesman announced President Rodrigo R. Duterte’s plan to look into all government contracts with foreign and private entities, including those with the water concessionaires.

“Maynilad has always believed in the sanctity of the concession agreement and the merits of this public-private partnership as seen in the vast improvement in the service levels enjoyed by our customers since we took over,” Maynilad Chief Operating Officer Randolph T. Estrellado said on Wednesday, a day after the Palace directive.

“We welcome any review of our obligations under this agreement as has been undertaken by our regulator since the start of the concession,” he added in a text message.

Manila Water Co., Inc. declined to comment when asked to react to the President’s order.

“None at the moment,” Geodino V. Carpio, Manila Water chief operating officer, said in a text message when asked to comment on the order.

Asked for comment, Metropolitan Waterworks and Sewerage System (MWSS) Administrator Reynaldo V. Velasco said the President’s directive was not addressed to his office.

“I cannot comment because in the first place I’m not a lawyer. Pangalawa (Second), it’s not addressed to us. It’s addressed to DoJ (Department of Justice),” he told reporters.

Mr. Velasco added that he was ready to submit a report as called for by Mr. Duterte during their meeting on March 19, days after a water shortage was experienced by Metro Manila’s east zone under Manila Water’s concession.

“Ready ako (I’m ready),” he said, adding that the MWSS would meet this week to approve his recommendations.

He said he can submit the report as early as April 6, or days ahead of the April 10 deadline set by the President, and not on April 7, as cited by Presidential Spokesman Salvador S. Panelo.

In an earlier interview, Ramoncito S. Fernandez, Maynilad president and chief executive officer, said he did not feel that the company was alluded to when the President threatened to fire officials and terminate the concession agreements.

“I don’t think Maynilad is alluded to, we don’t have a problem,” he said about the threat of losing its concession contract. But he said the company is prepared to respond to Malacañang and “rehash” its existing medium-term and long-term plans.

Mr. Velasco said on Wednesday that Maynilad was not part of the problem referred to by Mr. Duterte.

On Tuesday, Mr. Panelo said the President “instructed all agencies to check and review all contracts entered into and remove onerous provisions that might be detrimental to the lives of the Filipinos.”

Maynilad entered into a concession agreement with MWSS in February 2017, with respect to the agency’s west service area.

Under the concession agreement, MWSS grants Maynilad the sole right to manage, operate, repair, decommission and refurbish all fixed and movable assets required to provide water and sewerage services for 25 years ending in 2022.

In September 2009, MWSS approved an extension of its concession agreement with Maynilad for another 15 years to 2037.

Manila Water was granted the exclusive rights to provide the same services in the east service area, covering the same time period. — Victor V. Saulon

Legislators caution against reneging on contracts, support arbitration

SENATE Minority Leader Franklin M. Drilon cautioned against cancelling government contracts found to be onerous, after a review was ordered by President Rodrigo R. Duterte.

“I must caution that existing and binding contracts cannot simply be classified as onerous and unilaterally cancelled,” Mr. Drilon said in a statement on Wednesday.

Mr. Duterte at Monday’s 36th cabinet meeting directed the Office of the Solicitor General and the Department of Justice to review all government contracts.

While he supports the review of bilateral and multilateral agreements entered into by the government, Mr. Drilon said the government should act according to the provisions of the contracts.

“To do otherwise would constitute a breach of the government’s obligations under the contract,” he also said, noting this could send signal to other countries that the Philippine government does not honor its obligations.

“If the government thinks a contract duly executed is disadvantageous or onerous, it can renegotiate its terms, or go to court for its reformation. Or, bring it to the Ombudsman if it violates the anti-graft law. This power to review, moreover, must not be used to harass,” he said.

Senator Sherwin T. Gatchalian concurred, saying the review of the contracts should not result in the country’s withdrawal from agreements as this could reduce foreign investment.

“The review should not be meant to rescind live contracts. Reneging on contracts will tarnish the reputation of the our country in terms of attracting potential investors and the much needed FDI (Foreign Direct Investment,” Mr. Gatchalian said in a statement on Wednesday.

He said that to remedy a disadvantageous agreement, the government should follow the contract’s arbitration provisions. “I-trigger ang arbitration proceedings or provisions at doon pag-usapan kung paano ayusin ‘yung hindi tamang provision,” he said in a chance interview on Wednesday (“The government needs to trigger arbitration proceedings and there discuss which provisions need to be fixed.”)

Senator Gregorio B. Honasan II also proposed to subject all bilateral and multilateral agreements entered into by the government to a performance audit.

“Beyond review, performance audit of ALL multilateral, bilateral economic, security engagements and arrangements to determine if they have served mutual interests in the short-, medium-, and long-term,” Mr. Honasan told reporters in a phone message on Wednesday. — Charmaine A. Tadalan

Andaya says ‘no basis’ for Sotto’s budget reservations

HOUSE appropriations committee chair and Camarines Sur 1st District Rep. Roland G. Andaya Jr. said in a letter that Senate President Vicente C. Sotto III’s reservations about the 2019 national budget have no legal basis.

Mr. Andaya said he wrote to Executive Secretary Salvador C. Medialdea and Department of Budget and Management Acting Secretary Janet B. Abuel in separate letters on March 28 to counter the Senate President’s arguments for conditionally signing the 2019 budget bill.

“The Senate President is ill-advised by his lawyers. The letter he sent to the President expressing his ‘strong reservations’ as annotation in the 2019 National Budget enrolled bill has no legal basis. It is just a personal request, which the President may or may not take heed of,” Mr. Andaya said in a statement on Wednesday.

Mr. Sotto, despite signing the national budget on March 26, noted his “reservations” about the post ratification realignments made by the House, amounting to P95 billion.

He also asked President Rodrigo R. Duterte to veto the P75 billion worth of programs under the Local Infrastructure Program of the Department of Public Works and Highways.

Mr. Andaya added, “Also, I pointed out that the ‘Senate President cannot interfere with the exercise by President Duterte of his veto power by suggesting what items should be vetoed in an enrolled bill, which bears his signature.’”

The appropriations committee chair noted in his letters that there is no “conditional signing of an enrolled bill.”

“The Senate cannot clothe his signature to the 2019 General Appropriations Bill with ambivalence or dissent,” said Mr. Andaya.

Further, he said that the arguments by the Senate President in his letter are “completely baseless.”

“For one, the realignments he cited were adjustments authorized by no less than the Bicameral Conference Committee Report, which was approved and signed by the conferees from both chambers,” said Mr. Andaya.

The budget, ratified on Feb. 8, is awaiting President Rodrigo R. Duterte’s signature.

Sought for comment, Speaker Gloria Macapagal-Arroyo said that Malacañang is expected to sign the budget bill soon.

“I think it will signed soon. They are just, every year the President does line item vetoes so they are just working on now I think on what will be the line item veto but there is a date for us to go to Malacañang,” Ms. Arroyo sad in a chance interview with reporters on Wednesday.

Asked to comment, Mr. Sotto told reporters over Viber: “Omnibus motions only apply to them, not the entire Congress. Palusot lahat ’yan (it’s all an excuse). Bottom line is they touched something they shouldn’t have AFTER RATIFICATION.”

“What they did affected their colleagues that’s why they complained to us aside from the fact that LBRMO (the Legislative Budget Research and Monitoring Office) saw a red flag. But all their talk is now water under the bridge. It’s all in the President’s hands. I washed mine,” he also said, maintaining that the Senate only served its function as an independent branch of the government. — Vince Angelo C. Ferreras

Indonesia declares priority status for PHL agricultural goods

THE Indonesian government will implement a “Philippines First Policy” that will prioritize the Philippines as a source of agricultural goods whenever there is a need to import, Agriculture Secretary Emmanuel F. Piñol said on Tuesday.

“Yesterday, [Indonesian] Trade Minister [Enggartiasto] Lukita announced a new policy which will be adopted by Indonesia and they call it Philippine First Policy. They have recognized us as their distant cousins and they said starting now, if there is anything they need, they will look at the Philippines as a priority source for the things that they need before sourcing it from other countries,” Mr. Piñol said in a briefing in Quezon City.

Mr. Piñol earlier this year complained that Indonesia is not open to importing from the Philippines which results in a huge trade deficit between the two countries. Recently, the two countries along with Malaysia entered into a tripartite agreement to limit exports to the Philippines of palm oil.

“(Yesterday), [Indonesian] Trade Minister Lokita, [Philippine Trade] Secretary Ramon Lopez and myself, agreed that the three countries would form a technical working group (TWG) to come up with an acceptable arrangement. We call it a brotherly arrangement, to ensure that nobody will be placed in a disadvantageous position,” Mr. Piñol said.

“(Indonesia saw) it could have an adverse effect not only on diplomatic relations but also trade relationships. We are already consolidating our production that will be ready for the Indonesian market and I’m prioritizing onions [for export],” Mr. Piñol noted.

According to Mr. Piñol, the three countries have agreed to fight the campaign of Western countries against the use of palm oil and coconut oil.

“We should join hands to standing up to the lobby of vegetable oil producers in the Western countries who are waging a campaign against palm oil and coconut oil,” Mr. Piñol said.

Mr. Piñol also said that Indonesia is currently having a hard time in exporting palm oil to the European Union (EU), and banning them from exporting to the Philippines will be detrimental for Jakarta. Mr. Piñol earlier considered imposing quantitative restrictions (QR) on export of palm oil to the Philippines, claiming that such exports may have disadvantaged Filipino coconut farmers who are dealing with low prices for copra.

“I can understand their concern because right now hirap sila pumasok sa EU (…they are having difficulty to penetrate the EU market). Nagsta-start na ’yung ban ng EU sa palm oil (EU has already started banning palm oil). If they will get the same ban from the Philippines, that will be detrimental to their palm oil industry,” Mr. Piñol said.

“(There is a move right now) to really join hands and address this problem because we also have our own palm oil production in the Philippines. We will also be affected by the ban imposed by the EU,” Mr. Piñol said. — Reicelene Joy N. Ignacio

US-China trade war offers opportunities for PHL

THE Philippines stands to gain from an escalating China-US trade war, with the possible redirection of trade favoring Southeast Asian economies.

Asian Development Bank (ADB) statistician, Manhinthan Joseph Mariasingham said during the development forum “Global Economic Environment: A Symposium on the Global Economy and What It Means for the Philippines” that negative effects of the US-China trade war can be offset by the potential redirection of trade, benefiting the Philippines in the medium to long term.

“Philippine manufacturing could see a boost of 0.2-0.7%, primarily in electronics…[assuming] the Philippine economy is able to attract more trade from tariff-affected economies,” he said.

He said Malaysia, Vietnam and Taiwan are well-positioned to absorb excess demand.

“[These] countries have infrastructure to absorb the excess demand that would arise as result of tariffs [imposed in China]… mainly in the electronics sector,” Mr. Mariasingham said.

Meanwhile, he said that although the US-China trade war has very little impact on the Philippines’ trade in commodities, “services will be affected negatively because the sector is highly dependent on economic performance of other countries, especially those highly linked to globalization or global value chains (GVCs).”

Mr. Mariasingham noted that even without the US-China trade conflict, companies will move out of China because it is losing its competitive advantage as a major manufacturing hub for GVCs.

Kristy Tsun-Tzu Hsu, Director at the Chung-Hua Institute for Economic Research (CIER), concurred, and expects the US-China trade conflict to continue to escalate.

“Taiwanese companies with customers in the US (operating in China) will look for other countries to operate in,” she said during the same forum, organized by the Philippine Institute for Development Studies (PIDS).

In its survey of listed companies on the Taiwan stock exchange in December, CIER found that more than 60% of the companies which have operations in China will or are already planning to invest in other countries, 40% are considering investing back in Taiwan while 65% will consider other destinations in Southeast Asia.

“Most Taiwanese companies believe that the US-China rivalry and trade conflicts will escalate in the future, no matter whether US and China will reach a trade deal or not. China’s changing environment also makes it less competitive for export-oriented operations in central industrial sectors,” she said.

“The relocation of manufacturing operations may lead to the decentralization of China-centered supply chains, and the [emergence] of new ‘Asian Factories,’” she added.

“In particular, some Taiwan electronic, footwear and textile companies have already expressed their interest in setting up shop in the Philippines,” she said.

CIER’s Ms. Hsu said the the Philippines is one of the six priority countries Taiwan will partner with under its New Southbound Policy — a foreign investment policy adopted in 2016.

“Taiwan and Philippines have built closer business and people-to-people ties in the past few years. The two should work together to make the most of the current changing international economic environment and promote supply chain collaboration,” she said.

Currently, the Philippines has a unique relationship with Taiwan, Ms. Hsu said, as “Philippine workers have become the most important workforce in Taiwan’s technology industry,” she said.

Meanwhile, trade protectionism seem to be on the rise globally, not only between US and China.

The Foreign Service Institute’s (FSI) foreign affairs research specialist Jovito Jose P. Katigbak said at the forum: “Asia is [gearing] towards liberalization while countries on the other side of the globe are becoming protectionist, bringing jobs back to their countries and restraining future trade agreements.”

Mr. Katigbak said that free trade agreements (FTAs) are becoming the “new normal” as negotiations under the World Trade Organization are “deadlocked.”

With the rise in protectionism among developed economies as well as the trade disruptions brought by the US-China conflict, Mr. Katigbak said that the Philippines stands to gain in the Regional Comprehensive Economic Partnership (RCEP).

“The RCEP has an overall positive impact on the country within the period 2017-2023, [particularly in] major industries such as construction, transport and machinery equipment, and services,” he said.

Meanwhile, “rice and textile industries will experience contraction during the 10-year period,” he added. — Carmina Angelica V. Olano

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