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Toyota: TJ Cruiser leads brand’s new mobility concepts

Text and photos by Kap Maceda Aguila
THE centerpiece of Toyota Motor Philippines’ booth at the 7th Philippine International Motor Show was the Toyota TJ Cruiser concept model. Embracing the event’s theme of “Future Mobility,” the TJ Cruiser is a hybrid-powered vehicle that combines the luggage capacity of a cargo van with the imposing design of an off-road SUV, making it ideal for people whose lifestyles mix work and play.
The “T” in the model’s name stands for “toolbox,” which Toyota said refers to how the car can be used, while “j” stands for “joy.” The car maker said it assigned the “Cruiser” tag to identify the vehicle as one of its SUVs.
Also highlighted at Toyota’s display were the new-generation Vios, new Rush, Fortuner and Land Cruiser SUVs, Innova Touring Sport MPV, and the Prius C hybrid. Also proving a crowd-drawer was the Toyota Vios One Make Race pace car.

Mazda: Defying convention through SkyActiv lineup

Text and photos by Kap Maceda Aguila
MAZDA at the 7th Philippine International Motor Show brought out its 2019 lineup featuring the latest evolution of its Kodo design language and SkyActiv technology.
Leading the display was the 2019 Mazda6, which sports an updated look. Also improved are its handling, ride quality and cabin, which is now quieter. Engines available to the car are a 2.2-liter SkyActiv-D diesel and a 2.5-liter SkyActiv-G gasoline.
Mazda’s crossover lineup is headed by the 2019 CX-9 Signature Edition, which the company said is its most luxurious vehicle to date. The car’s interior is lined with Rosewood trim, and Nappa covers all seven seats. It is now equipped with Apple Car Play and Android Auto, which enhance device connectivity, as well as improve interaction between the car and driver.
Parked at the center of the Mazda SkyActiv Pavilion was the MX-5 roadster, which now packs a higher-revving, 181hp SkyActiv-G 2.0-liter gasoline engine. Also new to both the soft-top and RF metal-roof variants is a steering wheel that can be moved closer or farther from the driver.
Other models with updated SkyActiv body, chassis, engine and driving dynamics completed Mazda’s 2019 collection at the show. These were the Mazda2 subcompact, Mazda3 compact, and the CX-3 and CX-5 crossovers.

Volkswagen: New Lamando, latest variants of Santana headline brand’s Filipino-theme display

Text and photos by Kap Maceda Aguila
VOLKSWAGEN’s latest products made their public debut at PIMS, The new cars are the Lamando TSI DSG four-door sedan, the Santana GTS MPI A/T five-door subcompact hatchback, and the automatic-transmission variant of the Santana MPI four-door subcompact. The Lamando TSI DSG will come in both Comfortline and Highline trims, the Santana GTS MPI A/T in Comfortline only, and the Santana MPI A/T in Trendline and Comfortline.
The two Santana variants are powered by 1.5-liter, four-cylinder gasoline engines with BlueMotion Technology generating 108 hp at 6,000 rpm and 150 Nm at 4,000 rpm. Colors available to the Santana MPI A/T are Deep Black, Polar White and Reflex Silver, while prices are set at P898,000 for the Trendline and P962,000 for the Comfortline. The Santana GTS MPI A/T will come in Polar White, Toffee Brown or Red Rock Metallic. It will initially be sold for P998,000.
The Lamando 280 TSI DSG is equipped with a smaller-displacement but more powerful gasoline engine — the 1.4-liter, four-cylinder TSI, also with BlueMotion. It makes 147 hp at 5,000 rpm and 250 Nm from 1,750 rpm to 3,000 rpm. Colors offered for the model are Mangangrey, Polar White, Coriandolo, Dark Bronze and Misano Red. The Comfortline trim is priced at P1.569 million, the Highline at P1.703 million.

Volkswagen 2
Santana MPI sedan VW’s current notion of a people’s car.

Also included in Volkswagen’s 11-car display are examples of the Santana 1.4 MPI M/T Trendline, Lavida 230 TSI DSG Comfortline, Tiguan 280 TSI DSG Comfortline, and a customized Crafter 35L 2.0 TDI M/T premium passenger van. The Crafter came fitted with a smart LED TV, six captain’s chairs, vinyl floors, premium carpets, Focal audio speakers, window blinds, mood and drop lights, and a step board.
Volkswagen explained its Filipino-theme display “put the spotlight” on its German-engineered vehicles that are “more accessible to hardworking Filipinos.”

For Isuzu, October was a flurry of activities even outside PIMS

By Aries B. Espinosa
IN what could arguably be its busiest stretch yet, Isuzu Philippines Corporation (IPC) added five notches to its milestones — all within October.
And that’s not even including its successful participation in the 7th Philippine International Motor Show (PIMS).
In a span of 31 days, IPC opened three new dealerships and presided over two turnover ceremonies of its modernized public-utility vehicles. All while finding time to squeeze in four days at PIMS to showcase its latest diesel engine innovations.
IPC started the ball rolling with the opening of the Isuzu dealership in Pagbilao in Quezon Province on Oct. 5, followed by the Oct. 20 inauguration of Isuzu Butuan in northeastern Mindanao. On Oct. 29, it was Isuzu Taytay’s turn. These three new dealerships effectively added 21,912 square meters in display and service space, and brought the total number of dealerships nationwide to 43. More significantly, IPC deepens its reach into more strategic growth areas in Quezon and Rizal provinces, and in Mindanao’s Caraga region.
IPC president Hajime Koso explained that the rapid expansion of Isuzu dealerships isn’t just about selling more vehicles, though it has played a key role in the Japanese automaker achieving its number one status in total truck sales for 18 consecutive years.
“In order to make the Philippines an Isuzu country, our dealerships need not only to sell, but also to encourage more customers to patronize Isuzu after-sales services and genuine parts,” Mr. Koso stressed.
Apart from opening new dealerships, IPC had also been instrumental in pushing forward the government’s Public Utility Vehicle Modernization Program (PUVMP) envisioned to replace some 200,000 jeepneys nationwide which are 15 years and older with new, safe and environment-friendly PUVs.
And in October, IPC held formal turnovers of its modernized PUVs in two contrasting venues.
The first one, involving initially three modernized PUVs, was held in Boracay Island’s Bolabog Terminal on Oct. 26, on the day the island was re-opened to domestic and foreign tourists following a six-month rehabilitation. The three new PUVs would transport passengers along the island’s circumferential road, and would form part of the backbone of the Boracay Transport Master Plan.
The second turnover, on October 29, saw IPC handing over 15 units of the modernized PUVs to representatives of one of the country’s largest and transport groups — the Pangkalahatang Sanggunian Manila & Suburbs Drivers Association (Pasang-Masda) — at the Mabuhay Rotonda on the boundary of Manila and Quezon City.
On both occasions, the Isuzu PUVs were assembled using the Isuzu QKR77 cab-and-chassis platform, and the rear body designed and manufactured by Almazora Motors Corporation. These are air-conditioned, 23-seat, Class 2-type PUVs with side-facing seats, and compliant with Philippine National Standards (PNS 2126:2017).
Mr. Koso said: “What IPC started for the Senate’s transport cooperative last June 18, we have expanded to other key strategic locations in the country. Now, we bring the efficiency, safety and comfort of our Isuzu modernized PUVs right at the heart of the country’s vibrant socioeconomy, where a modernized public transport system is most needed.”

Would you consider ‘subscribing’ to a car instead of buying it?

You hear the term “sharing economy” a lot these days. It refers to assets and services that are literally being shared by different people, among whom no one is an owner. The most popular example of this is the ride-sharing service being offered by transport network companies like Grab. It’s like having your own car that’s available on demand, without you having to purchase the vehicle or pay for its operating costs (like fuel, parking, maintenance and insurance).
There’s also the hospitality service of lodging booking companies like Airbnb, which connects house owners to customers around the world who would like to rent their place for a period of time. As with the ride-sharing example above, it’s like having your own home in various locations across the globe — but you only pay on a per-need basis.
Of course, the issue with this business model is that customers can only be served based on the service’s availability. During rush hour, for instance, it becomes extremely challenging to book yourself a car ride. In such instances, you get reminded of the fact that you don’t own the car — you’re just requesting to use it. Which sucks if you’re in a hurry.
Now, there’s a more evolved (and certainly more expensive) version of the car-sharing concept, and it’s essentially by way of subscription. It’s like a timeshare agreement with your friends, but again without the hassle of maintaining the vehicle. And it’s not just cars that are being offered in this way at the moment. I’ve read about a company overseas that applies the principle to expensive wristwatches. You pay a monthly rate — a hefty sum, obviously (though not as prohibitive as buying a Rolex yourself) — and you get to use different timepieces of your choosing. So you subscribe to the right to wear the watches for a limited time. Imagine having a vast watch collection without shelling out for exorbitant price tags that high-end horology commands.
But back to cars. Automakers are now likewise adopting subscription programs to entice people to use their vehicles — people who would otherwise not buy a personal set of wheels. This topic visited me when I picked up the latest issue of Time magazine last weekend, in which the publication lists down the “50 genius companies” in the world. Or companies that come up with “a creative solution to a problem.”
When I saw the cover, I wondered if at least one car company had made the list. Indeed, one vehicle manufacturer is included on the honor roll. No, it’s not the United States’ Ford or Tesla. It’s not even Japan’s Nissan or Toyota. And it’s definitely not Germany’s Audi or BMW. Earning a citation is none other than Sweden’s Volvo. A firm previously known for seat belts and air bags is now being recognized for its innovative business idea, and yes, it’s about the brand’s “Care by Volvo” subscription service. For about $600 a month, a customer may use the stylish XC40 subcompact crossover SUV. So for about P32,000 a month, one has access to unlimited use of a premium car.
The amount is not cheap, but consider the advantages. First of all, you can stop availing of the service if you get tired of the vehicle (or if you no longer need it). And perhaps more importantly, you don’t have to worry about paying for insurance and maintenance service. The only drawback I can think of is that you don’t get to own the car even after a considerable period of subscribing to its use — something I’m sure won’t fly with many Filipinos. We like bragging about our stuff, you see.
But then, think about all those car buyers in our market who default on their monthly payments and have their vehicle repossessed by the bank. That’s even worse, because they already paid a substantial down payment and have also presumably shouldered maintenance costs.
And that is why this subscription concept is presently being experimented with by premium brands (Access by BMW, Book by Cadillac, Mercedes Me Flexperience and Porsche Passport). Because it’s really designed for those who won’t flinch over the monthly fees and who don’t really care if they own the car or not.
Still, I hope the business model will eventually trickle down to mass-market brands. With the kind of traffic we have now and with the high costs of owning a motor vehicle, I really don’t mind just subscribing to a car I can give up anytime I want.

On Cagayan’s Cryptohub: How can it succeed?

With the announcement that the Philippines is building a “Crypto Valley of Asia” (CVA) in the Cagayan Economic Zone Authority (CEZA), cryptocurrency once again took the national spotlight as a potential key industry in the country.

The Philippines is not alone in its bid to build a crypto hub. It’s competing in a bullish fintech, crypto, and blockchain ecosystem in Asia Pacific. Japan and Korea in East Asia, for example, are some of the friendliest countries towards cryptocurrency in Asia. But Southeast Asia also finds itself emerging as one of the most promising up-and-coming crypto markets. For instance, Thailand has established one of the biggest cryptocurrency hubs in the region.

Generally, Southeast Asia itself stands out as a promising region for the industry given its crypto-friendly regulations, ICO launches, start-up development, and number of mobile users. The region has some of the largest unbanked sectors, having one of the lowest numbers of bank depositors. Very few are able to avail of financial services in the formal sector. But with one of the highest numbers of mobile phone and mobile internet users, Southeast Asia provides the optimum environment for the adoption of fintech and crypto solutions.

And because financial inclusion is an imperative for Southeast Asian people, the region’s governments and private sectors look to fintech, cryptos and blockchain to further drive inclusive economic growth, the rise of their middle classes, and prosperity given greater participation in a more vibrant digital economy.

Build it and they will come

Eight hectares of land will be dedicated to the Philippines’ Crypto Valley of Asia (CVA), with CEZA expecting the generation of $68 million from licensing. Already, 17 crypto companies have paid in full for their enterprises to be located or have a presence in the country. CVA will feature a Blockchain University slated to go up and supported by a Korean company.

Yet, establishing any crypto hub can be tricky. It is a paradox of sorts: despite all the optimism driving global blockchain growth, cryptocurrency can also be very unpredictable in markets that are just in their infancy. Amidst all this, mass adoption is key to stability.

Which begs the question, “Will the people really come?” What does it take to open the doors for ordinary folk who are the intended beneficiaries of their government’s economic empowerment programs?

Cryptos as a way of life: Not just tech superiority; real-life applications

A crypto hub like CEZA must not exist in isolation and needs the support of a thriving cryptocurrency ecosystem and community to grow it. Essentially, crypto hubs across Asia must make sure that their cutting edge fintech and crypto technologies are made visible, accessible, and functional for communities.

In other words, crypto hubs must go beyond showcasing the technologies that they want consumers to adopt and instead push these as a way-of-life for their communities.

This is what will facilitate the widespread usage of the technology, with the hopes of making it as commonly-used as paper money. Or as Pundi X, a Jakarta-based crypto and blockchain leader, puts it: to make it as easy and commonplace as buying something as essential as bottled water.

Pundi X itself is in the midst of an aggressive rollout of point-of-sale systems that are essential if cryptocurrencies are to be used in everyday transactions. The Pundi XPOS systems introduced recently in Hong Kong and Taiwan allow people to use their cryptocurrency to transact for goods and services in real-world stores.

Generally, the Pundi XPOS systems are installed in partner establishments to facilitate transactions in cryptocurrency. Customers can even load up their e-wallets with cryptocurrencies by making use of the XPOS in partner establishments. The system makes use of Pundi X’s NPXS tokens to facilitate all these transactions, offering these tokens as rewards and incentives for continuous usage. All this is provided in an efficient and user-friendly system to ensure no hiccups in usage.

For many emerging crypto hubs, POS systems should make up the vital cogs that inject vibrancy, speeding up the adoption of cryptocurrency and ultimately bringing the benefits of blockchain to the mainstream market. For Cagayan’s CVA to succeed, it must – in the parlance of tech companies – “eat its own dog food,” or implement in the community the very products it wants to spread across the nation and the world. In addition to POS systems, CVA should also have crypto ATMs, such as those manufactured by Bitcoin Exchange Singapore.

Therefore, in CVA, digital wallets should be like passports: everyone should have one. Fortunately, Satoshi Citadel Industries (SCI), one of the country’s flagship fintech companies, has mobile money wallet BitBit that consumers can easily use. A company like SCI could also build a trading floor that would encourage community members to actively trade in popular and nascent digital currencies.

In short, CVA should be more than just a place where top cryptocurrency and fintech companies are located – we can establish it on the world’s tech map by showing that the solutions we believe are the future can be used seamlessly today.

NFA's bidding for 203,000 MT of rice fails

THE governments of Vietnam and Thailand, in separate letters, expressed their failure to comply with NFA’s terms of reference. — PHILSTAR

By Anna Gabriela A. Mogato
THE National Food Authority (NFA) has failed to secure the remaining balance for the additional 250,000 metric tons (MT) of rice after the governments of Thailand and Vietnam has pulled out from the bidding.
In a statement on Tuesday, the state-owned grains agency disclosed that both countries, in separate letters opened during the Opening of the Bids, said that they could not comply with the terms of reference (TOR) set by the NFA for the bidding of 203,000 MT of 25% broken long, white grain rice.
Vietnam and Thailand are the two countries which the Philippines can source its imported rice from in a government-to-government procurement scheme through a Memorandum of Agreement on Rice Trade.
Adul Chotinisakorn, Director General of the Department of Foreign Trade of Thailand’s Ministry of Commerce, in a letter dated Nov. 5, said that complying with the TOR “remains difficult” despite the amendments set by the NFA.
Likewise, Vietnam Southern Food Corp.’s (Vinafood 2) Deputy General Director Bach Ngoc Van, in a letter dated Nov. 6, also said that they could not meet the TOR without going into specifics.
The failed bidding was set to be a continuation from the last bidding on Oct. 18, which was done through an Open Tender scheme. Only 47,000 MT of the 250,000 MT offered was awarded to three suppliers: Vietnam Northern Food Corp. won the bid to supply 14,000 MT of rice; Vinafood 2, 15,000 MT of rice; and Thai Capital Crops, Co., Ltd., 18,000 MT of rice.
The result of the failed bidding is yet to be reported to the NFA Council.

ASEAN manufacturing purchasing managers’ index, October

FACTORY ACTIVITY in the Philippines saw the biggest improvement in 10 months in October, keeping the country in the lead in Southeast Asia, according to the latest survey which IHS Markit conducted for Nikkei, Inc. that cited “a sharp rise in demand for manufactured goods.” Read the full story.

ASEAN manufacturing purchasing managers’ index, October

Oct. factory reading best in 10 months

By Elijah Joseph C. Tubayan
Reporter
FACTORY ACTIVITY in the Philippines saw the biggest improvement in 10 months in October, keeping the country in the lead in Southeast Asia, according to the latest survey which IHS Markit conducted for Nikkei, Inc. that cited “a sharp rise in demand for manufactured goods.”
The Nikkei Philippines Manufacturing Purchasing Managers’ Index (PMI) rose to 54 in October from 52 in September, reflecting “solid improvement in the health of the sector.”
The Philippines remained at the helm of the seven Association of Southeast Asian Nations (ASEAN) members tracked by IHS Markit’s regional survey for the second straight month. Vietnam and Indonesia followed with 53.9 and 50.5 readings, respectively, and were the only other two Southeast Asian economies that improved from September.
The Nikkei ASEAN Manufacturing Purchasing Managers’ Index slid to 49.8 last month from 50.5 in September. “The index reading was the lowest recorded in 15 months and marked the first time since December 2017 that the PMI has posted below the no-change 50.0 level,” the regional report read.
A PMI reading above 50 indicates improvement in business conditions from the preceding month, while a score below signals deterioration. The manufacturing PMI is composed of five sub-indices, with new orders having the largest weight at 30%, followed by output at 25%, employment with 20%, suppliers’ delivery times with 15% and stocks of purchases with 10%.
Nikkei said that the latest reading reflected robust overall demand despite a decline in exports and a steep increase in prices.
“Business conditions improved solidly at the start of the fourth quarter, with the latest PMI data signalling a sharp rise in demand for manufactured goods in the Philippines. Both output and new business rose at a faster pace in October, with many firms reporting an influx of orders,” the report read.
“Purchasing activity also increased substantially, while employment rose for the third month running,” it added, even as it noted that “delivery times lengthened, in part due to port congestion.”
“Inflationary pressures persisted, leading to the sharpest rise in output prices seen in the survey history.”
Respondents also blamed longer customs checks and storms for longer delivery times.
Moreover, the report said that firms “continued to bear the burden of strong cost inflationary pressures.”
About 22% of respondents said their firms raised prices as 35% saw higher input costs amid elevated prices for raw materials, increased excise taxes under Republic Act No. 10963 or the Tax Reform for Acceleration and Inclusion Act (TRAIN) that took effect in January and the weaker peso.
“Looking ahead, goods producers in the Philippines remained strongly positive about future output. Many firms attributed this to the current upturn in business, while others hoped for a further increase in new clients and products,” the report said.
“That said, the level of optimism was the second-weakest in the series history.”
David Owen, economist at IHS Markit said in the report that inflation may start to slow towards yearend. “The recent trend suggests that price pressures are unlikely to relent in the coming months,” he said.
Economists asked BusinessWorld expect prices of widely used goods to have gone up by 6.7% in October, steady from September which had marked nine straight months of ascent.
Rizal Commercial Banking Corporation economist Michael L. Ricafort said separately that firms may have front-loaded production ahead of planned tax increases in 2019 such as those for coal and tobacco. “The rising trend in inflation, as well as prospects of higher taxes under the TRAIN law scheduled in January 2019 may have prompted some manufacturers to frontload production before prices and/or taxes increase further,” he said in an e-mail when sought for comment.
He also attributed growing manufacturing activity to the government’s rising infrastructure spending as well as the continued expansion of the real estate sector.
“The continued pick up in local manufacturing activities may be attributed to sharp growth in the government’s infrastructure spending as well as the continued growth in real estate activities that both increased the demand for construction- and real estate-related manufacturing activities, sustained strong growth in foreign direct investments that require the establishment of production facilities and subsequently add to manufacturing/production activities,” he explained
“Increased government spending — especially on infrastructure, partly in preparation for the May 2019 elections and for mega infrastructure projects — could continue to support the pickup in allied/related manufacturing activities such as construction materials and other related products.”
ASEAN manufacturing purchasing managers’ index, October

Employers cautious on, labor slams P25 NCR wage hike

METRO MANILA’s private sector minimum wage earners can expect a P25 hike in their daily pay within the month, after the Labor department formally announced the increase on Monday.
And while the wage hike had already been factored into the central bank’s updated forecast annual inflation averages for this year up to 2020, leaders of some business groups said enterprises will likely have to pass on the higher labor cost to customers through increased prices, lay off some employees and see their competitiveness erode, while a leader of a major labor group said the “unfair” and “unjust” amount will force it to seek another wage hike by January.
The latest increase, which will take effect 15 calendar days from publication in a newspaper, will take the National Capital Region’s (NCR) daily minimum wage to P500-537. “Last Oct. 30, the NCR regional board approved a P25 basic wage increase and integration of its existing P10 CoLA [Cost of Living Allowance to make the new basic wage levels of P475-512]. Upon effectivity of Wage Order No. NCR-22 the new minimum wage rates in Metro Manila shall be P500-537 across different sectors,” Labor Secretary Silvestre H. Bello III said in a press briefing in Manila.
Also announced in the same press briefing was a P12-20 daily minimum wage hike for MIMAROPA region, consisting of Occidental Mindoro, Oriental Mindoro, Marinduque, Romblon and Palawan in southern Luzon.
‘NOT REASONABLE BUT LIVABLE’
Saying the new floor wage levels were “hindi naman (not really) reasonable but it’s livable,” Employers Confederation of the Philippines Acting President Sergio R. Ortiz-Luis Jr. said in a phone interview: “Ang gagawin ng employers sa wage increase ay idadagdag sa presyo at babawasan ng tao (Employers will increase prices and reduce manpower).”
For Philippine Chamber of Commerce and Industry Chairman George T. Barcelon, “with the inflation now under control, with the P25 increase, that would be more than enough to cover (the effect of inflation)”. “Ang gusto natin ay maraming (We want to have many) foreign direct investments… [that] find our country attractive and competitive. As far as P25 (wage hike is concerned), I still think it’s a reasonable figure.”
John D. Forbes, senior adviser of The American Chamber of Commerce of the Philippines, Inc., said in a separate text that he was “concerned” that businesses in the Philippines “are not harmed by rising labor costs when they compete with imported goods and work to increase their exports.”
Bangko Sentral ng Pilipinas Deputy Governor Diwa C. Guinigundo said the latest wage hike in Metro Manila, which contributes more than a third to national production, had already been factored into latest inflation forecasts. “Given reports we received on the amount of the petitions in many regions, we decided to adjust our assumption from P18 to P25 daily minimum wage adjustment,” he said via text. “This is already reflected in our September forecasts of 5.2% for 2018, 4.3% for 2019 and 3.2% for 2020.”
Labor leaders, however, said the increase was insufficient.
Alan A. Tanjusay, spokesman of the Associated Labor Unions-Trade Union Congress of the Philippines that had asked for a P334 increase, said via text: “We are filing another wage hike petition, citing supervening conditions” that allow petitions to be filed even before the mandated one-year moratorium from the last wage hike will have lapsed.
“We are looking at December or first week of January 2019.”
Asked how much the new petition could amount to, Mr. Tanjusay replied: “It can be P334 or slightly higher.”
For Partido Manggagawa representative Renato B. Magtubo, “P25 is short by 30% to make up for the P35.84 erosion in wages due to the seven percent inflation in the NCR recorded in August this year.” He said in a press statement that “Partido Manggagawa’s own cost of living estimate for a family of five in Metro Manila is around P1,300 a day, more than double the new minimum wage of P537.” — Gillian M. Cortez

Debt watcher keeps PHL rating a notch above minimum investment grade

A KOREAN DEBT WATCHER kept its credit rating for the Philippines at above minimum investment grade, citing tax reform and infrastructure spending gains even as rising prices continue to bite.
NICE Investors Service maintained the Philippines’ rating at “BBB,” a notch higher than minimum investment grade, with a “stable” outlook. This comes after an upgrade announced in January 2016.
The rating applies to the country’s long-term foreign currency borrowings, while a “BBB+” rating is given to loans denominated in the local currency.
A higher credit rating improves the chances for a country to borrow cheaply from abroad, especially as the Philippines scrounges for funds to finance infrastructure projects.
NICE cited the country’s sustained economic momentum as a source of optimism. It expects Philippine growth to clock in at 6.3% this year, slower than the actual 6.7% climb in 2017 and the government’s 6.5-6.9% target. Economic growth averaged 6.3% last semester, while the third-quarter performance will be announced on Thursday. BusinessWorld’s poll among 15 economists yielded a 6.3% median estimate for July-September, which if realized will be faster than the second quarter’s six percent pace.
The slower growth estimate comes as NICE priced in the impact of lower exports, a series of interest rate hikes and base effects.
However, the government’s “Build, Build, Build” program is seen to propel expansion.
“Due to massive buildup in infrastructure, government consumption and fixed investment are expected to boost growth. Albeit somewhat expansionary fiscal policy in place, the fiscal deficit will remain at a sound level and tax reform will contribute to broadening tax revenue,” the credit rater said in its Oct. 30 report.
“Containing inflation expectations is key to sustaining stable growth trend of the Philippines.”
Inflation averaged five percent in the nine months to September, a percentage point above the government’s 2-4% target band for whole-year 2018. The debt watcher noted this was partly due to food supply concerns and surging world crude prices, together with the impact of higher fuel excise taxes and a weaker peso.
The decision of the Bangko Sentral ng Pilipinas (BSP) to hike policy rates by a cumulative 150 basis points in order to temper inflation expectations is seen as a positive move, with the debt watcher noting that the recent spike in consumer prices is unlikely to “undermine macroeconomic stability in the short term.”
At the same time, fiscal reforms are also expected to help spur overall economic activity and should enable the government to remain prudent despite a growing budget deficit.
“The policy direction of the Duterte administration… to increase government expenditure through expanding tax base is deemed appropriate, given the need for infrastructure investment,” the credit analysts explained.
“The government’s tax reform and infrastructure investment acceleration are already showing tangible effects in 2018.”
Republic Act No. 10963, or the Tax Reform for Acceleration and Inclusion Act, imposed, among others, additional duties on fuel, cigarettes, alcohol and sugary drinks starting Jan. 1.
This has helped the government rake in P2.112 trillion in total revenues as of end-September, 17% more than a year ago.
Still, NICE said it will keep an eye on the government’s revenue-raising capacity as well as the fate of succeeding tax reform packages, noting that these measures would tell whether the Philippines can remain stable at a time of increased state expenditures.
The debt watcher pointed out that the second tax reform package, which reduces the corporate income tax rate and simplifies the tax incentives system is “desirable.” However, it flagged that the planned removal of redundant perks could lead to a contraction in investments, dampen business sentiment and leave people jobless in the near term.
NICE said the Philippines can be expected to weather rising oil prices, higher global yields and an escalating trade war between the United States and China given ample dollar reserves, remittances and small foreign portfolio investments. — Melissa Luz T. Lopez

PHL firms face least risks from stronger dollar

By Melissa Luz T. Lopez, Senior Reporter
PHILIPPINE corporates have the least to worry about at a time of stronger dollar, S&P Global Ratings said as it pointed out that local firms have the lowest foreign debt compared to Southeast Asian peers.
In a report, the debt watcher said rated entities in various countries are exposed to varying degrees of volatility at a time of rising interest rates in the United States and sustained dollar strength. Still, the depreciation of emerging market currencies are considered “less severe” compared to previous crisis periods.
Borrowers from Turkey and Argentina are seeing the biggest pressure, but most companies from other emerging market economies “will be able to adjust” to developments in the global market, S&P said.
“The large majority of rated entities in other Southeast Asian countries either have limited foreign currency debt, conservative balance sheets, or are naturally hedged, especially in the commodities sector,” the credit rater said in the report.
While the peso, the Malaysian ringgit, Indonesian rupiah and Indian rupee stand as the most affected Asian currencies, it’s not all bad as far as the debt watcher is concerned.
“A significant portion of pre-existing current account deficits in India, Indonesia and the Philippines are financing large-scale infrastructure buildouts — generally seen as positive for future productivity and trade balances,” S&P said.
The peso is down by 6.13% year-to-date according to Reuters, but has been recovering over the past few weeks amid improved investor sentiment.
The current account, which measures fund flows drawn from goods and services trading, posted a $3.1 billion deficit as of end-June. Being in deficit is said to weigh down investor appetite towards the Philippines, and thus adds to external pressures towards emerging market currencies like the peso.
Zooming in on Southeast Asia, S&P said currency depreciation is likely to have a “more modest impact” now compared to previous episodes of financial stress. Instead, the impact will be felt for certain sectors.
“The main sectors affected are: transportation services, especially airlines, given that a high share of fuel aircraft leasing costs are denominated in US dollars; building materials (energy costs); and capital goods (input costs),” the debt watcher said, noting that outstanding debt for these industries stand for roughly 15% of outstanding loans for companies listed in 2018.
“Potential exposure appears highest in Indonesia, at about 25%, and lowest in the Philippines, where large diversified groups issue the bulk of debt,” it added.
S&P sees the US dollar to maintain its strength as the Federal Reserve is poised to raise rates anew. Still, some markets are seen insulated from such shocks as investors appear to be “discriminating,” as they judge countries based on economic fundamentals and policy frameworks rather than avoid these markets altogether.
In previous reports, the credit rater said the Philippines holds ample buffers to cushion the blow of rising interest rates, slower global growth and weaker currencies, and is unlikely to see contagion risks from Turkey and Argentina’s problems.

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