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Davao chili industry call for more small business-friendly FDA

DAVAO CITY — Dabawenyo Capsicum, a group of manufacturers of chili pepper products, said bureaucracy remains their biggest stumbling block despite the strong support for micro, small and medium-sized enterprises (MSMEs) from the Department of Trade and Industry (DTI).
“We need government support when it comes to the processing of papers, especially with the Food and Drug Administration (FDA),” Grace M. Sebanes, social media marketing head of Dabawenyo Capsicum Home of Spices, told BusinessWorld in an interview.
Ms. Sebanes said the DTI-Davao office (DTI-11) has been helping the sector grow since it launched the Program to Accelerate Building Livelihood Opportunities in Davao Oriental, which was launched in the aftermath of typhoon Pablo (international name: Bopha),which struck parts of Davao Region in December 2012.
DTI-11 encouraged the planting of chili peppers as these are easy to grow and can be harvested after four months. The department has also been assisting farmers develop value-added products, along with marketing schemes, through the hot chili project.
“The DTI program covers training in Good Manufacturing Practices and Food Safety to prepare processors for registration with the FDA; it also includes support through Shared Service Facilities,” DTI-11 Regional Director Ma. Belenda Q. Ambi said.
“We just hope that other agencies like the FDA will also be more MSMEs-friendly in terms of the budget and processing of papers,” Ms. Sebanes said.
Members of Dabawenyo Capsicum have started the process of registering their products with the FDA, but cannot proceed without a specified facility.
“We are small entrepreneurs and we cannot afford to put all our capital in just one area such as a facility like the one they require,” she said.
“We are also faced with the challenge of getting more funding especially now that we have opened up the Dabawenyo Capsicum Store and we invested money for renovation,” she added.
Dabawenyo Capsicum is composed of nine brands, all from the Davao Region. These are: ABJ Herbs Condiments and Spices, Arkadyo Pepper Sauce, Chilloy’s Gourmet, Ellie’s Premium Sukang Tuba, GKT Homemade Food Products, Pastil Queen, Test Kitchen, Yummy Kimchi, and Pedas Gila.
The group is now preparing to establish a cooperative and set up its own facilities to obtain an FDA registration.
“I wouldn’t accept the term backyard, but we are start-ups,” she said, with most of the members being home-based.
“All of us are chili enthusiasts who regularly meet during trade exhibits so we decided to form the group to market all our products as one,” she said.
One of the group’s goals is to increase the income of local chili farmers, expand distribution nationwide, and eventually export their products.
“Our advocacy is to help as many local farmers and since our main ingredient is chili. We buy directly from farmers and do away with third parties so the farmers get more income from their produce,” Ms. Sebanes said.
Despite challenges, she said sales are growing via the shop and trade fairs as well as the positive feedback from buyers.
“We personally test the shelf life of our products; our quality is our only guarantee,” she said. — Carmencita A. Carillo

‘Found it!’ NY button shop saves the day

NEW YORK — Since the 1960s, a narrow little New York shop has specialized in solving the fashion crises of customers who are desperate to find just the right button, a list that includes a US first lady, a renowned academic, and even Kermit the Frog.
Tender Buttons, housed in a 12.6-foot-wide (3.8-meter) brownstone on Manhattan’s Upper East Side, is stuffed to the ceiling with a cornucopia of clothing fasteners. For decades, it has been providing relief to anyone who has lost an unusual button and needs to replace it.
“Each button has its charm, its quality, its aesthetic,” said Millicent Safro, who opened the store in the 1960s with her friend Diane Epstein as an artistic jaunt inspired by New York’s burgeoning pop art scene. Safro runs the shop, named after a book of poems by Gertrude Stein, following Epstein’s death in 1998.
Decades later, the shop is stuffed to the rafters with buttons, some dating back to the 17th century, organized in multiple floors of Ms. Safro’s slender townhouse.
“A woman bought a dress in Rome and lost a button on the airplane. And we had the button. It was a very proud moment,” Ms. Safro said.
She steadfastly maintains the store’s tradition of sharing the often rich history of each button with the customer in pursuit of it.
“When you came to buy a humble shirt button, you got the entire history of that button,” Ms. Safro said.
That includes the metal and faceted glass buttons from 1890 that sell for $225 each and that collectors describe now as “Victorian jewels” but once called the less-politically correct “Gay 90s,” Ms. Safro said.
“It was a time when the railroads were being built and everyone was prospering,” she said, explaining why the enormous, showy knobs emerged as status symbols just before the turn of the 20th century.
In the 1890s, such a button may have secured a cape. In the 1980s, they were snapped up for couture wear by Chanel’s newest creative director, a rising designer named Karl Lagerfeld, who died last month, she said.
The fashion visionary who dressed former first lady Nancy Reagan, the late James Galanos, also was a customer. As was Harvard University professor Henry Louis Gates, Jr., who sat down for a cold beer with then-President Barack Obama in the Rose Garden of the White House in 2009.
When Kermit the Frog needed to secure his raincoat for an appearance on the US children’s television show Sesame Street, the Muppets’ clothing designer turned to Tender Buttons for help.
Much of the store’s inventory is contemporary. But it also includes antiques such as early American buttons made of copper, tin and brass and engraved with “Long Live the President — GW” to commemorate George Washington’s inauguration as the nation’s first president. The buttons sell for up to $4,000 apiece.
Ms. Safro was unable to provide a figure for the total number of buttons in the store. A Columbia University professor did manage to count them, but she said she had forgotten the total.
This week, Fabio Malaver, 53, a household butler, clutched a Mulberry suit bag and scoured the wall displays for an exact match to replace a long-lost button. Asked if he had found what he was looking for, he replied emphatically: “Yes, yes!” — Reuters

Peso to strengthen slightly against dollar

THE PESO is expected to strengthen slightly against the dollar this week as it will likely sustain the upward trajectory seen last Friday following the pronouncements of the Bangko Sentral ng Pilipinas (BSP).
On Friday, the local unit ended the week at P52.32 against the greenback, up one percent or 52 centavos from Thursday’s P52.84 finish, boosted by the decision of the BSP to keep both interest rates and bank reserve levels steady.
Week-on-week, the peso strengthened from the P52.65-per-dollar finish last March 15.
A foreign exchange trader said the peso will “likely sustain” its strength versus the dollar after the BSP kept borrowing costs steady during its meeting on Thursday.
BSP Governor Benjamin E. Diokno said the decision of the Monetary Board to keep interest rates at bay is “based on its assessment that prevailing monetary policy settings remain appropriate.”
The reserve requirement ratio (RRR) was also left untouched at 18%, with policy makers keeping a close eye on its effects.
“For next week, the peso strength will likely be sustained, especially with the weak dollar…” the trader said on Friday.
Meanwhile, a market analyst said the dollar is expected to “remain at least flat” on Monday on the back of concerns on slowing growth in Germany amid mixed US data on existing homes sales, manufacturing, and services.
“German manufacturing activity showed a sharper contraction in March 2019, increasing worries on decelerating growth in the currency bloc and amplifying risk aversion in the market due to Brexit uncertainties,” the analyst said in an e-mail on Sunday.
The market watcher added that news about another round of US-China trade talks in Beijing this week “may also help temper” the pessimism in the market.
US Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin will head to Beijing on Thursday for another round of trade talks between China and the US. Mr. Lighthizer said the trade negotiations had made some progress, although he noted that there were “few hurdles” remaining.
Toward the end of the week, the greenback is seen to dip anew due to likely dovish speeches from various US Federal Reserve (Fed) officials, before recovering on Friday amid bets of an upward revision in the fourth quarter US GDP growth.
Last week, the US central bank said there will be no interest rate hikes this year amid an economic slowdown, a departure from its previous pronouncements that it will raise benchmark rates thrice this year.
For this week, the trader expects the peso to move between P52.10 and P52.35, while the market analyst gave a wider P51.90-P52.70 range.
Meanwhile, Security Bank Corp. chief economist Robert Dan J. Roces projected the peso to end the first quarter at P53 against the dollar amid “risk-off sentiment.”
“We’re seeing risk-off sentiment. We’re seeing this all around. US-China trade war, very dovish Fed again, those are the factors,” Mr. Roces said on the sidelines of Security Bank’s economic forum in Mandaluyong City on Thursday. — Karl Angelo N. Vidal

How Philam Life’s digital shift helps craft products for Filipinos

By Karl Angelo N. Vidal
DIGITAL transformation has been a buzzword, an overused one, for quite some time across industries, especially in the financial services sector. Banks around the world continuously enhance their online and mobile platforms as they veer away from merely setting up more branches. Investment firms and asset managers are venturing into robo-advisors to broaden the market for clients who do not have enough funds for traditional advising.
Given the ever-changing business landscape, insurance companies too must employ digital innovations to improve sales, quicken underwriting, reduce costs and eventually increase profits. For Philippine American Life and General Insurance Co. (Philam Life), digital transformation has been its commitment for years.
In an interview, Philam Life Chief Agency Officer Eric G. Nicdao said the insurer sees the value of harnessing digital innovations as these enhance customer experience.
“Philam Life puts premium to technological and digital innovation to make every step of our consumer journey easier and more efficient, from the time they find out about our products to the time they make claims,” said Mr. Nicdao, who is also in charge of managing Philam Life’s digital transformation journey.
He said Philam Life is “leading” in terms of digital transformation in the industry, as the company was the first to adapt interactive point of sale (IPOS) and other mobile platforms, allowing customers to learn, buy, pay and claim their policies completely paperless.
“Looking at that journey, we mapped out what digital platforms we can set up to help and give the client the ease of doing business with us: learn, buy, after-sale, and claim,” he said.
Through IPOS, Philam Life’s financial advisors allow clients to fill out policy forms, understand the terms and conditions and sign the document using a tablet. The accomplished form will be immediately transmitted to the insurer’s underwriter and be approved within days. Clients can also pay for their premiums, update their information and eventually claim for the policy through online and mobile channels.
“Through IPOS, on the spot, we can tailor-fit the product and the proposal and the program according to the needs of the client,” Mr. Nicdao added.
For the agents, they can also track their productivity through a separate application, wherein they can monitor commissions and premiums collected, among others.
With these technological innovations, Mr. Nicdao said digital transformation translates to quicker turnaround time, more efficient agency pool and eventually wider customer base.
“For getting clients, it’s a lot easier as well because it’s ease of doing business. Definitely, it makes things a lot easier… It’s creating quality business,” he said, adding that the reception of the new ways of transacting was more or less well-received by both clients and agents.
“There are more people who are receptive than those who are not. Those who are not are those who are pretty old,” he said.
Currently, Philam Life’s IPOS system has a utilization rate of 93%, as some seasoned agents are “pushed back for change.”
Even as Philam Life has been rapidly adopting new ways of doing business, Mr. Nicdao noted that digital channels can never replace its agents.
“For me, digitalization is just an enabler or a tool. It makes doing business easier and convenient, but it cannot replace totally the human person or the human touch. High tech can never replace high touch,” he said.
“All a gadget can do is compute how much insurance you need, but it can never really match a person’s sentiments with the numbers. And financial advisors can do both of that,” he added.
Apart from making the business more efficient, Mr. Nicdao said digitalization also enables the company to tap more uninsured Filipinos, as insurance penetration in the country remains low at 1.76% as of end-September 2018.
“Our mission and vision is to bring a Philam Life policy in every Filipino home. If that is the vision, I guess digitalization can pave the way so that even those in the outskirts can also experience the beauty of life insurance,” Mr. Nicdao said.
The Philam Group is the biggest life insurer in the country. As of end-2017, Philam Life and its bancassurance affiliate BPI-Philam Life Assurance Co. posted a combined total premium income of P40.2 billion.
It is servicing over 700,000 clients nationwide with over 66 offices nationwide and 7,000 active agents.

In post-coup election, Thai rice, rubber farmers rethink old political divide

KHON KAEN/SONGKHLA, THAILAND — In the rice-growing heartland of Thailand’s northeast, Kamol Suanpanya, 80, meets in the off season with fellow farmers at a community center, where they discuss Sunday’s election, the first after nearly five years of military rule.
Like most in the area, Kamol will vote for Thailand’s largest party, Pheu Thai, whose government was overthrown in 2014. He is loyal because of policies like subsidies and low-cost health care pioneered by ousted premier Thaksin Shinawatra.
“I can tell you I will vote for Pheu Thai again,” said Kamol. “I haven’t changed my mind and I never will.”
Some 1,400 km (870 miles) to the south, a longtime stronghold of the anti-Thaksin Democrat party, rubber farmer Gorneena Pae-arlee isn’t so sure about her vote.
She has voted for the Democrats in the past, but says she will not do so again. Nor does she want junta leader Prayuth Chan-O-Cha to remain prime minister, as the new pro-military Palang Pracharat party is campaigning for.
“I want to vote for change,” said Gorneena, 52, who owns a big rubber plantation in Songkhla province.
Sunday’s general election has been cast as a struggle between democracy and military rule, with Thaksin’s Pheu Thai leading the charge for a “democratic front” against Palang Pracharat, the party backing Prayuth.
The pro-establishment Democrats are seen as a possible kingmaker.
But from north to south, farmers complain about hard times and growing mountains of debt since the military took over.
Many look to the election as a way out for what they say is an economy that seems to be growing but leaving them behind.
NORTH AND SOUTH
Thailand is the world’s largest exporter of rubber and second-largest of rice. Farming accounts for 30 percent of the work force, though only about 10 percent of the economy.
The rice-growing northeast and rubber-tapping south reflect the deep divide in Thailand’s polarized politics of the last 15 years.
Thaksin’s “red-shirt” supporters are mostly from the rice-growing northeast and north, whereas southern rubber farmers have come up to Bangkok at different times over the years to join anti-Thaksin “yellow-shirt” protests of middle-class voters who support the military and royalist establishment.
The unrest has led to bloodshed and two military coups, the first toppling former telecoms tycoon Thaksin in 2006, and the last one overthrowing a government that had been led by his sister, Yingluck.
The siblings live in self-exile to avoid convictions — corruption for Thaksin and negligence for Yingluck — handed down after they were ousted. They denied wrongdoing and said the charges were politically motivated.
After almost five years under a junta led by former army chief Prayuth, the rice-and-rubber divide still exists.
But while the north and northeast remain as pro-Thaksin as ever, some southerners said their support for the Democrat Party may be wavering.
LOW CROP PRICES
With new political parties on the scene and the price of rubber languishing, some farmers, like Gorneena, are considering the options.
“Rubber prices have suffered a lot, and nothing has improved under the military. I really want the new government to help fix this,” Gorneena said.
Thai benchmark rubber smoked sheets were trading at around 56.60 baht per kilogram this week, a far cry from a record 198.55 baht in 2011, according to Refinitiv data.
While the south’s rubber farmers are generally better off than their rice-growing counterparts, monthly income in the south declined by 2 percent to 26,913 baht ($850) per household from pre-coup 2013 to 2017.
That contrasts with average national income that grew roughly 7 percent, government data showed.
While several other rubber farmers interviewed said they would stick by the Democrats, a poll by Prince of Songkla University published last week signaled a weakening of their grip.
The poll showed 27 percent preferring the new, progressive Future Forward Party, compared with 24 percent for the Democrat Party, with Pheu Thai coming in at 19 percent and Palang Pracharat at 12 percent. It provided no margin of error.
HIGH DEBT
The plight of farmers from north to south comes as a stark contrast with Thailand’s top 1 percent, who own 66.9 percent of the country’s wealth, according to Credit Suisse’s 2018 Global Wealth Databook.
That makes Thailand the most unequal country in the world.
Southeast Asia’s second-largest economy expanded 4.1 percent in 2018, the fastest in six years. This year, the state planning agency predicts growth of 3.5-4.5 percent.
At the same time, household debt soared to a record 12.56 trillion-baht in the third quarter of 2018, or 77.8 percent of gross domestic product, central bank data showed.
For many Pheu Thai supporters, hard times have led to borrowing and left them pining for the party’s populist policies.
In the northeastern city of Khon Kaen, June Kit-Udom, who at 61 is the sole provider for her family of three, said she quit rice farming a few years ago because prices plunged following the 2014 coup.
She now works seven days a week at a recycling factory for 325 baht ($10.26) a day, but she says the tough work has resulted in spiking hospital bills.
“Life was better under Yingluck’s government. She helped us a lot with cash subsidy. This government gave us nothing,” June said.
Some 3.6 million households in the northeast are in debt, accounting for more than a third of the total, according to data by the National Statistics Office.
The northeast has the highest average debt per household of 179,923 baht ($5,680), and the lowest average income per capita at 6,656 baht ($210) per month.
Addressing inequality should be high on the agenda of the next government, said Thomas Parks, country representative of the Asia Foundation, a non-profit group focusing on development.
“Inequality and regional disparities are one of Thailand’s most fundamental challenges,” he said.
“We expect that any government, regardless of the election outcome, will make this a serious priority.” — Reuters

Briefs (03/25/19)

Loewe

Loewe opens first stand-alone store

LOCATED in Shangri-La Plaza, the new Loewe store spans 68 square meters and showcases the brand’s commitment to art and design. The store follows the Casa Loewe concept developed by the brand’s creative director Jonathan Anderson, who first introduced the concept in Omotesando before taking it to its fullest expression with the opening of Casa Loewe Madrid. Evoking the ambience of a stately home, the boutique features stucco walls and polished Campaspero limestone flooring, giving off a chic, modern vibe, which pays homage to the brand’s European heritage. The emerald canopy of translucent green stone conjures an image of modern Spain and references the captivating entrance to Loewe Madrid, which was designed by architect Javier Carvajal in 1959. Celebrating the past and present, Loewe selected pieces of modern and traditional art to accentuate the space, including a tapestry by master weaver and knitter John Allen. Known for his sense of color and ability to transpose snapshots of the British landscape into his works, the textile designer has collaborated with Loewe on multiple occasions, including the Spring Summer 2015 accessories collection. Lending a modern edge to Loewe Shangri-La Plaza are the original stools and chairs designed for the Fall Winter 2018 fashion show in Paris, an Akari E Light Sculpture by Japanese-American artist Isamu Noguchi, as well as specially designed, handmade geometric rugs and heirloom cider presses obtained after a tireless pursuit across Spain, Portugal and the South of France. A selection of leather goods, accessories and eyewear will be showcased in the store. The new Loewe store at Shangri-La Plaza is located at Level 1, Shangri-La Plaza East Wing, EDSA corner Shaw Boulevard, Mandaluyong City.

Ermenegildo Zegna unveils ‘All The World’s A Stage’

DIRECTED by Oscar-nominated Italian director Luca Guadagnino (I Am Love, Call Me By Your Name, Suspiria), “All the World’s a Stage” is a series of three character-based films shot in Milan that shows how Ermenegildo Zegna embraces the progressive attitude and versatility of modern menswear. Mr. Guadagnino’s series of portraits follows the private moments of three men. The international cast, reflecting contemporary masculinity, features Boyd Holbrook, star of Netflix’s Narcos, who embodies the freedom of identity that comes with Zegna casualwear. André Holland, star of Oscar-winning film Moonlight, sets the stage with his Su Misura look, defining his identity through his sartorial choices. William Chan, actor, singer and global face of Ermenegildo Zegna XXX, shows off the collection and how it elevates the refinery of tailoring and pairs it with the versatility of streetwear.

Yields on gov’t securities end flat

By Carmina Angelica V. Olano
Researcher
YIELDS ON government securities (GS) traded on the secondary market ended flat last week amid the risk-off mood following the US government’s dovish sentiments and local central bank’s decision to keep banks’ reserve requirements unchanged.
On average, GS yields went down by 7.75 basis points (bp) week on week, according to the PHP Bloomberg Valuation Service (BVAL) Reference Rates as of March 22 published on the Philippine Dealing System’s website.
“Most of the long-term local benchmark interest rates (PHP BVAL yields; with tenors of 5 years and longer) declined by 0.15-0.20 week-on-week, with some long-term tenors declining to new 1-year lows, partly due to renewed and surprise dovish statements from the US Federal Reserve…,” Michael L. Ricafort, economist at the Rizal Commercial Banking Corp., said in an email interview.
In its March 19-20 policy meeting, the Fed kept its rates steady, shifting to a dovish perspective. Most of its officials expect only one more rate hike through 2021, amid muted US inflation and an expected slowdown in the economy.
Mr. Ricafort noted comparable government bond yields in the US and other developed countries declined following the Fed’s dovish tone.
“The 10-year US government bond yield declined to 14-month lows at 2.50% levels, the 10-year German government bond yield declined to 0% (lowest since 2016), and the 10-year Japan government bond yield already negative, at -0.06% (lowest since 2016),” Mr. Ricafort said.
“Thus, local interest rate benchmarks similarly eased partly due to the interest rate differential dynamics with the US and other developed countries as some global investors search for higher yields in emerging markets such as the Philippines,” he added.
Meanwhile, analysts noted that yields in the local benchmark interest rates were higher at the short-end.
Mr. Ricafort said the one-month to two-year [notes] were slightly higher week-on-week by less than 0.10 [bp], “after the local monetary authorities left large banks’ reserve requirement ratio unchanged at 18%, contrary to some market expectations of a cut; while the key local policy rates were widely expected by the markets to be unchanged.”
“This resulted to a much flatter yield curve,” he added.
In a phone interview last Friday, BDO Unibank, Inc. chief market strategist Jonathan L. Ravelas also noted there were expectations of a reserve requirement ratio (RRR) cut, but this did not materialize.
On March 21, the Bangko Sentral ng Pilipinas (BSP) kept benchmark interest rates unchanged, which marks the third straight meeting that kept rates within 4.25-5.25% and the key rate of 4.75% still at a decade-high.
The BSP last slashed the RRR in March and May last year, bringing the mandatory reserves for big banks to 18% of their total deposits.
“The accelerated government borrowing pushed [short-term paper] rates slightly elevated,” BDO’s Mr. Ravelas said, citing the 364-day Treasury bill was offered at an annual rate as high as 6.1%.
Last March 18, the government made a partial award of the 364-day papers, accepting just P5.096 billion out of the P8-billion program and total offers amounting to P8.766 billion. The average yield climbed 3.3 bps to 6.052% from the 6.018% quoted in the previous offer.
Treasury bills (T-bills) climbed across the board, led by the 91-day T-bill with a 7.5-bp increase to 5.751%. This was followed by the one-year and 182-day T-bills’ 2.7-bp and 1.6-bp increase to 6.081% and 5.921%, respectively.
Bonds at the belly of the curve went down, except for the two-year Treasury bond (T-bond) yielding 6.049%, 4.3 bps higher than week ago levels.
The three-year and four-year T-bonds yielded 6.022% and 6.003%, down 2.7 bps and 9.6 bps, respectively. Similarly, the five-, seven-, 10-year papers yielded 5.991%, 5.981%, and 5.964%, which were 15.1 bps, 19.9 bps and 21.6 bps lower week on week.
Yields on longer-term debt papers also dropped, with the 20- and 25-year T-bonds yielding 6.104% and 6.32%, down 20.7 bps and 11.7 bps, respectively, from a week ago.
For this week, Mr. Ravelas expect yields to move sideways as the traders consolidate while waiting for the March inflation data to be released.
“If inflation continues to go down, yields have a downward potential,” he said.
The March inflation data is scheduled to be released on April 5.
Meanwhile, RCBS’s Mr. Ricafort expect yields of long-tenored notes continue to decline.
“Long-term local benchmark interest rates (PHP BVAL yields) could continue their easing trend/momentum [this] week, as seen recently, due to lower global government bond yields…that could prompt the search for higher yields by fund managers in emerging markets such as the Philippines,” he said.
Mr. Ricafort said local debt papers may attract foreign traders amid the easing inflation trend, as well as the possibility of monetary policy easing and RRR cut.
“The latest gains in the peso exchange rate, if sustained, could also help continue the easing trend in the long-term local interest rate benchmarks [this] week,” he added.

Optimism from steady BSP policy to sustain lift

LOCAL SHARES may edge higher this week, still supported by the central bank’s decision to keep interest rates steady last Thursday.
The Philippine Stock Exchange index (PSEi) clawed its way back to the 8,000 level after a month on Friday, ending 58.70 points or 0.73% higher at 8,013.42. It was up 2.76% on a weekly basis, following a 3.5% jump in holding firms and 2.5% increase in the property sector.
Turnover, however, dropped by 31% to P5.9 billion on average, indicating a cautious environment. Foreigners were net buyers for the week with a daily average of P312 million, 11% more than the preceding week.
“The general sentiment is still cautious but perhaps, the close above 8,000 last week will trigger some excitement which could propel it higher,” Eagle Equities, Inc. Research Head Christopher John Mangun said in a weekly market report.
Mr. Mangun said the PSEi would have to breach its next resistance level at 8,140 to confirm that the rally will keep going.
Online brokerage 2TradeAsia.com noted that the Bangko Sentral ng Pilipinas (BSP) and the Federal Reserve’s decision to keep rates unchanged will keep borrowing costs steady, which could translate to improved capex deployment.
OPPORTUNITIES
“This should prod investors to scout for investment opportunities, possibly in condo units that can be leased out, affordable housing, even franchising or store operations,” 2TradeAsia.com said in a market note.
“Similarly, those in capital-intensive industries would benefit, as infra-based projects are expedited.”
However, Mr. Mangun said concerns about the delay in enactment of the P3.757-trillion 2019 budget may be the biggest obstacle for the market to go higher.
“Analysts have already adjusted GDP (gross domestic product) growth targets because of this delay,” he noted.
Economic managers revised downwards economic growth target for the year to 6-7% from the original 7-8%. Growth could even slow to 4-2-4.9% this year if the budget were enacted as late as August. The growth target for the 2020 was also downgraded to 6.5% from 7.5%, while the growth targets for 2021 and 2022 remained at 7-8%.
“Because of the May elections, the passing of the budget could be pushed further,” Mr. Mangun added.
In the coming quarter, 2TradeAsia.com advised investors to consider sectors that would do well in the period surrounding the May 13 midterm elections, especially those in consumer and investment spending.
“Improved travel should also merit listed shares with tourism-related business models, either in accommodation or entertainment (gaming). Demand-driven summer season would also boost power or energy-related stocks,” the online brokerage said.
Mr. Mangun placed the main index’s support at 7,900-8,000, with resistance at 8,140-8,350. — Arra B. Francia

How PSEi member stocks performed — March 22, 2019

Here’s a quick glance at how PSEi stocks fared on Friday, March 22, 2019.
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Philippine Stock Exchange’s most active stocks by value turnover — March 22, 2019.
pseiactive032219

Manila Water deal may lead to renewed use of Wawa Dam

By Victor V. Saulon
Sub-Editor
THE original proponent of a project that targets to deliver 500 million liters per day (MLD) said the recently signed memorandum of understanding (MoU) with Ayala-controlled Manila Water Co., Inc. is the initial step that could resolve legal hurdles blocking the development of the Wawa Dam as a water source.
“This is an important step towards resolving the legal impediment preventing the development of one of the most strategic water supply sources for Metro Manila,” said Anthony C. Violago, president of San Lorenzo Ruiz Builders & Developers Group, Inc., in a statement on Sunday.
Mr. Violago and his partner, shipping magnate Enrique K. Razon, Jr., plan to develop a water supply facility at the Wawa catchment area traversing the municipality of Rodriguez and the city of Antipolo, both in the province of Rizal.
The legal impediment involves water rights that Mr. Violago’s group raised in court against Metropolitan Waterworks and Sewerage System (MWSS). Reynaldo V. Velasco, the agency’s administrator, had said that he would allow the project only if Mr. Violago’s group withdraws the complaint.
On Friday, Manila Water disclosed that it had signed the MoU with Mr. Razon’s Prime Metroline Infrastructure Holdings, Inc. (Prime Infra).
Mr. Razon has proposed to invest and assume a controlling stake in the project through an 82% share ownership once he was convinced of its legal, commercial and financial viability, the antitrust watchdog Philippine Competition Commission (PCC) said in 2017.
In turn, Mr. Violago’s company will contribute the Wawa water permit, an application for water volume increase, and the water project in exchange for an 18% stake in it. PCC cleared the partnership on Dec. 19, 2017.
Wawa Dam was formerly the main water source for Metro Manila prior to the construction of Angat Dam.
Manila Water became the possible third partner in the project, which the groups describe as strategically located to serve the expansion areas of the east zone concessionaire.
Mr. Razon, who leads Prime Infra, said the project is “not an immediate fix, but rather a medium- to long-term solution.”
“Yet our project is one of the fastest and most sustainable ways to solve this current water crisis. If we don’t act now, this will be a recurring problem,” he said in the same statement that also quoted Mr. Violago.
The Prime Infra statement said talks continue between the company and Manila Water to start the project “at the soonest possible time, especially considering the current water crisis.”
Since early this month, Manila Water has been experiencing a water shortage of about 150 MLD, which it was trying to plug through a number of means, including advancing the operation of a new water treatment plant, a cross-border water sharing with Metro Manila’s other concessionaire, and the activation of deep wells. It previously said the water deficit would be “totally eliminated” in June.
The MoU between Prime Infra and Manila Water calls for them to cooperate in the possible development of the Wawa bulk water supply project. The agreement formalizes the formation of a technical team that will conduct a technical study, which will be reviewed and approved by the MWSS.
Prime Infra said that compared to Laguna de Bay and other similar water supply options, the project does not require an expensive treatment technology such as reverse osmosis. At the 500-MLD capacity, it can serve more than 500,000 households, it added.
Guillaume Lucci, Prime Infra president and chief operating officer, said he is optimistic that the project will start considering the government’s support for developing new water sources for Metro Manila and Rizal province.
“The proximity and water source quality of the Wawa catchment area will allow us to deliver first water no later than 2022. Because of the scale and life cycle cost of large dams, the public can be assured that we will deliver it in a cost-effective manner,” he said.

Sotto casts doubt on passing tax measures; terrorism bill top priority

SENATE President Vicente C. Sotto III said the bill updating the anti-terrorism law is the Senate’s top priority measure when session resumes on May 20, while expressing doubt about the passage of pending tax measures for the remainder of the 17th Congress.
“Anti-terrorism act is number one,” he told reporters on Thursday.
Asked about the chances of the Tax Reform for Attracting Better and Higher-Quality Opportunities (TRABAHO) bill as well as the proposed hikes on tobacco, alcohol, and mining taxes reaching third reading approval in the Senate, Mr. Sotto said in a text message to BusinessWorld on Saturday, “Hearings on those have not been completed. No comm(ittee) reports yet. Doubtful at this point.”
Congress is on break between Feb. 9 and May 19 for the 2019 midterm elections. It will resume on May 20 with only nine session days remaining.
Senate Bill No. 2204 seeks to address the gaps in Republic Act No. 9372 or the Human Security Act by redefining the term terrorist acts and removing the limitations of law enforcement agencies to prevent and to address terrorism. It was sponsored to the plenary on Feb. 6 by Senator Panfilo M. Lacson, chair of the Senate committee on public order and dangerous drugs.
Meanwhile, the TRABAHO bill and the proposed hikes in tobacco, alcohol and mining taxes remain pending in the Senate committee on ways and means. Committee chair Senator Juan Edgardo M. Angara conducted hearings on the bills last year and during the Senate’s Jan. 14-Feb. 8 session.
The House of Representatives passed on third reading last year House Bill 8083 or the TRABAHO bill as well as House Bills. 8677, 8618 and 8400, which seek to raise tobacco, alcohol and mining taxes, respectively.
Mr. Angara has said the Senate ways and means committee will come up with its report on the bill seeking to raise the excise tax on tobacco products when Congress resumes session in May.
Aside from the amendments to the Human Security Act, Mr. Sotto told reporters that the Senate’s other priority measures include the proposed Medical Scholarship Act, amendments to the Public Services Act, the proposed Mindanao Railways Authority, the Budget Reform Act, the National Transport Act, and the bill lowering the criminal age of responsibility.
“Some of them have been reported to floor so there’s a good chance that it will be passed on second and third reading. There are one or two of them, which are still being in the committee report level… It could still be passed in the first week of June,” he said.
The proposed Medical Scholarship Act and the Mindanao Railways Authority remain pending at committee level. Meanwhile, Senate Bill No. 1754 or the amendments to the Public Services Act, Senate Bill No. 1761 or the Budget Reform Act, Senate Bill No. 1284 or the National Transport Act and Senate Bill No. 2198 or the lowering of the age of criminality liability are awaiting second reading approval. — Camille A. Aguinaldo

CTA rejects bulk of SM Investments’ tax refund claim

THE Court of Tax Appeals (CTA) partially granted SM Investments Corp.’s tax refund claim from 2013, but drastically reduced the initial claim of over P1 billion to just P179.3 million.
In a 26-page decision dated March 4, the CTA special second division ruled that of the initial P1.17-billion tax refund claim of SM Investments, the company was only able to prove its entitlement for refund of excess creditable withholding tax (CWT) for 2013 in the amount of P179.3 million.
“In sum, the Court finds that petitioner was able to prove that it is entitled to its refund claim only in the total amount of P179,295,580.72. Hence, the partial grant of the instant Petition is in order,” according to the decision, written by Associate Justice Juanito C. Castañeda, Jr.
The court ordered the remainder of the claim disallowed in the absence of records reflectng its corresponding payments and for failure to prove that the corresponding payments were properly recorded.
Other CWTs were disallowed for not being fully supported by the original copies of pertinent documents.
The CTA said that when there is a discrepancy between the amounts shown in the financial statements and the amounts per certificate of withholding, “there is uncertainty as to whether the income payments indeed formed part of petitioner’s revenue in its return.”
“Petitioner did not offer any explanation or reconciliation of the difference that may be brought about by timing or revenue recognition difference,” it said.
The tax appellate court said it is strict in applying the “well-settled rule” that actions for tax refund or credit should be backed up with pieces of evidence entitling a taxpayer to an exemption that is scrutinized and duly proven.
“The burden is on the taxpayer to show that he has strictly complied with the conditions for the grant of the tax refund or credit. In the present case, petitioner failed to discharge its burden of complying with the substantiation and reporting requirements of its claim,” the CTA said.
Associate Justice Catherine T. Manahan concurred in the decision. — Vann Marlo M. Villegas

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