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Senate to discuss fate of tax reforms, other priorities on Jan. 14

THE SENATE will discuss the fate of at least the second tax reform package, the proposed 2019 national budget and of other priorities in a caucus when 17th Congress lawmakers return to work on Jan. 14, the head of the chamber said on Wednesday.
“We are still discussing it. I’m calling for an all-senators caucus on the noon of the 14th,” Senate President Vicente C. Sotto III said in a mobile phone message when asked if there is a chance for the Senate to approve the proposed Tax Reform for Attracting Better and Higher-Quality Opportunities (TRABAHO) law in the limited time left for the 17th Congress to act on bills.
Lawmakers have Jan. 14-Feb. 8 to work on remaining priorities under this Congress, and just May 20-June 7 after the May 13 legislative and local elections. President Rodrigo R. Duterte appealed in his July 23 State of the Nation Address for both chambers of Congress to approve all tax reforms by last month, but controversies surrounding the proposed P3.757-trillion 2019 national budget prevented the Senate from acting on tax reforms before lawmakers adjourned for their Christmas break on Dec. 15.
The Finance department quoted its head, Secretary Carlos G. Dominguez III, in a Jan. 1 press release as telling reporters recently: “We will discuss again with them (legislators) and see how we can push (the tax reform packages).”
Only one of up to five planned tax reform packages has so far been enacted: Republic Act No. 10963, or the Tax Reform for Acceleration and Inclusion Act that slashed personal income tax rates and raised or added taxes on various items.
The TRABAHO bill — which the House of Representatives approved in September last year and which awaits approval in the Senate Ways and Means committee — aims to cut corporate income tax rates and streamline fiscal incentives.
Senator Juan Edgardo M. Angara, who heads that committee, said the panel will do its “best” to approve tax reform packages that hurdled the House last year. “We will do our best under the circumstances to push them forward. It’s quite important that all stakeholders and all points of view be heard first before the committee can come up with any committee reports,” he said in a text message.
The House had also approved the other remaining tax reforms before adjournment, including reforms in the motor vehicle users’ charge, additional excise taxes on tobacco and alcohol products, an increase in the government’s share from mining, restructuring of real tax property taxation, and rationalization of taxes on financial instruments.
OTHER PRIORITIES
Aside from the TRABAHO bill, Mr. Sotto said the all-senator Jan. 14 caucus will also discuss the proposed 2019 national budget, proposed amendments to the Human Security Act of 2007, and the Security of Tenure bill, among others.
The Senate adjourned session last Dec. 15 without approving the proposed national budget, saying it did not have enough time to do so. That resulted in automatic re-enactment of the 2018 budget, but the chamber has said it expects to approve the proposed 2019 spending plan by next month.
Proposed amendments to RA 9372 or the Human Security Act of 2007, which await Senate committee approval, seeks to impose stiffer penalties on acts of terrorism.
The Security of Tenure bill, which awaits second-reading approval in plenary session, tightens restrictions on labor contracting. Mr. Duterte had vowed in his presidential campaign to ban all forms of contracting, but the current bill has not found favor either with workers’ groups — who say it does not go far enough — or with business, which says it is too restrictive.
“To prioritize ‘endo’ (end of contract, referring to the Security of Tenure bill), amendments to the Procurement Law, Local Government Code, Omnibus Election Code… plus upgrading penalties to illegal gambling activities,” he told reporters in a mobile phone message. — Camille A. Aguinaldo

WB cites cash transfer program’s weaknesses

ALTHOUGH the government’s conditional cash transfer (CCT) program has exceeded some of its objectives, the World Bank cited as a concern a reduction in number of families covered and missed targets in other metrics, as well as inefficient distribution channels.
An implementation status and results report of the World Bank’s support to the Pantawid Pamilyang Pilipino Program noted that the program is compliant in three of seven key indicators, but is falling behind target in the other four.
As of November 2018, the Washington-based multilateral lender said that 91.3% of the monitored children in the CCT program are attending elementary school at least 85% of the time, which is above the 91% target.
Those attending high school made up 92.7% of the monitored children, above the 88.9% target.
The share of monitored children in poor CCT beneficiary households who transition from elementary to high school stood at 61.9%, higher than the 55% target.
However, the number of household beneficiaries that receive cash totaled 4.12 million families, fewer than the targeted 4.4 million.
About 96.2% of children below 5 years old who are being monitored under the CCT program have undergone health checks, compared to the 97% goal.
About 93.3% of monitored households attend the program’s monthly Family Development Session, lower than the 96% target.
“First, the total number of (regular) CCT beneficiaries is declining and has now fallen below the 2018 target because no new households were included into the program since 2016. Another concern is related to the still-high percentage of payments channeled through over-the-counter (OTC) methods (the proportion of households covered by cash cards is below target which highlights the long-standing concern over the limited capacity of the Land Bank of the Philippines to provide modern and efficient payment services to CCT beneficiaries),” the World Bank’s report read.
“The 2018 spot check survey is also behind schedule. The compliance rate on attendance to Family Development Sessions continues to be below target, which deserves further attention to investigate likely causes.”
As of end-November, there were 4.18 million households nationwide benefiting from the program. The government has used $321.124 million, or 71.4% of the $450-million World Bank loan.
The World Bank recommended expansion of CCT coverage. “There are solid arguments to expand coverage of Pantawid to include additional families in 2019, taking into account the large number of poor families with children that have not yet been covered. The mission continues to note the diminishing number of children covered by the program over the years, especially those who are below the age of five and are at high risk of malnutrition in poor communities, though at the same time acknowledges the efforts in reversing this trend by measures taken to sensitize Program municipal links on a more active approach,” the lender said.
“While there are important advances towards the institutional goal of moving all payments for CCT, UCT, and Social Pension to 100% cash cards, a continuing concern is that the available payment infrastructure is quite limited, which if not solved in the short run, will entail additional inconveniences and substantial transportation and time costs for beneficiaries.”
It said the national identification system will integrate information of CCT beneficiaries.
“DSWD (Department of Social Welfare and Development) has informed the mission that plans for Listahanan 2019 are under way and the mission also has recommended to consider plans for a more dynamic registry following the census sweep approach next year [2019] and establish plans to ensure all Pantawid families are included and reassessed, as well as the implications for the rollover of the approved National ID system (PhilSys), which will facilitate improved interoperability between Listahanan and user programs.” — EJCT

Oversupply, faltering growth to weigh on oil prices

BENGALURU — Crude oil prices look likely to trade below $70 per barrel in 2019 as surplus production — much of it from the United States — and slowing economic growth undermine OPEC-led efforts to shore up the market, according to results of a Reuters poll released earlier this week.
A survey of 32 economists and analysts forecasts the North Sea Brent crude oil benchmark will average $69.13 per barrel in 2019, more than $5 lower than last month’s projection. Brent averaged $71.76 in 2018.
“The first half of 2019 will be dominated by concerns about oversupply,” said Ashley Petersen of Stratas Advisors.
The Organization of the Petroleum Exporting Countries (OPEC) and other producers including Russia, known collectively as OPEC+, agreed early last month to cut production by 1.2 million barrels per day (bpd) to try to drain global crude inventories and support prices.
But the cuts took place just this month and prices had fallen more than 15% since the announcement.
“The market had largely priced in renewed production cuts from OPEC. As a result, we expect prices to sink if OPEC or Russia diverge from their production quotas notably,” said Cailin Birch, analyst at the Economist Intelligence Unit. “We expect the cuts to be renewed in April, when the deal comes up for review, as higher output from the US and weakening global demand require continued restraint.”
Oil prices have fallen more than 40% from multi-year highs reached in early October on concerns about the impact of the US-China trade spat on global economic growth and demand for oil.
Another potential headwind this year is slowing consumption. Many analysts project demand growth of a little over 1 million bpd in 2019, compared with an increase of 1.54 million bpd in 2018, according to the US Energy Information Administration.
US shale oil output growth is expected to remain robust, adding to supply. The United States last year surpassed Russia and Saudi Arabia as the world’s biggest oil producer, with US output climbing to a record 11.7 million bpd.
“We expect US (companies) will increase shale oil production continuously over the next year,” CaixaBank Research economist Adrià Morron Salmeron said.
The Reuters poll forecast US light crude price would average $61.05 per barrel in 2019, versus $67.45 projected in the previous poll. It averaged $64.98 last year.
Moreover, analysts believe the end of US sanctions waivers on Iran’s oil exports will put extra pressure on oil prices. — Reuters

ASEAN Manufacturing Purchasing Manager’s Index, December

FACTORY ACTIVITY in the Philippines improved in December at the slowest pace in three months on milder output and order growth, though overall input cost hike “eased noticeably,” according to the latest survey IHS Markit conducted for Nikkei, Inc. Read the full story.
ASEAN Manufacturing Purchasing Manager's Index, December

DoubleDragon aims to generate over P10-B revenues this year

By Arra B. Francia
Reporter
DOUBLEDRAGON Properties Corp. looks to generate a total of P10.52 billion in rental income and sales from its malls, office, warehouse, and hotel projects in 2019, as the property developer continues to benefit from its aggressive expansion program in the previous years.
DoubleDragon Chairman and Chief Executive Officer Edgar J. Sia II said he expects the company to post P4.42 billion in rental income from its community mall concept called CityMall, its office projects in Metro Manila, as well as its industrial space leasing business.
The company was on track to end 2018 with 50 CityMalls in second and third tier cities to take advantage of the economic growth in the provinces.
Its office projects are DD Meridian Park, an office tower complex located in the Pasay City, and the Jollibee Tower in Ortigas Center.
It also completed its first industrial facility called CentralHub Tarlac in the third quarter of 2018, with seven more to follow in the coming years.
DoubleDragon is also set to book P6.10 billion in sales from five Hotel101 projects. In the latter part of 2018, the company incorporated international subsidiaries to help sell the firm’s hotel projects to potential investors overseas. It will start selling Hotel101 units in Davao, Boracay, Bohol, and Palawan this year.
“2019 is also expected to be the year with the biggest jump in DoubleDragon’s recurring revenues contributed by the over 600,000 square meters of completed leasable space versus having zero leasable space in 2014,” Mr. Sia told BusinessWorld in an e-mailed reply to questions.
DoubleDragon is one year away from its goal of having a total of 1.2 million sq.m. in overall leasing spaces in 2020. By 2020, the company would have 100 CityMalls, 5,000 hotel rooms under the Hotel101 and JinJiang Inn Philippines brands, and eight industrial hubs across different sites in Luzon, Visayas, and Mindanao.
Mr. Sia said he is upbeat on the company’s prospects for this year.
“Our outlook for 2019 is very positive, as I personally believe that the most challenging stage of a start-up business venture is always on its first seven years, and gladly DoubleDragon in 2019 is turning 7 years old after our joint venture partnership with the Jollibee Group in July 2012,” Mr. Sia said.
Formerly called Injap Land Corp. which was fully owned by the Sia family’s holding firm Injap Investments, Inc., Jollibee Foods Corp. Chairman Tony Tan Caktiong entered DoubleDragon through Honeystar Holdings Corp.
Prior to their partnership in property development, Mr. Tan Caktiong, through Jollibee, also purchased Mr. Sia’s grilled chicken chain Mang Inasal.
DoubleDragon’s net income attributable to the parent stood at P966.02 million in the first nine months of 2018, 19% higher year-on-year, after gross revenues surged 16% to P4.72 billion in the same period.

AG&P interested in gov’t infrastructure projects

By Arra B. Francia
Reporter
HOMEGROWN engineering firm Atlantic Gulf & Pacific Co. (AG&P) is keen on participating in the government’s infrastructure program, looking to offer its expertise on the oil and power generation sector as well as transportation projects.
AG&P Vice-President for Business Development Alexander Gamboa said the company is currently in various stages of discussion with groups who are participating in the Duterte administration’s “Build, Build, Build” program.
“Our primary market would be energy infrastructure, which is power generation, oil and gas, petrochemicals, and the like. That would still be our main market,” Mr. Gamboa told BusinessWorld in a phone interview earlier this month.
“We expect an increase in power capacity, availability of fuels. That’s the side that AG&P is an expert in, and we want to make sure we’re going to be number one on that aspect.”
Aside from projects for the energy sector, Mr. Gamboa said AG&P is also interested to create structures for bridges, noting that the company has the largest structure fabrication capacity in the Philippines, making it one of the largest in Southeast Asia.
“We’re interested also to participate in airports. Another thing is the rail projects,” he added.
Founded in 1900, AG&P describes itself as a global industrial infrastructure company specializing in providing gas logistics solutions and construction services to several clients abroad. The company’s willingness to participate in the government’s infrastructure program is part of its efforts to refocus back to the Philippines, banking on the country’s strong economic growth in the past six years.
“We’re very bullish on the Philippine market… We’ve seen that for the last six years, the country has been growing at 6-7% every year… We see the government now pushing for improved infrastructure which is really very important at this point in time, in view of all the traffic that we see,” Mr. Gamboa explained.
While the company has yet to participate in public sector projects, it has recently been tapped for the fabrication and construction of a new petrochemical power plant on a 250-hectare property in Southern Luzon. The project requires the hiring of an additional 5,000 people.
“This petrochemical plant in particular will require an additional 5,000 people because of the magnitude of this project, and much of the required skills are mechanical and electrical engineers,” Mr. Gamboa said.
Mr. Gamboa said the company’s P1.5-billion investment back in 2015 to expand its yard facilities will support its ongoing expansion program. The company currently operates on a total of 150 hectares of fabrication and assemble space, which Mr. Gamboa said is more than enough.
In terms of capacity, AG&P can fabricate 60,000 metric tons of steel and steel structures every year; 600,000 bio inches of pipes annually, and 125,000 metric tons of total steel and pipe assembly every year.

IP E-Games divests from Netopia operator

IP E-Game Ventures, Inc. has divested from the operator of Netopia internet cafés due to the lower demand for its business, as consumers shift to mobile devices and places offering free Wi-Fi.
In a disclosure to the stock exchange on Wednesday, IP E-Games said it is assigning P62.93 million worth of shares in Netopia operator Digital Paradise, Inc. (DPI) to Y-Fi Business Solutions, Inc. This is equivalent to 62.93 million shares in DPI with a par value of P1 per share, or 48.38% of DPI’s total outstanding shares.
IP E-Games said DPI’s Netopia business has been in a “state of steady decline” over the years, with its financial statement showing losses since 2016 alongside the closure of more internet cafés.
DPI booked a comprehensive loss of P4.31 million by end 2016 when it had 40 operating stores. Its losses further ballooned to P43.22 million in 2017.
As of end-November, DPI’s losses reached P31.43 million, while its operating stores dwindled to 14.
IP E-Games noted negative trends, such as the increase in locations that offer free Wi-Fi, the widespread popularity of portable gaming devices, as well as the improving economy which has allowed more people to purchase mobile devices, indicate that the slowdown in the internet café business will be hard to reverse.
“All this has caused a significant reduction in the demand for internet cafés, and a downward trend in DPI’s sales, transactions per store and number of stores — all of which justify the Issuer’s exit from this industry,” IP E-Games explained.
The listed firm added that there would have been a strong possibility that no other willing buyer will step up to acquire its stake in DPI if it passed up the opportunity to divest, citing the downward trend in the company’s earnings.
IP E-Games acquired a stake in DPI back in 2016. The decision to divest from DPI is in line with the company’s decision to evaluate the potential sale of non-core assets.
“Upon rationalization of the operations of DPI and pursuant to the authority and directive by the Board, the Executive Committee, through the Chief Finance Officer, decided to divest portions of its investment in DPI,” the company said.
Incorporated in 2005, IP E-Games is primarily involved in the business of interactive gaming and content distribution to the local, regional, and global market. It also offers online games such as massively multiplayer online role-playing games (MMORPGs) and casual online games.
The company widened its attributable loss to P2.72 million in the first nine months of 2016, compared to P1.86 million in the same period a year ago. Revenues meanwhile stood at P148.82 million. — Arra B. Francia

Facebook eyes more activity in platforms in 2019

By Denise A. Valdez
Reporter
FACEBOOK PHILIPPINES is targeting more user activity as it welcomes the new year, with more than 66 million Filipinos already in its platforms.
Facebook Philippines Country Head John Rubio said in a Dec. 7 interview that the company wants to improve its existing products this year.
“If you look at the Philippines, when you have already (over 66 million) people on your platform, you’re still going to get incremental increases but maybe not as much as before. So it’s about how do we develop better relationships where we can embody more of the stuff that people want to do,” he told BusinessWorld.
He noted three main services that the company will work on this 2019: sharing of visual content through Facebook Watch and Instagram TV (IGTV), 24-hour expiring content through Facebook Stories, and seamless instant messaging through Messenger.
Facebook Watch and IGTV are dedicated platforms for video content controlled by Facebook and Instagram. Facebook Stories, which took inspiration from Instagram Stories, is an app function for photo and video uploads which are viewable only within 24 hours. Messenger is Facebook’s instant messaging platform to connect to friends and enterprises.
“[The focus is] deepening relationships because Filipinos love visual communication, the ephemeralness of stories which allows people to more frequently share, and…the intimate communication which is person-to-person, or person-to-business, person-to-group on the messaging side,” Mr. Rubio said.
The social networking company founded in 2004 has grown rapidly over the years, now with 2.6 billion monthly users globally in at least one of the four platforms it controls: Facebook, WhatsApp, Messenger, and Instagram.
Mr. Rubio said in its 15th year, Facebook Philippines would like to focus “less about…new services…, but just bedding in all the new stuff we launched.”
“We have all these new products that we still want to make sure we scale locally, because we believe they’re really strong products. Marketplace, to change how commerce is happening. A lot of our video products like Watch or IGTV, and how it embodies a lot of that visual communication that we were talking about. Stories, and all the ephemeral content that we were talking about. So that’s the focus for (2019),” he said.
Mr. Rubio noted Facebook products already announced in other countries such as Facebook Dating are likely to arrive in the country in 2020, as the focus first is improving services catered to socializing and business.
“Filipinos love the platform that we have, and I think it embodies what’s best in the Filipino. We’re such a community based (country). It’s a Filipino thing. We live our lives socially and it (Facebook) helps enable that. We’re really good out here,” he said.

Vulcan donates Palawan properties to former workers

LISTED Vulcan Industrial and Mining Corp. on Wednesday said it has donated two properties in Roxas, Palawan to its former employees, as well as current workers of Alakor Corporation and Anglo Philippine Holdings Corporation.
In a disclosure, Vulcan said the donated properties were part of its mine site that has been shuttered and non-operational for decades.
“The donations were made in favor of groups of individuals who are either former employees of the Corporation who live or used to live in the area or current employees of related parties, Alakor Corporation or Anglo Philippine Holdings Corporation, who signified their interest to acquire said properties,” it said.
According to Vulcan, it donated the properties after considering their book value of P87,144, as well as the cost of maintenance and presence of informal settlers.
At the same time, Vulcan said it transferred its mineral production sharing agreements (MPSA) in Negros Occidental to United Paragon Mining Corporation (UPMC), in exchange for the latter assuming the listed company’s liabilities, obligations and future claims.
MPSA 092-97-VI and MPSA 113-98-VI have an aggregate historical value of P12.89 million.
Under the deal, UPMC will assume Vulcan’s liabilities amounting to P13.33 million, as well as any liabilities and obligations arising from the oil and mineral assets, including deferred exploration costs.
The transfer also involves Vulcan’s condonation of its advances to UPMC amounting to P539,173.42.
Shares in Vulcan closed 3.7% or 6 centavos lower at P1.54 each on Wednesday. — Reicelene Joy N. Ignacio

Now Corp. will undergo equity restructuring

NOW CORP. on Wednesday said it will undergo equity restructuring to erase its accumulated deficit.
In a disclosure to the stock exchange, the listed telecommunications company said its board of directors approved its equity restructuring plan during a meeting on Dec. 28.
The plan involves “reducing the par value of the common shares of stock of the Company and by applying the resulting additional paid-in capital to eliminate its accumulated deficit.”
The par value of the common shares will be reduced to 70 centavos from the current P1. This will result in a decrease in the company’s authorized capital stock to P1.44 billion from P2.12 billion, divided into 2.06 billion common shares.
In its third quarter financial report, Now said its deficit amounted to P414.356 million.
“The equity restructuring will not reduce the number of outstanding shares and will not change a stockholder’s interest in Now. Furthermore, the P1 par value per share of the existing preferred shares will not change,” the company noted.
Now said it will secure approval from the Securities and Exchange Commission for the amendment in its Articles of Incorporation to change the par value of common shares and authorized capital stock.
In the first three quarters of 2018, Now posted a 7808.9% increase in attributable net income to P6.7 million from P84,762 the previous year, driven by a 25.9% increase in revenue to P127.42 million from P101.17 million.
Shares in Now rose by 5.23% or 18 centavos to close at P3.62 each. — Denise A. Valdez

Digital payments use to increase this year

THE USAGE of emerging digital payments solutions is expected to pick up further in 2019, displacing legacy payment options such as cash and credit cards, an analytics software firm predicted.
In a statement, Fair Isaac Corp. (FICO) said emerging payment solutions such as mobile wallets and peer-to-peer payment networks are “cementing themselves in the day-to-day lives of consumers,” particularly the younger generations.
“Big strides are already made in Asia Pacific with mobile payment usage climbing 30% in 2018, the trend is only going to accelerate in the coming year,” FICO said.
Emerging payments solutions are seen to become more mature next year as the companies will pay attention on educating their customers and adapting their fraud controls to counter threats from cybercriminals.
In a previous statement, FICO said 2018 will be the “beginning of the end for physical credit cards” as digital payment schemes gain prominence.
In the country, banks and other financial institutions have been enhancing and foraying into electronic payments, in line with the push of the Bangko Sentral ng Pilipinas to promote the shift into a “cash-lite” economy where financial transactions veer away from cash and check and toward electronic fund transfers and digital wallets.
The main goal is to increase the share of electronic payments to 20% of all transactions by 2020, from only a percent share in 2013.
Aside from the maturing payment solutions, FICO also predicted that banks will invest on deposit pricing strategies this year as lenders might face issues from growing or at least sustaining their deposits base given the “current rising rate environment.”
“Sophisticated analytics tools, like optimization, and the ability to rapidly deploy the models developed by those tools will give banks the ability to deliver smarter, more granular pricing, enabling them to compete effectively in this increasingly frenetic environment,” the analytics software firm said.
FICO added that banks undergoing digital transformation will realize they have a silos problem, as isolated business units and technology stacks for credit risk and fraud among others “work poorly” when it comes to large-scale transformation.
“Banks will increasingly recognize this and work to [improve] the negative effects of silos as they shift from product-centric to customer-centric business strategies.” — K.A.N. Vidal

Resort operator BHI posts lower sales in November

BOULEVARD Holdings, Inc. (BHI) reported lower sales in November, despite the reopening of its resort in Boracay after the island’s six-month closure.
In a sales report disclosed to the stock exchange on Wednesday, BHI said consolidated sales of products and services dropped by 36% to P5.86 million in November, versus the P9.14 million posted in the same period a year ago.
On a six-month period, BHI’s consolidated sales fell by 52% to P18.68 million.
“(The) decrease in sales (was) mainly due to the six-month closure of Boracay, Malay, Aklan for rehabilitation effective April 26, 2018 and Friday’s Holdings, Inc., which owns and operates Friday’s Boracay Beach Resort (Friday’s Resort) is one of the companies affected by the order of the National Government,” the company said.
Friday’s Holdings is a subsidiary of BHI.
The company noted that Friday’s Resort restarted its hotel operations on Oct. 30, 2018, as Boracay Island welcomed back local and international tourists on Oct. 26.
With the tourist island’s reopening, Friday’s Resort said it expects improved business due to the rehabilitation back to its state in the 1980s.
“Friday’s Resort hopes for a balance of “economic development and sustainability” on the world renowned resort island,” the company said.
It also added that the increase of travel agents promoting Boracay will be valuable to its business as well as other compliant hotels, which in turn will ensure the continuity of their business operations.
BHI suffered a net loss of P1.77 million in the nine months ending February 2018, a reversal of its attributable profit amounting to P2.02 million in the same period the year before. Gross revenues meanwhile stood at P79.37 million, 11% higher year-on-year. — Arra B. Francia

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