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Philippines lags behind SE Asia neighbors in auto sales, production

OF the eight members of the Association of Southeast Asian Nations (ASEAN) that submit data to the region’s vehicle industry group, three have recorded less deliveries in the first nine months of 2018 when compared to the same period of the previous year.
According to the latest available data from the ASEAN Automotive Federation (AAF), sales of vehicles in Brunei dropped 4.8% in the January-to-September stretch in 2018, while those in the Philippines and Singapore decreased 13.8% and 16.8%, respectively. In contrast, vehicle deliveries in Indonesia, Malaysia, Myanmar, Thailand and Vietnam increased. No data regarding Cambodia and Laos, the two other ASEAN members, is supplied by the AAF.
SALES SLOWDOWN
Brunei reported sales of 8,389 vehicles in the first three quarters of 2018, or 401 less than those recorded during the comparable period in 2017. The Philippines managed 261,161 deliveries, which were 41,698 vehicles short of its nine-month tally in 2017. Singapore’s total was 70,105 vehicles, down by 14,124 units.
The dip in Singapore’s results, seen in seven of the nine months of 2018, was a result of the city-state’s cap on purchases of cars meant for personal use. Singapore’s Land Transport Authority on Oct. 23, 2017 announced the 0.25% annual growth rate specified for cars and similar vehicles during the time would be reduced to 0% by February 2018 (vehicles intended for commercial purposes are allowed a 0.25% growth rate until the first quarter of 2021). The sales cap, according to a statement posted by the government agency on its Website, was implemented “in view of Singapore’s land constraints and [its] commitment to continually improve [its] public transport system.”
The sales slowdown in the Philippines, according to the Chamber of Automotive Manufacturers of the Philippines, Inc. (CAMPI) and the Truck Manufacturers Association (TMA), was attributed to higher taxes imposed on vehicles and to rising inflation. In March 2018 CAMPI president Rommel R. Gutierrez in a statement explained the decrease seen in February — the first month vehicles sales declined in the country — “suggests that the market is still adjusting to the new excise tax regime.”
In July last year, CAMPI reported first-half sales of its member-companies (including those of TMA’s) were down 12.5% compared to the same period in 2017, or 171,352 vehicles against the previous year’s 195,772-vehicle tally. In a CAMPI statement issued with report, Mr. Gutierrez said the drop was “largely due to consumers’ prioritization of buying basic goods and services as buying big-ticket items like motor vehicles is less favorable at this time due to rising inflation, which increased to 5.2% this June 2018.”
In October 2018, when CAMPI’s and TMA’s sales tally for the first three quarters of the year became available — and which showed a 13.8% decline year-to-date — the groups expressed optimism over signs of recovery. CAMPI and TMA said they “expect a boost” coming from new model releases and purchases during the Christmas season (the groups’ sales by the end of November 2018 — the last month for which data is available — were down 14.4% from 2017).
The AAF data reflects sales reports from CAMPI and TMA and does not include those from another local industry group, the Association of Vehicle Importers and Distributors (AVID).
AVID reported in October last year that sales of its member-companies in the first three quarters of 2018 decreased 13% compared to their tally for the same period in 2017 — or 65,917 vehicles last year versus 75,949 vehicles a year before. The group’s president, Ma. Fe Perez-Agudo, in a statement contained in the same report said vehicle demand was “dampened by high inflation, interest rate hike and surge in oil prices.”
At least three auto brands report their sales performance to both CAMPI and AVID.
POSITIVE PERFORMANCES
Myanmar posted the fastest vehicle-sales growth in ASEAN; a 120.1% spike in the first three quarters of 2018 compared to the same stretch in 2017, or 11,815 vehicles last year against 5,369 vehicles two years ago.
Selling the most number was Indonesia, with 856,439 vehicles delivered during the nine-month period in 2018. The total represented a 6.5% rise from the 803,812 vehicles sold during the comparable period in 2017.

car factory assembly line
Auto factories’ assembly lines in Thailand are always humming with activity — the country builds the most number of cars in the region. — BRIAN M. AFUANG

Vehicle sales in Thailand in the same nine months of 2018 totaled 746,584 units, up 20.3% from the comparable duration a year before — which stood at 620,715 units. Malaysia recorded deliveries of 454,971 vehicles, 6.9% more than the 425,678 vehicles sold in the first three quarters of 2017. Sold in Vietnam during the same duration in 2018 were 194,427 vehicles, a 5.2% increase from the 184,838-unit tally in the nine-month period of 2017.
Across all eight ASEAN members, vehicle sales totaled 2,603,871 units from January to September 2018, topping the 2,436,300-unit result for the same stretch in 2017 — a 6.9% growth.
Adding to the tally are the 7,610,826 motorcycles sold in Indonesia, Malaysia, Philippines, Singapore and Thailand during the first three quarters of last year. Of the total, Indonesia accounted for 4,722,242 units, Thailand for 1,366,100, and the Philippines took in 1,174,476 motorcycles.
Sales of motorcycles in the five countries grew 8.4% year-to-date.
PRODUCTION PROFILE
Thailand and Indonesia led in auto manufacturing in the region in the first three quarters of 2018, with both countries producing more vehicles than they sold in their domestic markets. Both countries also registered year-to-date increases in production — 8.6% and 10.2%, respectively.
Thailand built 1,604,115 vehicles, Indonesia 995,836 vehicles during the same period.
In that time Malaysia also managed a double-digit rise in production — 10.3%, representing 420, 498 vehicles in 2018 — while Vietnam manufactured 148,317 vehicles, up 1.6%. Myanmar recorded a 145.5% increase in production with 8,014 vehicles made.
Of the six Southeast Asian countries submitting vehicle-production data to the AAF — Laos and Singapore both supply the organization with sales figures, but not regarding production — the Philippines was the only one which recorded a decline in the first nine months of 2018. Vehicles built in the country totaled 62,491 units, 44.8% less than the 113,167-unit output for the same period in 2017.
The production output for all six countries reached 3,239,272 vehicles, rising 7.1% year-to-date.
Three countries reported their motorcycle production data to the ASEAN Automotive Federation for the Jan.-Sept. 2018 period, all of which saw increases. Thailand inched 0.7% up with 1,557,281 units built, the Philippines’ output rose 4.4% with 947,866 motorcycles built, and Malaysia’s total of 335,340 units built represented a 1.4% growth year-on-year.
The total output for the three countries — 2,839,487 motorcycles in the first three quarters of 2018 — was 2% more than that logged during the comparable period in 2017. — Brian M. Afuang

Of EVs and evolving energy

By Kap Maceda Aguila
“THE prospect is extremely bright for EVs [electric vehicles] in the Philippines in 2019,” confidently declared Rommel T Juan, president of the Electric Vehicle Association of the Philippines (EVAP), in an interview with BusinessWorld.
There is reason for Mr. Juan’s bullishness on EVs which, though still taking a backseat to conventional internal combustion engine-powered transportation, are rapidly growing in adoption and have long ago crossed the divide from fiction to reality. EVAP reports that government is facing the emerging trend by bracing for the “eventual mass introduction in the Philippine market,” quoting DOTr Undersecretary Mark Richmund M. de Leon, officer-in-charge for Road Transport and Infrastructure, at a recent workshop to review the Low-Carbon Urban Transport System funded in part by the United Nations Development Programme.
Plotting the direction and progress of EVs in the country, Mr. de Leon said at the workshop; “Some 54 experts covering nine sectors are with us as we review the project to ensure… activities are still aligned with the priorities of the government and the private sector. The government, manufacturers and assemblers of low-carbon vehicles, alternative fuel providers, battery solution providers, financial institutions, fleet and transport operators, transport-related NGOs and even the academe are well represented here, thus we are assured that the project is in good and capable hands.”
One could consider the program a hard reset for the state’s decision makers; a rethinking “to create an enabling environment for the commercialization of low-carbon urban transport system in the Philippines. This is through the propagation of environmentally-sustainable transport such as electric vehicles, hybrid vehicles, and vehicles powered by alternative fuel sources like LPG, CNG, and solar.”
Mr. Juan added that even the DTI, in cooperation with the local EV industry, is getting into the act by drawing a “new roadmap.” Even framed within the Tax Reform for Acceleration and Inclusion scheme, EVs are clearly being given a leg up through excise tax relief –ostensibly clearing the way for greater adoption and easier acquisition.
Electric (and alternatively fueled vehicles) are seemingly the new sexy in this new age of mobility. But, to digress, perhaps this notion does not give it enough importance and immediacy. The undeniable effects of climate change has asked society to reexamine its carbon footprint and, within it, our boundless need for mobility.
Even petroleum firms have begun to face the inevitability of a so-called “energy transition,” which will eventually wean us from finite and polluting fossil fuels. Shell Companies in the Philippines chairman Cesar G. Romero, in a position paper released last year, pointed to the Philippines being part of the Paris Agreement “which commits [signatories] to limit the global rise in temperatures to well below two degrees Celsius above pre-industrial levels, and to strive for a limit of 1.5 degrees Celsius.”
He declared that “Shell supports this commitment to reduce global warming by reducing the Net Carbon Footprint of our energy products by around half by the middle of the century. This means reducing emissions from our own operations, and changing the mix of products we sell to our customers… In the Philippines, we support [the] government’s pledge to achieve a 70% cut in carbon emissions by 2030 to be taken from the energy, transport, waste, forestry, and industry sectors.”
More significantly, Shell is looking at itself in a new light. “We’re no longer an oil company, but an energy company,” averred Mr. Romero in an interview with this writer for another publication.
In the same interview, the executive stressed that the mission now is to provide affordable, cleaner energy to those who do not have it. “At the moment, there are a billion people in the world with no access to electricity… An additional three billion use highly polluting solid fuel such as wood, charcoal, peat and coal.” Tellingly, Mr. Romero used the term “cleaner.”
“Energy is needed for human progress,” he said simply. “Oil is one of the key fuels for energy. The crucial aspect is ensuring responsible production and responsible consumption.
“Our aspiration over the long term is to be able to provide the world with the energy it needs in whatever shape or form. Of course, in the spirit of cleaner and lighter, we have focused our efforts on oil, gas, and renewables.”
Just as newfangled energy companies are bracing for an ultimately carbon-free tomorrow, greater EV adoption has already appeared on the horizon and is getting closer to fruition. The trajectory has somewhat changed with a cognizant government which is starting to roll the red carpet out to promote not only electrics but alternative-fuel transportation.
When infrastructure is firmed up, and with fiscal relief aplenty, the country’s mobility evolution and green aspirations can further increase velocity.

Toyota tests autonomous driving technology at CES

THE Toyota Research Institute (TRI) on Jan. 7 at the 2019 International Consumer Electronics Show (CES) in Las Vegas unveiled the TRI-P4 automated-driving test vehicle. The P4 is a fifth-generation Lexus LS sedan fitted with autonomous driving systems TRI is developing under its Chauffeur and Guardian programs.
TRI explained Chauffeur is focused on fully autonomous driving technologies in which “the human is essentially removed from the driving equation, either completely in all environments, or within a restricted driving domain.”
Ryan Eustice, senior vice-president for automated driving at TRI, continued Guardian is geared toward making a driver perform better — not replace him or her. The executive noted the P4, set to join TRI’s fleet of self-drive cars, will help “accelerate the development” of the Chauffeur and Guardian programs
TRI said the P4 uses Lexus’s latest chassis and steering technologies, making it more responsive and smoother when the car is driving itself. To do this, it relies on two additional cameras to improve situational awareness on the sides and two new imaging sensors — one facing forward and one pointed to the rear — specifically designed for autonomous vehicles. A modified radar system improves close-range detection.
Carried over from previous Lexus test cars is the LIDAR sensing system, which has eight scanning heads.

Toyota TRI-P4 2
The P4’s trunk contains the “brain” of the automated driving system.

TRI said the “P4 is a much smarter research vehicle than its predecessor” due largely to “greater computing power [that allows] its systems to operate more machine learning algorithms.” The car can process sensor inputs faster and react more quickly to the surrounding environment, TRI noted.
It added the computer box in the P4’s trunk — the “brain” of the automated driving system — is now mounted vertically against the rear seat. This frees up the car’s trunk for hauling cargo.
“We took a holistic approach to integrating autonomous components into the design of the new LS,” said Scott Roller, senior lead designer at CALTY Design Research, which TRI tasked to handle the car’s styling. “The result is a fluid surface embracing advanced technology loosely inspired by science fiction in the graphic separations between form and function.”
TRI said Toyota Motor North America’s prototype development center will begin converting more LS sedans into P4 in the first quarter of 2019.

Schumacher tribute at Ferrari Museum opens


AN exhibition honoring Michael Schumacher on Jan. 3 — the 50th birthday of the seven-time Formula One world champion — was opened at the Ferrari Museum in Maranello, Italy.
Called the “Michael 50,” the exhibit tells the story of Mr. Schumacher’s record-breaking F1 career — the German driver won a still-unequalled seven world titles, 91 races and 155 podium finishes. On display at the museum’s Hall of Victories are some of the most important Ferrari F1 cars driven by Mr. Schumacher during his 11 years with the Scuderia Ferrari — the car maker’s F1 division. The cars range from the F310 of 1996, with which Mr. Schumacher won three races in his first season with Ferrari, to the F399, the car that won the constructors’ title in 1999, and which heralded Mr. Schumacher’s and Ferrari’s five-year dominance in Formula One racing.
Also included in the exhibit is the F1-2000, or “Alba Rossa” (“Red Dawn”), which Mr. Schumacher drove in 2000 to hand Ferrari its first world title since Jody Scheckter took the driver’s championship in 1979. The record-breaking F2002 and F2004 join the exhibit, too; Ferrari won but two of the 17 races in 2002 and clinched 15 of the 18 races in 2004. Taking an equally special spot at the museum is the 248 F1 of 2006, the car Mr. Schumacher drove to score his 72nd and final victory with Ferrari.
Along with the race cars, another highlight of the exhibit is Mr. Schumacher’s role in Ferrari after he first retired from F1 racing. The champion helped in developing various Ferrari road cars, notably the 2007 430 Scuderia and the 2008 California, both displayed at the museum.
The “Michael 50” benefits the Keep Fighting Foundation, a non-profit initiative for Mr. Schumacher, who was seriously injured in a skiing accident in France in December 2013.

The Aston Martin DBS proves profitability often trumps brand heritage

It’s an interesting question that deserves to be debated in marketing classes. Which one is more important: to improve a company’s profitability or to stay true to its brand heritage? It’s a corporate quandary that I’m sure countless companies have argued over — something that is quite common in the automotive industry.
I discuss this because Aston Martin has just previewed its very first SUV, called the DBX. The British luxury automaker says it has already tested the prototype in real-world conditions, and that the vehicle is expected to be officially unveiled at the end of 2019. Imagine that… a sport-utility vehicle from the same car company that gave us James Bond’s elegant automobiles — one that built its reputation upon the likes of the DB5, the DBS, the Vantage, the Vanquish and the One-77.
I could picture the agonizing deliberations during the company’s board meetings.
Are we really doing this?
Are we seriously attaching our winged logo on a tall, rugged vehicle?
Are we now defiling our brand just to get a share of the luxury SUV market?

Aston Martin DBX 2
British luxury automaker Aston Martin says it has already tested the DBX prototype in real-world conditions, and that the vehicle will be unveiled at the end of 2019.

Well, BMW, Porsche, Audi, Bentley, Jaguar, Maserati and Rolls-Royce had all surely struggled with the same questions when they were trying to decide whether to push through with the release of the X5 (1999), the Cayenne (2002), the Q7 (2006), the Bentayga (2015), the F-Pace (2016), the Levante (2016) and the Cullinan (2018) — and their answer was ultimately yes. To a degree, Mercedes-Benz and Lamborghini had also wrestled with the same existential dilemma before they launched the M-Class (1997) and the Urus (2018), but not as much as the others since both brands had already produced SUVs in the past (the popular G-Wagen for the former and the little-known LM002 for the latter).
It’s clear then: When push comes to shove, the brand will always take a back seat to the bottom line. Because really, there will be no brand to manage — no brand to polish — if the firm goes belly up.
This trend of suddenly designing and assembling sport-utility vehicles among manufacturers of high-end luxury passenger cars was obviously spurred by the need of said automakers to make money (and lots of it). Some of these brands had to initially endure some backlash from their purist fans and customers, but the motoring world eventually came to accept their SUV offerings. Most of these premium sport-utes have now even become bread-and-butter bestsellers for their makers, highlighting the modern-day car buyer’s penchant for versatile, go-anywhere vehicles.
It remains to be seen whether Ferrari — the last SUV holdout among the traditional high-end car companies — would give in to the crossover craze later on. I bet the iconic Italian marque is still trying to preserve its supercar image, but it’s not like it hasn’t strayed far from its time-tested brand guidelines before. Remember, Ferrari launched its first-ever four-wheel-drive vehicle in the FF in 2011, and then followed that up with the GTC4 Lusso in 2016. It goes to show that even the hallowed boardroom of Maranello is prepared to adjust and tweak the product line just to adapt to the changing times.

December FX reserves top BSP forecast

FOREIGN CURRENCY reserves recovered in December on the back of higher gold valuations and bigger foreign investment gains, to settle above the central bank’s yearend projection.
Gross international reserves (GIR) totalled $78.461 billion for the month, improving from November’s $75.682-billion level in November though still below the year-ago $81.57 billion, the Bangko Sentral ng Pilipinas (BSP) said on Monday.
Still, the latest amount settled above the revised $76-billion forecast of the central bank.
This is also the highest reserve level in seven months, or since the $79.202 billion recorded in May, and marks the second straight month of rising reserves.
“The BSP looks to rebuild its stash of foreign currency buffer ahead of potential headwinds moving into 2019. Despite indications for a more dovish Fed, the PHL is still projected to run current account deficits given the economies stark demand for imported capital machinery and raw materials,” Nicholas Antonio T. Mapa, senior economist at ING Bank NV-Manila, said in an e-mail to journalists.
“BSP is likely looking to rebuild GIR after seeing its stockpile slide to $74.71 bn when the peso was buffeted by heightened risk-off sentiment from September and October on expectations of runaway inflation and $100/barrel oil,” Mr. Mapa noted.
“Furthermore, aside from its usual source of FX (OF remittances, exports and BPO receipts) the PHL has access to international financial markets with the government expected to float another $-denominated bond in the near term,” he added.
“As such, the PHL has ample reserves to help allay investors’ concerns about its projected current account deficit for 2019, with the GIR buildup seen to be a boon by credit ratings agencies.”
DRIVERS
In a statement, the central bank attributed December’s higher GIR to inflows from its foreign exchange operations, coupled with net foreign currency deposits and revaluation gains from the BSP’s gold holdings.
The value of the BSP’s gold holdings rose to $8.154 billion in December from $7.776 billion in November, although it was lower than the year-ago $8.337 billion.
Income from the central bank’s foreign investments amounted to $66.092 billion, up by 7.8% from the previous month’s $61.318 billion and 0.42% bigger than the year-ago $65.815 billion.
In contrast, the central bank’s foreign currency holdings were halved to $2.564 billion from November’s $4.932 billion and from $5.783 billion a year ago, data showed.
The central bank uses its dollar reserves to temper sharp swings in the exchange rate. The peso pared its losses in December as it traded at the P52 level, ending the year at P52.58 against the greenback.
Reserves with the International Monetary Fund (IMF) slipped to $473.6 million from November’s $478.8 million, though it was still bigger than the year-ago $424.4 million. The Philippines’ special drawing rights — the amount that can be tapped under the IMF’s reserve currency basket — steadied at $1.177 billion from November but was slightly less than December 2017’s $1.211 billion.
The reserves can cover 6.9 months’ worth of the country’s import payments.
The BSP said this level provides “ample” external liquidity buffer, well above the three-month global standard.
The dollars can also settle up to 5.8 times the country’s short-term external debt based on original maturity — or those falling due in up to 12 months — and four times short-term debt based on residual maturity, or outstanding external debt with original maturity of one year or less, plus principal payments on medium- and long-term loans of the public and private sectors falling due in the next 12 months.
BSP Deputy Governor Diwa C. Guinigundo has said that monetary authorities are looking to rebuild the GIR stash after this eroded for the most part of 2018.
Credit raters have been citing ample GIR level as a source of strength for the Philippines, as it shields the country against external financial shocks that could unduly weigh on the country’s ability to pay foreign obligations. — Melissa Luz T. Lopez

Philippines launches 10-year US dollar bonds

THE PHILIPPINES launched a 10-year US dollar bond issue on Monday, making it the first country in Asia to tap the global debt market this year, according to capital markets publication Refinitiv IFR.
Marketing for the US dollar notes began on Monday and the deal was given an initial guidance of Treasuries plus 130 basis points, Refinitiv IFR said.
Asked about the offering, Philippine National Treasurer Rosalia V. de Leon said the government has issued the announcement but declined to say more.
S&P Global Ratings and Fitch Ratings on Monday said they have assigned a long-term foreign currency rating of “BBB”, while Moody’s Investors Service gave a “Baa2” grade — all a notch above minimum investment grade — to the benchmark-sized US dollar-denominated senior unsecured notes.
The Philippines, one of Asia’s most active sovereign bond issuers, is raising funds to help finance its budget this year. Its Congress has yet to approve the Executive’s proposed P3.757-trillion ($71.8 billion) 2019 budget, as President Rodrigo R. Duterte increases infrastructure spending.
The government has been given authority by the central bank to issue $500 million to $2 billion of global bonds for 2019.
Bank of China, JP Morgan and Standard Chartered Bank were appointed joint global coordinators, and were joint bookrunners with Citigroup, Credit Suisse, Goldman Sachs and UBS, Refinitiv-IFR said.
Manila’s borrowing plan includes Samurai and Panda bond offerings this year or in 2020. It is also exploring a maiden sterling bond sale. — Reuters

SEC refines draft rules on initial coin offerings

THE SECURITIES AND EXCHANGE COMMISSION (SEC) has refined its proposed guidelines on initial coin offerings (ICOs) for another round of public consultation in the face of heightened interest in such fund raising.
In a statement issued on Monday, the country’s corporate regulator said it has revised its draft guidelines based on inputs received in the first round of consultations that ended on Nov. 30 last year.
ICOs are defined by the commission as “distributed ledger technology fund-raising operations involving the issuance of tokens in return for cash, other cryptocurrencies, or other assets.”
The proposed rules seek to govern the conduct of ICOs by start-ups or registered corporations in the country, as well as by those based abroad that target Filipinos through online platforms.
Revisions in the draft include additional requirements for an issuer’s prospectus, which should now contain interim financial statements in case the issuer has been doing business for more than a year.
Interim financial statements should also be provided if the prospectus is filed more than 135 days from issuance of audited financial statements.
The revised draft also removed the requirement of submission of proof of ICO team members’ financial capabilities as part of the prospectus.
But the issuer must submit the operations manual, including KYC/AMLA (Know your customer/Anti-money Laundering Act) procedures; a disaster recovery plan; as well as risk and security protocols during the registration proper.
The draft also allows registration of security tokens to be issued by foreign companies whose instruments have already been registered in another jurisdiction. Still, the issuer must provide sufficient proof of security tokens registration in another jurisdiction, as well as the regulatory framework observed. Should the foreign entity fail to comply with these requirements, the SEC will order the issuer to establish a local office instead.
Based on public comments so far, the SEC added a chapter on escrow agents, covering appointment of the escrow agent, its duties and reportorial requirements.
At the same time, the SEC removed the requirement on quarterly progress reports on use of ICO proceeds, as well as semi-annual reports on acquired and operating equipment and properties for funded projects.
Should the issuer abandon the project before it is completed, the escrow agent must submit a notice of project abandonment to the SEC.
The SEC’s Markets and Securities Regulation Department is calling on banks, investment houses, the investing public and other interested parties to submit their inputs by Jan. 15. — Arra B. Francia

SE Asia wary of China’s Belt and Road project, skeptical of US — policy survey

SINGAPORE — Southeast Asian countries should be cautious in negotiating with China on its flagship Belt and Road Initiative (BRI) to avoid being trapped in unsustainable debt, 70% of respondents said in a policy survey released Monday.
Southeast Asia is increasingly skeptical of US commitment to the region as a strategic partner and a source of security, while China’s reach is seen as growing both politically and economically, the study also showed.
“The conventional wisdom that China holds sway in the economic realm while the United States wields its influence in the political-strategic domain will… need to be revisited in light of the survey results,” it said.
The survey by the ISEAS-Yusof Ishak Institute, affiliated with Singapore’s government, polled 1,008 respondents from all 10 Association of Southeast Asian Nations (ASEAN) countries drawn from government, academic and business communities, civil society and media.
Nearly half of the respondents said President Xi Jinping’s hallmark Belt and Road initiative would bring ASEAN “closer into China’s orbit,” while a third said the project lacked transparency and 16% predicted it would fail.
A large majority, or 70%, said their governments “should be cautious in negotiating BRI projects, to avoid getting into unsustainable financial debts with China,” a view strongest in Malaysia, the Philippines, and Thailand.
Some Western governments have accused China of pulling countries into a debt trap with the initiative, an accusation China has denied.
China was seen by 73% of respondents as having the greatest economic influence in the region and was also believed to have more influence politically and strategically than the United States.
Six out of ten respondents said US influence globally had deteriorated from a year ago and two-thirds believed US engagement with Southeast Asia declined.
About a third said they had little or no confidence in the US as a strategic partner and provider of regional security.
Fewer than one in 10 saw China as “a benign and benevolent power,” with nearly a half saying Beijing possessed “an intent to turn Southeast Asia into its sphere of influence”.
The study’s authors wrote, “This result… is a wake-up call for China to burnish its negative image across Southeast Asia despite Beijing’s repeated assurance of its benign and peaceful rise.”
There was a call for the ASEAN to play a more active role in Myanmar’s Rohingya crisis, although a majority of the respondents sought mediation rather than diplomatic pressure.
The United Nations estimates that 730,000 Rohingya Muslims have fled from Myanmar’s Rakhine State to Bangladesh since the military’s crackdown on insurgent attacks.
United Nations-mandated investigators have accused Myanmar’s military of carrying out killings, gang rape and arson with “genocidal intent,” an allegation the military has denied. — Reuters

US firm proposes LNG facility in Philippines

BW FILE PHOTO

US-based Excelerate Energy L.P. has joined the list of companies planning to build a liquefied natural gas (LNG) facility in the Philippines as it filed on Dec. 27, 2018 its proposal with the Energy department, officials of the agency said on Monday.
Excelerate becomes the fourth company with an ambition to put up a facility ahead of the expected depletion of the Malampaya gas field, the country’s only natural gas fuel source.
Rino E. Abad, director of the Department of Energy’s (DoE) Oil Industry Management Bureau (OIMB), said the US company, which is based in Texas, plans to build a floating storage regasification unit (FSRU) off the Batangas area.
“Nag-instruct kaagad ako noong Monday, sinabihan ko na start na ‘yung evaluation (I immediately instructed on Monday to start the evaluation),” Mr. Abad told reporters, adding that he expects the evaluation to be completed in a few days.
The DoE’s move to encourage the development of an LNG facility comes as it expects the depletion of Malampaya gas to start by 2024, thus the need for a storage facility for imported gas, which is transformed into a liquefied state for ease of transport. The fuel is then regasified at the trading destination.
Separately, Ma. Laura L. Saguin, chief science research specialist at the DoE, said the latest LNG proponent is building the project on its own, without any local partner. She said full foreign ownership is allowed under local regulations.
The proposal of Excelerate is currently being evaluated by the DoE’s technical working group. The proposal of First Gen Corp. and its Japanese partner Tokyo Gas Co., Ltd. is also in this stage of evaluation, the DoE officials said.
Ms. Saguin said she expects Excelerate to also include a power plant to go with its LNG project as commercial viability is one of the factors being looked into by the DoE in approving a project. The officials declined to give details on the project’s capacity.
Based on information found on its website, Excelerate is part of a privately held US energy group that also includes Kaiser Francis Oil Co., which has production projects in the US and Canada, and Cactus Drilling Co., a private drilling company in the US.
“Excelerate is the pioneer and market leader in innovative floating LNG solutions, providing integrated services along the entire LNG value chain with an objective of delivering rapid-to-market and reliable LNG solutions to customers. Excelerate offers a full range of floating regasification services from FSRU to infrastructure development to LNG supply,” the company website added.
Ahead of Excelerate and First Gen’s LNG projects, the DoE’s technical working group evaluated the application of two other proponents — Australia’s Energy World Corp. Ltd. (EWC), and Phoenix Petroleum Philippines, Inc. and its Chinese partner China National Offshore Oil Corp. (CNOOC).
EWC last week disclosed to the Australian Securities Exchange, that DoE Secretary Alfonso G. Cusi had issued to Energy World Gas Operations Philippines, Inc. a permit to construct, own and operate an LNG import terminal and regasification facility at Pagbilao Grande Island, Quezon province.
Mr. Abad said the proposal of Phoenix Petroleum has yet to be signed by Mr. Cusi as the office of DoE Assistant Secretary Redentor E. Delola had questions about the project. He declined to disclose details of the delay. — Victor V. Saulon

What to make of Netflix’s big losses

WHILE YOU spent the holidays streaming Bird Box, Black Mirror: Bandersnatch, and/or re-watching The Office for the hundredth time, Netflix Inc. was playing out a corporate drama of its own — poaching Activision Blizzard Inc. Chief Financial Officer Spencer Neumann to be its new CFO.
Just before the news emerged, Activision abruptly announced that it would fire Mr. Neumann, who had agreed to a provision that barred him from negotiating for a new job until the last six months of his contract. It was a clear sign that Mr. Neumann wasn’t willing to pass up a chance to work at Netflix, this era’s preeminent high-flying, money-burning media company.
Mr. Neumann’s mandate at the company is clear. A Wall Street Journal headline put it this way: “New Netflix CFO to Tackle Cash Flow Conundrum.”
Buzzy original thrillers like Bird Box, or choose-your-own-adventure gambits like Bandersnatch aren’t cheap. And as Netflix’s public profile has climbed, so have its losses. Analysts predict that the company will report about $3 billion in negative cash flow for 2018, up from $2 billion in the previous year. Fans of wildly expensive, high-quality television should hope the company can figure out its balance sheet.
The most obvious solution is for Netflix to just continue to increase the number of people who subscribe to its video-streaming service. Its core growth strategy has paid off so far. And recently, the company has taken on a more global focus, creating content for countries all over the world. As part of this approach, it could also further increase the price of a subscription.
Another, more untested path would be to cater more to active users over less engaged ones. This is where the company has a lot to learn from Disney and Activision, Mr. Neumann’s former employers. Both of those companies — in very different ways — do a great job of charging different customers vastly disparate amounts of money for consuming their content. Disney doesn’t just charge you for a ticket to see Star Wars. If you’re a superfan, you can buy action figures, go to a Disney theme park or watch The Clone Wars on Netflix. There are endless ways to upsell customers based on their affection for a particular piece of intellectual property.
The video game industry has a term for this — whales. Many companies make the bulk of their revenue from a relatively small group of people, and modern games are built to extract the maximum amount from those willing to pay. That means selling in-game loot boxes, virtual items, and special game editions. Activision is also exploring esports to further monetize its popular titles.
Right now, Netflix charges most people the same amount, no matter how much they consume. Sure, you can pay slightly more for Netflix Ultra HD, but as the Disney and Activision examples illustrate, there are plenty of way to charge more without metering content. Think elite movie packages akin to WarnerMedia’s HBO, merchandise tied to shows, or some other version of in-app purchases.
A third path for improving cash flow would be to simply spend less money. This might seem like an appealing tactic for a new CFO, but I’d argue the levers here are partly out of Netflix’s control. If you take for granted, as Netflix does, that it wants to be a once-in-a-generation global media company, then you need to work backwards from there. Netflix needs to pay what it costs to hire talent.
Last year, there were media reports that Netflix paid at least $150 million to “lure” showrunner Shonda Rhimes to its staff. Ms. Rhimes, on Twitter, broke it down this way: “Why do reporters always say writers were ‘lured’? Like we’re children following a trail of candy. I created a $2B+ revenue stream for a major Corp with my imagination. I do not follow trails of candy. I am the candy.” — Eric Newcomer, Bloomberg

Phoenix Petroleum on track to hit income target

PHOENIX PETROLEUM PHILIPPINES

By Victor V. Saulon, Sub-editor
PHOENIX Petroleum Philippines, Inc. said it expected to hit its P1.5-billion income target for 2018, with its new businesses driving growth and continuing to do so in 2019, the company’s finance chief said.
“I know that we’ll be able to hit our target — we’re tied on P1.5 [billion],” said Ma. Concepcion F. De Claro, Phoenix Petroleum chief finance officer, in an interview late last month.
In 2017, the Davao City-based independent oil company posted record sales volume, revenues and net income as its investments through the years started bringing in returns, it previously told the stock exchange.
Net income hit P1.79 billion in 2017, up 65% from the level a year earlier, with the partial consolidation of the liquefied petroleum gas (LPG) business starting in August 2017.
“We’re already P1 billion as of September [2018] — P1.1 billion,” Ms. De Claro said.
“We think we’ll be able to hit it [P1.5 billion]. We were hoping that it would surpass significantly our target but since crude prices have been going down the last couple of months since September it’s actually going to eat up on our margins,” she added.
Ms. De Claro said the biggest driver of company’s growth is its Singapore office PNX Petroleum Singapore Pte Ltd., which was set up in September 2017 as the group’s trading and supply office.
In October 2018, PNX Energy International Holdings Pte Ltd. was also created to manage the group’s international investments, including expansion of related business activities and operations in the Asia-Pacific region.
“The contribution of our Singapore office… net income-wise [as of] September was about P200 million, that’s about a little less than 10%,” she said.
“We started operations lang December, but medyo nag-full blast this January. And then the LPG also because that’s also new,” she added.
For 2019, Phoenix Petroleum plans to expand the Singapore trading business, Ms. De Claro said.
“We’d like to expand it, but currently what we’re doing is also expanding, getting more lines kasi (because) we’d like to be able to sell more to third parties, not only Phoenix Singapore addressing the requirements of Phoenix Philippines,” she said.
“But we’re limited by the lines — our credit lines,” she said. “So with that, if we are able to get more lines then we can expand the business. If we double the lines from last year, it would be able to double the contribution, but of course that’s considering that crude prices are stable — no abrupt change to the price,” she said.
Liquid fuels remain the company’s main business, with sales from diesel, gasoline, bunker fuel, lubes and aviation fuel accounting for the biggest share of the company’s revenues.
“That was before. Then we expanded in 2017 [we acquired] LPG… Now we have the trading, which is in Singapore, and then we’re going to have the asphalt and the bitumen, and then the last one is LNG (liquefied natural gas). But outside of that we have the convenience retailing,” she said.
In January 2018, Phoenix completed the purchase of the Family Mart convenience store brand, which had 67 outlets in Luzon at that time.
Ms. De Claro said liquid fuels remained the biggest contributor for 2018 and possibly beyond, although sales volumes for the other businesses are also expected to expand.
“It’s going to be same [in 2019],” she said, adding that the total would just expand for the various business segments.
However, the convenience stores, now numbering 71, have yet to contribute “significantly” to the group.
“We’re still trying to fix up a lot of things,” she said, adding that what Phoenix Petroleum is targeting for the Family Mart business is to be “cash positive.”
Ms. De Claro said Family Mart is still expected to incur some loss, but she hopes it would generate a profit in 2019.
“If we can get, say, a 2%-3% [growth in] revenues then that should be fine with us… Probably if we can hit mga P50 [million] to P100 million that’s already substantial [for] our Family Mart but insignificant as far as the contribution to the bottomline,” she said.

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