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Women representation on boards of listed companies should be mandatory — PBCWE

REGULATORS should make it mandatory for publicly listed companies in the country to have women representation on their boards, according to the Philippine Business Coalition for Women Empowerment (PBCWE). 

“In my view, make it mandatory but not penalize them (listed firms) immediately. Give them time to comply,” PBCWE Governing Council Chairperson Ma. Aurora D. Geotina-Garcia said on the sidelines of the launch of the “Census on Women in Leadership Roles in Philippine Publicly Listed Companies” report in Makati City on Tuesday.   

“Eventually, it becomes part of the DNA that they will consciously and intentionally say that when we start looking for board members, we should also deliberately have a goal of women’s representation,” she added.   

The new report showed female chief executive officers (CEOs) accounted for 13% of Philippine listed companies in 2022 from 12% in 2021 and 10% in 2020.

Majority of the female CEOs are from the services sector, followed by the industrial sector and the property sector.

The percentage of females on the boards of directors of listed firms reached 21% in 2022 from 19% in 2021 and 18% in 2020.   

Ms. Garcia said the ideal representation of women across the boards of listed companies should be around 30%.

“We have countries who’ve actually imposed quotas including Malaysia, France, and many of the Scandinavian countries. If you impose quotas, there’s more compelling reason for companies to deliberately and intentionally recruit females,” she said.

Ms. Garcia said the Securities and Exchange Commission (SEC) should spearhead the proposal on mandatory women representation, with support from the Philippine Stock Exchange (PSE).

“It should be the SEC because this is regulatory. Although, it should work together with the PSE because the PSE also is part of the decision process of who is going to be listed. I would be happy to see if one of their considerations for the company applying for listing is its diversity and inclusion policies,” she said.

The report also showed that women comprise 40% of executive leadership teams in Philippine listed companies in 2022.

“While there has been progress, many women in executive leadership teams continue to occupy functional or support roles. However, the data indicate an improvement in the representation of women in line or operational roles, which are critical for career advancement to top leadership positions,” the report said.

The report also noted only 2% of large companies and none of the small- and medium-sized firms have set specific gender diversity targets.

“Most (publicly listed companies) have broad diversity policies; however, these need to be complemented by concrete targets in order to be measured and ultimately achieved,” the report said.

The study was done by the PBCWE in partnership with WR Numero Research and supported by Investing in Women and the SEC. The data collection period was from Aug. 15 to Sept. 15 last year.

Meanwhile, SEC Commissioner Javey Paul D. Francisco said sustainability reporting is a tool that can be used by listed firms to disclose women representation in boards, establish inclusivity benchmarks, and track progress on their development.

“It’s evident that women remain under-represented in executive leadership teams and boards and we still have a long way to go,” he said in his keynote speech at the launch event.

Mr. Francisco added that the SEC has introduced guidelines on the issuance of social bonds under the ASEAN Social Bond Standards in the Philippines.

“This allows investors to direct their capital to eligible social projects, including gender bonds, which expand financial opportunities for women, support women-led businesses, and enhance women’s financial inclusion,” he said.

“It’s clear that our journey towards gender equality is far from over. Our vision is a future where gender equality is a given; where it is not just a matter of social justice but rather a strategic necessity and a smart business move leading to greater employee retention, enhanced creativity, and overall better business outcomes,” he added. — Revin Mikhael D. Ochave

Inclusive growth key to lower poverty incidence — Balisacan

Informal settlers go about their daily routine in Binondo, Manila, April 23, 2024 — PHILIPPINE STAR/EDD GUMBAN

By Beatriz Marie D. Cruz, Reporter

THE PHILIPPINE GOVERNMENT is banking on increased investments in the manufacturing and services sectors to make growth more inclusive and lift more Filipinos out of poverty by 2028, the National Economic and Development Authority (NEDA) said.

“Inequality of opportunities is what we want to reduce — whether that inequality is in the form of access to education, health, wealth, credit, technology,” NEDA Secretary Arsenio M. Balisacan told BusinessWorld last week.

The country’s poverty rate fell to 15.5% in 2023 from 18.1% in 2021, the Philippine Statistics Authority (PSA) said. The number of poor Filipinos declined by 12.26% to 17.54 million in 2023 from 19.99 million in 2021.

The government is aiming to reduce poverty incidence to 9% by 2028 or the end of the Marcos administration.

To be able to achieve this target, a total of seven million Filipinos must be lifted out of poverty in the next four years, or 1.75 million annually, NEDA said.

This would be possible if economic growth in the next few years is sustained and inclusive, Mr. Balisacan said.

The Philippine economy is expected to grow by 6-7% this year and 6.5-7.5% next year. It also expects gross domestic product (GDP) growth at 6.5-8% from 2026 to 2028.

“When we say more inclusive, technically, it means the Gini (coefficient) ratio will fall or will at least remain the same… If it will increase, it weakens the impact of economic growth,” Mr. Balisacan said.

The Gini coefficient, which measures how unevenly distributed a country’s annual income is, fell to 0.3909 in 2023 from 0.4063 in 2021. A Gini coefficient reading of “0” suggests perfect equality, while “1” denotes perfect inequality.

Mr. Balisacan also highlighted the need for the “structural transformation of the economy” by increasing the value of high productivity sectors such as manufacturing, services, and tourism.

“If you can infuse even more dynamism into the services sector, this is where the people will go,” he said.

As an example, integrating the medical technology sector with the business process outsourcing (BPO) industry could also help create more job opportunities, Mr. Balisacan said.

“Since we’re a global supplier of nurses and doctors, and if we can get the medtech (medical technology) industry here in conjunction with a strong BPO, you can have a very strong pillar of poverty reduction and economic growth,” he said.

‘UNREALISTIC’ THRESHOLD
Meanwhile, IBON Foundation Executive Director Jose Enrique A. Africa said the improved poverty rate is not the result of the creation of more productive and high-paying jobs.

“It is for instance striking that job creation accompanying recent supposedly rapid economic growth is mostly in low-paying and low-productivity sectors that are notorious for informality,” he said in a Viber message.

Mr. Africa also noted that the poverty threshold used by the PSA remains “low and unrealistic,” and was likely offset by the expansion of social protection or ayuda programs.

The poverty threshold or the minimum income needed to meet the basic food and nonfood requirements of a family of five is currently at P13,873 per month, PSA data showed.

The food threshold or the minimum income needed by a family of five to meet their monthly basic food needs was at P9,581 or about P64 per person per day.

Ateneo de Manila University economics professor Leonardo A. Lanzona said that people who are considered above the poverty threshold but receive government subsidies are still vulnerable to economic shocks.

“We have this huge category of nonpoor people hovering just above the threshold. Because of this, any economic shock such as high inflation or COVID-19 (coronavirus disease 2019) can result in substantial increases again in poverty, making it very difficult to reduce poverty permanently to single-digit levels,” he said in a Facebook Messenger chat.

The government must focus on developing the domestic agriculture and industry sectors to ensure “truly sustainable and inclusive” growth, Mr. Africa said.

Last week, Mr. Balisacan defended the use of these poverty and food thresholds, saying these are metrics used to determine the inclusiveness of economic growth and effectiveness of policies.

“They are not, and were never intended to be, prescribed budgets for a decent standard of living. They do not dictate how much a family should spend on food, nor do they provide an idea of a desirable household budget,” he said in a statement.

Energy projects set for boost from rate cut — analysts

FREEPIK

By Sheldeen Joy Talavera, Reporter

THE RECENT interest rate cut is expected to boost both existing and new energy projects, especially renewable energy projects that require substantial funding, analysts said.

“The rate cut reduces borrowing costs, making it cheaper for companies to finance large projects like energy projects,” AB Capital Securities, Inc. Vice-President Jovis L. Vistan said in a Viber message.

He said that cheaper credit should encourage more investment in the energy sector and that developers may be more likely to pursue new projects or expand existing ones as the lower cost of capital improves the return on investment.

Reduced interest rates could also accelerate the country’s energy transition goal by encouraging the development of new renewable energy capacities, Seedbox Securities, Inc. Equity Trader Jayniel Carl S. Manuel said.

“The rate cut is a step in the right direction, providing a more conducive environment for sustainable energy development,” he said.

The Philippine government has set an ambitious goal of increasing the share of renewable energy in the country’s power generation mix to 35% by 2030 and 50% by 2040.

“This is especially true for renewable energy like wind, solar, or hydropower, as these require substantial upfront investments. Lower interest rates make these projects more financially viable,” Mr. Vistan said.

The Bangko Sentral ng Pilipinas (BSP) cut policy rates last week for the first time since November 2020, driven by the improving inflation outlook. The Monetary Board implemented a 25-bp rate cut, lowering the benchmark rate to 6.25% from the over 17-year high of 6.5%.

Despite the accelerated inflation, BSP Governor Eli M. Remolona, Jr. said that inflation is expected to trend downward to within the government’s target range of 2% to 4%.

Juan Paolo E. Colet, managing director at Chinabank Capital Corp., said that lower financing costs should improve “the economics of renewable energy projects and encourage expansion in the sector.”

“For operating energy companies, lower borrowing costs will improve their profit margins (assuming other costs remain constant). The hope is that the interest rate savings are passed on to the consumers via lower power rates,” he said in a Viber message.

April Lynn C. Lee-Tan, chief equity strategist at COL Financial Group, said in a Viber message that lower rates will make it cheaper for companies to borrow over the longer term.

“If it encourages more power projects, then we can enjoy lower power costs,” she said.

The Department of Energy (DoE) is expecting at least 4,164.92 megawatts (MW) of conventional and renewable energy projects to come online this year. As of April, 161.20 MW of the committed projects are in full commercial operation, while 835.89 MW are under the testing and commissioning stage.

“These additional capacities will strengthen the reliability and stability of the grid, providing much-needed capacity to meet the growing energy demand in the country,” the DoE said in a statement in April.

“The anticipated increase in capacity will prevent supply deficiencies and potential power interruptions, particularly during peak demand periods,” it added.

Meralco proceeding with 1,000-MW bid

MANILA Electric Co. (Meralco) will proceed with the bidding process for its 1,000-megawatt (MW) power supply requirement after the dismissal of an injunction petition, the power distributor said on Tuesday.

The Taguig Regional Trial Court (RTC) dismissed the petition and deemed the 20-day temporary restraining order (TRO) as “without force and effect,” Meralco said in a statement.

“This allows us to continue our efforts to secure our power supply requirements in the least-cost manner, consistent with our mandate,” the power distributor said.

“We will now resume the bidding procedures for both 600 MW and 400 MW…, for which new bid bulletins will be issued, particularly with respect to the timelines,” it added.

Last month, the Taguig RTC issued a TRO stopping Meralco from proceeding with its bidding processes for additional power supply of 600 MW and 400 MW.

Members of the Malampaya consortium — Prime Energy Resources Development B.V., Prime Oil & Gas, Inc., UC38 LLC, and PNOC Exploration Corp. — sought the restraining order, saying the bid terms violate the preference given to indigenous natural gas under the law.

“There exists an extreme urgent necessity for the writ as to warrant the issuance of a temporary restraining order to prevent further damages to the plaintiffs’ interests, the government, and the environment,” according to an order promulgated on July 31.

The TRO was extended to 20 days from three days.

“The court finds merit in the urgent motion to dismiss the complaint for injunction of plaintiffs,” the order dated Aug. 17 read.

“Relative thereto, the temporary restraining order the court issued on August 2, 2024, is hereby rendered without force and effect,” it added.

Meralco said that all competitive selection processes (CSPs) for its supply requirements “are strictly conducted in accordance with existing rules of the Department of Energy and the Energy Regulatory Commission, which have the primary jurisdiction over the CSPs.”

In June, Meralco invited bids for contract capacities of 600-MW baseload and 400-MW mid-merit supply, which are set to take effect in August 2025.

Eight companies expressed interest and participated in the pre-bid conference last month for Meralco’s 600-MW supply.

These are First Gas Power Corp. and First NatGas Power Corp. of First Gen Corp.; Mariveles Power Generation Corp. and Masinloc Power Co. Ltd. of San Miguel Global Power Holdings Corp.; GNPower Dinginin Ltd. Co. and Therma Luzon, Inc. of Aboitiz Power Corp.; Southwest Luzon Power Generation Corp. of Semirara Mining and Power Corp.; and Quezon Power (Philippines) Ltd Co.

The distribution utility moved the bid submission deadline from Aug. 2 to Aug. 27. It has yet to issue the updated schedule for the bidding process for the 400-MW capacity.

Meralco’s controlling stakeholder, Beacon Electric Asset Holdings, Inc., is partly owned by PLDT, Inc.

Hastings Holdings, Inc., a unit of PLDT Beneficial Trust Fund subsidiary MediaQuest Holdings, Inc., has an interest in BusinessWorld through the Philippine Star Group, which it controls. — Sheldeen Joy Talavera

True love twirls onstage

BALLET MANILA’S Giselle to feature global superstars Renata Shakirova and Alexei Timofeyev.

Ballet Manila brings Russian dance couple to Aliw stage

TWO SUPERSTARS from the Mariinsky Ballet in Russia will be gracing the home stage of Ballet Manila, the Aliw Theater, for a restaging of the love story Giselle.

The ballet will be headlined by dancers and real-life couple Renata Shakirova and Alexei Timofeyev, who will be dancing Giselle together for the first time.

Ballet Manila’s principal dancers Abigail Oliveiro and Mark Sumaylo will headline the performance on Aug. 31 at 1 p.m. while Ms. Shakirova and Mr. Timofeyev will take on the title roles on Aug. 31 at 8 p.m. and Sept. 1 at 5 p.m.

Ballet Manila’s artistic director Lisa Macuja-Elizalde said at an Aug. 14 press conference that the collaboration came about from her close ties with the Mariinsky Ballet (formerly the Kirov Ballet), where she trained and became its first foreign soloist in the mid-1980s.

She invited them via e-mail earlier this year to come over, which they accepted.

“I think that Renata’s true romantic style of dancing and the fact that she is dancing with her real-life prince Alexei is going to transform Ballet Manila’s Giselle to a Giselle of another level,” said Ms. Macuja-Elizalde.

For Mr. Timofeyev, it was hard to say no to the seasoned ballerina, who is always “full of energy and life” about the ballet.

Ms. Shakirova added that they are taking the opportunity to try and connect with an unfamiliar audience through the universal language of dance.

“It means highlighting the small nuances in the performance, like the turn of the head or eye contact with your partner, so that the emotions of the story resonate,” she said.

Born in Tashkent, Uzbekistan, Ms. Shakirova joined the Mariinsky Ballet upon her graduation in 2015 and was immediately given her first principal role as Kitri in Don Quixote. In 2016, she competed in the Bolshoi Ballet Competition, where she won first prize.

Meanwhile, Leningrad-born Mr. Timofeyev joined the Mariinsky Ballet in 2004. As the current soloist of the dance company, he has won multiple ballet competitions over the years.

EXCITING MATCHUP
Mr. Timofeyev explained that, while the two of them have performed together before, this being their first time doing Giselle together makes it exciting

“It is one of my favorite ballets. Dancing it with my wife, Renata, is even more interesting as we get to find out what could happen,” said Mr. Timofeyev. “We are getting a good kind of jitters because we are also performing in front of an audience we don’t know.”

As the third offering of Ballet Manila’s 26th performance season, Giselle is a classic love story revolving around the titular village girl who falls in love with Albrecht, not knowing he is already engaged. When she finds out, she dies of a broken heart and becomes a wili, joining the souls of girls who were wronged by their men. When Albrecht visits Giselle’s grave, she protects him from Myrtha, the vengeful wili queen.

“Giselle and Albrecht are such dynamic roles, both physically and mentally,” Ms. Shakirova said of the difficulty performing the ballet. “But it will be a great experience because we’re going to be holding each other. That kind of artistry with somebody you are close to will make the performance special.”

Ms. Macuja-Elizalde said that the recently rebuilt and upgraded Aliw Theater, which now has LED light projections, has resulted in an update of Giselle compared with Ballet Manila’s previous stagings of the ballet.

All performances will be staged at the Aliw Theater, CCP Complex, Pasay City. For tickets, visit www.ticketworld.com.ph. — Brontë H. Lacsamana

T-bonds fetch lower rates on BSP, Fed easing bets

BW FILE PHOTO

THE GOVERNMENT made a full award of the reissued Treasury bonds (T-bonds) it offered on Tuesday as yields declined on expectations of rate cuts from the Bangko Sentral ng Pilipinas (BSP) and the US Federal Reserve in the coming months.

The Bureau of the Treasury (BTr) raised P25 billion as planned via the reissued 20-year bonds it auctioned off on Tuesday as total bids reached P54.601 billion, or more than double the amount on offer.

This brought the outstanding volume for the series to P164.3 billion, the Treasury said in a statement.

The bonds, which have a remaining life of 14 years and five months, were awarded at an average rate of 6.103%. Accepted yields ranged from 6.05% to 6.125%.

The average rate of the reissued papers dropped by 67.8 basis points (bps) from the 6.781% fetched for the series’ last award on June 19. This was also 64.7 bps lower than the 6.75% coupon for the issue.

It was likewise 0.9 bp below the 6.112% seen for the same bond series and 3.4 bps lower than the 6.137% quoted for the 15-year bond, the tenor closest to the remaining life of the papers on offer, at the secondary market before Tuesday’s auction, based on PHP Bloomberg Valuation Service Reference Rates data provided by the BTr.

The government fully awarded its T-bond offer as the average rate fetched was lower than the bond series’ prevailing secondary market rate and previous average yield quoted for the issue, the BTr said.

The T-bonds auctioned off on Tuesday fetched lower yields amid “aggressive buying” for long tenors as the market expects the monetary easing cycles of both the BSP and the Fed to extend until next year, a trader said in a phone interview.

The BSP’s first rate cut in nearly four years and signals of more cuts ahead, as well as expectations that it would match future Fed easing moves, led to the lower awarded yields for the T-bonds on offer, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort likewise said in a Viber message.

The Philippine central bank on Thursday cut benchmark interest rates for the first time in almost four years to mark the start of a “calibrated” easing cycle amid an improving inflation and economic outlook, with the BSP chief signaling at least one more reduction before the end of the year.

The Monetary Board reduced its target reverse repurchase rate by 25 bps to 6.25%. This was in line with the expectations of nine out of 16 analysts surveyed in a BusinessWorld poll.

Prior to the cut, the BSP kept its policy rate at an over 17-year high of 6.5% for six straight meetings following cumulative hikes worth 450 bps between May 2022 and October 2023 to combat inflation.

“With inflation on a target-consistent path, the current macroeconomic outlook supports a calibrated shift to a less restrictive monetary policy stance,” BSP Governor Eli M. Remolona, Jr. said at a briefing.

He said they could cut rates by another 25 bps within the year. The Monetary Board’s remaining policy-setting meetings this year are scheduled for Oct. 17 and Dec. 19.

Analysts expect the BSP’s easing cycle to continue until next year amid stabilizing inflation, with at least 100 bps in rate cuts seen in 2025.

Meanwhile, the BSP expects the Fed to begin cutting rates next month, possibly by 50 bps, and by 100 bps more until the end of 2024 and by 125 bps in 2025, Mr. Remolona said last week.

Fed policy makers have in recent days signaled a potential rate easing in September, priming markets for a similar tone from Fed Chair Jerome H. Powell and other speakers at the annual meeting of global central bankers and other policy makers in Jackson Hole, Wyoming, Reuters reported.

Investors largely expect Mr. Powell to acknowledge the case for a rate cut and will parse his words for cues on whether the Fed will start with a 25-bp cut or a 50-bp cut in September.

While labor market deterioration led to the markets expecting a bigger rate cut in September, data since has been mixed, with upbeat retail sales still signaling a resilient consumer.

Markets are pricing in a 24.5% chance of a 50-bp cut in September, down from 50% a week ago, with a 25-bp reduction having odds of 75.5%, the CME FedWatch Tool showed. Traders are pricing in a total of 93 bps of cuts this year.

A slim majority of economists polled by Reuters expect the US central bank to cut rates by 25 bps at each of the remaining three meetings of 2024.

The BTr wants to raise P220 billion from the domestic market this month, or P80 billion through Treasury bills and P140 billion via T-bonds.

The government borrows from local and foreign sources to help fund its budget deficit, which is capped at P1.48 trillion or 5.6% of gross domestic product for this year. — A.M.C. Sy with Reuters

Kuya J eyes overseas expansion in 2025

FILIPINO restaurant Kuya J, owned and operated by Kuya J Holdings Group, Inc., is planning to enter the overseas market next year, with Singapore identified as the ideal location due to easier logistics, a company official said.

“Singapore is an ideal country in Asia. It’s easier on logistics in terms of importation… The importation in Singapore is more lenient compared to the others,” Carlo L. Fajardo, chief operations officer of the Kuya J group’s Franchise Division, told BusinessWorld on Tuesday on the sidelines of a media briefing.

Mr. Fajardo also said that most franchising offers come from the Middle East. However, the restaurant’s core product is pork, including the best-seller crispy pata.

“We’re looking at other alternative pork dishes. That’s why we don’t want to say we’ll go ahead with the Middle East. As long as we fine-tune the menu, that it’s appropriate for the Filipinos,” he said.

In the Philippines, Mr. Fajardo said the company is bullish on expansion. It expects to open two to three stores by the end of 2024 and is looking to expand 20 branches in 2025.

Currently, Kuya J has 86 branches nationwide, including the recently opened 218-square-meter branch at Robinsons Antipolo, which has a seating capacity of 64.

Don Edrain Tirol, the Kuya J group’s chief operating officer, said that Kuya J is financially healthy enough to fund its own expansion.

Kuya J currently has 15 franchised and 71 company-owned stores.

“We have the store, the store size, products, and the organization to back it up. Now we’re ready to expand because unlike before, we expanded rapidly, like one to 100 and then, there was a problem…,” Mr. Tirol said.

“You have to build a commissary right away, you have to build the organization right away. So now, it’s set, it’s ready,” he added.

He said that with an investment of P1.5 million, one can acquire a local franchise for a duration of 10 years.

In 2024, the capital expenditure (capex) per store reached P15 million, but a lower capex of P14 million is expected in 2025 due to the smaller format of stores.

Mr. Tirol said the company’s focus is to reduce the kitchen’s physical footprint to make it more efficient for the cooks.

When asked about the company’s initial public offering  plans, Mr. Fajardo said that while it is not part of the immediate strategy, it remains a consideration for the long term.

In 2018, the Kuya J group announced its intention to go public once it reaches the 100-store mark. — Aubrey Rose A. Inosante

Food banking to alleviate hunger: Inspired by Pope Francis

FOODBANK.ORG.PH

(Part 2)

It was in 2013 that the world first learned about Pope Francis’ commitment to the urgent task of eradicating hunger when he visited the UN World Program. He gave the full support of the Catholic Church to eliminating hunger, especially among children all over the world.

Not too long after that historic visit, he wrote the encyclical Laudato Si, addressed to all men and women of good will, where he lamented about the prevailing culture of waste or the “throw-away culture” through which millions of tons of food are thrown away as surplus (especially in the United States) while tens of millions of people are going to bed hungry every day. 

This message reverberated around the world, including the Philippines, and inspired a group of businesspeople led by industrialist Jose Sandejas to do something concrete to address this problem affecting millions of people in the Philippines.

Motivated by the Christian imperative of undertaking corporal works of mercy (the first of which is to feed the hungry), this group, following the usual practice in business to do environmental scanning as a step towards strategic planning of any enterprise, turned to data of the World Bank (where the Pope first announced his great interest in mobilizing the Catholic Church to fight world hunger).

The key findings of the World Bank can be summarized as follows:

1.) Undernutrition is, and has always been, a serious problem in the Philippines. For nearly 30 years, there have been almost no improvements in the prevalence of undernutrition in the Philippines. One in three children (29%) younger than five years old suffer from stunting, or being small in size for their age. The Philippines is ranked 5th among countries in East Asia and the Pacific region with the highest prevalence of stunting and is among the 10 countries in the world with the highest number of stunted children.

Micronutrient undernutrition is also highly prevalent in the Philippines: 38% among infants six to 11 months old; 26% among children 12 to 23 months old; and 20% of pregnant women are anemic. Nearly 17% of children aged six to 59 months suffer from Vitamin A deficiency, of which children aged 12-24 months have the highest prevalence (22%) followed by children aged six to 12 months (18%).

2.) Good nutrition is a foundation for economic prosperity, and investments in nutrition are highly cost-effective. The persistence of very high levels of childhood undernutrition, despite decades of economic growth and poverty reduction could lead to a staggering loss of the country’s human and economic potential. A Filipino child with optimal nutrition will have greater cognitive development, stay in school longer, learn more in school, and have a brighter future as an adult, while undernutrition robs other children of their chance to succeed. 

The burden on the Philippine economy brought about by childhood undernutrition was estimated at $4.4 billion or 1.5% of the country’s GDP in 2015. The country’s Human Capital Index (HCI) of 0.52 indicates that the future productivity of a child born today will be half of what they could have been achieved with complete education and full health. In 2013, it was estimated the benefit cost ratio for nutrition investments in the Philippines at 44. In other words, every dollar invested in nutrition has the potential of yielding $44 return. A lower estimate projecting benefits accruing from a nutrition intervention scenario (NIS) at the national level through key nutrition-specific interventions rolled out over 10 years at full coverage reaches $12.8 billion over a 10-year period with a corresponding cost of $1.062 billion, yielding a benefit cost ratio of 12:1.

Predictably, the World Bank recommended certain policy and programmatic actions to the Philippine Government to address the challenge of reducing childhood undernutrition. Among these were building a strong and more coordinated partnership for nutrition by strengthening the National Nutrition Council to provide the supervisory and oversight capacities needed for programs to run effectively and efficiently and be enabled to respond to gaps in program implementation. 

It was also suggested that high priority and strong support for nutrition should be on the agenda of both the executive and legislative bodies in the municipalities. I was personally aware that at least two progressive LGUs — Quezon and Bataan provinces — were implementing the so-called 1,000-day nutrition program for pregnant mothers and children until the age of two (approximately 1,000 days) to address the most crucial period of growth of a human being to avoid damage to the brain due to undernutrition and malnutrition.

It was obvious to the group of concerned businesspeople that the Government needed help from the private sector (both business and civil society) to implement the recommendations of the World Bank. It is a well-known practice in the Philippines that the business and the NGO sectors try as much as possible to fill in the inadequacies and shortcomings of the public sector. That is why one of the strengths of Philippine society — despite our many weaknesses — is the very vibrant NGO sector.

Fortunately, in 2016, when Lito Sandejas and his colleagues from the private sector resolved to do something about the serious problem described in the World Bank report — and were encouraged by the words of Pope Francis about a throw-away culture — I was still sitting in the board of one of the leading manufacturers of milk products in the country: the Alaska Milk Corp.

It did not take much convincing for Alaska’s CEO then, Freddie Uytengsu, Jr. (famous in local sports circles for promoting basketball and the Ironman events) to agree that the firm’s soon-to-expire (SOTEX) milk products be donated to orphanages and other institutions so the children could be better nourished with protein-rich milk products.

This first experience of donating SOTEX food products to alleviate the hunger of children would give rise to the organization of the Philippine Food Bank Foundation. The incorporators of the Foundation were Lito Sandejas, the late Jaime Ladao, Danilo Navarro, Rafael (Itong) Torres, and myself.  We were soon joined on the board by Quintin Pastrana, Chito Perez, and architect Mike Torres. Through the generosity of the business enterprises owned by Lito Sandejas, the cash expenses of the Foundation (manpower, warehousing, logistics and transport) were subsidized.

Since milk products were the most suitable for the children in the orphanages and other feeding clinics such as those in the public schools, we were fortunate that Alaska’s example was soon followed by other milk manufacturers such as Anchor Milk, Arla, Century Pacific, Holly’s, and Meadow Fresh.

Since hunger cuts across all ages, the Foundation actively sought donations of food products from a variety of manufacturers and food establishments like All Day Supermarket, Alegro Beverage Corp., Amici Pasta, Andre Kahn Vegetables, Bizu, Caramia Cakes, Colgate-Palmolive Phils., Concept Foods, Delbros, Del Monte Phils., Dole Philippines, Dunkin Donuts, Energen, Gardenia Bakeries, Green Cross, Jollibee, Krispy Kreme, Makati Sports Club, Mama Sita’s, Mary Grace, Monde Nissin Corp., Nutri-Asia, Pan de Manila, Pick-Up Coffee, Procter & Gamble, RFM Corp., Shakey’s Pizza, Starbucks, Subway, Toscana Farms, Unilever Philippines, and URC.

Also, a very crucial partner is the transport delivery company, Grab, that donates its logistics services for the transport of goods either directly to the recipient institution from the donor company or from the donor company to the Foundation’s warehouse. As of this writing, the Food Bank is delivering food donations not only in the National Capital Region, but to municipalities in cities and provinces like Cebu, Iloilo, Cagayan de Oro, Davao, Pampanga, and Tarlac.

(To be continued.)

 

Bernardo M. Villegas has a Ph.D. in Economics from Harvard, is professor emeritus at the University of Asia and the Pacific, and a visiting professor at the IESE Business School in Barcelona, Spain. He was a member of the 1986 Constitutional Commission.

bernardo.villegas@uap.asia

The rich can’t sell their art, so they’re borrowing against it

PRIVATEBANK.BANKOFAMERICA.COM

A WEALTHY client at Bank of America Corp. put up his fine art collection so he could borrow enough to buy a sports franchise. Another posted his caché of 19th century American landscapes to renovate his estate.

Such is the burgeoning world of art lending — where pieces are used to secure loans, allowing their affluent owners to tap their collections for cash without having to part with prized possessions. Art sales have slowed, forcing many to reevaluate their options. The major May New York auction season fell about 23% by value from the prior year, with the world’s richest waiting on the sidelines to buy.

“If you’re an owner and need liquidity now, you pause on selling, and instead borrow against your art, waiting for better market conditions,” said Adriano Picinati di Torcello, global art and finance coordinator for Deloitte. That’s contributing to the growth of the art-lending market, he said.

As the market expands, Wall Street’s biggest firms are growing their efforts by adding staff and marketing the service to new and existing clients. While the precise size of the market isn’t certain, Deloitte estimates outstanding loans against art could surpass $36 billion in 2024, up from $29 billion to $34 billion last year. That also compares with $20.3 billion to $23.6 billion of such loans outstanding five years ago, according to Deloitte.

The largest US banks are looking to broaden their reach into the art market as a way to bring on and retain some of the world’s wealthiest individuals and families. Catering to the affluent often means competing with rivals to offer more diverse products, fighting the constant threat that clients can move their money elsewhere.

Art lending offers specific advantages for wealthy owners evaluating their investments as broader financial markets face volatility. Unlike stocks, art isn’t subject to daily swings and is valued annually.

“We’re not asking what the value of your Andy Warhol is every day,” said Katy Lingle, US head of lending solutions at JPMorgan Chase & Co. Private Bank.

The global art market has cooled from record-high valuations coming out of the pandemic. Even as sales have slumped and values have pulled back, demand for art loans is there.

Bank of America has seen new credit lines backed by art rise more than 14% compared to a year ago, according to Drew Watson, head of art services. Its book of art loans recently hit its highest on record. Within JPMorgan’s asset and wealth management business, art lending is up 1% year over year, in line with other loans in that business, according to a spokesperson.

“Even in a higher rate environment, people are still taking advantage of timely opportunities,” taking out loans on their art over selling it at a discount or selling stock, Mr. Watson said.

Bank of America, since it formed its art services group in 2017, has grown to capture over 30% market share, according to a spokesperson. The team, which the bank is continuing to invest in, has 12 specialists in the art market across credit, wealth planning, and philanthropy. The bank’s clients that already have loans keep them, while utilization has remained around 70% this year, according to Mr. Watson.

“The retention and strong utilization is reflected in the balances outstanding, which have remained strong,” he said.

Bank of America structures these loans on a variable rate, so over time the cost of capital could decrease if rates fall. The interest rate is based on the secured overnight financing rate, plus a spread, Mr. Watson said. So as rates get cut, loans like this are even more likely to increase.

Citigroup, which estimates its share of the market at 10% to 15%, has a steady base of art-lending clients because rates on art loans are still favorable compared to other loans, according to Fotini Xydas, head of art finance at Citi Private Bank.

“Even though rates are higher, art is a very stable asset over the long term, compared to other assets in terms of volatility,” she said.

Art loans function as lines of credit, so clients draw on them and pay them back as they can. They’re only available to the wealthy, given the nature of the collateral. The larger the collection, the more flexibility there is for the borrowers.

To qualify at Bank of America and Citigroup, a collection usually needs to be worth at least $10 million, which secures a loan of $5 million or more. Bank of America typically offers 50% loan to value, with each piece worth a minimum of around $100,000. The terms run from around one to three years, with an option to renew, and clients can still keep their pieces protected at home as long as its within the US. Citigroup looks for a minimum value of $200,000 per piece.

JPMorgan bases its loan sizes on the value of the collection and strength of the borrower. The bank looks for diversity of pieces, ensuring they are of “museum quality,” Ms. Lingle said. It also does a financial analysis on borrowers to make sure they can service the debt.

One Citigroup client who had collected several pieces from Pablo Picasso and Claude Monet used them to secure a line of credit to cover taxes tied to estate planning, another common use of this product.

Another private equity principal wanted a line of credit to help fund a capital call. Bank of America facilitated a $10-million loan for one borrower worried about market volatility, using his collection of post-war and contemporary art as collateral.

“There are margin calls, death, divorce and bankruptcy, so we have endless interest for lending,” said Philip Hoffman, the founder of The Fine Art Group, an art advisory and finance specialist that competes with the banks. — Bloomberg

Trevolution Group sees 48.3% rise in PHL outbound travel for 1st half

YOUSEF ALFUHIGI-UNSPLASH

TREVOLUTION Group, a global player in the travel industry, saw a 48.3% increase in outbound tourism from the Philippines during the first half of 2024 compared with the same period last year.  

“[This] indicates the market’s rapid recovery and progressive economic growth,” the company said in a media release on Tuesday.

Trevolution Group operates several travel-related brands, including International Travel Network, ASAP Tickets, Skylux Travel, Dreamport, and Oojo.

“Today, more Filipino travelers choose foreign destinations that are closer to home or prefer to travel domestically, showing almost a threefold increase in flights taken across the country compared with the first half of 2023,” said Trevolution Group, a division of the global technology group Dyninno Group of Companies.

“Family-friendly destinations and extended weekend trips are stealing the spotlight while simultaneously boosting the local tourism sector,” it added.  

The Philippines accounted for almost 20% of Trevolution Group’s overall gross profit for the first half, with over 90,000 airline tickets sold, resulting in more than $120 million in gross bookings, the company said.

“Historically, the Philippines has been a top travel choice for the Group’s air passengers, and currently, the demand for transpacific flights departing from the country is also growing significantly and surpassing the levels seen before the pandemic,” it said.  

For the first half, economy class constituted 98.5% of all flight bookings, with a 9.6% increase in demand.

The share of round-trip tickets increased by 2.5%, amounting to 79.7% of all tickets sold, the company said.

The average length of stay abroad for Filipino travelers decreased to 39.5 days from 62 days last year, indicating a trend towards shorter, more frequent trips.  

Economy-class flight prices from the Philippines decreased by 23.7%, amounting to $767 per ticket, while business-class fares dropped by 14%.

The top departure countries for travelers to the Philippines were the United States, Canada, the United Kingdom, and Japan.

Notably, there was almost a fifteenfold increase in inbound flights from the UK’s major airports compared with the first half of 2023.

Similarly, the top departure cities remained Los Angeles, San Francisco, New York, Toronto, and Chicago, with Philippine Airlines, EVA Air, United Airlines, China Airlines, and Korean Air being the most popular air carriers.  

“Our objectives for the Philippines this year are very ambitious — we are now focusing on local expansion and active hiring, expecting to gain over 1,000 people in Cebu and over 500 in Manila. To provide more value for the market, we are now working on offering our travel products to the local clientele, including the introduction of financial options to help finance air travel,” said Alex Weinstein, founder of Dyninno Group of Companies.

“Additionally, our team is excited to launch a new product, the all-in-one travel super-app Dreampass, designed to further enhance customer engagement,” he added. — Sheldeen Joy Talavera

Security Bank raises P20 billion from five-year corporate bonds

BW FILE PHOTO

SECURITY BANK Corp. has raised P20 billion from its offering of five-year fixed-rate peso corporate bonds, four times as much as its initial target, amid robust investor demand, it said on Tuesday.

“Security Bank raised P20 billion worth of bonds… This is the largest issue size of the bank to date. Due to strong demand for the bonds, the bank exercised its oversubscription option and accepted offers above its minimum P5-billion issue size,” the listed lender said in a disclosure to the stock exchange.

“We’re humbled by the overwhelming response to our bond offering, which reflects the strong trust and confidence of our investors in Security Bank and our BetterBanking promise. We’re grateful for their support and will strive to keep delivering value to our clients and stakeholders,” Security Bank Executive Vice-President and Financial Markets Segment Head Arnold Q. Bengco said.

Proceeds of the bond issuance will be used to diversify the bank’s funding sources and support its lending activities, the lender said.

The notes, which have a tenor of five years and one month, were priced at 6.05% per annum.

The offer period for the five-year papers ran from July 8 to Aug. 5. The offering was originally set to end on Aug. 13 but was closed early “as volume significantly exceeded target.”

Philippine Commercial Capital, Inc. and SB Capital Investment Corp. were the joint bookrunners, joint lead arrangers, and selling agents for the issuance.

Security Bank issued the bonds and listed them on the Philippine Dealing and Exchange Corp. on Tuesday.

The papers were issued out of the bank’s P200-billion peso bond and commercial papers program.

Security Bank last tapped the domestic bond market in July 2023, where it raised P18.5 billion from the issuance of 1.5-year fixed-rate corporate bonds due 2025.

The lender’s net income rose by 10.19% year on year to P2.82 billion in the second quarter amid higher revenues.

Security Bank’s shares closed at P61.30 apiece on Tuesday, declining by 70 centavos or 1.13%. — A.M.C. Sy

To achieve energy security, balance is key

NURAGHIES-FREEPIK

On Aug. 13, nine business groups released a joint statement expressing their support for the Department of Energy’s pursuit of a balanced energy mix, saying that this policy is appropriate to the country’s particular context. “As an emerging market,” the group said, “the country must balance energy security and affordability with climate change concerns to support its economic progress.”

The groups — the Blockchain Council of the Philippines, the Employers Confederation of the Philippines, the Federation of Philippine Industries, the Financial Executives Institute of the Philippines, Fintech Alliance.PH, the Foundation for Economic Freedom, the Makati Business Club, the Management Association of the Philippines, and the Women’s Business Council Philippines — said that the country has growing energy demands and that our energy supply per capita is the third lowest in the ASEAN region. Thus, “we need to prioritize augmenting power capacity.”

They further pointed out that energy insecurity is expensive, using the power outage on Panay Island in January as an example. The outage led to about P3.8 billion in economic losses in Iloilo province.

Energy Secretary Raphael Lotilla has reaffirmed the importance of a balanced energy mix amidst claims that the Department of Energy’s moratorium on coal-fired projects is being violated. He stressed the need for a blend of renewable and traditional energy sources, such as coal, oil, and natural gas, to meet the Philippines’ energy demands while ensuring affordability, reliability, and environmental responsibility.

He further pointed out that the Energy department’s strategy involves not just the immediate expansion of renewable energy but also maintaining and upgrading existing coal and gas facilities to prevent power shortages.

We at Stratbase echo the sentiments of the business groups. Diversifying our energy sources will allow the Philippines to mitigate risks like power outages and wide-scale disruption, reduce the reliance on imports, and support economic stability while transitioning to cleaner energy which is a long and tedious process that will take decades to achieve.

We recognize the great need for power. An economy like the Philippines’ needs a reliable supply of electricity to power economic activity. Power costs here in the Philippines are among the most expensive in the region. We are also angling to attain middle-income status in the foreseeable future, and to achieve this, our industries must have a stable supply of power.

All this lies on a continuum between two extremes. On the one hand, there is a clear need to move away from dirty sources because these have been proven to cause harm to the environment on a planetary scale. Our commitment to the Paris Agreement and our very real experience of the calamitous effects of climate change should erase all doubt that we have to lessen and eventually eliminate our dependence on coal-fired power plants and fossil fuels as a source of energy.

On the other hand, purely renewable energy (RE) sources are not yet viable as a baseload alternative as these are still developing and costly technologies. While essential for reducing carbon emissions, renewables like solar, hydro, and wind are unpredictable and weather-dependent, risking power shortages without more reliable energy sources. The Philippine government’s targets — 35% RE by 2030, 50% by 2040, and over 50% by 2050 — reflect a keen recognition of this realty.

For the time being, only a balanced energy mix combining renewable and non-renewable sources will ensure energy security, affordability, and sustainability. This approach is what the Philippines needs at this time. It allows us room to manage the inherent variability of energy sources and recognize that there remains a significant need for fossil fuel-based sources to ensure energy reliability and affordability, all while moving toward the goal of being increasingly powered by cleaner energy over time.

With a balanced energy mix, we do not have to sacrifice economic growth and stability for environmental sustainability.

A crucial aspect of the balanced and optimal mix of energy sources are so-called transition fuels like natural gas. Natural gas delivers an adequate supply at the least social cost toward a smooth transition to cleaner energy. In the past two decades, the Malampaya gas field has served the country well in contributing a significant part of our energy needs, even as production has dropped significantly since 2022.

There is now an urgency to shift to imported liquefied natural gas (LNG) — a cleaner alternative as it emits 50-60% less carbon dioxide than coal. LNG also has quick startup and shutdown capabilities.

The private sector plays a crucial role in meeting the objectives of the country’s energy plan, including access to affordable energy, a reliable and resilient energy supply, and transition to clean, sustainable, and climate-centered energy resources. Private partners have the technical expertise and financial capability to build the necessary infrastructure to facilitate the transition to clean energy.

Thus, while the adoption of a policy of balanced mix of energy sources is commendable, as the business groups already articulated in their statement, there needs to be a parallel effort on the part of the government to create an attractive and enabling policy environment for investors. There are many private groups who would like to participate in helping in the transition to clean energy, and they should be given the opportunity to help and contribute to this crucial journey.

 

Victor Andres “Dindo” C. Manhit is the president of the Stratbase ADR Institute.

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