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Inflation among poor households up 9.5% in October

By Jochebed B. Gonzales, Senior Researcher
INFLATION, as experienced by low income households, stood at 9.5% in October, driven by sharp price upticks in food and utilities, the government reported on Friday.
The October inflation turnout for goods and services used by households at the bottom 30% income segment matched September’s 9.5% print, which was the fastest since the first quarter of 2009’s 12.3%, based on available data from the Philippine Statistics Authority’s Web site. It also accelerated from the 3.4% year on year price increase recorded in the same month a year ago.
The latest reading brought the segment’s year to date inflation to 7.0%, higher than the 2.9% average during last year’s comparable period.
The Consumer Price Index for the bottom 30% income segment reconfigures the model basket of goods to reflect a heavier weighting for food, beverages and tobacco (FBT) index. This and other weightings are regarded to more accurately capture the spending patterns of the poor.
FBT recorded the highest uptick among commodity groups, rising 10.7% year on year from 3.3% in October 2017. The food alone index logged a 9.8% growth with rice and corn prices climbing 11.5% and 5.6%, respectively.
Fruits and vegetables registered a 14.2% price growth while fish and meat prices rose 12.6% and 7.1%, respectively.
The cost of utilities, consisting of fuel, light and water, accelerated to 9.8% from 6.5% a year ago. Higher annual markups were also recorded in housing and repairs (5.1% from 2.8%), services (3.5% from 1.8%), clothing (2.9% from 1.3%) and miscellaneous goods (2.2% from 1.3%).
By region, inflation on goods used by poor households was highest in Mimaropa at 15.8%. Also seeing double-digit inflation were the regions of Ilocos (12.6%), Cagayan Valley (11.7%), Western Visayas (11.7%), Bicol (10.5%) and Central Visayas (10.1%).
Summing up the regions apart from the nation’s capital, inflation for the bottom 30% income segment in areas outside the National Capital Region came in at 9.5%. Metro Manila, on the other hand, was lower with 6.9% price growth.
Sought for comment, Michael L. Ricafort, economist at Rizal Commercial Banking Corp., pointed to faster increases in food and fuel prices.
“Food prices that have relatively higher inflation weights such as rice, corn, fish, fruits and vegetables posted a relatively higher increase in 2018, especially amid reduced local supply brought about by lower importation of rice that led to shortage/reduced market supply of cheap NFA (National Food Authority) rice earlier this year,” he said, noting that the low income segment purchased the more expensive commercial varieties of rice.
Mr. Ricafort added, “The sharp increase in global crude oil/fuel prices earlier in 2018 resulted (in) much higher expenses by households from the lowest income brackets since transport/fuel costs account for a higher share of their budgets/expenditures as a result of lower income base, thereby magnifying the adverse impact of higher transport fares and other fuel expenses compared to higher-income groups.”
He also pointed out: “Inflation of the lowest income brackets, higher than the headline inflation for all income segments, could ease by a much faster rate, given the dramatic decline in global oil prices….”
“Furthermore, harvest season for rice and the proposed tariffication of rice imports and other non-monetary measures to increase rice/food supply in an effort to reduce prices could have a bigger impact on the reduction of inflation for the bottom 30% income segment than on higher income segments.”

Stratbase forum charts PHL outlook on economy, politics, international relations

By Camille A. Aguinaldo, Reporter
BANGKO Sentral ng Pilipinas (BSP) Deputy Governor Diwa C. Guinigundo said the “strong political capital” of the Duterte administration has provided government a leverage to push for policies that would further improve the country’s economy.
“Reforms pursued in the past puts the current administration in a favorable position to push for further reforms and leverage on the strong political capital that it possesses. It has to leverage on that very important aspects of policymaking,” he said at the Pilipinas conference forum organized by the Stratbase Albert Del Rosario Institute (ADRI) on Friday.
In discussing the interplay of politics and economic policies, Mr. Guinigundo noted that suboptimal economic policies could cause public discontent which may lead to adverse political events. In turn, uncertainty in current economic environments may also be driven more by political issues, rather then usual factors in the market.
He said the Philippines in the past 25 years has embarked on “often difficult and painful reforms,” which he said were necessary to strengthen the country’s institutions and to propel the economy forward. These policies included the liberalization of the banking, telecommunications, transport and power sectors, the creation of the BSP as the country’s independent monetary authority, as well as the efforts to strengthen the banking system.
The BSP official said these past reforms have helped the Duterte administration to push for more favorable policies, with the help of its strong political capital.
Mr. Guinigundo noted that the government is already addressing bottlenecks in government services by establishing online services aimed at improving the public’s transactions with government. The BSP is also adopting technological innovations that would improve efficiency in the monetary policy and would help them adjust in emerging challenges of the digital landscape, he added.
“These ongoing reforms are aimed at further reducing cost of doing business to translate to a more competitive and productive business and workforce,” he said.
He also assured that the central bank is focused on inclusive growth and price stability, noting that issues on equality, even if it may appear as a non-monetary concern, may transform into a major disruption if it leads to political unrest and dissatisfaction.
“We need to look at the bigger picture because good policymaking is about good economics, good politics and their interaction,” he said.
2019 AND BEYOND
Other analysts, government officials, and business leaders highlighted the hits and misses of the Duterte administration halfway into its term, and shared prospects in 2019 and beyond on the country’s economic, security, and political future.
Foundation for Economic Freedom (FEF) president Calixto V. Chikiamco said the government faced challenges in achieving its gross domestic product (GDP) targets due to issues on the manufacturing sector and the poor state of agricultural productivity.
He said a large percentage of the country’s exports have been focused on low-value added products in the electronic sectors. He added that manufacturing growth is also declining due to the government’s unstable policies.
“Most probably we’ll have to be happy with 6% (GDP) or even less. The Philippine economic growth has been constrained by its agricultural export sector….(L)ow agricultural productivity will remain the biggest drag to manufacturing growth,” Mr. Chikiamco said.
National Scientist and University of the Philippines (UP) economics professor Raul V. Fabella stressed the need for manufacturing to outpace the services sector in order to help reduce poverty.
He also pointed out that if the government achieved the goals of the Build, Build, Build infrastructure program, the Philippines will be able to stretch the potential growth of the economy beyond the estimates of the Asian Development Bank (ADB).
Mr. Fabella also backed Malacañang’s decision to proceed with the scheduled increase of fuel excise tax under the tax reform law and the passage of the Tax Reform for Attracting Better and High-Quality Opportunities (TRABAHO) bill, which proposes to reduce corporate income tax and rationalize the country’s fiscal incentives system.
“When the global fuel prices are on a downward trend, it’s always the time to push for structural reforms because the inflationary effect, especially on fuel, tax adjustment, would not be felt as much,” he said.
For Mr. Chikiamco, the government needs to increase the country’s foreign direct investments by removing the constitutional economic restrictions, to increase agricultural productivity by removing the restrictions preventing farmers from expanding, as well as to diversify exports by having stable mining policies and to amend the Labor Code to allow for more labor-intensive industries.
Philippine Chamber of Commerce and Industry Inc. (PCCI) president George T. Barcelon expressed optimism in the prospects for the Philippine economy. But he also said the government needed to work on tourism, agriculture, and manufacturing growth.
“We are recognized as one of the more resilient economies in Asia. So we look forward, that 2019 will continue its steady growth,” he said.
FOREIGN POLICY
As for security prospects in the country, Defense Secretary Delfin N. Lorenzana said President Rodrigo R. Duterte pursues an independent foreign policy that will allow the Philippines continue to deepen its security ties with the United States, but at the same time forge closer relations with China, and other regional powers like India and Russia.
“Engaging more partners does not mean we are letting go of old friends,” he said.
Mr. Lorenzana said the Duterte administration’s approach, especially with regards to the South China Sea, does not mean it is turning its back on the 2016 Hague ruling on the disputed waters. He said the government continues to view the ruling as “valid and legitimate.”
The Armed Forces of the Philippines (AFP) has also established its presence Philippine-claimed islands in the South China Sea by constructing facilities, such as the beaching ramp and mooring bollard in Pagasa island as well as a fisherman’s shelter in Mavulis island, the Defense Secretary added.
Asia Maritime Transparency Institute Initiative Director Gregory Poling cited the need for the United States to clarify its commitments under Mutual Defense Treaty (MDT) with the Philippines. He said this would be the Philippines’ greatest leverage in its alliance with the US to deter China’s activities in the South China Sea.
“My contention would be the only way that we would carry a position of real leverage and real strength is the workability of the alliance to effectively respond to a timely manner to any provocation,…for the US to offer clarification of the MDT paired with a recognition of Manila that EDCA (Enhanced Defense Cooperation Agreement) is necessary. And without full implementation of EDCA, the US cannot come to the Philippines’ aid,” he said.
On the political outlook, analysts noted that the upcoming 2019 midterm elections would not only provide a referendum on public support for the Duterte administration but would also indicate if the support would extend beyond the election period and into the legislative agenda.
“The real question is if the support can be translated still into approval of his legislative reforms, such as TRAIN, federalism. And so on. And the way that they prepared for elections is actually addressing that. I’m referring to the establishment of the Hugpong ng Pagbabago….I’m saying…that it’s a pragmatic way of consolidating forces,” said Institute for Political and Electoral Reforms (IPER) executive director Ramon Casiple.
Stratbase ADRI program convenor Francisco Mango said for his part, “It’s really about political capital on why are there concerns on popularity (during midterm elections)….What is important is that the political capital from public perception is meant to be harness to push for key policies….”
For Ateneo School of Government Dean Ronald U. Mendoza, the 2019 midterm polls may also see the rise of alternative leaders that would counter the increasing number of so-called fat dynasties, which he said have hampered development in some parts of the country.
“Our economic institutions seem to be improving and it is showing in our economic system but our political institutions seem to be lagging very very much behind and could be our weakness moving forward,” he said.
“There are good signs….There are alternative leaders emerging and are taking up the cudgels….But it would be an uphill climb for them and of course a challenge for us to support these alternative leaders,” he added.

LTFRB approves two new TNC applications

THE Land Transportation Franchising and Regulatory Board (LTFRB) said Friday that it issued certificates of public convenience (CPC) to two new transport network companies (TNCs), paving the way for them to start operations.
These two companies are Aztech Solution International Corp. and RYD Global Inc, owners of the ride-hailing apps SnappyCab and RYD Global, respectively.
The LTFRB did not say when the companies plan to launch their apps.
According to LTFRB, SnappyCab will operate in Metro Manila, while RYD Global will operate in Metro Manila and other regions.
That brings to eight the accredited TNCs: Ipara Technologies and Solutions Inc, Hirna Mobility Solutions Inc, Hype Transport Systems, Inc, Micab Systems Corp., E-Pick Me Up Inc, GoLag, as well as Aztech Solution and RYD Global.
The LTFRB also said that the accreditation of Grab Philippines which has the biggest share of transport network vehicles (TNVS) has yet to be renewed. Grab Philippines in April acquired the Southeast Asian business of its rival company Uber, leaving it alone in the market until new TNCs were approved in June.
The common base supply for TNVS is still capped at 65,000 units in Metro Manila, 1,500 units in Metro Cebu, and 250 units in Pampanga. — Reicelene Joy N. Ignacio

Ayala Healthcare buys 75% of Negros Grace Pharmacy

AYALA Healthcare Holdings, Inc. has invested in Negros Grace Pharmacy, Inc. through a share purchase agreement for a 75% stake in the Visayan-focused chain, its parent firm Ayala Corp. said on Friday.
“This transaction enables AC Health to expand its portfolio in pharmacies, particularly in the Visayas region,” the listed diversified conglomerate told the stock exchange.
The share purchase agreement, which was signed with Jasminum Corp., was executed on Dec. 6, 2018. Closing is subject to the fulfillment of certain conditions precedent and to securing any necessary regulatory approval, Ayala Corp. said.
“Negros Grace, based in Bacolod City and founded in 1971, owns and operates over 70 drugstores across Central and Western Visayas,” the holding firm said.
The agreement comes a day after Ayala Corp. disclosed the ratification by its board of the executive committee’s approval of the merger of its subsidiary AC Education, Inc. with iPeople, inc., the education subsidiary of House of Investments, Inc.
Under the terms and conditions of the merger, listed iPeople will be the surviving entity.
“The merger, which shall be completed as a statutory merger in accordance with Philippine law, shall be subject to the approval of the respective Boards of Directors and stockholders of AC Education and iPeople as well as securing the necessary regulatory approval,” it said.
On Friday, shares in Ayala Corp. fell 2.57% to P910. — Victor V. Saulon

Rockwell board approves capex funding plan from earnings

ROCKWELL Land Corp. said its board approved on Friday the appropriation of P7 billion of the company’s retained earnings of P12.1 billion for capital expenditure covering the period 2019 to 2021.
The retained earnings level was as of Sept. 30, the company said told the stock exchange.
Rockwell did not disclose details, nor discuss the planned expenditure program for the three-year period.
As of September, the company reported a net profit attributable to the parent equity holders of P1.878 billion, up from P1.612 billion a year earlier. The increase comes after it recorded gross revenue of P12.201 billion from P10.721 billion in the same period nine-month period last year.
Basic earnings per share was at P0.31, from P0.26 previously.
Rockwell Land on Friday rose 1.01% to P2.00. — Victor V. Saulon

Vista Land prices 5, 7-year bonds

VISTA Land & Lifescapes, Inc. has priced its fixed-rate retail bonds at 8% for the five-year instruments due in 2023, and at 8.25% for the seven-year bonds due in 2025.
The total bond principal is P5 billion with an oversubscription option of up P5 billion. They will be issued out of the company’s P20 billion shelf registration, which the Securities and Exchange Commission made effective on July 18, 2018.
Vista Land said the bonds are to be offered through China Bank Capital Corp., the issue manager, underwriter, and bookrunner. The offering schedule is from Dec. 10, 2018 to Dec. 14, 2018, after the receipt of the permit to sell from the securities regulator.
The company said the bonds are set to be issued on Dec. 21, 2018.
It said Credit Rating and Investors Services Philippines, Inc. rated the bonds AAA, which is the highest rating assigned by the credit rating firm.
Vista Land declined 1.15% to close at P5.14. — Victor V. Saulon

Victorias Milling submits new bank loan restructuring plan

VICTORIAS Milling Co. Inc (VMC) said Friday it proposed to modify a rehabilitation plan it submited to the Securities and Exchange Commission (SEC) in April by including a compromise payment scheme for some bank loans.
In a disclosure to the Philippine Stock Exchange (PSE), VMC said that its subsidiary North Negros Marketing Company Inc (Nonemarco) used refined sugar delivery orders (RSDO) and refined sugar quedans (RSQ) issued by VMC to avail of loans from several banks, which remain outstanding.
The banks with outstanding loans are: Dao Heng Bank Inc (DHB, now BDO Unibank Inc), Land Bank of the Philippines (LBP), Bank of the Philippine Islands (BPI) and Philippine National Bank (PNB).
VMC said that while it asserts it did not benefit from the loans, it is willing to repay the banks over a period of 10 years, to avoid future and protracted litigation.
The compromise amounts are as follows: P34,136,587 for DHB; P204,907,006.50 for LBP; P55,250,000 for BPI; and P10,629,850 for PNB.
“Interests, penalty charges, legal fees, and expenses claimed against VMC in connection with the RSDOs and RSQs are deemed waived and condoned by the RSDO and RSQ claimants,” VMC quoted the order it received and transmitted to the company by its rehabilitation counsel.
“The compromise amount or any remaining balance thereof shall not be subject to any interests or changes during the 10-year payment period,” the order stated.
“Any provisions in the rehabilitation plans of VMC, particularly, the Updated Rehabilitation Plan dated Sept. 25,1998, First Addendum to the Rehabilitation Plan as of Feb. 5, 1999, Second Amendment to the Rehabilitation Plan dated July 22, 1999, Alternative Rehabilitation Plan, and the Debt Restructuring Agreement dated April 29, 2002, inconsistent herewith are hereby repealed or modified accordingly,” according to the order.
Meanwhile, VMC was also directed to determine the status of RSDO claims by Asianbank and submit a plan to settle it if it determines the existence of an outstanding debt; validate other pending claims against the company particularly labor cases in other courts or tribunals; discuss with other claimants and creditors contingent claims and labor claims pending before courts or other tribunals; and submit a separate plan for the settlement of the claims for approval. — Reicelene Joy N. Ignacio

Summit closes $1.2-M financing round for Kumu livestream app

SUMMIT Media said Friday that it completed its $1.2 million seed round fundraising for its livestream and content mobile app Kumu.
In a statement, Lisa Gokongwei-Cheng, president and chief executive officer of Summit Media, said: “Our investment in Kumu is an important addition to our portfolio. We are committed to investing in the future of media, as we are cognizant of our audiences’ rapidly changing needs.”
Ms. Gokongwei-Cheng is also a director of Robinsons Bank.
Other institutions that joined Summit Media, the lead investor in the seed round are: FOXMONT Capital Partners; Two Culture Capital, and Jove Schrottmann of Mandala Spa Boracay.
Summit Media has 16 titles including Entrepreneur, Cosmo and Top Gear Philippines.
“Since livestreaming is still relatively new in the Philippines, it is our company’s responsibility to show Filipinos what is possible to achieve through this medium,” Kumu Head of Strategy and Co-Founder Rexy Dorado said.
Roland Ros, CEO and Co-Founder of Kumu, said that part of the seed round will be used to help grow the community of content creators.
“We are allocating some of our funding to supporting our livestreamers across the creative process, beginning with training and going all the way up to production. Our goal is to create the world’s first social television network, where content creators can readily find enthusiastic fans who want to engage with them,” Mr. Ros said. — Reicelene Joy N. Ignacio

Japan building materials firm Tajima opens flagship store in Mandaluyong

JAPAN’s Tajima Roofing Inc., a building materials maker, opened its first flagship store in the Philippines to highlight its tile products, its local partner Future Flooring Inc. said.
The store at Shangri-la Plaza Mall in Madaluyong features vinyl tiles for various applications including hospitals, gyms, and outdoor spaces.
“Vinyl is a very good option because it is not affected by termites, it does not expand (when exposed to) weather. It can take on water… (Tajima also has) certain flooring for special applications like sports… and for outdoors. You rarely see vinyl flooring used outdoors,” Roy C. Chua, managing director of Future Flooring, Inc., Tajima’s exclusive distributor in the Philippines, told BusinessWorld.
Tajima’s floor tile product line also addresses various specialized applications like flooring for event spaces and flame-retardant carpet tiles.
“We want to bring something new to educate the Philippine market,” Kyuko Hayama, Tajima’s manager for international markets, told BusinessWorld.
Ms. Hayama added that the company expects the use of marble and ceramics for floorings to fade and be replaced by vinyl, which is easier to install and more environmentally friendly.
“Basically, we want to grow together with the Philippine economy,” Yoshio Kotake, Tajima executive vice president told BusinessWorld through an interpreter. — Vincent Mariel P. Galang

UnionBank lists P11 billion 2-year debt

UnionBank of the Philippines, Inc. raised P11 billion via the issue of peso notes, the proceeds of which will go towards meeting tighter liquidity requirements.
Aboitiz-controlled UnionBank also listed the P11 billion fixed-rate debt issue at the Philippine Dealing & Exchange Corp. (PDEx) in Makati City on Thursday.
The notes will mature in two years and carry an interest rate of 7.061%, payable quarterly until 2020.
The listing represents the initial tranche of its P20-billion bond or commercial paper program approved by its board on Aug. 31.
In his speech at the listing ceremony, UnionBank treasurer and chief financial officer Jose Emmanuel U. Hilado said the offer received “overwhelming interest” from investors.
“We were only planning to issue P5 billion. We ended up issuing P11 billion because of overwhelming interest from both institutional and retail investors,” Mr. Hilado said.
“This kind of instrument is friendly for the liquidity coverage ratio because the full implementation in 2019 wherein you have to maintain a 100% liquidity coverage ratio,” he said. “So you need longer term liabilities instead of having just the usual short-term deposits.”
Banks have been tapping the capital markets in recent months to raise more capital ahead of stricter risk management requirements that will take effect on Jan. 1, 2019 under the international Basel 3 framework.
The Hongkong and Shanghai Banking Corp. Ltd. as well as Standard Chartered Bank were lead managers and bookrunners, and were also selling agents alongside UnionBank.
The listing brings the total volume of outstanding securities listed at the PDEx to P1.013.27 trillion, floated by 50 companies.
The Bangko Sentral ng Pilipinas recently allowed lenders to raise funds with greater ease through corporate debt paper, with new regulations doing away with approvals.
Bank of the Philippine Islands as well as Metropolitan Bank & Trust Co. recently issued fixed-rate commercial bonds, raising P25 billion and P10 billion, respectively.
Mr. Hilado said “it’s hard to say when” UnionBank will issue the next tranche, although he noted that it will be a “regular product.”
“As the bank grows, your ratios adjust. If growth is solid, that means you need to keep doing issuances like this to comply with the ratios,” he said.
“I think it will be a regular product because it’s flexible, you don’t need central bank approval. So as the need arises, you just start issuing.”
UnionBank closed at P65.95 on Friday, down 95 centavos or 1.42%. — Karl Angelo N. Vidal

PNB Savings opens first fully-digital branch

PNB Savings Bank said it opened its first fully digital branch in San Juan City with no tellers and largely paperless transactions.
The new branch is equipped with interactive touchscreens, self-service kiosks, tablets, chatbots and full-function automated teller machines, among others.
In place of bank tellers, “universal officers” are on-site to assist clients in getting used to the new technology, open accounts and recommend financial products.
“This fully digital branch is much more than just a showcase of the new digital technologies in banking. It is an actual channel that efficiently connects you to new opportunities,” PNB Savings Bank President Jovencio Hernandez was quoted as saying in the statement.
Meanwhile, the newly-appointed president of PNB Jose Arnulfo A. Veloso said the bank will continue to pursue innovation.
PNB is the latest bank to turn to technology to reduce the need for bank branch staff.
Last year, UnionBank of the Philippines launched a fully digital branch, which was branded “The ARK” in Makati, with plans to open more in Taguig, Cebu and Davao by converting existing branches.
Meanwhile, Bank of the Philippines Islands has said that it adopted a so-called “omni-channel” strategy with digital platforms complementing traditional modes of banking.
PNB, the country’s fifth-biggest bank, announced in September that it will absorb PNB Savings Bank, subject to regulatory approval.
Once combined, the lender will have a total of 707 branches and over 1,390 automated teller machines, on top of 70 overseas offices. — Karl Angelo N. Vidal

Peso higher after dollar slides on weak jobs data, oil prices

THE peso strengthened on Friday as the dollar was undermined by weak jobs data and lower global oil prices.
The peso closed at P52.71 to the dollar on Friday, against its the P52.76 finish Thursday.
The peso was stronger the whole day, opening the session at P52.689. Its intraday peak was P52.60, while the low was P52.73.
Trading volume declined to $973.95 million from $993.25 million on Thursday.
A foreign exchange trader said the peso recovered today after a weak US jobs report.
According to the payrolls processor Automated Data Processing, Inc., the private sector in the US added 179,000 jobs in November, lower than the anticipated 195,000 jobs in a Bloomberg poll.
October employment on the other hand was revised to 225,000 additional jobs, slightly lower than the previous print of 227,000.
The trader also attributed the dollar’s weakness to “heightened US-China trade relations” following the arrest of Huawei chief financial officer Meng Wanzhou in Canada, who is also facing extradition to the US.
The arrest of the Chinese executive is expected to undermine the 90-day ceasefire signed by the US and China on Saturday during the G-20 Summit in Argentina.
Michael L. Ricafort, economist at Rizal Commercial Banking Corp., said the peso strengthened after The Organisation of Petroleum Exporting Countries failed to to agree on oil production cuts. The bloc is expected to meet again on Friday.
“[This resulted] in lower global oil prices and a weakening of the dollar against major emerging-market currencies including the peso,” Mr. Ricafort said in a text message. — Karl Angelo N. Vidal

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