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Federal Reserve’s Williams says strong economy warrants further rate hikes

FEDERAL RESERVE Bank of New York President John Williams gave an optimistic review of the US economy, reiterated his support for further gradual interest-rate increases and expressed no concern that market participants have dialed back expectations for policy tightening in 2019.
Markets moved sharply after Chairman Jerome Powell said last week that the Fed is getting closer to its range of estimates for the neutral interest rate — the dividing line between tight and easy policy — and his phrasing was widely interpreted as a dovish signal.
Interest-rate futures pricing adjusted so that they’re now anticipating just one rate increase in 2019 following a hike at their meeting later this month. That’s at odds with the Fed’s Summary of Economic Projections from September, which suggests that officials see a rate increase this month and three more hikes next year. That forecast will be updated when officials gather Dec. 18-19 in Washington.
“My own view is — I think completely consistent with what Chairman Powell said — is that the US economy is strong, but there are definitely” some “risks on the horizon,” Williams said Tuesday in a press briefing. The Fed is in a good position to react to whatever the economy does going forward, he said.
‘WELL-POSITIONED’
“There’s a good — like 50 percent chance — that the economy performs faster, inflation picks up a little bit more than we expect, and I think we’re positioned to adjust to that,” Williams said. “We’re well-positioned to adjust our path of interest rates if the economic data disappoint.”
Despite that nod to uncertainty, Williams painted an overwhelmingly positive picture of a strong economy that’s achieving the Fed’s goal of full employment. He said he expects tailwinds from fiscal stimulus to persist into 2019, and he thinks inflation will move slightly — but not dramatically — above the Fed’s 2% target.
“I expect with the economy continuing to grow nicely above-trend, we’ll see further job gains, further declines in the unemployment rate, and unemployment will edge slightly below 3.5% over the next year or so,” he said. “I do continue to expect that further gradual increases in interest rates will best foster a sustained economic expansion and sustained achievement of our dual mandate goals.”
As the economy improves, the Fed will need to reconsider how much guidance it’s providing, Williams said. The central bank will get to a situation “where it’s not as obvious that we are going to be raising interest rates at a gradual pace over time,” he explained.
LOW UNEMPLOYMENT
“Then it will be appropriate to further step back on how much explicit forward guidance we give in statements,” he said, though he said the dot plot and press conferences will continue to provide a “transparent and comprehensive view” of the Fed’s outlook.
One “open question” is how low unemployment can remain without stoking hotter inflation, the New York Fed chief said. Unemployment is currently at 3.7%, well under the 4.5% that Fed officials have penciled in as the long-run sustainable rate.
“Right now I think we’re in a great position,” Williams said. “We’re in a good position to allow the unemployment rate to be below 4% for the next few years without really having — I don’t have much concern about inflation pressures picking up.”
Against that backdrop, he suggested it’s OK to continue testing the limits. “Over the next couple of years we’re going to continue to learn whether maybe a lower unemployment rate is sustainable without creating inflationary pressures,” he said. — Bloomberg

Microsoft inks agreement with AIM to assist start-ups

MICROSOFT Philippines is offering its technological expertise and cloud solutions to the Asian Institute of Management (AIM) — Dado Banatao Incubator, the school’s program that helps start-ups scale their businesses.
The two organizations signed a memorandum of agreement (MoA) on Wednesday at the AIM building in Makati City, formalizing the partnership aimed at boosting the school’s incubator program.
“Through Azure and Microsoft regional partner Rhipe’s support, start-ups at The Incubator are provided with cloud enabled tools to help them digitally transform their businesses to become more competitive in their respective industries,” Eileen Ong, Microsoft Philippines director for commercial partners and small medium corporate business unit, said in a statement.
During the signing event, Ms. Ong said Microsoft will provide start-ups with the computing software to help them process the data gathered for their businesses.
“[W]e all know in today’s world how critical it is for companies to be able to have insights for them to be able to understand what the customers need, what are the consumer behaviors, for them to be able to understand how to improve their products to be able to deliver more to their customers, which in turn will help them to be able to improve their own profitability and growth as an organization,” Ms. Ong said.
Aside from the software, Microsoft will also offer a curriculum at the AIM Incubator, which include the training of start-ups on how to utilize cloud tools, create technology architecture and connect with Microsoft’s network of potential partners.
“We wanted a more progressive curriculum… that’s how we approached Microsoft, this is the kind of setup that we wanted. We do not just want these services, but we want your (Microsoft’s) technologists and architects to work with our start-ups,” AIM-DBI Executive Director Prim Paypon said.
The Incubator is a program offered at AIM which allows start-ups to receive mentorship and training from industry experts, rent an in-house office located in Makati City, and use facilities and resources from the AIM campus. — Denise A. Valdez

Fortnite addiction prompts parents to turn to video-game rehab

DEBBIE VITANY is fighting a losing battle against Fortnite.
Her 17-year-old son, Carson, has been logging 12 hours a day on the video game, searching for weapons and resources in a post-apocalyptic world where the goal is being the last person standing. Teachers complain he falls asleep in class and his grades have plummeted.
“We’d made some progress in getting him to cut down his Fortnite hours and get better sleep, but he’s slipped back into his old habits,” Vitany, who lives near Saginaw, Michigan, said in an interview. “I’ve never seen a game that has such control over kids’ minds.”
Vitany’s anguish is echoed by an army of other parents, teachers and bosses around the world grappling with a game that sucks up hours of players’ time — sometimes to the detriment of other activities. More than 200 million people have registered to play Fortnite, which has become a billion-dollar business for its creator, Epic Games Inc. Some desperate parents have sent their kids to rehab.
“This game is like heroin,” said Lorrine Marer, a British behavioral specialist who works with kids battling game addiction. “Once you are hooked, it’s hard to get unhooked.”
Epic has issued past warnings about avoiding Fortnite scammers, but it declined to comment on the addiction issue.
Video-game addiction isn’t new: Parents and teachers have been carping about distracted children — and their joystick-addled hands — since the days of Atari consoles. But the ubiquity of Fortnite has created a more widespread menace. And it’s happening against the backdrop of broader concerns about social-media and smartphone overuse.
SPURRING BREAKUPS
Fortnite, first released in its popular “battle royale” mode in September 2017, isn’t just causing problems for kids. An online UK divorce service says 200 petitions cited Fortnite and other video games this year as the reason for the breakup of marriages.
Professional athletes are getting hooked, too. The National Hockey League’s Vancouver Canucks had so much trouble getting players to meetings and dinners they banned Fortnite on the road. David Price, star pitcher for Major League Baseball’s World Series-winning Boston Red Sox, was scratched from a May start against the archrival New York Yankees because of wrist problems that may have been exacerbated by Fortnite playing.
Randy Kulman, a child psychologist in Wakefield, Rhode Island, has seen a surge in parents taking their kids to counseling because of video-game addictions.
THREE HUNDRED WINS
“I had a 13-year-old in my office who said he had 300 Fortnite wins,” Kulman said. “I had to stop for a minute and calculate what he had to invest just to get those.”
Michael Jacobus, who runs the Reset Summer Camp for kids with addictions, said about 60 percent of the 120 children he counseled at camps in Santa Barbara, California, and Asheville, North Carolina, last summer were playing Fortnite excessively. Treatment involves a technology detox — their devices are taken away — combined with healthy eating, sleep, and group therapy. Next summer, he plans to enroll more than twice as many kids, with additional locations in Texas, Indiana, and New York.
Fortnite is particularly compelling because the battle-royale version is free to play and available on a range of devices from phones to gaming consoles, notes Cam Adair, who dropped out of high school at age 15 due to his own video-game addiction and now speaks on the subject to schools and others groups. Fortnite players compete in 100-person fights until the last one is standing — matches that make it difficult to quit once they’re started.
‘WORLD WAR III’
“It’s World War III if a parent asks their son to come to dinner because if they leave they lose,” Adair said.
While the game is free, Epic has created opportunities to sell hundreds of dollars of add-ons — including exotic weapons and “skins,” such as Dark Voyager, a black space suit with reflective striping — on credit cards. The company recently partnered with the National Football League to sell jerseys based on players’ favorite teams.
“Parents have lost substantial amounts of money by not paying attention to whether their credit card is tied to the game console,” said Marer, the behavioral specialist.
In October, Epic capitalized on Fortnite’s popularity by raising $1.25 billion from an investor group that included KKR & Co., Vulcan Capital and Kleiner Perkins. The deal values the closely held company at $15 billion.
GRAND THEFT AUTO
Video games have generated a backlash before. The Grand Theft Auto series, made by Take-Two Interactive Software Inc., has at times been banned in countries around the globe for its extreme violence and sexual content. The industry has also drawn criticism following mass shootings that involved individuals linked to video games.
In April, Dutch gaming regulators released a study stating that “loot boxes,” where players purchase merchandise in a game without knowing exactly what they are getting, amounted to gambling and can be addictive.
For now, Fortnite is the game of choice. On a recent afternoon, the game was the most-viewed on Amazon.com Inc.’s Twitch streaming service, with 250,000 people watching others play.
The World Health Organization designated “gaming disorder” as a disease for the first time in June, a move that could make it easier for parents to seek reimbursement for treatment from insurers, according Paul Weigle, a psychiatrist in Mansfield Center, Connecticut.
Weigle, who’s seeing about 20 compulsive Fortnite players, recommends that parents keep kids under 10 from playing video games. And parents need to set limits when they do play. As games get more sophisticated in their ability to hook fans, he sees the issue of addiction only growing.
“It’s going to be more of a problem than it is now,” Weigle said. — Bloomberg

How PSEi member stocks performed — December 5, 2018

Here’s a quick glance at how PSEi stocks fared on Wednesday, December 5, 2018.

 
Philippine Stock Exchange’s most active stocks by value turnover — December 5, 2018

Ateneo champs anew

By Michael Angelo S. Murillo
Senior Reporter

THE Ateneo Blue Eagles made it back-to-back University Athletic Association of the Philippines titles after closing out the University of the Philippines Fighting Maroons, 99-81, in Game Two of their best-of-three Season 81 finals series on Wednesday at the jampacked Smart Araneta Coliseum.
Got early leverage at the beginning of the match, the Eagles just not relented the rest of the way, frustrating every attempt the Maroons made at coming back to complete the closeout.
The win handed Ateneo its 10th overall UAAP title and second straight while putting an end to what was a spirited campaign for Diliman-based UP.
The start of the game was delayed for a few minutes as Ateneo raised concerns on Bright Akhuetie playing with a metal brace as protection after hurting his left knee in Game One.
Eventually UP got suade to remove it and the contest got under way.
Thirdy Ravena got things going for the Eagles, all around once again to help his team to a 14-9 lead with four minutes to go in the opening quarter.
They would extend it to an eight-point cushion, 18-10, with two minutes on the clock, eventually settling for a 25-13 lead after the first 10 minutes.
In the second quarter, Juan Gomez De Liano and Paul Desiderio jump-started UP’s offense, pushing the Maroons to within six points, 28-22, in the first two and a half minutes.
But the Eagles would answer with a 5-0 run in the next minute to restore a double-digit lead, 33-22.
The two went back and forth after, fighting to a 48-37 count, with Ateneo still on top, by halftime.
Ateneo started the third canto on a flurry, creating a wider separation of 18 points, 59-41, by the 6:15 mark of the frame.
The Maroons fashioned comeback attempts but could only come within 13 points, the last time at 59-46 with 5:02 to go in the quarter.
Ateneo poured it on after, holding a 16-point lead, 70-54, heading into the payoff quarter.
Had firm control of the match, the Eagles went for the early kill, led by Tyler Tio and Ravena.
Ateneo’s lead ballooned to 22 points, 81-59, with 6:42 left.
Gomez De Liano tried to ignite a last-ditch run for UP but Ravena And Company would not allow them to have much headway.
The score was at 91-74 for Ateneo at the last two-minute mark and Ravena and the Eagles went for the finish from there.
Ravena had career-high and game-high 38 points to go along with six assists, five rebounds and three steals for Ateneo.
King Eagle Ravena also took finals most valuable player honors for averaging 29.5 points, eight rebounds, 7.5 assists and 2.5 steals in two games.
Ange Kouame had a monster double-double of 22 points and 20 rebounds while Raffy Verano had 11 markers.
Gomez De Liano led UP with 24 points while Akhuetie had 19 points and eight boards.
Graduating Desiderio finished his UAAP career with 15 points.
“We’re happy to have been able to defend our title. We’re not here without God. We give everything back to him. Thanks to the players as well. It’s a privilege to have a chance to coach these guys,” said Ateneo coach Tab Baldwin after their win.
The Eagles are now at solo fourth place in overall UAAP titles.
The finals defeat, meanwhile, ended a spirited season for UP which made it back to the UAAP Final Four after 32 years.
Game Two of the finals saw 23,471 in attendance.
INDIVIDUAL AWARDS
Earlier in the day, winners of the top individual awards for the season were officially honored.
Akhuetie led all awardees by taking home the MVP award.
The UP big man, who averaged 18.9 points, 14.6 rebounds, 2.8 assists and 1.1 steals for the season, topped the race with 82.5 total statistical points.
Akhuetie also headed the mythical five selection, which included University of the East’s Alvin Pasaol (74.57 SPs), UP’s Gomez de Liano (63.86 SPs), La Salle’s Justine Baltazar (61.29 SPs) and Adamson’s Jerrick Ahanmisi (58.38 SPs).
Ateneo’s Kouame, who finished second in the MVP race with 76.21 SPs, bagged rookie of the year honors.
Kouame is not part of the mythical team as league rules only allow the top foreign player to enter the group.
Akhuetie followed Eric Altamirano, part of the last champion UP team in 1986, as UAAP MVP.
In women’s play, Malu Irebu of University of Santo Tomas bagged the MVP award.
Joining her in the mythical team were Clare Castro of Far Eastern University, Jack Animam of five-peat champion National University, Misaela Larosa of UST and Nathalie Prado of Adamson University.
Rookie of the Year was Reynalyn Ferrer of UST.

PHL Azkals shoot for ‘Miracle in Hanoi’ anew

By Michael Angelo S. Murillo
Senior Reporter
BACK in 2010, the Philippine men’s national football team willed itself to national and international consciousness with an upset 2-0 win over then defending AFF Suzuki Cup champion Vietnam to barge into the semifinals in what is now known as the “Miracle in Hanoi.”
It is something the Philippine Azkals are now asked to replicate if they are to make history and advance to their first-ever Suzuki Cup final appearance.
Facing The Golden Stars today in a key semifinal match at the My Dinh Stadium in Hanoi, the Azkals have to come up with the same result eight years ago to stave off elimination in this year’s edition of the biennial regional meet and advance to the next stage.
They found themselves in such a situation after bowing to Vietnam, 2-1, in the first leg of their semifinal match on Dec. 2 in Bacolod City.
The Philippines tried its best to get the early pairing lead but the visiting side was not to be denied and was solid throughout the first leg.
Vietnam did not waste much time to get on the scoreboard last time around with Nguyen Anh Duc giving his side the early 1-0 lead in the 12th minute.
It tried to add on to it but the Philippine defense would hold its own for the rest of the opening half.
The Azkals made a last-ditch effort to level the count before the halftime break and was rewarded accordingly with Patrick Reichelt converting a goal off a pass from captain Phil Younghusband inside the three minutes added time in the first half of the contest.
Just like in the opening half, Vietnam would strike early as Phan Van Duc scored just three minutes into the restart.
The Azkals tried to get back the goal they gave but The Golden Stars would continue to frustrate them even as Vietnam had its chances to end up with a bigger lead but could not complete them.
Four minutes were added after regulation but no Philippine comeback was to come as it slumped to the defeat.
While recognizing that the road to the Suzuki Cup final got tougher with their defeat in the first leg, Azkals coach Sven-Goran Eriksson is still optimistic of his team finding its way back and getting the job done.
“Vietnam are the favorites before this game, and now they’re even bigger. I think we did okay today. We still have 90 minutes to go so we’ll see,” said Mr. Eriksson following the first leg.
For Mr. Younghusband, who was part of the team in 2010, their predicament could actually work in their favor, as it could serve as a major catalyst for them to go even harder in the game.
“It means that we now need to go for things in the second game and I think that will suit us better knowing that we have to go and score rather than sitting back,” Mr. Younghusband was quoted as saying by the official AFF Suzuki Cup Website.
But nonetheless he recognizes that it is not going to be easy and that they really have to take the fight to Vietnam if they are to succeed.
“They get so many bodies behind the ball that they’re difficult to break down and maybe if we didn’t score we would’ve gone into the next game thinking it’s a bigger challenge. But knowing that we can score against them gives us confidence going into the second leg,” the Philippine captain said.
“They’re a young team and I think we showed today (first leg) that we can get at them and create chances. And if we can stop them from scoring we’ve got a chance so for me I think it’s all to play for – it’s a one goal difference and we’ve seen bigger miracles in football before and I think we still have a chance,” he added.
The second leg of the semifinal match between the Azkals and Vietnam will be shown live beginning at 8:30 p.m. over ESPN5 and livestream over ESPN5.com.

Magnolia dominates Alaska in Game One

By Michael Angelo S. Murillo
Senior Reporter
THE Magnolia Hotshots Pambansang Manok drew first blood against the Alaska Aces in their best-of-seven Philippine Basketball Association Governors’ Cup finals series, winning Game One, 100-84, on Wednesday at the Mall of Asia Arena.
Got off to a fiery start, the Hotshots did not take their foot off the gas pedal en route to the commanding victory.
The Aces tried to rally back in the fourth quarter but could not complete any comeback as Magnolia reasserted command when Alaska came too near for comfort.
Import Romeo Travis led the way for the Hotshots with 29 points and 13 rebounds with Mark Barroca adding 16 points, 10 coming in the fourth period to douse cold water on the Alaska rally.
Paul Lee had 14 points while Jio Jalalon had all-around numbers of seven points, 12 rebounds and nine assists for Magnolia.
Alaska, meanwhile, was paced by import Mike Harris with 20 points and 15 boards with Chris Banchero finishing with 12 points.
Game Two of the Governors’ Cup finals is on Friday at the Smart Araneta Coliseum.

Secretaries authorized to rehab Panglao, El Nido without EO

MALACAÑANG on Wednesday said the rehabilitation of Panglao Island in Bohol and El Nido in Palawan, two important centers for the resort industry, will proceed without an Executive Order (EO) from President Rodrigo R. Duterte.
“On the rehabilitation of Panglao Island in Bohol and El Nido in Palawan, the Cabinet agreed that there is no need to issue an Executive Order,” Presidential Spokesperson Salvador S. Panelo said in a statement on Wednesday, Nov. 5.
The decision was made during the 32nd Cabinet meeting on Tuesday night, Dec. 4, at the Aguinaldo State Dining Room in Malacañang, according to Mr. Panelo.
In a phone message to BusinessWorld, Tourism Secretary Bernadette Romulo-Puyat said the rehabilitation “has already started,” and the timeline is “six months for both.”
“We (Environment Secretary Roy A. Cimatu, Interior Secretary Eduardo M. Año, and myself) first spoke to El Nido Mayor on Nov. 14 at the DENR (Department of Environment and Natural Resources), and we all went to El Nido on Nov. 28,” she said.
“The three of us also spoke to the Panglao Mayor on Nov. 27,” she added.
Initially, according to Ms. Puyat, the local officials “have to implement the 20-meter + 10 (easement zone) for Panglao and 20-meter in El Nido.”
Also last month, the inter-agency task force led by DENR said it was set “to replicate the ‘Boracay model of rehabilitation’ in Palawan province and other top tourist destinations,” including Panglao Island in Bohol.
“We have to maintain Palawan as the last ecological frontier of the country,” Mr. Cimatu was quoted as saying in a statement on Nov. 15.
“Since we’ve started in Boracay, let’s continue these rehabilitation efforts for the sake of the Philippines and the Filipino people, so that they can have something to be proud of,” he added.
He also clarified that El Nido will not be closed down to visitors, unlike the shutdown of Boracay during its six-month rehabilitation. — Arjay L. Balinbin

House panel hears bills calling for fuel tax hike suspension

THE House Committee on Ways and Means on Wednesday began deliberating bills and resolutions seeking to suspend the increase of the excise taxes on fuel.
“While the President has basis for his decision to go ahead with the second tranche (of excise tax increases) we should always consider the impact on consumers,” Committee Chair Estrellita B. Suansing of the 1st district of Nueva Ecija told reporters following the committee meeting.
“If you ask me, they have to reconsider,” she said.
The Committee meeting comes after President Rodrigo R. Duterte and his Cabinet decided to approve the P2 increase in the excise tax on fuel scheduled for 2019.
The higher taxes were authorized by the Tax Reform for Acceleration and Inclusion (TRAIN) law, which provided for a P2.5 per liter increase in oil excise tax in 2018, P2 in 2019 and P1.5 in 2020.
The committee was considering House Bill No. 8171, House Joint Resolutions No. 27, 29 and 31, and House Resolutions 1838, 1919, 2253, all proposing to suspend the second tranche of the excise tax hike.
Marikina-2nd district Rep. Romero S. Quimbo, who wrote HB 8171, proposed to suspend increase of excise taxes on kerosene and diesel.
“Kerosene today in terms of total collection from January to September is P257.2 million. Yet based on the experts, it’s really a fuel used by the poor… They pay for it, the impact on them is catastrophic and yet the amount that we collect is not even 300 million,” Mr. Quimbo said before the committee.
Mr. Quimbo had raised the need to reassess the provisions of the TRAIN Law, considering that the Bureau of Internal Revenue (BIR) and the Bureau of Customs (BoC) have exceeded their target collections for the year.
“We’ve exceeded the target and it’s not even the end of year… I think it becomes even more pressing for us to re-evaluate,” he said.
According to the Department of Finance (DoF), as of October, the BIR has collected P31.7 billion, while the BoC, as of September, collected P31.2 billion, higher than their full-year targets of P29.7 billion and P24 billion, respectively.
The DoF, for its part, wants to proceed with the scheduled excise tax increase.
“If we suspend, this deprives the budget immediately for 2019. For example, if we do not impose the P2 that is mandated under the law, this will deprive the budget of P40 billion for the whole year,” Assistant Secretary Teresa S. Habitan told the committee. — Charmaine A. Tadalan

Budget dep’t releases P13.7 billion in construction funds for Marawi, schools

THE DEPARTMENT of Budget and Management (DBM) released P13.71 billion worth of construction funds in mid-November, to fund the building of schools, the reconstruction of Marawi city, the Metro Manila Subway, and right-of-way acquisition.
These include releases to the Department of Public Works and Highways (DPWH) for Department of Education (DepEd) Basic Education Facilities worth P5.24 billion; P2.55 billion to pay right-of-way claims for property affected by the construction of the North Luzon Expressway-South Luzon Expressway Connector Road Project; and P730 million for right-of-way claims against the C-5 Northern Link Road Project, Phase 2, Segment 10 from MacArthur Highway, Valenzuela City to Malabon and C-3 Road Caloocan City.
The DPWH also received P990 million worth of funding support for the rehabilitation of Marawi City and surrounding areas.
The DBM also released P560 million to the Department of Transportation (DoTr) to help fund the implementation of the Metro Manila Subway Project Phase 1.
It remitted P590 million worth of subsidies to the Philippine Postal Corp.
Budget releases totaled P3.629 trillion in the year to date as of Nov. 22, equivalent to 96.3% of the P3.767-trillion 2018 budget.
“The release of the budget to requesting agencies is subject to their compliance with the documentary requirements set by the DBM. To date, only P137.9 billion of the FY 2018 National Budget remains unreleased,” Budget Secretary Benjamin E. Diokno said in a briefing on Wednesday.
“There is absolutely no underspending to speak of. The government is ahead in its disbursements. In fact, we are slightly overspending,” Mr. Diokno said.
He said disbursements in the nine months to September were 2.6% above target.
After overspending, he expects government spending to normalize in the fourth quarter, without breaching the ceiling of 3% of gross domestic product.
“This improved rate of spending indicates quicker delivery of programs in health, education, and poverty-reduction and the faster implementation and completion of public infrastructure projects. Incidentally, Congress’ failure to approve the 2019 budget before the end of the year will be a drag on efforts in improving budget utilization and eliminating underspending and result in the delay of essential public services,” Mr. Diokno said. — Elijah Joseph C. Tubayan

LNG bill to require guaranteed offtake of import shipments

PROPOSED legislation governing the liquefied natural gas (LNG) industry will require imported shipments to have offtakers, a measure intended to ensure the long-term viability of the LNG receiving terminal to be built in the Philippines.
The bill, should it be signed into law, will also institutionalize third-party access to the terminal.
These are among the features of the law being drafted by the Senate energy committee chaired by Sen. Sherwin T. Gatchalian in coordination with the Department of Energy (DoE), which is currently evaluating a proposal from the private sector to build an integrated LNG facility.
In an interview, he said the law will look into the sustainability and the bankability of the LNG project by making sure that shipments have a buyer, known as the offtaker in the energy industry.
“The offtaker is the important link to make sure that the terminal operator will be sustainable and profitable,” Mr. Gatchalian he said during the First Asia Pacific LNG Investment Summit at Solaire Resort & Casino on Wednesday.
“That’s the assurance that our investors are looking for. But we’re formulating it in such a way that it will not become anti-competitive because if you put that form of assurance it might curtail competition. So we have to balance between financial viability of the proponent through the offtake and power supply agreement and also balance it with competition,” Mr. Gatchalian said.
Mr. Gatchalian also said that the proposed law will promote competition in the LNG terminal industry, while also ensuring that the electricity produced by gas-fired power plants is competitive.
“One of the features [of the bill] is the third-party access feature in which different power plants can bring in their LNG using the same terminal,” he said.
“The terminal operator should allow other power plants to import and to use that terminal so it would improve competition. Rather than create a monopoly, it should be open to anyone — power plants or maybe transport operators — to bring in their own competitive LNG,” he said.
Mr. Gatchalian said he was working with the DoE to come up with “stronger legislation (that is) more comprehensive” in place of the interim framework issued by the department governing the LNG sector.
Asked for comment, DoE Assistant Secretary said Leonido J. Pulido III the department was coordinating with Mr. Gatchalian’s office to draft the LNG bill, which he said will build on the existing regulation passed by the agency.
“We really want it to be a very competitive and open market. And to do that you have to have some form of third-party rules, which is actually a very difficult set of rules or regulations to draft,” he said.
He also eased fears about the law coming out after the construction of an integrated LNG facility, leaving the proponent contending with a law that is not completely compatible with its completed project.
“Because of the time constraints involved, we want the law passed as soon as possible. But it’s not one or the other, it’s not ‘we need this before the other.’ They can both happen at the same time. In fact I think we need not wait for the law, but we do need a law so that we can institutionalize a lot of the concepts that we’ve put in the Philippine downstream natural gas rules,” Mr. Pulido said.
“And it would give the DoE more teeth and authority to develop the natural gas industry,” he added. — Victor V. Saulon

Finance dep’t in no rush to issue dollar bonds

THE GOVERNMENT is in no hurry to issue dollar bonds due to the current volatility on global markets, the Finance department said.
“We are waiting for the right moment. Everything is in the timing, so we’re just waiting for the right moment,” Finance Secretary Carlos G. Dominguez III told reporters on the sidelines of the Senate plenary deliberations for the 2019 budget.
“We thought that it would be better to do it earlier than later but it didn’t turn out to be an ideal situation,” Mr. Dominguez added.
In May the Department of Finance (DoF) said it will front load its global dollar bond offer to the latter half of the year rather than early 2019, in anticipation of further rate hikes from the Federal Reserve.
Mr. Dominguez said that the government remains comfortable with the level of funds on hand.
“There is no pressure. We (can) take our time. Remember the usual schedule is towards the end of January. But we wanted to see if we could do it earlier rather than later but conditions are not there. Better to be prepared to do something rather than be forced to do it,” said Mr. Dominguez.
The factors that were considered in the timing of the dollar bond offer include the 90-day truce between China and the US, and declining world oil prices.
“Big uncertainties were overhanging the market. There was no agreement yet on the trade issues and prices of oil were spiking. Now I think it seems that the market is settling down, and our confidence in the longer planning horizon is possible,” Mr. Dominguez said.
Asked if it is still possible to float the bonds before year’s end, Mr. Dominguez said; “We’ll see. Of course, it’s possible.”
A bond trader said that US yields are still expected to decline even after an agreement between the US and China to hold off assessing new tariffs on each other for 90 days as they negotiate to resolve the trade dispute.
He also said that the Fed’s rate-setting body is under less pressure to tighten rates at its Dec. 18 meeting due to declining oil prices.
“With uncertainty due to the trade war, investors will seek safe havens like US Treasuries, and its effect is to lower interest rates. That’s what is happening today. But even if the US and China reach a settlement, that’s supposed to be better for riskier assets, but the mood remains wary. Right now there do not seem to ne concrete steps by China,” the trader said in a phone interview.
“It would be better for them if they postpone (the issue) if the outlook is for lower interest rates, which mean lower borrowing costs. The consensus is that the Fed will hike this December, and the expectation is for a strong US economy which can absorb the higher rates. But the lower oil prices have also lowered inflation expectations,” he added.
In January, the government raised $2 billion from the issue of 10-year dollar bonds, with $750 million issued to new investors at a 3% coupon, while $1.25 billion was applied to a liability management exercise.
In a separate statement, the DoF said that it is also still studying the timing for the retail Treasury bond issue that will fund the rehabilitation of Marawi City, as the government considers the funds pledged by development partners.
“We still have the budget in place and actually, we have until 2022 to complete the funding. So we will review the pledges that we got and see the exact timing of them so that we can time the Marawi bonds as well,” said Mr. Dominguez.
The government raised P35.1 billion worth of concessional loans and grants at a pledging session on Nov. 28 for the reconstruction of Marawi.
Mr. Dominguez said that he expects the funds to come in “before the end of 2018 or early next year.”
The government is planning a P13.5-billion issue to fund Marawi reconstruction targeted at retail investors. The issuances will run until 2022. — Elijah Joseph C. Tubayan