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DTI conducts special price monitoring in Davao groceries

DAVAO CITY — Department of Trade and Industry (DTI) Secretary Ramon M. Lopez conducted a special price monitoring yesterday in two groceries in this city, checking if suggested retail prices (SRPs) of goods have gone up.

Mr. Lopez said he was surprised to find out that no cost movements were reported and that prices in two groceries he visited — Park and Shop in Victoria Plaza and Gaisano Mall of Davao — remain below SRP.

“I was surprised because prices of milk was sold P2.50 below the SRP of P54 and that condensed milk in cans were sold at P14.50 or P13.50 which is a good development,” he said in Filipino during an interview.

Products monitored in two groceries were sardines, processed milk, condensed milk, evaporated milk, coffee, bread, instant noodles, and laundry soap.

However, prices of softdrinks have already moved since specified excise taxes have already been imposed on these products.

On January 15, prices of softdrinks are expected to rise, Mr. Lopez said, citing the newly-implemented TRAIN Law or Tax Reform Acceleration and Inclusion Law, which doesn’t cover convenience or sari-sari stores.

“Department stores, groceries, and supermarkets are committed to follow the SRP,” he said, adding that consumers need not worry about price adjustments.

He also advised the consumers to check the prices in the grocery or supermarkets.

Lopez also assured that the DTI is checking if prices of products are being adjusted simultaneously. — Maya M. Padillo

Investors flocking to equities amid continued strength

INVESTORS are shifting their attention to the equity market from the low-risk bond mart, as the bellwether index is seen breaching the 10,000 level in the next two years, the asset management arm of Bank of the Philippine Islands (BPI) said on Friday.

Carlos A. Jalandoni, BPI Asset Management and Trust Corp. vice president and head of credit and research, said in a media luncheon on Friday that global asset allocation in 2017 has shifted focus to stocks over bonds.

“When you look at the asset allocation, it’s no wonder that investors are saying ‘we don’t want safe returns out of our bonds —we’re going to go in stocks,’” Mr. Jalandoni said.

Data presented by Mr. Jalandoni showed equities had a 60.2% share in global asset holdings from the 39% trough in 2009. Meanwhile, global bond holdings reached a 23.5% allocation last year, from the 34% peak in 2009.

He cited three developments in the global economy which pushed the market players for “massive risk-taking activities” which lead to significant returns in stock markets.

First, Mr, Jalandoni noted the weakness of the US dollar due to longer and weaker-than-expected economic reforms as President Donald J. Trump indicated in his campaign promises.

“Donald Trump was supposed to infuse a lot of growth to the economy because he wants to make America great again, but it took a little longer to fulfill his promises,” he said, adding that his tax reform has only brought the corporate taxes to only 25% from 35%, versus the campaign promise of 15%.

Second in the list of developments were the diffused political risks in the European Union, as Emmanuel Macron won the French presidency over far-right candidate Marine Le Pen and as Angela Merkel notched her fourth term as the German chancellor. The election of the two leaders tempered the political risks posed by the exit of UK in the 28-member bloc.

Lastly, commodity prices also started to recover, led by petroleum.

“[Market players have already accepted that] the global economy is no longer weak or no longer falling through the cracks. We are now prepared to take more risks and it translates to re-rating of growth globally.”

As interest in equities returned, stock markets across many countries grew, including the Philippine Stock Exchange index (PSEi), which rose by 25.1% in 2017.

Looking forward, Mr. Jalandoni said BPI Asset Management’s outlook for the stock market’s growth will for this year be “conservative,” expecting it to land between 8% to 10%, bringing the stock market index to the 9,300 to 9,400 levels.

Despite the expected slower growth, Mr. Jalandoni still sees the PSEi breaching the 10,000 level “within two years.”

Meanwhile, amid continued volatility, Mr. Jalandoni said the Philippine peso’s trajectory will remain mostly downward.

In the latter part of 2017, the local currency dropped to P51.76 versus the dollar, its lowest in more than a decade.

However, BPI Asset Management’s vice president said the weak peso is “totally fine” as this reflects the country’s economic growth.

“Learn to accept a weak currency as a reflection that the economy is actually growing much faster on the back of infrastructure and investments. Unfortunately, we don’t make much machinery; we have to import these stuff [in support of the government’s infrastructure push.],” he said, adding that the depreciating peso is only a “safety mechanism” against overvaluation.

BPI Asset Management and Trust is the biggest index fund manager in the country, with over P54 billion in assets under management for its six index funds. — Karl Angelo N. Vidal

MPIC avails of P8-B loan facility

METRO Pacific Investments Corp. (MPIC) has secured an P8-billion syndicated term loan facility to partially finance the obligations of one of its subsidiaries.

In a disclosure to the stock exchange on Friday, the Manuel V. Pangilinan-led firm said the syndicated term loan facility — set to mature in 10 years and 15 years — will be used partially for the redemption of outstanding debt obligations of Beacon Electric Asset Holdings, Inc.

The infrastructure conglomerate tapped BDO Capital and Investment Corp. to act as arranger and bookrunner for the transaction.

MPIC started acquiring Beacon from PLDT, Inc.’s unit PLDT Communications and Energy Ventures in 2016, in order to increase its interest in Manila Electric Co. Beacon Electric previously owned 35% of Meralco, while 56% is held by Global Business Power.

The company earlier paid P12 billion in cash out of the P21.8-billion purchase price of Beacon, with the remaining P9.8 billion to be paid in the next four years.

The transaction brings MPIC’s effective ownership stake in Meralco to 45.5%, from the previous 41.2%, as well as increases its stake in Global Business Power to 62.4% from 47.8%. MPIC already had a 10.5% direct interest in Meralco prior to the transaction.

This year, MPIC has committed to spend P100 billion in capital expenditures to accelerate the expansion of its tollway, water, energy, rail, and hospital segments. The company specifically allocated P38 billion for Metro Pacific Tollways Corp., P17 billion for the Light Rail Manila Corp., P21 billion for Meralco, P12 billion for Maynilad Water Services, Inc., P6 billion for Metro Pacific Hospital Holdings, Inc., and P6 billion for logistics.

To fund this capex, the company said it is using internally generated income, a combination of equity partners, value crystallization in its portfolio, and banks. It also plans to offer P30 billion worth of bonds in the next three years.

MPIC generated a net income attributable to the parent of P11.3 billion in the first three quarters of 2017, posting a 17% year-on-year increase as revenues likewise climbed 30% to P43 billion during the same period.

MPIC is one of three Philippine units of Hong Kong-based First Pacific, along with PLDT and Philex Mining. Hastings Holdings, Inc. — a unit of PLDT Beneficial Trust Fund subsidiary MediaQuest Holdings, Inc. — maintains interest in BusinessWorld through the Philippine Star Group, which it controls.

Shares in MPIC lost six centavos or 0.91% to close at P6.55 apiece at the Philippine Stock Exchange on Friday. — Arra B. Francia

SBITC sees better performance this year

SUBIC BAY International Terminal Corp. (SBITC) sees its performance improving this year, buoyed by both the government and private sector’s interest to invest in the Subic Bay Freeport Zone.

In a statement on Friday, SBITC president Roberto R. Locsin said that with the government prioritizing the development of infrastructure nationwide and the improved intra-regional trade among Southeast Asian nations, a positive year for seaports and maritime routes is likely.

“The Subic Freeport Zone is bustling with activity from various logistics and trading firms and we project growth will continue due to the infrastructure program of the administration,” he added.

The company also manages the two terminals in the New Container Compound in the Subic Free Port Area. A few months ago, the company expanded its services in the southern regions, operating a container barge service between Cebu and Cagayan de Oro, connecting other provinces in between.

The International Container Terminal Services, Inc. subsidiary will also benefit from the refurbishment of piers and wharves in the Subic Bay Freeport Zone, which has been granted a P500 million budget under the General Appropriations Act.

“[V]arious international firms have recognized the potential of Subic Bay as a strategic gateway in the Asian market. With cautious optimism, SBITC will continue to be a progressive partner for economic prosperity through managing our ports,” Mr. Locsin said.

Aside from this, the Subic Bay Metropolitan Authority (SBMA) also signed deals with major ports in the US to further the expansion plans in the Freeport Zone, one of SBMA’s priorities to make the port as one of the heavyweights in global maritime trade.

“Our priority is to make Subic a more open and competitive Freeport in international trade. With additional investment prospects in the works, Subic Bay is moving forward with positive momentum,” SBMA chairperson and administrator Wilma T. Eisma said in the same statement. — A.G.A. Mogato

Duterte to fire 70 cops, 3 generals

PRESIDENT Rodrigo R. Duterte announced on Thursday, Jan. 11, that around 70 policemen, three generals, and a chairman of a government agency will soon be put on his chopping block due to irregularities.

“I am firing another chairman of an entity in government maybe this week and another set of policemen,” Mr. Duterte said during the kick off ceremony of the Philippine Amusement and Gaming Corporation’s (PAGCOR) Game On! All In! For Nation Building. “I intend to fire…maybe 70 or 49 policemen and three generals for corruption,” he added.

Mr. Duterte also reiterated that he will continue with his aggressive campaign against corrupt government officials.

“This is really a purging regime. I think that I’ll be spending a lot of time just to clean up government and would consume four years for the time that I would be there,” the President said.

PAGCOR officials were told as well not to allow “police, BIR, (and even) Customs” to “extort” money. “You can call anybody in the government…and I will take care of it,” Mr. Duterte said.

“If you have problems even in the locals, do not bribe. Because once I find out, it will just sour up our relationship,” the President warned, adding, “All I have to do is for you to cooperate, and I said do not give in to extortionists.”

The President had recently fired Maritime Industry Authority (MARINA) administrator Marcial Quirico C. Amaro III and Presidential Commission for the Urban Poor (PCUP) Chair Terry Ridon for their “excessive” foreign trips.

Other officials who were relieved last year were Dionisio R. Santiago and Benjamin P. Reyes of the Dangerous Drugs Board (DDB).

Last Monday, Jan. 8, Mr. Duterte also announced that he will now turn more of his attention to local government units including the Autonomous Region in Muslim Mindanao (ARMM) as part of his administration’s anti-corruption drive.

For his part, Presidential Spokesperson Herminio Harry L. Roque, Jr. explained that the President as well, not only the Ombudsman, has the power to remove local government officials.

“That is called concurrent jurisdiction…It’s because he is the highest chief executive in the republic. He has the supervision and control over government officials, so that is his legal basis,” Mr. Roque explained during a televised press briefing in Valencia, Bukidnon on Friday, Jan. 12.

Meanwhile, opposition Senator Antonio “Sonny” F. Trillanes IV said that he “will only believe” in Mr. Duterte’s corruption purge if he shows his “bank accounts.”

“He cannot explain until now how he acquired his billions,” Mr. Trillanes said in a radio interview.

The lawmaker likewise said that eventually the President himself “should be purged.”

Mr. Trillanes had challenged the President last year to explain the alleged P2 billion in his bank accounts and the alleged millions deposited by a campaign contributor. Mr. Duterte, for his part, had repeatedly denied the allegations of the lawmaker and even promised that he will “immediately” resign if the bank account claims are proven to be true. — Arjay L. Balinbin

Peso declines on bargain-hunting

THE PESO dropped against the dollar on Friday due to bargain-hunting in the afternoon session and despite softer US producer prices data as well as hawkish European Central Bank (ECB) minutes.

The local currency finished at P50.40 against the greenback at the week’s close, moving sideways as it lost four centavos from its P50.36-per-dollar close on Thursday.

The local unit opened stronger at P50.27 versus the dollar. Its best showing stood at P50.25, while its intraday low was Friday’s closing rate.

Dollars traded on Friday surged to $588.5 million from the $833.7 million that changed hands the previous session.

A trader attributed the sideways movement of the local currency to the “last-minute bargain-hunting” in the afternoon session.

“Market players continue to buy on dips, and might be some demands from corporates since it’s mid-month,” the trader noted.

This buying, however, was tempered as US producer prices for the month of December slipped for the first time in nearly one-and-a-half years.

Reuters reported that producer price index (PPI) for final demand slipped 0.1% last month, down from November’s 0.4%. This was the first drop of the PPI since August 2016.

The softer December PPI is seen to offset the expectations of accelerating inflation this year.

“[The PPI data] is likely indicative of a softer US headline inflation reading to be released tonight,” the trader noted.

The trader added that the “hawkish” minutes from the ECB also pulled down the dollar.

Minutes of the December meeting of ECB’s policymakers hinted that they are preparing to wind down their monetary stimulus program soon. — K.A.N. Vidal

BoI eyes declaration of Marawi as less developed area

THE BOARD of Investments (BoI) on Friday proposed to include the city of Marawi and the surrounding towns to be included in the list of the country’s less developed areas (LDA) to speed up its economic recovery after bearing the brunt of a five-month firefight between the Maute group and the military.

The Department of Trade and Industry’s (DTI) investment promotions arm said in a statement that the inclusion of the war-torn city will assure that it will become a priority area for investments and employment for internally-displaced persons.

“Listing these areas as LDAs will encourage more investors, both local and foreign, to seriously look into investment opportunities in the said areas,” BoI Managing Head Ceferino S. Rodolfo said.

Places included in an LDA will mean that the investments will be entitled to maximum incentives under the Omnibus Investments Code.

There are currently 134 cities and municipalities included in the LDA list. DTI data showed that from November 2013 to October 2017, the BoI approved 92 projects worth P141.36 billion, most of which are in the power sector, followed by transportation and storage, manufacturing and mass housing projects.

At full operation, the investments generated an estimated 12,622 jobs. — AGAM

PayMaya makes deal for cashless payments at McDonald’s

PayMaya Philippines, Inc., the digital financial services arm of PLDT, Inc.’s Voyager Innovations, has teamed up with McDonald’s to allow the fast-food chain to accept cashless payment through PayMaya in its stores.

With the partnership, 42 McDonald’s restaurants have started accepting card payments for all types of MasterCard and Visa credit, debit, and prepaid cards, including PayMaya Visa cards and Smart MasterCard, PayMaya Philippines President and CEO Orlando B. Vea said in a briefing in Taguig City on Friday.

The company will soon accept PayMaya QR payments in its McCafé BGC Arts Center and McCafé Tagaytay Calamba stores, with more stores accepting QR-based payments in the coming months.

Customers can also book and pay for birthday parties online as well as settle online orders “in the next few weeks.”

“Our goal is to continuously provide our customers with a convenient and feel-good restaurant experience, which is why we are committed in seeking out innovations that can deliver this to them. Through our partnership with PayMaya, our customers will now have a cashless payment option to make ordering their favorite McDonald’s meals more convenient,” McDonald’s President and CEO Kenneth S. Yang was quoted in a statement as saying.

“This is digital technology at its most convenient, and we are working toward enabling more partners like McDonald’s to further build a ‘cashless’ ecosystem,” said Manuel V. Pangilinan, chairman at PLDT, Smart, and PayMaya.

“We’re starting with McDonald’s today, but we envision a future where most of our transactions will be carried out with the help of a PayMaya account.”

McDonald’s joins a fast-growing list of companies and merchants that have tapped PayMaya for cashless transactions including e-commerce retailers Lazada and Zalora, Philippine Airlines, and Cebu Pacific, among others.

PayMaya is powering the QR payments acceptance of supermarkets, department stores, and shops under Robinsons Store Specialists, Inc., as well as department stores and mall information booths of SM malls.

With only a third of the country’s population having bank accounts, PayMaya allows the unbanked and those who have no credit cards to settle online transactions. A physical PayMaya prepaid card can also be used in stores worldwide that accept Visa.

Hastings Holdings, Inc., a unit of PLDT Beneficial Trust Fund subsidiary MediaQuest Holdings, Inc., has a stake in BusinessWorld through the Philippine Star Group, which it controls.

Shares in PLDT added P19 or 1.36% to close at P1,419 apiece on Friday. — Krista Angela M. Montealegre

PSEi ends flat as investors stay on sidelines

AFTER hitting fresh highs this week, Philippine shares closed flat on Friday, as investors chose to stay on the sidelines and reposition their portfolios.

The 30-member Philippine Stock Exchange index added 0.02% or 1.37 points to close the week at 8,814.62. The all-shares index meanwhile fell 0.05% or 2.66 points to 5,098.75.

“Philippine markets settled flat after a see-saw week as investors begin to re-calibrate their portfolios,” Regina Capital Development Corp. Managing Director Luis A. Limlingan said.

This comes after the index breached the 8,900 level at the start of the week, with investors reacting to developments on the remaining tax reform measures as part of the Tax Reform for Acceleration and Inclusion law.

Analysts noted this momentary pause would be healthy for the market as it accelerated at a fast pace, already recording a 5% increase from the start of the year.

Wall Street was up on Thursday, as the Dow Jones Industrial Average picked up 0.81% or 205.60 points to 25,574.73. The S&P 500 index also gained 0.7% or 19.33 points to 2,767.56, and the Nasdaq Composite index rose 0.81% or 58.21 points.

Most Asian indices tracked lower performances, continuing Thursday’s decline as investors took caution on rising global yields. Japan’s Nikkei 225 dropped 0.24% or 56.61 points to 23,653.82. The MSCI AC Asia Pacific index also dipped 0.26% or 0.47 points to 180.41.

At the Philippine stock market, four sectors ended on positive territory, while two others in closed in the red. The mining and oil sub-index gave up 1.22% or 144.90 points to 11,752.81, while industrials dropped 0.9% or 104.46 points to 11,471.49.

Property meanwhile inched up 0.39% or 15.55 points to 4,020.67, as financials increased 0.35% or 8.18 points to 2,325.65. Holding firms registered a 0.07% uptick to 8,995.48, while services increased 0.04% to 1,619.58, respectively.

A total of 649 million issues switched hands, for a value turnover of P7.95 billion. Decliners trumped advancers, 103 to 96, while 48 issues remained unchanged.

Foreign investors turned buyers for a net foreign inflow of P141.94 million, reversing Thursday’s net selling record of P878.96 million.

Banking stocks were among the most active for the day, with Security Bank Corp. gaining 0.47% to P255.40 each, and BDO Unibank, Inc. losing 0.06% to P164.90 apiece. Ayala Land, Inc. on the other hand was flat at P44.35 each. — Arra B. Francia

Tax reform undergoes birth pangs

THE RECENTLY ENACTED first of up to five planned tax reform packages may help the government undertake an P8.44-trillion infrastructure development drive, but not before it weathers back-to-back blows on the legal and implementation fronts.

TRAIN ‘RAILROADED’
Three militant lawmakers in the House of Representatives asked the Supreme Court on Thursday to declare as “unconstitutional” President Rodrigo R. Duterte’s centerpiece tax law and stop its implementation on the grounds that their fellow legislators “railroaded” its passage.

The three — ACT Teachers Rep. Antonio L. Tinio, Bayan Muna Rep. Carlos Isagani T. Zarate and Anakpawis Rep. Ariel “Ka Ayik” B. Casilao — belong to the so-called Makabayan bloc, a coalition of party-list political parties at the House that had broken away from the majority in September last year due to policy differences.

In their 33-page petition for certiorari, they argued that Republic Act No. 10963, packaged by the Duterte administration as the Tax Reform for Acceleration and Inclusion (TRAIN) that overhauled the 1997 Philippine tax code to cut personal income taxes while raising the sales tax and levies of most consumer goods like oil and car purchases, is not a valid bill passed by Congress.

Their central argument has been that the House did not have the required numbers enough to make a quorum and vote on the night that the House ratified a bicameral conference committee report on the tax measure.

Petitioners Messrs. Tinio and Zarate said they raised their objection — but were ignored — when Deputy Speaker Raneo E. Abu as acting floor leader moved for the bicameral committee report’s ratification on Dec. 13 last year. Mr. Tinio claimed there were “barely 10 people on the floor” out of 295 House members in that Dec. 13 proceeding that the petitioners claimed lasted for just three minutes and “occurred simultaneously” with the Christmas party of the Partido Demokratiko Pilipino-Lakas ng Bayan (PDP-Laban), Mr. Duterte’s political party.

“[Q]uorum is a constitutional requirement for the enactment of laws. A House that lacks a quorum, with a sparse attendance at that, Petitioners submit, is a House that is in no position and has no power to act as a legislative body,” the petition read.

“The bogus ratification was slipped through when the members, especially its leadership, were not attending the session in Congress but outside its halls, with some even partying at a five-star hotel.”

Mr. Abu as well as Speaker Pantaleon D. Alvarez, Majority leader Rodolfo C. Fariñas and Deputy majority leader Arthur R. Defensor, Jr. were named respondents.

The President was also named a respondent, with the petitioners arguing that Mr. Duterte “committed grave abuse of discretion in enacting into law a bill which was not passed in accordance with the Constitution and the Rules of the House of Representatives.”

TRAIN was signed by Mr. Duterte on Dec. 19 last year and took effect on Jan. 1, driving pump prices higher as early as this month in gas stations with new inventories as well as electricity rates by February to reflect the increases in oil and coal taxes.

“No matter how many times he signs the BCC [bicameral conference committee] Report, he could not, in the eyes of the Constitution, enact such an invalidly ratified document into law,” the petition read.

“The foregoing considered, Petitioners pray: 1. That the Honorable court strike down as unconstitutional the signed Tax Reform for Acceleration and Inclusion for having been ratified by the House of Representatives and enacted by the President in violation of the Rules of the House of Representatives and the 1987 Constitution and 2. That it issue a restraining order against the implementation of the signed TRAIN.”

This is not the first time that a freshly minted tax law was questioned before the highest court of the land. In 2005, the ABAKADA Guro Party List and then opposition Senator Aquilino “Nene” Pimentel Jr., among others, sought the intervention of the high tribunal shortly after the Arroyo government passed the expanded value added tax law that raised the value added tax (VAT) rate to 12% from 10%. The high court that same year upheld the law’s constitutionality.

QUESTIONS
Yesterday also saw public consultations at the head office in Quezon City of the Bureau of Internal Revenue (BIR) for TRAIN’s implementing rules and regulations (IRR) which, BIR Commissioner Caesar R. Dulay told reporters afterwards, was attended by an estimated “over 1,000” tax practitioners who had tried initially to fit in an auditorium built for just 200 people.

The bureau thus opened the covered court to accommodate the bigger crowd.

Questions were on issues like the withholding of income taxes of existing employees of regional operating headquarters (ROHQs).

A TRAIN provision which Mr. Duterte had vetoed — on grounds of fairness — would have allowed them to continue enjoying the existing 15% preferential withholding tax rate rather than be subject to the new tax rates that will cover new ROHQ hires.

“We have to wait for the policy direction from the Department of Finance (DoF),” Mr. Dulay said during the consultation.

Maria Lourdes P. Lim, president of the Tax Management Association of the Philippines, had said earlier that Mr. Duterte’s veto effectively maintained the status quo.

“The President cannot just automatically remove the affected employees’ entitlement to the preferential rate as he is not the legislature. To effect the intention, Section 25 (C), (D) and (E) of the Tax Code needs to be specifically amended removing such incentive,” she had explained.

“While we laud the intention premised on fairness and equity, a process of amendment still needs to be followed.”

Euvimil Nina R. Asuncion of BIR’s Legal Group said during the same consultations that implementing the excise tax on cosmetic surgery and sugar-sweetened beverages (SSB) — the tax code’s newest levies — would also be challenging.

“The cosmetic procedures is a challenge to us but we’ve already formulated something to address that. Reversed withholding ‘yung procedure na gagawin,” Ms. Asuncion said, explaining that surgeons, hospitals and clinics will have to collect the tax directly from patients.

Pag sa SSB naman it is also a challenge to us because it’s a new tax,” she added.

“But most of our players — they are already within the LTS (Large Taxpayer Service), so medyo under our control na ‘yung kanilang taxation.”

The BIR official said that the bureau is working with the Food and Drug Administration in cross-checking beverage manufacturers’ declared excise tax payments.

“The first few months of course is transition… We have to be a bit lax but we will do post audit. We will check on their compliance… after a few months we will go back to those they declared to see if they declared correctly,” Ms. Asuncion said.

Other questions raised include whether employers should now impose the new withholding income tax rates even without the revenue regulations (RR) to be released by the BIR and the Department of Finance.

“The withholding agent has the obligation to withhold the correct amount. Some employers said they are waiting for the RR. They do not have to wait for the RR because we have released initial guidance while waiting for the formal RR,” BIR Assistant Commissioner Marissa O. Cabreros told reporters in Filipino, referring to revenue memorandum circulars the bureau issued before 2017 ended.

“We are appealing to employers to recalibrate their systems to reflect the correct tax rate.”

Mr. Dulay said that the bureau aims to finalize the required revenue regulations “before the end of the month,” but said withholding agents and taxpayers need to immediately follow provisions of the law.

Kailangan ma-implement nila. January 1 ang effectivity ng batas. (They have to implement the law, which took effect on Jan. 1). So they should be read,” he said.

Revenue regulations the BIR has to issue will focus on provisions like the lower estate and donor’s taxes rates; withdrawal of some value-added tax exemptions; increases of excise tax for petroleum, automobiles, mineral products, and tobacco; the excise levy and VAT on coal; as well as higher documentary stamp tax, among others. — with a report from Elijah Joseph C. Tubayan

Philippine banking industry on solid ground despite risks

PHILIPPINE banks can be expected to keep solid footing this year despite “rising” credit risks as interest rates pick up and robust loan growth continues, analysts at BMI Research said.

“We expect the performance of Philippine banks to remain supported by the robust macroeconomic backdrop, but this will be somewhat offset by rising interest rates over the coming quarters,” the Fitch Group unit said in a note yesterday.

“Although banks are well-capitalized, we note that downside risks to financial stability are rising.”

BMI said local players will continue to benefit from the country’s robust macroeconomic backdrop, with upbeat economic activity to support loan growth, bottom lines and asset quality.

Philippine gross domestic product expanded by 6.7% in the nine months to September, well within the government’s 6.5-7.5% target that keeps the country among Asia’s fastest-growing economies.

The state is looking to boost infrastructure spending that, in turn, will spur GDP expansion faster to 7-8% annually starting this year up to 2022, when President Rodrigo R. Duterte ends his six-year term.

“We note that the current record-low interest rate environment and upbeat economic growth expectations have resulted in a sharp rise in leverage, and malinvestment have started to accumulate in the economy,” BMI said.

“If left unchecked, this poses downside risks to financial stability, even though Philippine banks generally boast healthy capital buffers.”

Benchmark borrowing and lending rates stand at 2.5% for overnight deposit, 3.0% for overnight reverse repurchase and 3.5% for overnight lending, with the Bangko Sentral ng Pilipinas (BSP) seeing no need to adjust policy settings as of its December review in the face of manageable inflation and upbeat domestic demand.

The Monetary Board’s decision to leave rates unchanged last month came in the wake of 2017’s third rate hike in the United States that placed upward pressure on global yields.

Central bank officials have said that they do not have to match the Fed’s tightening moves as they come, with Philippine developments remaining their key consideration for policy adjustments.

BMI expects bank lending growth to clock 15% this year, coming from a 17% estimate for 2017. Credit growth is expected to remain brisk, with the research unit pencilling a 13% annual pick-up in lending from 2019 to 2022.

Bank lending expanded by 19.2% in November, the slowest pace since June 2017.

This brought outstanding loans granted by banks to P6.961 trillion, according to central bank data.

“[S]ustained periods of high credit growth generally precede future asset quality deterioration as the quality of lending is often lax when sentiment is upbeat,” BMI warned, adding it expects the central bank to “gradually unwind” supportive interest rates this year.

The amount of bad loans held by local banks may also increase slightly from 1.9% as of end-November to around two percent over the coming quarters, with the Fitch research unit pointing out “heavy lending” towards the volatile property sector.

Total loans even doubled to P1.71 trillion as of end-September from P866.6 billion three years ago.

BSP officials have constantly downplayed overheating concerns raised by economists, and policy makers said strong lending simply supports increased production activities as the economy keeps growing. — Melissa Luz T. Lopez

Visiting Guam: A bit of history and a whole lot of shopping

By Zsarlene B. Chua
Reporter

Despite being a US territory, the small island of Guam in the middle of the Pacific Ocean has quite a number of similarities with the Philippines, from its shared history under Spanish and American colonial rule to the sheer number of people with Filipino heritage living on the island.

The Guam Visitors Bureau (GVB) estimates that almost a third of the island’s population of 170,000 are Filipinos, making it the second largest ethnic group in the country after the native Chamorros.

In fact, as the media group invited by Cebu Pacific pointed out the moment we exited the airport, Guam feels almost like home with some pointing out how similar the island looks to Subic, Zambales — mainly due to the larger roads, its being so near the coast, and because Subic was once home to one of the largest US military facilities outside the mainland.

“Hafa adai,” (pronounced like “half a day”) is how Guamanians greet tourists using the native Chamorro term for “hello,” but as we eventually realized after spending four days in Guam last November, the greeting can serve as an answer to how long it takes to go around the island — it takes just half a day as Guam has a total land area of just 543.9 square kilometers. In comparison, the entire Metro Manila encompasses 619.6 square kilometers.

THE SPANISH CONNECTION AND WW2
The written history of the Philippines pretty much started the moment Portuguese explorer Ferdinand Magellan landed on Homonhon island in Eastern Samar on March 16, 1521. And while Magellan died in Cebu just a month later after battling Datu Lapu-Lapu in Mactan, his actions started the more than three centuries of Spanish colonial rule.

But 10 days before reaching Homonhon, Magellan and his crew had already landed in Guam. Guam became a Spanish colony in 1565.

Located on the southwest side of the island is Umatac Bay, the bay where Magellan and his fleet of five ships landed on March 6, 1521. The silent waters of the bay, as well as the cliffs surrounding, were witness to how five ships from the other side of the world started what turned out to be centuries of rule under the kingdom of Spain.

There are no statues on the bay to commemorate this event save for a plaque telling the story of how Magellan, despite being welcomed by the Chamorros, deigned to repay their kindness by burning down their homes and killing them.

Guam eventually became an important stopover for the Manila Galleons — the fleet of trading ships plying the route of Manila, Philippines to Acapulco, Mexico — and in the process, many crops and livestock from the archipelago made it to Guam, including carabaos.

Beyond the Spanish connection, Guam and the Philippines were both under American rule and while the Philippines eventually gained its independence, Guam remains a territory of the United States of America.

Guam — like the Philippines — paid the price for its American connection when it became a fierce battleground in the Pacific Theater of the Second World War. Some historians claim that the battle for Guam in 1944 cost the lives of 10% of the population of Guam.

This dark part of the island’s history is well documented in the Pacific War Museum located in the capital, Hagatna, using new technology and existing film footage to chart the battle, as well as reproductions of local newspapers bearing the headlines of the start of war and its end.

SHOPPING
Lest anybody think Guam is just a tropical island filled with beaches, resorts, and history, Guam is also a haven for shoppers as the group learned, having arrived on the island a day after Black Friday — one of the biggest shopping days in the US.

Over the course of our four-day stay, no day was spent without visiting the island’s biggest shopping malls including KMart and Guam Premier Outlets in Tamuning, T Galleria in Tumon, and Micronesia Mall in Dededo.

GVB has taken advantage of the surfeit of shopping options by introducing the Shop Guam Festival, an annual event that lists all the best deals during the holidays via a dedicated app.

Do note that if you make a point of going to Guam during the Black Friday weekend (the weekend after Thanksgiving) you might be able to score crazy deals, like a $90 Michael Kors tote (originally priced at $200), or a medium-sized piece of Samsonite luggage for less than $100, or Nine West shoes for half the price — but prepared to see everybody in the malls as well.

Lines will be long and, in the case of Ross Dress for Less, which carries branded apparel and other items at discounted prices, be prepared to see racks picked clean. For this writer, lining up at KMart and Ross Dress for Less in the wee hours of the night on a Monday was still a test of endurance.

SECURITY AND TOURISM IN GUAM
Being a US territory in the middle of the Pacific, Guam is in turns a tropical vacation spot and a stronghold for the super power. In fact, almost 30% of the island’s total land area (16,000 hectares) is under the control of the US military.

And because of its strategic location and the presence of military bases, Guam found itself the focus of threats from North Korea’s leader Kim Jong Un, as the strongman declared last August that his country was testing an intermediate range ballistic missile (IRBM) which could reach Guam to counter the military drills being held between the US and South Korea at the time.

But North Korea’s threat has — according to Regina Nedlic, GVB marketing manager for the Philippines and Russia — had not deterred tourists from visiting nor alarmed locals.

“Generally, overall — we have two military bases here, the Air Force and the Navy — it (North Korea threat) doesn’t really affect us,” she told the media during a press conference in November.

“I think Guam has been very resilient to these kinds of threats. We’ve been through World War 2, and security is our top concern,” she added, explaining that it actually seemed as if the threats helped Guam’s tourism industry largely due to the fact that many people who didn’t know about Guam are now curious about it.

Ms. Nedlic said the tourism industry — which, along with the military bases, is a large component of the island’s economy — did not feel the effects of the threats. They were expecting to welcome 1.5 million visitors in 2017, a bit more than the 1.4 million they recorded in 2016.

While Japan has long been one of the largest markets for Guam tourism, she said that in October the number of Korean visitors surpassed Japanese tourists.

Other major markets include the US mainland, China, Hawaii, Taiwan, and the Philippines.

The Filipino contingent is also increasing, said Ms. Nedlic as the island welcomed 20,000 Filipinos from October 2016 to September 2017, a marked increase from the “10,000 to 12,000” average number of Filipino visitors they had yearly in the past.

This, she said, is largely due to the entry of more airlines as Guam is currently serviced by Philippine Airlines, United Airlines, and, most recently, Cebu Pacific which introduced its Guam-Manila route in March 2016. It currently flies there three times a week.

Locals might not be alarmed by the North Korean threats but it was clear that the Guamanian government was taking the aggressive rhetoric seriously judging by the strict security measures employed within the airport.

Before leaving for Guam, the group had to go through two extra security checkpoints before boarding the plane which included an interview before checking in and a more hands-on pat-down check at the gate.

“Some say we’re now the safest place in the world because everybody is protecting us,” said Carmel Carpio of GVB Philippines.