Nation at a Glance — (01/18/18)
News stories from across the nation. Visit www.bworldonline.com (section: The Nation) to read more national and regional news from the Philippines.
Food price slump may relieve inflation concerns at central banks worldwide
FOR ALL THE WORRY about soaring oil and metals prices fueling inflation, consumers may at least catch a break at the dinner table.
Globally, food prices have been in decline for the past three months and in December costs fell the most in more than two years. Food got cheaper thanks to a slump in prices of sugar and dairy products from cheese to butter, the United Nations’ Food and Agriculture Organization (FAO) said Thursday.
Prices of meat, grains and vegetable oils fell too.
Lower prices of staples may help restrain inflation at a time when investors are betting it will pick up, spurred by a surge in commodities and the fastest world economy since 2011. A Bloomberg gauge of 22 raw materials rose for a record 14 days in a row last week, reaching a three-year high.
Central banks often try to set aside volatile food prices when deciding on interest rates, although staples do form a bigger part of inflation baskets in developing nations such as India. Even so, cheaper food will leave households with more disposable income to spend on non-essential items, helping demand.
While oil and metals prices gained from stronger manufacturing, agricultural commodities have been mostly stuck in the doldrums due to a glut of everything from sugar to wheat. The Bloomberg agriculture sub-index of futures contracts reached a record low last month.
The FAO Food Price Index fell 3.3% in December, the most since August 2015. In sugar, booming output from the European Union to Asia is adding to a glut, and dairy prices are softening after a 2017 surge amid a butter shortage. — Bloomberg
From a venture capitalist: Tips on convincing investors
For tech startups, money is the fuel that keeps a company going. Raising funds to sustain operation is as difficult as marketing a product or coming up with innovative ideas to lead the race.
Good thing there are investors who are willing to invest some money in new enterprises. But convincing investors to bet on a company, especially startups, is not a piece of cake.
Michael Lints, partner at early‑stage venture capital firm Golden Gate Ventures (GGV), knows this struggle among startups very well. For one, his current job requires him to negotiate with founders where his company can invest in. GGV, to date, has already invested in more than 40 startups in Southeast Asia, including some enterprises in the Philippines such as Lendo, Ayannah, and Carousell.
Lints has also had a fair share of struggle in courting investors back in early 2000’s when he, together with his two best friends, put up a startup that provided small enterprises with IT platforms. The lack of funds and tractions prompted them to stop its operation in 2006.
In a forum organized by QBO Philippines on January 9 in Makati City, Lints shared some pointers that startup founders should always remember when dealing with investors.
There’s a lot of money that businesses can get from investors. But the question is, how do you get those money?
According to Lints, allowing investors to invest in a company is more that just about money. Startup founders should, instead, consider it as a form of marriage that will last for at least ten years.
“It’s all about the marriage between you and the investors ,” he said. “There’s always this weird relationship between investors and founders because [when money is involved,] people feel some form of guilt … But you have to view it as a partnership, and partnership means we’re building this business together [and that] we want you to be successful. If you’re successful, we’re successful.”
Startups should not consider fundraising as a side gig. Instead, Lints said, they should take it as important as their sales.
“[Companies] do fundraising two months before they run out of money, and what happens when you do that, you’re gonna [have] the wrong partners,” he said. “Fund raising is a part of your business, it’s not different from sales. Fund raising is something you do every single day. And what does that mean? That means that you do research.”
In talking to investors, he said, startup founders should “do their homework” and research by reading about investment‑related articles that are available online.
“If a fund is coming, you should know. If a new Chinese player is coming to the Philippines to look for a deal, you should know. You should be the first one to know. The next thing is to ask, how can I find a way to be connected to these guys?” he said.
Before meeting with an investor, founders should make sure that all important files and documents containing crucial information about their company are organized.
“Whenever an investor asks questions about your finance, contracts, you wanna answer them fast,” Lints said. “So if you take up to two months to answer because you have to look [for an answer], you can’t find it, that’s a sign in itself. It basically means you don’t have your [things] in order. It’s something that you can solve, but it’s a worry.”
In pitching to investors, conveying a clear message through a presentation is essential. And, according to Lints, founders can achieve an effective pitch by practicing.
“I’m 42, but every single pitch, I practice. Every single [time]. I wanna make sure that the story I’m telling is sticking with investors I’m talking to. Use your friends, relatives, to practice with,” he said, adding that founders can even film themselves while delivering their presentation to make their pitch clearer.
While there is no formula in creating a successful pitch presentation, Lints said a good one should have at least three key contents: context by “describing how the world looks today,” the change that the company introduces through its product or service, and the world after using this change.
“Your company is about making a change because if you’re not changing anything, that means you’re not also starting anything,” he said.
He added that presenters should also let investors know how they will generate revenue and scale the business. In proving the company’s relevance, startup founders should present the growth in traction that their companies have generated.
“Investors will always ask about traction. Try to show that you’re relevant,” he finally advised. “And relevant means yesterday we had 200 users, now we have 400. But don’t just show growth. Explain why you’re growing.”
TJ Manotoc’s new YouTube channel tackles mental health
The battle for and the subsequent passage of the Mental Health Act has opened the floodgates for the discussion for mental health. Plenty of influential people—mostly young artists—shared their own struggle with depression, outspoken in their call for a more supportive environment.
But depression and anxiety were not sicknesses that appeared overnight. They have always been there, it’s only now—like Harry Potter against Voldemort—that we’ve called the monster out by its name. Journalist TJ Manotoc, now 40, in a short video he posted on YouTube and Facebook, shared how he went through depression in his teenage years.
His decision to go public about depression was borne of a serendipitous televised interview (“around seven to eight years ago,” Manotoc recalled) with Jean Goulbourn of the Natasha Goulbourn Foundation, which helps manage the Hopeline 24/7 suicide prevention hotline. And the only reason Manotoc had that interview was because the main host who handles their show couldn’t make it to the studio in time due to traffic. Manotoc describes his discussion with Goulbourn to be “casual”, where he openly shared that he too was going through depression. That was when most people, including his bosses at his TV station, found out about it. Eventually he went with Goulbourn to give a talk about depression awareness in a school in Cavite. “I realized that just sharing my story was inspiring. I told [her] back then that I will write a book about it,” Manotoc said.
And while the book project is on hold, Manotoc took to YouTube. “Kids today are very moved by video, so that’s why we decided to do it on video format, to be what Max was to me to thousands of children who are online.” He also enjoys watching YouTube himself, telling SparkUp that he’s a fan of the vlogs of Casey Neistat and enjoys watching tech videos.
“Maybe they don’t have access to me physically but if they see me, they see this and it touches them enough to make them fight. Just enough for them to say ’I’m not going to give up because I know a guy who went through this and he made it’,” Manotoc continued during the launch.
“When I was in my darkest moments I had no idea what I was going through… I had no goal until I met Max.” But with the internet, perhaps the youth of today don’t need to wait for too long to find someone who inspires them. “Thanks to the internet, with Youtube and Facebook, it’s my turn to give hope and I want to use my story to encourage others to tell their stories. This is going to be more than my story.“
What kind of content can we expect from You Will Be Alright? Aside from interviews with people who have battled their own mental monsters, Manotoc said that they will also interview people who have lost their loved ones to mental health issues such as Goulbourn, who lost her daughter to suicide, and the gamut of opportunities—medical, alternative, and the like—that those with mental health problems can use. “This is such a complex situation,” Manotoc told SparkUp. “People have different trigges and there are different ways to get out.”
But as we wait for more content from You Will Be Alright, perhaps we can take solace from the advice Manotoc has to the youth who, like him, are struggling with anxiety and depression.
“Accept yourself,” Manotoc told SparkUp. “Don’t be angry with yourself, the world, or whatever you might have.” He likened living with depression to having a flat tire, and how one has to step out of the car, notice the tire and change the tire to be able to continue on with one’s journey safely. “You need that action of stepping out of yourself, looking a yourself. It starts with accepting it. You can’t try to cure your situation with being angry.” Personally, what helped him out was positive affirmations, repeating “I accept myself” ten times to himself out loud in the mirror, to himself, and in writing.
“And seek help,” he added. “You shouldn’t be afraid to talk to someone.” He hopes that with You Will Be Alright, those with mental health issues will find people to reach out to for help. He also referred calling HOPEline (tel no. 804-HOPE/0917558HOPE), the 24/7 mental health and suicide prevention hotline managed by the Department of Health, World Health Organization and the Natasha Goulbourn Foundation.-LDG
LETTER TO THE EDITOR | Five reasons why the TRAIN will not benefit the poor
Dear Editor:
These reiterations are in reaction to the article “Assessing TRAIN” by Mr. Filomeno Sta. Ana of the Action for Economic Reforms (AER), which appeared on the January 8, 2018 issue of Business World.
IBON has repeatedly presented its evidence-based analysis of the TRAIN (basing on the Department of Finance data no less) and consistently deepened our explanations to the public. Our 40 years of institutionalization has equipped us with analysis sets to provide a popular understanding of socio-economic issues.
The Duterte administration claims that the Tax Reform for Acceleration and Inclusion (TRAIN) Law will benefit the poor in terms of lower personal income tax, unconditional cash transfers, and new infrastructure. It also describes the new tax law to be inclusive and even progressive. IBON belies these false claims. Under TRAIN, the poor stand to lose while the rich will gain.
1. TRAIN will not benefit the poor majority of Filipinos with lower personal income tax.
According to the government, 6.8 million low- and middle-income families will be completely exempted because they are earning less than the P250,000 personal income tax threshold. But this figure includes millions of minimum wage earners or otherwise those in informal work with low and erratic incomes already exempted by law. The 6.8 million families certainly deserve income tax cuts to cope with rising costs of living. But of the country’s total 22.7 million families, the personal income tax cuts for most of the reported 7.5 million personal income tax payers still leaves as much as 15.2 million families without any income tax gains from this measure.
Yet, at the very start of 2018, these families have already had to deal with more expensive goods, such as food and drinks, and cooking expenses. Jeepney and bus fares, electricity and other utility fees are bound to increase due to new taxes on oil products including liquid petroleum gas (LPG), kerosene, diesel, and gasoline. Other price hikes abound when the imposition of value-added tax (VAT) on previously exempted services and goods takes effect. Note that the value-added tax slapped on petroleum products per Republic Act 9337 of 2005 drove up inflation from 6.0% in 2004 to 7.6% in 2005.
2. TRAIN is pro-rich.
Government slams TRAIN critics who say that the tax program is anti-poor. Yet it is the country’s richest who are among the biggest gainers from TRAIN’s income tax reforms. The richest 1% of families with incomes of over P1.5 million or more a year will have an average of P100,000 to over P300,000 additional take-home pay annually especially when income taxes are lowered further in 2023. This is on top of how the rich will pay billions of pesos less in estate and donor taxes. Also, the richest 10% already earning an average of P104,170 monthly according to Department of Finance data, will have P90,793 more every year. Meanwhile, every chief executive officer (CEO) already earning P494,471 monthly will have P88,568 more in their pockets every year.
3. TRAIN-provided cash transfers are temporary.
That TRAIN will provide P200 per month in unconditional cash transfers to the poorest 10 million Filipino households from 2018 to 2020 is an indirect admission by government that the TRAIN’s taxes do put an additional burden on the poor. The relief ends after the third year while the greater TRAIN tax burdens are permanent.
4. Infrastructure spending is biased away from poor regions, and biased away from the kind of infrastructure projects that the poor directly need or will directly use.
There is a general trend of higher infrastructure spending in regions of low poverty incidence, and low infrastructure spending in regions of high poverty incidence. This is observed when comparing the value and regional distribution of the government’s flagship infrastructure projects and poverty incidence by region. For instance, the NCR has the lowest official poverty incidence of 3.9% but takes up the largest chunk of flagship projects at P343 billion, while the Autonomous Region of Muslim Mindanao (ARMM) with the highest official poverty incidence of 53.7% accounts for among the least flagship projects at just P5.4 billion.
Also, instead of irrigation, milling factories, and post-harvest facilities; public schools; public hospitals; and mass housing, which millions of poor Filipinos need for their livelihoods and welfare, the Duterte administration’s flagship projects are mostly big-ticket transportation infrastructure eyed by oligarchs and their foreign counterparts for business, such as roads, bridges, fly-overs, railways, seaports, and airports.
5. TRAIN remains regressive.
The Duterte administration claims that TRAIN is progressive, but this should mean that the people are taxed according to their capacity to pay. On the contrary, the poor stand to bear the greater burden under TRAIN.
According to official data, only the richest 20% Filipinos earn the family living wage (FLW or the amount needed by a family of 5 to live decently ) or more (P30,000 per month on the average for 5 persons).
Meanwhile, the poorest 80% earn way below the family living wage, but they are being made to pay the same additional taxes as the richest, while the latter will even be relieved of certain tax obligations. While the middle class deserve lower personal income taxes, it is unjust that those earning millions monthly should be taxed less.
Government can undertake concrete measures towards genuinely progressive taxation by raising direct taxes on the richest such as personal income tax and corporate income tax, while reducing indirect taxes such as VAT and other taxes on consumer products. IBON also proposes steps, which, while temporary, may ease the burden on the poorest: (1) Maintain exemptions on products where the poorest are directly affected; (2) Tax the rich more, specifically, raise taxes on those belonging to the highest income bracket; and (3) Allocate specific budget items for essential social services.
Sonny Africa
IBON Executive Director
House gets DoF proposal to cut corporate tax
THE ADMINISTRATION of President Rodrigo R. Duterte submitted to the House of Representatives on Monday the second of up to five planned tax reform packages — seeking to cut the corporate income tax rate and remove fiscal perks of sectors that do not need them — as lawmakers returned from a month-long Christmas-New Year break, the Finance department announced on Tuesday.
“The Department of Finance (DoF) has formally submitted to the House of Representatives this week the second package of the Duterte administration’s Comprehensive Tax Reform Program that aims to reduce corporate income tax rates and modernize fiscal incentives to investors… as committed… by Secretary Carlos (G.) Dominguez III last year,” the DoF said in a press statement.
The Constitution requires tax laws to emanate from the House, although the Senate can hold parallel public hearings without formally approving such measures until after the House does so.
That was the case of the first package which the DoF submitted to both chambers in September 2016 and which was enacted as Republic Act No. 10963, or the Tax Reform for Acceleration and Inclusion, on Dec. 19 last year. Slashing personal income tax rates as well as simplifying donor’s and estate tax systems, while plugging projected foregone revenues by either hiking or adding taxes on fuel, cars, minerals, tobacco, some investment products and sugar-sweetened drinks among others, will yield estimated net collections of P89.9 billion in the first year of the law’s implementation.
Yesterday’s press release quoted Finance Undersecretary Karl Kendrick T. Chua as saying that the just-submitted second package, which DoF designed to be “revenue-neutral,” seeks to gradually cut the corporate income tax rate to 25% from 30% currently and to modernize fiscal incentives for businesses by making them “performance-based, targeted, time-bound and transparent.”
The DoF estimates that redundant investor perks have been costing the government more than P301 billion a year in terms of foregone revenues.
“… [I]n general, we are giving up almost 0.8% of GDP (gross domestic product) so far… from these income tax holidays and custom duty exemptions. Together with the VAT, it is P301 billion, or two percent of GDP,” Mr. Chua said, clarifying that “[t]hese are only the investment incentives” and “do not yet include exemptions from the payment of local business taxes and the estimates on tax leakages.”
Citing 2015 data, Mr. Chua said income tax holidays, special rates, custom duty and import value added tax (VAT) breaks made up 53.77 billion, 32.48 billion, P18.4 billion and P159.82 billion, respectively, of foregone revenues that year, “almost five percent of national government revenues and 0.78% of GDP.”
Central bank looking out for tax reform’s wider impact on inflation
THE BANGKO SENTRAL ng Pilipinas (BSP) may raise interest rates should tax reform trigger price increases for all other consumer goods and services as well as wage hike petitions that, in turn, could push inflation beyond target.
“For the BSP, our concern there is the secondary impact on inflation. We’ve always understood that it would have an impact on inflation in the short run, but we don’t expect it to last,” BSP Governor Nestor A. Espenilla, Jr. said yesterday at the Edsa Shangri-La Hotel.
“It will last if people begin to believe that inflation is going overboard… and we may need to react to that.”
Enacted as Republic Act No. 10963, the Tax Reform for Acceleration and Inclusion (TRAIN) reduces personal income tax rates and provided a simpler system for computing donor and estate taxes. Foregone revenues will be offset by the removal of some exemptions from value-added tax, alongside higher tax rates for fuel, cars, capital gains and new taxes for sugar-sweetened drinks, among others.
The BSP has said that it expects the new taxes to add “less than one percentage point” to overall inflation, hence, keeping overall price movements manageable.
Pressed further, Mr. Espenilla said TRAIN’s second-round impact which the central bank is looking out for would include increases in daily minimum wage, the cost of other products and services even if these are not directly hit by the additional excise taxes imposed starting this month.
“We are looking at the secondary effects and on the impact on expectations of people. When people try to ask for more wages because of taxes, that’s a secondary effect that we need to evaluate and analyze the impact,” Mr. Espenilla said in an interview.
“When people try to jack up prices everywhere in the system although they are not part of the direct hit of TRAIN… we have to evaluate that.”
Mr. Espenilla said the new tax law gives people a sense that the prices of all other commodities should be rising.
GENERALLY POSITIVE
Despite this, Mr. Espenilla sees the tax reform as “positive” for the Philippine economy as it would unlock more disposable incomes despite the pickup in the prices of consumer goods.
“The economy is expected to continue to grow strongly this year and consumption spending will remain strong,” he added.
Bank economists have been flagging the need for the central bank to raise rates in order to keep up with rising inflation and contain the build-up of risks in the financial system, as well as with rising global yields as the United States tightens its monetary policy further. Last year saw the Federal Reserve increase policy interest rates three times, and another three increases are expected in 2018.
Mr. Espenilla said Philippine monetary authorities will bare new inflation forecasts during their Feb. 8 policy meeting — their first this year — as they have incorporated TRAIN’s impact into their baseline forecasts.
The Monetary Board kept borrowing rates unchanged during its Dec. 14 review as it saw inflation settling within the 2-4% annual target until 2019. The BSP expects a 3.4% average inflation this year, coming from 3.2% in 2017.
“It will be an interesting policy meeting,” Mr. Espenilla said.
“That will give us a better handle as to whether we can continue our initial assessment that we don’t necessarily have to react to this because this is known as transitory and minimal.”
There appears to be a change in tack, following previous assertions by central bank officials that they have enough leeway to keep any tweak on policy interest rates on hold.
EXTERNAL RISKS
Mr. Espenilla also flagged potential risks from global developments that could take a toll on the Philippine economy.
Continuing uncertainty for the United States’ economy, potential instability in Europe amid the United Kingdom’s exit from the European Union, political tremors in the Middle East and tensions on the Korean peninsula could roil markets worldwide.
“We can get a curve ball from any of these issues,” Mr. Espenilla said, adding cybersecurity threats to potential market risks.
Still, the central bank chief said prospects remain “very good” for the Philippine economy this year amid indications that robust growth will continue with a fiscal deficit that’s under control and a strong banking system.
RESERVE STANDARDS
Mr. Espenilla said Philippine monetary authorities are carefully timing their plan to reduce the 20% reserve requirement ratio imposed on big banks, mindful that the financial system remains awash with cash despite some tightening in liquidity conditions in December.
“There’s the basic management of liquidity, and there’s also the desire to change the way we manage liquidity,” the central bank chief said.
“We want to substitute reserve requirements with open market instruments without necessarily increasing liquidity. The BSP is planning such a maneuver.”
Mr. Espenilla has said that he wants to see the reserve standard cut to single-digit levels to remove such “inefficiency” from the banking system, even as he said such an adjustment will be done gradually in order not to flood the market with cash and trigger imbalances in the economy. — Melissa Luz T. Lopez
Press freedom image takes a hit as Rappler faces uphill battle
By Krista A. M. Montealegre
National Correspondent
MULTIMEDIA news Web site Rappler, Inc. faces an uphill battle to challenge the Securities and Exchange Commission’s (SEC) decision to revoke its incorporation papers, a ruling that fed suspicions about the government’s hand in undermining press freedom.
“We have no problem. They should bring it to court if they want to. Kahit anong baliktad gawin (From any point of view), it was an admitted violation pa nga,” SEC Chairperson Teresita J. Herbosa said in an interview in Pasay City on Tuesday.
In a press briefing, Armando A. Pan, Jr., officer-in-charge of the Office of the Commission Secretary, said Rappler can undertake corrective measures to cure the “fraudulent” Philippine depositary receipts (PDR) with the SEC, but the Department of Justice (DoJ) can still pursue criminal charges against it.
The SEC, which has no quasi-judicial power, has endorsed its ruling to the DoJ “for appropriate action.”
“They can issue new PDRs. If they want to register they can, but the decision stands,” Mr. Pan said, noting that companies seeking to register their securities can amend their filings with the commission, but this is before an en banc decision has been made.
“The DoJ will start the proceedings…” he said.
For now, Rappler can continue its operations, as it has 15 days from Jan. 12 to file an appeal with the Commission on Appeals, Mr. Pan said.
The SEC, in a 29-page decision dated Jan. 11, ruled that Rappler and its parent Rappler Holdings Corp. (RHC) were “liable for violating the constitutional and statutory foreign equity restrictions in mass media,” resulting in the revocation of their incorporation papers.
At the center of the SEC ruling is Rappler’s sale of PDRs — securities that give holders the right to the delivery or sale of the underlying share without conferring ownership or control — to Omidyar Network Fund LLC, which contains a “repugnant” provision requiring Rappler to seek approval of PDR holders on corporate matters.
“These rights are reserved to the shareholders of a corporation. Ordinarily, PDR holders cannot do this, but when it comes to Omidyar PDR holders, these rights were given to them,” Mr. Pan said.
The SEC, in its ruling, declared “void” the PDRs issued to Omidyar Network, arguing that “control” is not limited to stock ownership alone but encompasses “other schemes that grant influence over corporate policy, actions and structure.”
Rappler has argued that PDR holders do not interfere in editorial matters.
While Rappler issued the securities to Omidyar in 2015, Mr. Pan said the SEC did not have access to the terms and conditions of the PDRs at that time because the multimedia news Web site asked for exemptive relief for the registration of the securities.
The SEC grants exemptive relief when securities are sold through a private placement or issued to less than 19 qualified institutional buyers, among others.
“That’s why we had to issue a subpoena so the documents will be made available to the special panel,” Mr. Pan said.
The Philippine Stock Exchange (PSE) has two listed PDRs: ABS-CBN Holdings Corp. and GMA Holdings, Inc. The mass media companies have issued PDRs to the public in the past to obtain foreign capital without violating the Constitution.
“The ABS-CBN (and) GMA PDRs were registered — unlike the Omidyar PDRs where a notice of exemption was filed — because they were offered to the public,” Mr. Pan said.
“I was told GMA and ABS-CBN PDRs do not contain those political rights.”
Investors appeared to have shrugged off the Rappler issue, with the bellwether PSE index (PSEi) hitting another intraday high on Tuesday.
“It shouldn’t affect (the investment community) as Rappler’s PDRs didn’t follow what listed companies do, i.e. no control is given to the investors. PDRs should be economic only,” Eduardo V. Francisco, president of BDO Capital and Investment Corp., said by phone.
Mr. Francisco, who has assisted several listed companies in issuing PDRs, said the SEC had a legal basis in its decision against Rappler.
“With Rappler, while the PDRs are not voting, there is exercise of control. Just to change the address you need the approval and you need to consult with the PDR holders,” Mr. Francisco said.
“It is not just economic right; there is control. It is not a true PDR in the spirit.”
The SEC decision against Rappler has marked the latest showdown between the press and the administration of President Rodrigo R. Duterte, who has slammed media for their critical coverage of his bloody war on the narcotics trade.
Presidential Spokesperson Harry L. Roque, Jr. yesterday said Mr. Duterte had not influenced the corporate regulator’s decision against Rappler and that the President had called him to ask why critics were pointing the finger at him.
“He did not like the fact that Rappler was saying this is a result of the President’s dislike of Rappler,” Mr. Roque said in a regular news briefing in Malacañan Palace.
“Of course not, he had nothing to do with this decision. He was not even aware there was a decision coming up.”
Responding to Rappler’s description of the decision as “pure and simple harassment,” SEC’s Mr. Pan said: “We never think about that — harassment.”
“We only assess governance and ownership structure of Rappler. As to claims of restraint of press freedom, hindi naman. We focused on the PDR issue, the security itself.”
Interestingly, Omidyar Network, owner of the PDRs in question, is a philanthropic investment firm founded by online auction firm e-bay founder Pierre Omidyar, who reportedly pledged to donate $100 million to fund investigative journalism and combat the spread of “fake news” online.
“Regardless of whether it’s political or legal in nature, I think it may, in general, have a negative impact on people’s perception of press freedom in the Philippines,” RCBC Capital Corp. President Jose Luis F. Gomez said in a mobile phone message. — with Reuters input
Phoenix Petroleum to form JV with Thailand’s Tipco Asphalt
PHOENIX Petroleum Philippines, Inc. is teaming up with a Thailand-based asphalt maker and a local company to distribute bitumen products in the country, as it seeks to take advantage of the government’s aggressive infrastructure program.
In a disclosure to the stock exchange on Tuesday, the company led by Davao-based businessman Dennis A. Uy said its board of directors approved the execution of a joint venture agreement with Tipco Asphalt Public Company, Limited, and Carlito B. Castrillo for PhilAsphalt Development Corp.
The joint venture company will market and distribute bitumen and bitumen-related products in the country. Refined bitumen is primarily used as asphalt cement for road construction.
Describing bitumen as one of the by-products of crude oil refining, Phoenix Petroleum said the deal effectively allows it to expand its portfolio of petroleum products.
“Phoenix’s strategic focus will be on creating growth and opportunities in highly attractive industries and markets that are complementary to its core fuel business and are underpinned by strong macroeconomic fundamentals,” the listed company said.
According to its Web site, Tipco Asphalt “manufactures and distributes asphalt products servicing road construction, maintenance and paving industries, essential for transportation.” It has manufacturing facilities and asphalt terminals in every region in Thailand, and operates a refinery in Kemaman, Malaysia.
After the execution of the joint venture deal, Phoenix Petroleum said the parties will apply for incorporation and registration of the joint venture company within 30 days.
The total authorized capital stock of the joint venture company is estimated at P275 million.
Phoenix Petroleum and Tipco Asphalt will each own 40% of the joint venture, with PhilAsphalt’s Mr. Castrillo will own 20%.
A precedent condition for the completion of the deal is the incorporation of PhilAsphalt in 30 days and the assignment of Mr. Castrillo’s shares to PhilAsphalt.
The new company will also lease a parcel of land from Calaca Industrial and Seaport Park for the construction of a terminal.
On Tuesday, shares in Phoenix slipped 0.49% to close at P12.28 each. — Victor V. Saulon
Banks seen to meet leverage standards
By Melissa Luz T. Lopez,
Senior Reporter
PHILIPPINE BANKS are broadly expected to meet minimum leverage standards set by the Bangko Sentral ng Pilipinas (BSP), its chief said, with lenders well-armed with capital buffers to maintain their sound positions.
On Monday, the central bank announced that it will implement the five-percent minimum leverage ratio covering universal and commercial banks by July, representing how much capital banks should have on hand to cover non-risk weighted assets.
The computation of the ratio includes subsidiary and quasi-banks owned by a big lender, which prevents excessive debt exposures which could trigger a funding crunch during times of financial stress.
“Today, the leverage ratio of practically all banks is well above five percent. There’s lot of room because the system is well-capitalized,” BSP Governor Nestor A. Espenilla, Jr. told reporters on Tuesday.
The BSP defines the ratio as a backstop measure to mitigate the “excessive” accumulation of assets in the banking system by comparing a bank’s high-quality Tier 1 capital to its total loan exposures.
Included in the computation of the leverage ratio are the reported amounts of accounts on the balance sheet as well as off-balance sheet items, including derivatives and securities financing transactions, the central bank said.
Once in place, the leverage ratio will boost capital buffers maintained by banks against potential risks, and will complement the 6% common equity Tier 1 ratio, the 7.5% Tier 1 ratio, and the 10% capital adequacy ratio (CAR).
The 5% standard is higher than the 3% minimum set under the international Basel 3 framework, like how the CAR is also above the 8% global standard.
“Generally, the approach of the BSP is we don’t set a standard if it’s not met at this time,” Mr. Espenilla said in explaining the timing of the new standard.
The liquidity coverage ratio (LCR) will also be implemented starting this year, another measure which will improve risk management among banks.
“The LCR is a powerful macroprudential tool. It requires banks to not just have capital but have enough assets in liquid form. That means it will lower the room for creating risk assets like loans,” Mr. Espenilla added.
The standard requires big banks to hold high-quality and easily convertible assets to cover its total net cash outflows for a 30-day period. Banks are expected to hold assets that will cover 90% of their monthly cash outflows this year, which will go up to 100% by 2019.
Both measures form part of the Basel 3 regime, which was crafted by international policy makers to improve risk management and prevent a repeat of the 2008 Global Financial Crisis. Excessive lending led to massive credit defaults, which then triggered the collapse of big banks and caused widespread recession worldwide.
Several economists have flagged overheating concerns for the Philippine economy as credit growth pushes at a double-digit pace, although central bank officials have said that this should not ring alarm bells just yet as lending has been diversified and productive.
BASIC ACCOUNTS
The central bank has also approved basic deposit accounts as a new banking product, which is expected to bring more Filipinos to use formal financial channels for their transactions.
Mr. Espenilla said the Monetary Board approved last week the creation of “no-frills” basic bank accounts, which will impose no maintaining balances and allow banks to accept new depositors with minimal documentary requirements.
Through this, anyone can open a basic account with a minimum deposit of P100. The account will be accessed for payments, remittances and fund transfers up to a maximum balance of P50,000 without being imposed reserve requirements.
This will complement the “branch-lite” units approved by the BSP in December, which allows lenders to set up dressed-down branches in town centers and even wet markets in order to bring their services closer to the public.
Both measures are expected to help improve financial inclusion, after a recent central bank survey showed that 571 towns and cities in the Philippines — about a third of the total — remain unbanked as of June 2017.
Getting more Filipinos aboard the banking channel also augurs well for the central bank’s goal of raising the share of electronic payments to 20% by 2020 by encouraging digital banking platforms.
Last Thursday, the Monetary Board officially recognized the Philippine Payments Management, Inc. as the industry-led management body for two automated clearing houses for digital transactions which are expected to go live this year.
The faster deployment and access to money is seen to spur increased economic activity, the central bank said.
GSIS looks to invest $800 million offshore
STATE PENSION FUND Government Service Insurance System (GSIS) wants to put $800 million in foreign-currency instruments to diversify its asset portfolio.
“$800 million is really for testing grounds in investment. It’s not too big… What we need is to understand the market globally, and we would like to look at our global fund managers how they handle,” GSIS President and General Manager Jesus Clint O. Aranas said in a press conference on Tuesday.
The plan to place $800 million in “foreign currency-denominated instruments” is part of the pension fund’s target of a 9% per annum return of investment.
“These days, return of investment is at an average of 5.5%, below our ideal rate of 9% per annum. We want to beat that 9%…that’s why we have a risk conservative approach,” Mr. Aranas said, adding that the pension fund will be maximizing the “very good” market performance recently.
GSIS is looking to hire two external asset managers to have an allocation of $400 million apiece.
“The fund manager must have an experience to manage a global portfolio because we want a fund manager who knows how to do dynamic asset allocation,” said Gracita Gilda V. Bocanegra, senior vice-president of GSIS, adding that they are open to local firms.
As of November, 62% the pension fund’s assets were invested in financial assets, 24% in loans to its members, 6% in investment properties, 4% in cash and another 4% in property, equipment and other assets.
GSIS posted a net income of P84.15 billion in the first 11 months of 2017, up 52.52% from the P55.17 billion posted in the comparable year-ago period.
Income generated from loans slightly increased by 3.8% to P22.49, as active loan accounts as of November 2017 grew to 1.19 million from 720,342 accounts posted in the comparable year-ago period.
Revenues from insurance also grew 11.2% in the eleven months ended November 2017. This was driven by “increased social insurance contributions” as the number of contributing members rose to 1.7 million as of November last year.
In the expenditure side, GSIS paid more than P85 billion in social insurance claims and benefits in the period, up 13% from P75.1 billion in 2016.
Meanwhile, GSIS’ total assets rose 8% to P1.09 billion as of November 2017.
“The growth was driven by income from financial assets, which doubled to P52.12 billion on the back of the robust performance of financial markets,” a statement from GSIS read. — Karl Angelo N. Vidal
CLI reservation sales hit P4.58B in 2017
NEW RESIDENTIAL PROJECTS boosted Cebu Landmasters, Inc. (CLI)’s reservation sales in 2017, allowing it to post a 55.6% growth from 2016 figures.
In a statement issued Tuesday, the listed property developer said it booked reservation sales of P4.58 billion in 2017, exceeding its P4-billion target.
CLI said the growth was driven by newly launched residential projects — 38 Park Avenue in Cebu IT Park which offers 745 units, Casa Mira South in Cebu with 3,200 units, and Mivesa Garden Residences in Cebu with 1,514 units.
The company’s developments in Mindanao, such as the 798-unit Mesaverte in Cagayan de Oro and the 694-unit in Davao City, likewise showed robust sales.
“All the projects we launched were well-received by their respective markets making 2017 another banner year,” CLI Chief Executive Officer Jose R. Soberano III was quoted as saying in a statement.
CLI aims to continue this growth in 2018 as it targets to book P7 billion in reservation sales, marking a 52% year-on-year increase. This will be driven by a total of 20 projects to be launched, half of which will be in Cebu.
The company said it will be entering two new locations in the Visayas area, with Bacolod to house two residential projects and a hotel. CLI will also be constructing a residential condominium in Iloilo, riding on the optimism on the expected economic growth in these areas.
“Reports from the National Economic Development Authority show that the Visayas region will zoom ahead of other regions in the next five years and is expected to outpace the projected 7-8% growth for the Philippines,” CLI said.
For Mindanao, CLI is planning the launch of two residential subdivisions and one condominium in Cagayan de Oro, as well as a central business district and two residential condominiums for Davao City.
“In 2018, we will continue to expand our footprint in the Visayas and Mindanao, and develop projects that respond to the growing market in these areas,” Mr. Soberano said.
With this, CLI looks to end 2018 with a total of 66 developments. These projects cater primarily to the mid-market segment, although the company noted some of its condominiums serve the high-end market as well.
CLI said it is counting on people with increased take-home pay to divert these funds into housing, following the lowering of personal income taxes from the newly enacted tax reform program.
This year, CLI is targeting a net income of P1.7 billion and revenues of P5.3 billion.
CLI booked a net income of P960 million in the first three quarters of 2017, 77% up from year-ago levels as revenues also jumped 67% to P2.77 billion in the same period.
Shares in CLI were down five centavos or 1.01% to P4.90 apiece at the stock exchange on Tuesday. — Arra B. Francia