In & out

October 11, 2018 | 8:27 pm

Jimmy Butler finally joined the Timberwolves for practice yesterday, capping his absence from team activities at three weeks. Since he met head coach Tom Thibodeau and enunciated his desire to be traded last month, he moved — and was granted permission — to stay away. Needless to say, the hope was that a deal could be done soon. With the start of the season just around the corner, however, he had to allow for the possible perpetuation of the status quo.
By all accounts, Butler took no time reasserting his alpha-dog status with the Timberwolves. He was extremely active yesterday, showing all and sundry that he, too, stayed in shape during the time he kept to himself. And if the intensity he displayed is any indication, he’s prepared to be front and center for the blue and black once the 2018-19 campaign gets under way. He was engaged from start to finish, his commitment to his craft evident even to his most critical teammates.
Which is not to say Butler has changed his mind. On the contrary, he made sure everyone knew where he stood, taking to task Thibodeau, general manager Scott Layden, fellow All-Star Karl-Anthony Towns, and 2014 top overall pick Andrew Wiggins throughout the practice session. He minced no words, saw fit to talk trash, and, just to make sure his message got through, reiterated his position during an interview with ESPN’s Rachel Nichols right after.
Whether Butler’s defiant stance makes him more or less desirable as a trade target remains to be seen. The Heat are said to remain interested in acquiring his services, but not to the point of being fleeced. Certainly, the Timberwolves’ bargaining power has been eroded by his publicized intent to test free agency next year. That said, they’re obviously ready to play the long game; they may acknowledge that he’s on the way out, but they want to let it happen on their terms. In other words, the seemingly inevitable is clear, but the when is not.

Anthony L. Cuaycong has been writing Courtside since BusinessWorld introduced a Sports section in 1994.

How (and why) entrepreneurs should cash in on the coconut craze

October 11, 2018 | 2:51 pm

A few days before Dr. Karin Michels, an adjunct professor at the Harvard T.H. Chan School of Public Health, called coconut oil “pure poison” in her now-viral lecture, the Philippines was busy holding the first World Coconut Congress.
In 2017, the Philippines’ coconut oil exports generated over $1.46 billion in total revenues, putting the country among the world’s top coconut and coconut-derivative producers. Harvard University has since distanced itself from Dr. Michels’ comments, saying they were “not made on behalf of the institution.” Similarly, organizations all over the world have written up countless rebuttals to the coconut oil put-down.
The fact stands, coconut oil is a huge market, one that Filipinos ought to capitalize on.

Tech bias

The emergence of tech startups today has created a huge and arguably disproportionate amount of interest in emerging tech products and services. As far as potential entrepreneurs and venture capitalists are concerned, new tech, like blockchain or AI, is the new oil.
This attraction to the tech sector is not necessarily bad. But, amid rising globalization in agricultural and non-agricultural supply chains, the lack of attention among entrepreneurs to invest, disrupt, and innovate in more traditional sectors puts these precarious industries, and the economy at large, at risk of falling behind.
Last August 14 to 16, the Philippines hosted the first World Coconut Congress at the SMX Convention Center in Pasay City. The theme: “The Time is Now”.
The conference and exhibition was the flagship event of the 32nd National Coconut Week of the Philippine Coconut Authority (PCA), bringing together global industry experts; business leaders; government officials; NGOs; members of the academic, medical, and research communities; and key stakeholders in the coconut industry.
Here are some of the opportunities in the industry today:

Wide and diverse applications

The coconut tree is known as the tree of life, and for good reason. The fruit can be broken down into a wide range of coconut-based and derivative products spanning multiple consumer categories:

food (coconut cream, coconut milk, coconut oil, lambanog, coconut water, and coconut sugar),
food supplements and health and wellness (refined, bleached, and deodorized coconut oil, virgin coconut oil, and medium-chain triglyceride oil),
personal and home care (soaps, cleaners, and surfactants),
furniture,
and handicraft material and fibers.

Effectively communicating how versatile this product can be is key to making coconut-based and derivative products attractive to potential investors and industry players.
Global market values of coconut milk, water, and virgin coconut oil have grown steadily in both value and volume since 2014. Ken Gibson, senior vice-president of Franklin Baker Company of the Philippines, says this has sparked a renaissance for producers shifting away from more traditional products like desiccated coconut, towards newer offerings.
According to Divina Bawalan, an international coconut processing consultant and former senior research specialist at the Philippine Coconut Authority, this renewed interest in products such as coconut water and oil have done much to revitalize the industry that has been in decline since the early 2000s.

Increasing demand and growth potential

From Madonna to the Kardashians—massive investments and waves of celebrity endorsements in coconut derivatives placed within the health, beauty, personal care, and wellness categories have garnered a lot of attention for these products.
Whether it’s virgin coconut oil, sugar, water, vinegar, or amino, there is growing consumer acceptance and increased demand in export markets. Coconut-based products are being touted as a superfood for their health benefits, sold in massive quantities at countless big retailers like Whole Foods and Wal-Mart.
Marco Reyes, president of the Virgin Coconut Oil Producers & Traders Association of the Philippines, expects an annual compound growth rate of about 10% to 11% in global demand for virgin coconut oil over the next three years.

Health, beauty, and wellness properties

Academic research—such as that of Dr. Fabian Dayrit, chairman of the Asian and Pacific Coconut Community Scientific Advisory Committee for Health—has long extolled the benefits of coconut-based products. New research has found benefits in:

maintaining cholesterol levels,
weight loss,
increasing metabolism,
skin and hair care,
and treating cognitive illnesses such as Alzheimer’s disease.

On the other end of the wellness spectrum, Mintel’s 2018 Report on Global Beauty Trends shows global consumer preferences shifting towards environmentally-friendly products made from natural ingredients.
Glenn Apostol, a market development manager at oleochemical producer Chemrez, describes three main coconut derivatives under this category:

mild, hypoallergenic soaps and shampoos
petroleum and silicon-free skin moisturizers (that make for fantastic natural sunscreens)
natural antimicrobial lipids proven to be highly effective at treating skin infections

Coconut oil is a small component of global vegetable oil production

Compared to its closest substitute, palm kernel oil, global coconut oil production has stood at just over three million tons in 2017, less than half of the seven million tons of palm kernel oil produced in the same year. More aggressively marketing coconut oil as a substitute for palm kernel oil can potentially capture an extra three million tons of demand for palm kernel oil.
There remains, of course, a number of challenges: integrated processing facilities’ high barriers to entry, lack of support from the medical and scientific community in the west, decreasing supply and output, and a fragmented marketplace for raw coconut inputs, to name a few.

A need for inclusive growth

Government support in the form of subsidies, training, information dissemination, and R&D on coconut tree hybrids, spearheaded by the Philippine Coconut Authority, DTI, and DOST, are a good first step in the right direction.
The use of new technologies like blockchain applied to big multinational companies’ supply chains can allow for greater transparency in the way manufacturers source their raw materials, giving farmers a voice toward fair and ethical sourcing.
Innovations in tech mint a few billionaires here and there, but inclusive growth is the only way to ensure the Philippines’ coconut industry—and the agricultural sector as a whole— grows sustainably.
We need to deploy programs toward restructuring systems and reskilling the labor force such that more traditional sectors of the economy like agriculture can continue to thrive. By providing sustainable livelihoods to the workers and farmers in this sector, not only the intrepid entrepreneurs, but the nation at large, can reap the benefits of this coconut boom.

Ryann Chris Aninias is an economist by training, with a masters degree in Economics from the University of the Philippines. He currently serves as the associate director at a local tech startup.

FDI net inflows more than double in July

October 11, 2018 | 12:32 am

NET INFLOWS of foreign direct investments (FDI) more than doubled in July, marked by strong inflows for both intercompany loans and equity capital, the Bangko Sentral ng Pilipinas (BSP) reported on Wednesday.
FDI net inflows reached $914 million for the month, improving from $831 million in June and jumping from $344 million received in July 2017. This also marks the biggest net inflows since May’s $1.645 billion.
“This reflected the continued positive investor sentiment on the Philippine economy on the back of strong macroeconomic fundamentals and growth prospects,” the BSP said in a statement.
FDIs infuse additional capital for the Philippine economy, which in turn creates more job opportunities and spurs domestic activity by supporting business expansions.
The July inflows also brought year-to-date FDI net inflows to $6.669 billion, 52.1% more than the $4.385 billion investments that entered the country in 2017’s first seven months. This also brings FDI inflows closer to the $9.2-billion forecast given by the BSP for the entire year, coming from the record $10.049 billion recorded last year.
Both equity and debt placements surged in July, data showed.
Net equity investments reached $261 million for the month, nearly double the $137 million a year ago.
Broken down, gross placements surged by 60.6% to $278 million, which was partly offset by $17 million worth of outbound capital. This compares to $173 million worth of inbound equity capital in July 2017, offset by withdrawals worth $36 million.
Reinvested earnings totalled $69 million, slipping 2.3% from $71 million in July last year.
Lending by foreign firms to their subsidiaries or affiliates in the Philippines quadrupled to $584 million in July from $136 million a year ago.
The central bank said foreign investments went mainly to manufacturing; financial and insurance; real estate; wholesale and retail trade; and administrative and support service activities. The biggest sources of capital in July were Singapore, Hong Kong, Japan, the United States and China.
One observer said that the surge in FDIs shows that the Philippines remains a “legitimate investment destination” in Southeast Asia.
“The economy has been growing, in spite of recent — I would say — economic hiccups or challenges (high inflation, in particular), but this latest FDI release describes a robust appetite for Philippine business opportunities,” said Ruben Carlo O. Asuncion, chief economist at the Union Bank of the Philippines, Inc.
Despite the steady climb in inflows, the Philippines continues to lag behind its neighbors in terms of attracting foreign capital. HSBC Global Research previously said this is because of Constitutional limits on foreign ownership plus market uncertainty over a new system for tax incentives which hold back investors from making big bets here.
The second tax reform package pending in Senate seeks to cut the corporate income tax rate gradually to 20% from 30% via two percentage-point reduction every other year starting 2021. The bill will also limit incentives to a single menu for all types of industries. Perks will be capped at five years and will replace all other forms of incentives granted by investment promotion agencies.
Business groups and ecozone locators have cautioned that changing the set of these investment “sweeteners” could dampen investor appetite towards the Philippines and derail expansion plans of foreign firms.
On the other hand, relaxation of the Foreign Investment Negative List that limits participation of offshore investors in select sectors awaits Malacañang’s approval more than a year after it had been expected. — Melissa Luz T. Lopez

August merchandise export growth fails to stem trade deficit

October 11, 2018 | 12:31 am

THE COUNTRY’s merchandise trade deficit lingered above the $3-billion mark for the fifth straight month this year in August as a pickup in export growth that month failed to offset a slower increase in imports, according to data the Philippine Statistics Authority (PSA) reported on Wednesday.
August saw overseas sales of Philippine goods increase by 3.089% year-on-year to $6.163 billion, outstripped by an 11.034% hike in value of inbound foreign goods to $9.677 billion, yielding a $3.513-billion deficit in trade in goods that was 28.393% bigger than the year-ago $2.737 billion. August’s trade gap was also 0.9% less than July’s $3.546 billion.
Year-to-date, exports dipped 2.049% to $44.908 billion while imports grew 15.043% to $70.911 billion, pushing the merchandise trade gap up 64.668% to $26.003 billion. The government has targeted exports to grow nine percent and imports 10% for 2018.

Merchandise export growth in August was the best performance for this year, so far, and was the third straight month of positive performance, while that of imports was the slowest in five months.
In a statement, the National Economic and Development Authority (NEDA) noted that exports in August were buoyed particularly by electronic products, mineral products, as well as fruits and vegetables. It said steps to help exports grow further include removing unnecessary regulatory impediments, raising productivity and competitiveness of businesses, upgrading export quality and standards, improving access to trade finance, and enhancing innovation.
Electronic products, which accounted for 54.282% of exports in August, grew 6.978% year-on-year to $3.346 billion. Year-to-date, this segment was up 5.712% to $24.987 billion.
NEDA also noted that import growth softened on weaker increases in purchases of consumer items, capital goods, as well as raw materials and intermediate goods. It added that the country’s total import bill can be expected to grow further in the coming months on increased purchases of capital goods for the government’s infrastructure development push as well as rising oil prices.
Electronic products, used as intermediate production inputs, made up 25.404% of August merchandise imports at $2.458 billion, up 9.95% from a year ago. Year-to-date, these products grew 19.219% to $18.352 billion.
Capital goods made up 34.466% of imports in August at $3.335 billion, up 12.944% from a year ago. Year-to-date, this segment was up 16.076% to $23.443 billion.
The peso, which on Wednesday was 8.5% weaker against the dollar year-to-date, has also been a factor, supposedly helping to make Philippine goods cheaper when sold abroad while at the same time making it more expensive to buy foreign products.
The eight months to August saw the United States lead overseas markets of Philippine goods with a 15.297% share with $6.869 billion, up by 6.781%. Hong Kong followed with a 14.612% share of $6.562 billion, up 15.196%; Japan came next with a 14.146% share of $6,353 billion, though down by 16.509%; while China accounted for 12.921% with $5,803 billion, up 12.031%.
The same period saw China top sources of products that went into the Philippines, accounting for 19.421% with $13.771 billion, up 24.774%. South Korea came next with a 10.138% share of $7,189 billion, up 38.204; Japan followed with a 9.932% share of $7.043 billion, down 4.181%; while the United States accounted for 7.296% at $5.174 billion, up 5.49%.
The growing trade deficit has fueled the increase in the country’s current account gap, which at $3.1 billion last semester had already hit the full-year projection of the Bangko Sentral ng Pilipinas (BSP). The current account provides a snapshot of the country’s overall economic interaction with the rest of the world covering trade in goods and services; remittances from overseas Filipino workers; profit from Philippine investments abroad; interest payments to foreign creditors; as well as gifts, grants and donations to and from abroad. The growing current account gap has been blamed for the peso’s persistent weakness against the dollar.
ING Bank N.V. Manila Senior Economist Nicholas Antonio T. Mapa said in a note on Wednesday: “The prognosis is for the current account to remain in the red, exerting further pressure on the local unit despite BSP’s already very hawkish stance,” referring to a cumulative 150-basis-point hike in policy interest rates since May as the central bank sought to temper inflation pressures and support the peso.
Sought for comment, UnionBank of the Philippines, Inc. Chief Economist Ruben Carlo O. Asuncion said in an e-mail that the country’s trade gap can be expected to grow further in “this kind of external environment of weak demand for exports.”
“By end 2018, I still expect the trade deficit to further widen and persist,” Mr. Asuncion said.
“Nevertheless, the said trade deficit is not major concern since there are ample international reserves and the macroeconomic fundamentals are fairly stable.” — Janina C. Lim

Philippine trade year-on-year performance (August 2018)

October 11, 2018 | 12:31 am

Singapore court ruling in favor of Maynilad’s claim vs gov’t final

October 11, 2018 | 12:30 am

THE DECISION of the Singapore High Court to uphold the arbitral award amounting to at least P3.4 billion in favor of Maynilad Water Services, Inc. has become final after the Philippine government no longer appealed the case.
In separate disclosures to the stock exchange on Wednesday, Maynilad’s major shareholders Metro Pacific Investments Corp. (MPIC) and DMCI Holdings, Inc. said the water concessionaire’s Singapore-based counsel formally confirmed on Tuesday that the decision of the court issued on Sept. 4, 2018 had become final as of Oct. 4, 2018.
The court last month dismissed the application of the Republic of the Philippines to set aside the first partial award dated July 24, 2017 that was issued by a unanimous three-man arbitral tribunal in the arbitration between Maynilad and the Philippine government. The Philippines on Feb. 13, 2018 filed an application to set aside the arbitral award.
The disclosures quoted Ramon S. Fernandez, Maynilad president and chief operating officer, as saying the company’s “latest victory” vindicates its position that there are no valid and meritorious grounds to challenge or set aside the arbitral award.
Maynilad holds the exclusive concession granted by the Metropolitan Waterworks and Sewerage System (MWSS), on behalf of the government, to provide water and sewerage services in the west service area of Metro Manila. Metro Pacific owns 52.8% of Maynilad, while DMCI has a 25% indirect economic interest in the utility.
The arbitral award upheld the validity of Maynilad’s claim against the undertaking letters issued by the Republic, through the Department of Finance (DoF). The award ordered the Philippines to compensate the company for foregone revenues, from March 11, 2015 onwards. The losses resulted from the refusal of the MWSS to implement Maynilad’s tariff adjustment for the period 2013 to 2017, which includes its recovery of corporate income tax payments.
The Singapore court’s decision became final after the Philippines decided to no longer appeal the dismissal within 30 days from Sept. 4 or until Oct. 4, the disclosures said.
Aside from dismissing the application to set aside the award, the Singaporean court also ordered the Philippines to pay Maynilad S$40,000 by way of costs.
Randolph T. Estrellado, Maynilad chief operating officer, said in a text message that details of the company’s next steps were not yet available. He said the company “will work towards an efficient collection of its claim in a manner that recognizes the interest of its various stakeholders including its shareholders and customers, taxpayers and the government.”
He said the arbitral tribunal previously ordered the Philippines to reimburse Maynilad P3,424,690,000 for losses from March 11, 2015 to Aug. 31, 2016.
Under Maynilad’s concession agreement with the government, it may request tariff rate adjustments based on movements in the inflation rate, foreign exchange currency differentials, a rate rebasing process scheduled every five years and certain extraordinary events.
Any rate adjustment needs the approval of MWSS and the agency’s regulatory office. Tariff adjustments that are not granted could have an adverse effect on Maynilad’s finances as well as those of MPIC.
Sought for comment, MWSS Chief Regulator Patrick Lester N. Ty said by phone: “That one (Singapore court case) is actually between the DoF and Maynilad. I am not party to the case. I wasn’t even informed about all these things.”
He said the national government could still decide to contest the case in the Philippines or pay the arbitral award.
“I’m going to wait if the DoF decides to pay it and then if it tries to claim against the MWSS. Right now, we don’t know,” he added.
The department’s undertaking letter provides that the government will indemnify Maynilad for any losses caused by a delay attributable to the Republic or to any state agency in implementing any increase in the standard water rates beyond the date of its implementation, in accordance with the Feb. 21, 1997 concession agreement.
MPIC is one of three Philippine units of Hong Kong-based First Pacific Co. Ltd., the others being Philex Mining Corp. and PLDT Inc. Hastings Holdings, Inc., a unit of PLDT Beneficial Trust Fund subsidiary MediaQuest Holdings, Inc., has interest in BusinessWorld through the Philippine Star Group, which it controls. — Victor V. Saulon

McDonald’s PHL allots P3-billion capex for 2019

October 11, 2018 | 12:09 am

MCDONALD’S Philippines is increasing its capital expenditure (capex) to P3 billion for 2019, as it opens new stores and upgrades existing ones with self-paying kiosks.
“Next year, we expect the capital investment to grow by 50% so we’re looking at P3-billion capex. And that capex, not just for NXTGEN but it also includes the expansion plans so it includes continuing our expansion plan of opening stores… The new stores will already be offering this service platform (NXTGEN),” McDonald’s Philippines Managing Director Margot B. Torres told reporters during the launching of the company’s NXTGEN store in McKinley West, Taguig.
McDonald’s Philippines’ NXTGEN stores feature self-paying kiosks where customers can place their orders and pay for meals using Visa or Mastercard credit, debit, or prepaid cards. Customers can pick up their orders at the claim counter.
“By 2019, 10% of our store base will already be NXTGEN but the goal is to convert by 2021 into NXTGEN 70% of the stores,” Ms. Torres said.
McDonald’s Philippines tapped PayMaya for the self-ordering kiosks, which are currently available at branches in Kapitolyo (Pasig), Robinson’s Galleria (Pasig), Madison (San Juan), and Pioneer (Mandaluyong).
“Through our respective innovations we hope to transform the experience of McDonald’s customers whenever they order their favorite food, and push the adoption of the ‘cashless’ lifestyle by more Filipinos,” Paolo Azzola, chief operating officer and managing director at PayMaya Philippines, said in a statement.
With the opening of the McKinley West branch, McDonald’s Philippines currently has 604 stores. It targets to end the year with 620 stores nationwide.
“A higher percentage will be opened in Visayas, Mindanao. 20% to 30% in Mindanao. We just opened a week ago in Iloilo, Davao and also in Surigao,” McDonald’s Philippines President and Chief Executive Officer Kenneth S. Yang told reporters.
PRICE INCREASE
At the same time, Mr. Yang said the fast food giant is currently reviewing prices of its offerings, which may increase next year.
“We’re still reviewing, but we try to be below inflation. We try to absorb some of the increases so we will not pass on all the increases to customers,” Mr. Yang said, adding the company sources 70% of their products locally.
Inflation surged anew in September to a fresh nine-year high. Prices of basic goods and services jumped by 6.7% in September, rising from 6.4% in August to mark the ninth straight month of increase, the Philippine Statistics Authority (PSA) reported last week.
Ms. Torres said McDonald’s Philippines increased prices at the start of the year due to the sugar-sweetened beverage tax imposed by the government.
“In the menu items, not everything increases across the board, so we also choose the items that we believe are not price sensitive. And then we even commit to items to not increase their price and keep it a price point because it is purchased by the mass market, we have done that through the years,” she said.
As an example, Ms. Torres pointed to its McSaver meal which has been pegged at P59 for several years until it was increased to P65 when the sugar tax was imposed.
“Pero di pa rin namin ginagalaw despite the increase in bigas, inflation (But we haven’t increased prices of McSaver meals despite higher rice prices, inflation). It is still at P65,” she added.
Ms. Torres noted the company faced challenges with the typhoons and the closure of Boracay island, where it had two profitable branches.
“There were challenges we faced in June, July, August. Everybody was affected by weather, there were more storms this year versus last year. We were also challenged by closures that we did not anticipate, specifically for Boracay… We had to close one and we kept one open but of course, because of the island closure, the sales really dropped. We were also affected by the scarce supply of sugar,” Ms. Torres said. — Reicelene Joy N. Ignacio

Phase 1 of C5 South Link on track to open in March

October 11, 2018 | 12:08 am

THE government expects phase 1 of the C5 South Link Expressway to open by March, three months ahead of the June 2019 schedule.
Public Works and Highways Secretary Mark A. Villar said on Wednesday the construction of the project is on track, while acquisition of right of way is still ongoing.
“Ang target natin is by the first quarter of next year, magiging operational na ‘yung link between C5 and ‘yung tawid ng SLEx [Our target is to have the link between C5 and the road crossing South Luzon Expressway operational by the first quarter of next year],” he told reporters after the inspection of the road construction on Wednesday.
For the first phase, the government’s private concessionaire Cavitex Infrastructure Corp. (CIC) of the Metro Pacific Tollways Corp. (MPTC) said 74.54% of right of way has already been acquired. Seven structures owned by the Manila International Airport Authority (MIAA) and five structures of the Philippine National Police are still being processed.
“Na-resolve ‘yung [We resolved the] right of way at MIAA. So we’re able to access that. Syempre ‘yung mga ganitong projects kasi [Of course in projects like these] you just have to push the contractor… So contractually they have to finish in June, pero sabi namin agahan natin [but we told them to finish earlier],” CIC President Luigi L. Bautista told reporters.
The P10-billion C5 South Link is a 7.7-kilometer toll road linking Circumferential Road 5 (C5) to the Manila-Cavite Expressway (CAVITEx), aimed at halving travel time to Taguig from Parañaque, Las Piñas and Cavite to around 30 minutes.
The first phase covers the first 2.2 kilometers from the C5 road to Merville, the second phase from Merville to Sucat, and the last phase from Sucat to R1 Expressway.
Mr. Villar said the whole alignment is targeted to be completed by 2020.
“We’ll open another phase by 2019, then we’ll open another phase by 2020…. Pero at least, as early as next year, first quarter, mapapakinabangan na itong C5 link [But at least, as early as first quarter of next year, we will get to utilize the C5 link],” Mr. Villar said.
MPTC is the tollways unit of Metro Pacific Investments Corp. (MPIC). MPIC is one of three Philippine units of Hong Kong-based First Pacific Co. Ltd., others being PLDT, Inc. and Philex Mining Corp. Hastings Holdings, Inc., a unit of PLDT Beneficial Trust Fund subsidiary MediaQuest Holdings, Inc., has an interest in BusinessWorld through the Philippine Star Group, which it controls. — Denise A. Valdez

Electric cooperatives slam Energy chief for backing Solar Para sa Bayan Corp.

October 11, 2018 | 12:07 am

ELECTRIC cooperatives have responded to the Energy secretary’s support for Solar Para sa Bayan Corp.’s bid for a nationwide microgrid franchise, in a bluntly worded statement that calls him out for being allegedly biased against them.
The cooperatives, through various industry organizations, said they had never seen an Energy secretary “who’s so subservient and biased to private business interests.”
Their statement came after Department of Energy (DoE) Secretary Alfonso G. Cusi last week described Solar Para sa Bayan, a company led by Leandro L. Leviste, as a “positive disruptive” development that could result in a change in the way electric cooperatives are serving unenergized areas in the countryside.
Mr. Leviste, the son of Senator Loren B. Legarda, stands to benefit from House Bill 8179, which seeks to grant a non-exclusive legislative franchise to Solar Para sa Bayan. The measure is opposed by solar energy developers and electric cooperatives. A number of House representatives have also called for further review and deliberation on the bill.
“Mr. Cusi is mouthing the untested and false claims of an entity that has no proven track record in the power industry but is in the process of acquiring a legislative franchise because of political backers,” the cooperatives said.
The statement was attributed to leaders of National Association of General Managers of Electric Cooperatives and Philippine Rural Electric Cooperatives Association, two of the largest groups of electric cooperatives in the country.
They criticized Mr. Cusi for allegedly acting as the spokesperson of Mr. Leviste “while denigrating the decades-long contributions of electric cooperatives to rural development, as evidenced by the emergence of industries and employment opportunities contributing to the robust growth in the countryside.”
Separately, Philippine Independent Power Producers Association, Inc. (PIPPA) said in a statement that while electrification is a valid concern, granting a nationwide franchise to any entity is not the proper means to achieving this purpose.
While it supports the common goal of nationwide electrification and affordable electricity, PIPPA said Republic Act 9136 or the Electric Power Industry Reform Act of 2001 (EPIRA) “provides that generation of electric power does not require a national franchise and should be competitive and open.”
“As such, [Solar Para sa Bayan’s] means of entry into the generation sector is already provided for by the EPIRA. In fact, electrification to unserved and underserved areas are already being done without a franchise,” it said, citing as example the company itself and other power generation companies that have been coordinating with the DoE for such purpose.
“PIPPA believes that the same may be achieved, without any undue favor or harm, simply through the proper implementation of the EPIRA. The unbridled authority to operate at any capacity, of whatever kind, and in any part of the Philippines, is far too great a privilege for any entity,” the association said. — Victor V. Saulon

PHL firms ignore nearly half of cyberthreat alerts

October 11, 2018 | 12:06 am

COMPANIES in the Philippines are not able to address nearly half of legitimate cybersecurity threats they receive, a study published by Cisco Systems, Inc. (Cisco) showed.
According to the Cisco 2018 Asia Pacific Security Capabilities Benchmark Study, in the region, companies receive six threats every minute but only 50% of alerts are being investigated.
The study was conducted by independent third-party researchers had more than 2,000 respondents across 11 countries — China, Korea, Japan, Singapore, Thailand, Malaysia, Vietnam, Philippines, Indonesia, Australia, and India.
For the Philippines, there were 150 respondents from the financial services, telecommunications, retail, and software industries all classified as medium and large enterprises.
The study showed 42% of the Philippine respondents said they receive 5,000 alerts per day, although this share is among the lowest in Southeast Asian countries.
“As compared to Singapore, we are not as digitized yet… Second is the cybersecurity law and data privacy act that’s recently been implemented has created a lot of awareness and education… While the number of attacks is less compared to the other five [Southeast Asian countries], it’s a statistical model… We are not discounting the fact that it may be less in volume, but…the attacks could be bigger,“ Karrie C. Ilagan, Cisco Systems Philippines Managing Director, told BusinessWorld on the sidelines of a briefing on the study yesterday when asked why the result was better than other countries in the region.
However, on average, local firms investigate just 50% of the alerts they receive. Of those investigated, 30% turn out to be legitimate, of which just 51% are acted upon and corrected.
Attacks were not observed just in the information technology infrastructure, but also in the operational infrastructure, which includes the data center, cloud services, and endpoints. About 19% of respondents said they encountered such attacks on their operational infrastructure, and more than a quarter expect these in the coming year.
“The threat is really becoming bigger… The new kind of security discussion or conversation is happening globally. The security has gone beyond borders because of this. Cybersecurity has become an industry. The cyber-hacking industry is massive globally and that’s precisely why you see a lot of actors coming about in many parts of the world… because of the amount of data that is available today and how these data has become a source of revenue, income,” Ms. Ilagan said.
Still, the study showed that companies in the country had the largest percentage in terms of allotting budget both for information technology and security.
“The Philippines had the largest percentage of companies, at 37%, whose security budget is completely separate from the IT budget. That’s one of the reasons why we think the Philippines is actually doing much better in terms of ranking… Bottom line, I think this is good news,” Ms. Ilagan said.
Earlier this year, Cisco said in a study that the Philippines needs to spend $8.8 billion between 2018 and 2025 to be in line with the average benchmark and $22.8 billion to be in line with “global best-in-class countries” in the same period.
In the region, 60% of the respondents said cybersecurity attacks cost them more than $500,000, while 51% of cyberattacks resulted in losses of more than $1 million. These costs includes lost revenue, lost customers, lost opportunities and out-of-pocket costs, among others.
With multiple security providers coming and companies engaging different providers, identifying and managing threats take longer. The study said 97% of respondents in the Asia Pacific are having a hard time managing the multiple alerts they receive from these vendors. — V.M.P. Galang

PCC taps UK firm to keep track of Grab’s ‘voluntary commitments’

October 11, 2018 | 12:06 am

By Denise A. Valdez, Reporter
THE Philippine Competition Commission (PCC) tapped a United Kingdom-based audit firm to monitor Grab Philippines’ (MyTaxi.PH, Inc.) fulfillment of its voluntary commitments in relation to its acquisition of Uber Philippines in March.
In a statement on Wednesday, the competition watchdog said it picked Smith & Williamson (S&W) as the third party auditor to oversee Grab’s compliance for one year.
“After thorough evaluation, S&W was determined as the most suited to conduct monitoring compliance with the parties’ voluntary commitments in the Grab case. Their track record on competition cases includes the most recent task of monitoring Grab-Uber on the Interim Measures Directions in Singapore,” the PCC said.
It noted the company’s credibility as an auditor is backed by its “over 100 years’ experience as an audit firm and 13 years of reporting to various competition authorities across jurisdictions.”
In a statement, Grab said it has worked with S&W in Singapore, describing them as “truly fair and independent.”
Last August, the PCC approved Grab’s voluntary commitments that were meant to address competition concerns. These commitments cover the ride-hailing company’s service quality, fare transparency, pricing, removal of a “see destination” feature for drivers, driver and operator non-exclusivity, incentives monitoring, and an improvement plan.
“During the 12-month period, every time the monitor would have findings of some kind of a breach (in commitments), they would have to report that to the Commission, then the Commission will decide whether or not to impose fines,”
PCC Commissioner Stella Luz A. Quimbo told BusinessWorld in a phone interview.
Should the PCC find Grab engaging in anti-competitive practices after the 12-month period, Ms. Quimbo said it may still call out the company, but for a different provision in the Philippine Competition Act.
“After the 12-month period, if PCC still finds anti-competitive behavior on the part of Grab, we can open Section 15 (a) which is abuse of dominance. We can have some form of intervention, not a merger control but a case that we open under what we call abuse of dominance,” she said.
Section 15 of the Philippine Competition Act outlines provisions that empower the PCC to prohibit practices from a dominant industry player that “substantially prevent, restrict or lessen competition.”
Ms. Quimbo said the monitoring of voluntary commitments, which Grab tapped to deal with its Uber buy-out issue, is part of PCC’s merger control policy.

Neuroscience start-up teaches robot drivers to think like humans

October 11, 2018 | 12:05 am

ROBOT CARS make for annoying drivers.
Relative to human motorists, the driverless vehicles now undergoing testing on public roads are overly cautious, maddeningly slow, and prone to abrupt halts or bizarre paralysis caused by bikers, joggers, crosswalks or anything else that doesn’t fit within the neat confines of binary robot brains. Self-driving companies are well aware of the problem, but there’s not much they can do at this point. Tweaking the algorithms to produce a smoother ride would compromise safety, undercutting one of the most-often heralded justifications for the technology.
It was just this kind of tuning to minimize excessive braking that led to a fatal crash involving an Uber Technologies Inc. autonomous vehicle in March, according to federal investigators. The company has yet to resume public testing of self-driving cars since shutting down operations in Arizona following the crash.
If driverless cars can’t be safely programmed to mimic risk-taking human drivers, perhaps they can be taught to better understand the way humans act. That’s the goal of Perceptive Automata, a Boston-based startup applying research techniques from neuroscience and psychology to give automated vehicles more human-like intuition on the road: Can software be taught to anticipate human behavior?
“We think about what that other person is doing or has the intent to do,” said Ann Cheng, a senior investment manager at Hyundai Cradle, the South Korean automaker’s venture arm and one of the investors that just helped Perceptive Automata raise $16 million. Toyota Motor Corp. is also backing the two-year-old startup founded by researchers and professors at Harvard University and Massachusetts Institute of Technology.
“We see a lot of AI [Artificial Intelligence] companies working on more classical problems, like object detection [or] object classification,” Cheng said. “Perceptive is trying to go one layer deeper — what we do intuitively already.”
This predictive aspect of self-driving tech “was either misunderstood or completely underestimated” in the early stages of autonomous development, said Jim Adler, the managing director of Toyota AI Ventures.
With Alphabet Inc.’s Waymo planning to roll out an autonomous taxi service to paying customers in the Phoenix area later this year, and General Motor Co.’s driverless unit racing to deploy a ride-hailing business in 2019, the shortcomings of robot cars interacting with humans are coming under increased scrutiny. Some experts have advocated for education campaigns to train pedestrians to be more mindful of autonomous vehicles. Startups and global automakers are busy testing external display screens to telegraph the intent of a robotic car to bystanders.
But no one believes that will be enough to make autonomous cars move seamlessly among human drivers. For that, the car needs to be able to decipher intent by reading body language and understanding social norms. Perceptive Automata is trying to teach machines to predict human behavior by modeling how humans do it.
Sam Anthony, chief technology officer at Perceptive and a former hacker with a PhD in cognition and brain behavior from Harvard, developed a way to take image recognition tests used in psychology and use them to train so-called neural networks, a kind of machine learning based loosely on how the human brain works. His startup has drafted hundreds of people across diverse age ranges, driving experiences and locales to look at thousands of clips or images from street life — pedestrians chatting on a corner, a cyclist looking at his phone — and decide what they’re doing, or about to do. All those responses then get fed into the neural network, or computer brain, until it has a reference library it can call on to recognize what’s happening in real life situations.
Perceptive has found it’s important to incorporate regional differences, since jaywalking is commonplace in New York City and virtually non-existent elsewhere. “No one jaywalks in Tokyo, I’ve never seen it,” says Adler of Toyota. “These social mores and norms of how our culture will evolve and how different cultures will evolve with this tech is incredibly fascinating and also incredibly complex.”
Perceptive is working with startups, suppliers and automakers in the US, Europe, and Asia, although it won’t specify which. The company is hoping to have its technology integrated into mass production cars with self-driving features as soon as 2021. Even at the level of partial autonomy, with features such as lane-keeping and hands-off highway driving, deciphering human intent is relevant.
Autonomous vehicles “are going to be slow and clunky and miserable unless they can understand how to deal with humans in a complex environment,” said Mike Ramsey, an analyst at Gartner. Still, he cautioned that Perceptive’s undertaking “is exceptionally difficult.”
Even if Perceptive proves capable of doing what it claims, Ramsey said, it may also surface fresh ethical questions about outsourcing life or death decisions to machines. Because the startup is going beyond object identification to mimicking human intuition, it could be liable for programming the wrong decision if an error occurs.
It’s also not the only company working on this problem. It’s reasonable to assume that major players like Waymo, GM’s Cruise LLC, and Zoox Inc. are trying to solve it internally, said Sasha Ostojic, former head of engineering at Cruise who is now a venture investor at Playground Global in Silicon Valley.
Until anyone makes major headway, however, be prepared to curb your road rage while stuck behind a robot car that drives like a grandma. “The more responsible people in the AV industry optimize for safety rather than comfort,” Ostojic said. — Bloomberg

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