Spotlight is BusinessWorld’s sponsored section that allows advertisers to amplify their brand and connect with BusinessWorld’s audience by publishing their stories on the BusinessWorld Web site. For more information, send an email to online@bworldonline.com.
Join us on Viber at https://bit.ly/3hv6bLA to get more updates and subscribe to BusinessWorld’s titles and get exclusive content through www.bworld-x.com.
BEIJING – Spanish Prime Minister Pedro Sanchez is expected to meet Chinese President Xi Jinping on Monday, with the EU and China on the verge of a trade war and Beijing preparing to hit back at Spanish automobiles and pork if Brussels imposes tariffs on its EVs.
Beijing in June warned that escalating frictions with the European Union over its electric cars could trigger a trade war, just days after China ratcheted up tensions by announcing an anti-dumping investigation into European pork imports.
China in August then raised the stakes even higher by kicking off a probe of the 27-strong bloc’s dairy subsidies.
Both of which brought Brussels’ dispute with Beijing to Mr. Sanchez’s backyard.
Spain in 2023 exported $1.5 billion worth of the pork products China will investigate, Chinese customs data showed, more than second- and third-ranking the Netherlands and Denmark’s combined exports of $620 million and $608 million, respectively.
The Iberian state also sold just under $50 million worth of targeted dairy products to China last year.
“Our objective is to maintain the political momentum of the bilateral relationship, strengthen economic and trade relations and support Spanish culture, education and science in China,” Mr. Sanchez’s official X account said above a video of his arrival in Beijing on Sunday.
The Spanish Prime Minister is due to meet Mr. Xi and participate in various business forums in Beijing and Shanghai, according to Chinese state media.
Mr. Sanchez will want assurance that China will not strike back at Brussels by raising its own tariffs on imported large-engined gasoline-powered vehicles, as state Chinese media have suggested it might, as that could hurt SEAT, an automaker owned by Volkswagen VOWG_p.DE that is one of Spain’s biggest employers.
And while Beijing’s January and May announcements it would also examine whether European brandy and POM copolymers, a type of manufacturing plastic, had been sold into China below market rates will impact Paris and Berlin more than Madrid, the broader bloc will be hoping Sanchez can dial the tensions down a notch.
State-owned newspaper Global Times said on Monday it was “important that China and Spain can have constructive communication on trade issues”, citing Zhao Junjie, an academic affiliated with the Chinese Academy of Social Sciences.
Mr. Zhao also hoped that Mr. Sanchez’s visit would “make clear the notion to the EU that trade frictions in a few areas cannot represent the big picture and should not be a hurdle to bilateral relations.”
China has been canvassing the EU’s member states to reject the European Commission’s proposal to adopt additional duties of up to 36.3% on Chinese-made EVs when they vote on it in October.
The curbs will be implemented in addition to the EU’s standard 10% import tariff unless a qualified majority of 15 EU members representing 65% of the EU population vote against them.
In an advisory vote in July, Spain along with France and Italy supported the tariffs, while Germany, Finland and Sweden abstained. – Reuters
It’s been a down day for Asia as it catches up with the post-payrolls fallout on Wall Street, with the Nikkei losing another 1.7% on top of last week’s nearly 6% slide.
At least S&P 500 futures ESc1 have recouped early losses to trade up 0.3% and European equity futures are modestly firmer ahead of an all-but-certain rate cut from the ECB on Thursday. Treasury yields have come off their lows, while the dollar has regained some ground on the safe-haven yen.
Not helping the mood were misses for Chinese inflation data where producer prices dropped 1.8% against forecasts for a 1.4% fall. CPI rose an annual 0.6% in August and almost all of that was food, with goods prices up just 0.2%.
All this is positive for continued global disinflation, but hardly smacks of a long-awaited recovery in demand at home and Chinese blue chips CSI300 fell 1.3%.
The US CPI report for August comes out on Wednesday and forecasts are for the headline figure to slow to 2.6%, the lowest since March 2021 and a world away from the peak of 9.1%. The range of forecasts also runs from 2.4% to 2.6%, suggesting the risk is to the downside.
A soft outcome would encourage calls for the Federal Reserve to cut by 50 basis points next week, which futures currently price at a 31% chance. A move of 25 basis points is 100% priced, with 112 basis points implied by Christmas. FEDWATCH
Fed speakers on Friday did not sound overly keen on an outsized cut, with Governor Christopher Waller suggesting he would only advocate “front-loading” easing if “subsequent” data showed weakness in the labor market. There is little in the way of major jobs data between now and Sept. 18.
The August US unemployment rate of 4.2% and jobs growth of 142,000, released on Friday, were hardly recessionary, although the downward revision of 86,000 to the prior two months has markets assuming August will get revised down as well. The three-month average also slowed to 116,000, which is well short of the 200,000-odd needed to meet growth in the labor force and stop the jobless rate from rising.
An added wrinkle for the Fed is that their Nov. 7 meeting comes just two days after the U.S. presidential election and it might not be entirely clear by then which side has won. Deciding on whether to go by 50 bp in such a politically charged environment could be a tough call.
That just underlines the stakes for the debate between Ms. Harris and Mr. Trump on Tuesday evening.
Key developments that could influence markets on Monday:
– Euro Zone Sentix Index for Sept
– Fireside chat by ECB Board Member Elizabeth McCaul in New York
As more Filipino consumers rely on on-demand service platforms like Grab, more livelihood opportunities are created for on-demand professionals like ride-hailing drivers and food delivery riders.
These delivery- and driver-partners — relishing the flexibility of work schedule and the high-earnings potential, mostly rely on the platform to be primary breadwinners for their families. They not only fulfill basic necessities but also pave the way for their families’ socioeconomic advancement and overall life improvement.
Such is the inspiring story of Matet Craig, a GrabCar driver-partner for almost a decade. “Walang makakatanggi na ibang klase ang kasipagan, tiyaga, diskarte, at pagmamahal sa biyahe ng mga ride-hailing professionals gaya ko. Naniniwala ako na magkaroon man ng mga hadlang, ang taong determinado magtagumpay sa buhay ay makakahanap ng paraan,” shares Craig. With her earnings, the solo parent of three was able to purchase her six-seater vehicle and send her children to school. “Walang madaling hanapbuhay, pero hangga’t klaro ang layunin mo para sa iyong sarili at pamilya, makikita at makikita ito sa kalidad at klase ng serbisyo na i-ooffer mo sa bawat pasahero.”
A Much-Deserved Celebration of Hard Work and Determination
In celebration of National Heroes Day, Grab’s delivery- and driver-partners were honored in the leading superapp’s online film series, “Itatawid, Ihahatid.” The series highlighted the multifaceted roles and numerous challenges these contemporary heroes must play and overcome on the road to provide exceptional service — unwavering in their determination to inch closer to their life aspirations.
The films were aimed at cultivating the much-deserved appreciation for the often-overlooked dedication of on-demand service professionals to ensure that every passenger gets to their destination safely and conveniently; and that every craving is satisfied. The films were positively received by netizens, with most comments commending the service and perseverance of drivers and riders.
Additionally, in a tribute to their dedication and resilience, drivers and riders en route to their pickup and delivery locations have been honored on the Grab app. All “Kuya” and “Ate” Grab, known for their relentless hard work, have been depicted as committed superheroes on the app’s location tracking feature as they fulfill their services. This innovative tribute, which runs from Aug. 26 to Sept. 1, serves as a constant reminder of their invaluable contribution to the community.
Ralph Guillermo from the Grab Ugnayan Advocates, a group of GrabFood delivery-partners, has underscored the importance of recognizing the dedication of platform professionals such as him. “Hindi ho madali ang ang aming kabuhayan. Ang daming mga iba’t ibang bagay na kailangan namin harapin sa daan upang makapaghatid kami ng serbisyo, gaya na lamang ng traffic, pabago-bagong panahon, at iba pa. Pero siyempre, hindi kami nagpapapigil sa mga ito para sa bawat customer at para sa aming kabuhayan.”
Another Ugnayan Advocate, Alan Carrillo, highlighted how delivery-partnrs appreciate feedback from consumers. “Nakakatuwa kapag kami ay nakakatanggap ng simpleng feedback gaya ng five-star rating o magandang komento, pati na rin tips, mula sa aming customers. Ang mga ito ay patunay na lahat panalo sa bawat maayos na delivery — napapasaya ang mga customer habang kami naman ay umuusad papalapit sa aming aspirasyon sa buhay.”
Spotlight is BusinessWorld’s sponsored section that allows advertisers to amplify their brand and connect with BusinessWorld’s audience by publishing their stories on the BusinessWorld Web site. For more information, send an email to online@bworldonline.com.
Join us on Viber at https://bit.ly/3hv6bLA to get more updates and subscribe to BusinessWorld’s titles and get exclusive content through www.bworld-x.com.
SEOUL, Sept 9 (Reuters) – South Korea convened an international summit on Monday seeking to establish a blueprint for the responsible use of artificial intelligence (AI) in the military, though any agreement is not expected to have binding powers to enforce it.
More than 90 countries including the United States and China have sent government representatives to the two-day summit in Seoul, which is the second such gathering.
At the first summit was held in Amsterdam last year, where the United States, China and other nations endorsed a modest “call to action” without legal commitment.
“Recently, in the Russia-Ukraine war, an AI-applied Ukrainian drone functioned as David’s slingshot,” South Korean Defence Minister Kim Yong-hyun said in an opening address.
He was referring to Ukraine’s efforts for a technological edge against Russia by rolling out AI-enabled drones, hoping they will help overcome signal jamming as well as enable unmanned aerial vehicles (UAVs) to work in larger groups.
“As AI is applied to the military domain, the military’s operational capabilities are dramatically improved. However it is like a double-edged sword, as it can cause damage from abuse,” Kim said.
South Korean Foreign Minister Cho Tae-yul said discussions would cover areas such as a legal review to ensure compliance with international law and mechanisms to prevent autonomous weapons from making life-and-death decisions without appropriate human oversight.
The Seoul summit hoped to agree to a blueprint for action, establishing a minimum level of guard-rails for AI in the military and suggesting principles on responsible use by reflecting principles laid out by NATO, by the U.S. or a number of other countries, according to a senior South Korean official.
It was unclear how many nations attending the summit would endorse the document on Tuesday, which is aiming to be a more detailed attempt to set boundaries on AI use in the military, but still likely lack legal commitments.
The summit is not the only international set of discussions on AI use in the military.
U.N. countries that belong to the 1983 Convention on Certain Conventional Weapons (CCW) are discussing potential restrictions on lethal autonomous weapons systems for compliance with international humanitarian law.
The U.S. government last year also launched a declaration on responsible use of AI in the military, which covers broader military application of AI, beyond weapons. As of August, 55 countries have endorsed the declaration.
The Seoul summit, co-hosted by the Netherlands, Singapore, Kenya and the United Kingdom, aims to ensure ongoing multi-stakeholder discussions in a field where technological developments are primarily driven by the private sector, but governments are the main decision makers.
About 2,000 people globally have registered to take part in the summit, including representatives from international organizations, academia and the private sector, to attend discussions on topics such as civilian protection and AI use in the control of nuclear weapons. – Reuters
MANILA – Philippine President Ferdinand Marcos Jr said on Monday that evangelist preacher Apollo Quiboloy will not be given special treatment following his arrest on Sunday, after a weeks-long police search for the celebrity pastor.
Mr. Quiboloy, a self-proclaimed “owner of the universe” and “appointed son of god”, is wanted on charges of child and sexual abuse and allegations of human trafficking in the Philippines. He is also wanted by Federal Bureau of Investigation in the U.S. on charges of sex trafficking and bulk cash smuggling.
Mr. Quiboloy, who has rejected all charges, is followed by millions of people in the Philippines, where church leaders hold heavy sway in politics. He is also a longtime friend of former president Rodrigo Duterte.
“There is no special treatment,” Mr. Marcos told reporters on Monday. “We will treat him like any other arrested person and respect his rights.”
“We will demonstrate once again that our judicial system in the Philippines is active, vibrant and working,” he added.
More than 2,000 police were deployed to search a sprawling compound in the southern city of Davao owned by Mr. Quiboloy‘s church, the Kingdom of Jesus Christ (KOJC), on suspicion that he was hiding there in a bunker.
Philippine police spokesperson Jean Fajardo said on Sunday Mr. Quiboloy was captured inside the compound, but did not provide details.
Mr. Quiboloy‘s lawyer, Israelito Torreon, disputed the government’s account, saying the pastor surrendered to the police and military because he did not want the situation to further escalate. “The innocence of Quiboloy will be affirmed by the court,” Mr. Torreon told DZBB radio.
Mr. Marcos said Mr. Quiboloy‘s camp had set conditions for his surrender, including a guarantee he would not be sent to the United States to face charges.
“Putting conditions is not an option for someone who is a fugitive,” Mr. Marcos said, describing the law enforcement operation to capture Mr. Quiboloy as “police work at its best”.
“It is with some relief that I can say that this phase of the operation is over. We will now leave Quiboloy to the judicial system,” he said.
The Philippines’ Department of Justice acknowledged the country’s extradition treaty with the US but said in a statement on Monday that Mr. Quiboloy will first face trial and serve any sentence in the Philippines before any extradition request is granted. – Reuters
BEIJING – China called on the Philippines to “seriously consider the future” of a relationship “at a crossroads” in a Monday commentary published by the People’s Daily, the newspaper of the governing Communist Party, amid tensions in the South China Sea.
The Philippines and China have exchanged accusations of intentionally ramming coast guard vessels in the disputed waterway in recent months, including a violent clash in June in which a Filipino sailor lost a finger.
The incidents have overshadowed efforts by both nations to rebuild trust and better manage confrontations, including setting up new lines of communication to improve handling maritime disputes.
“China–Philippines relations stand at a crossroads, facing a choice of which way to go,” the commentary said. “Dialogue and consultation is the right path, as there is no way out of the conflict through confrontation.”
Manila “should seriously consider the future of China–Philippines relations and work with China to push bilateral relations back on track,” it added.
The commentary was published under the pen name “Zhong Sheng”, meaning “Voice of China“, which is often used to give the paper’s view on foreign policy issues.
Beijing claims almost the entire South China Sea, including parts claimed by the Philippines, Brunei, Malaysia, Taiwan and Vietnam. Portions of the waterway, where $3 trillion worth of trade passes annually, are believed to be rich in oil and natural gas deposits, as well as fish stocks.
The Permanent Court of Arbitration in 2016 found China‘s sweeping claims had no legal basis, a ruling Beijing rejects.
In June, the United States reaffirmed its commitment to the Philippines‘ security, after Manila accused China of a “deliberate action” to stop the resupply of Philippine troops stationed at the disputed Second Thomas Shoal.
In Monday’s commentary, China blamed the Philippines for “the so-called ‘humanitarian’ problem” that Filipino sailors aboard what China considers “an illegally stranded ship” at nearby Sabina Shoal had no access to supplies, adding “the people aboard are absolutely allowed to leave.” – Reuters
PRIVATE SECTOR ECONOMISTS trimmed their inflation expectations for this year and the next two years, with the majority expecting the consumer price index (CPI) to fall within the Bangko Sentral ng Pilipinas’ (BSP) 2-4% target range until 2026.
The BSP’s Monetary Policy Report from its August meeting showed the analysts’ forecasts continued to move closer to the midpoint of the 2-4% target range.
The BSP’s survey of external forecasters (BSEF) for August showed that the mean inflation forecast was cut to 3.5% for this year from 3.7% in the May survey.
The inflation forecast for 2025 was trimmed to 3.1% from 3.5% in the May survey.
Likewise, analysts cut the 2026 forecast to 3.2% from the 3.4% projection in May.
“Risks to the inflation outlook are broadly balanced, with local inflation expected to trend lower for the rest of the year,” the BSP said. “Downside risks to the inflation outlook are seen to stem largely from lower rice prices, following the implementation of Executive Order (EO) No. 62.”
President Ferdinand R. Marcos, Jr. issued EO 62, which reduced tariffs on imported rice to 15% from 35% until 2028 to lower prices of the staple. The order took effect in July.
“Analysts also anticipate downward inflationary pressures from a stronger peso against the US dollar, as well as favorable base effects,” the BSP said.
The local unit closed at P55.905 per dollar on Friday, strengthening by 30.5 centavos from its P56.21 finish on Thursday, Bankers Association of the Philippines data showed. This was the first time the peso hit the P55-per-dollar level in almost six months or since its P55.58-a-dollar close on March 18.
Year to date, the peso has depreciated by 53.5 centavos from its P55.37-a-dollar close on Dec. 29, 2023.
“Meanwhile, the main upside risk is expected to arise from second-round effects, such as higher electricity costs brought about by a potential uptick in oil prices amid geopolitical conflicts,” the BSP said.
At the same time, the BSEF showed most analysts expect inflation to remain within the 2-4% target until 2026.
“Compared to the July survey, the August probability distribution for 2024 remained narrow and within the target range. The probability distribution shifted slightly to the left for 2024-2026, indicating a strong likelihood that inflation will stay well within the target range,” the BSP said.
Forecasts provided by 18 out of 23 respondents showed an 86.4% chance that inflation will remain within the 2-4% target range for 2024. However, this was lower than the 87.2% recorded in July.
On the other hand, analysts estimated a 12.5% chance that inflation will surpass the target range, up from 12%.
Meanwhile, the probability of inflation staying within the target range for 2025 decreased to 80.6% from 84.3%.
Expectations of inflation staying within target for 2026 likewise slipped to 82.7% from 86.8%.
The BSEF also showed that most analysts see the BSP cutting rates by another 25 basis points (bps) in the fourth quarter, bringing the total amount of rate cuts for the year to 50 bps.
“Moreover, they expect the BSP to lower the rate by 50-250 bps in 2025, with additional cuts of up to 100 bps by the end of 2026,” it said.
Last month the Monetary Board cut its policy rate by 25 bps to 6.25% from 6.5%.
BSP Governor Eli M. Remolona, Jr. previously said the central bank could cut rates by another 25 bps within the year. The Monetary Board’s last two policy-setting meetings this year are on Oct. 17 and Dec. 19. — Aaron Michael C. Sy
THE PHILIPPINES’ foreign exchange reserves rose to its highest level in over two years, mainly due to the increase in the central bank’s earnings from its foreign investments.
Preliminary data from the Bangko Sentral ng Pilipinas (BSP) showed that gross dollar reserves inched up by 0.18% to $106.92 billion as of end-August from $106.74 billion as of end-July.
“The month-on-month increase in the GIR (gross international reserves) level reflected mainly the net income from the BSP’s investments abroad,” the central bank said in a statement.
Year on year, the country’s dollar buffers rose by 7.39% from $99.57 billion in August 2023.
The dollar reserves in August were also at their highest level in 29 months or since the $107.3 billion in March 2022.
As of end-August, the level of dollar reserves was enough to cover about 6.1 times the country’s short-term external debt based on original maturity and 3.7 times based on residual maturity.
It was also equivalent to 7.9 months’ worth of imports of goods and payments of services and primary income.
Ample foreign exchange buffers shield an economy from market volatility and ensure the country can pay its debts in case of an economic downturn.
BSP data showed that foreign investments went up by 0.33% to $91.41 billion as of end-August from $91.11 billion a month ago, and by 8.65% from $84.13 billion in the same month last year.
Reserves in the form of gold were valued at $10.22 billion as of end-August, slipping by 0.88% from $10.31 billion in the previous month and by 0.1% from $10.23 billion a year ago.
On the other hand, net foreign currency deposits slipped by 4.4% to $773.4 million from $809 million month on month. However, this increased by 19.98% from $664.6 million a year earlier.
Net international reserves as of end-August went up by 0.19% to $106.9 billion from $106.7 billion last month.
Net international reserves are the difference between the BSP’s reserve assets or GIR and reserve liabilities, such as short-term foreign debt and credit and loans from the International Monetary Fund (IMF).
The Philippines’ reserve position in the IMF increased by 0.83% to $725.9 million as of end-August from $719.9 million as of end-July. However, this was an 8.16% drop from $790.4 million a year ago.
Special drawing rights, or the amount the country can tap from the IMF, rose by 0.2% to $3.8 billion from $3.79 billion last month. It also increased by 0.72% from $3.77 billion last year.
“The continued increase in the GIR could be attributed to the continued increase in the country’s structural US dollar inflows such as overseas Filipino worker remittances, BPO (business process outsourcing) revenues, exports, foreign investments (foreign direct investments and foreign portfolio), among others,” Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.
In the first half, cash remittances jumped by 2.9% year on year to $16.25 billion.
Hot money yielded a net inflow of $1.46 billion in the January-to-July period, surging by 830.7% from the $157.3-million inflows in the same period a year ago.
In the January-to-May period, net inflows of foreign direct investments jumped by 15.8% year on year to $4.024 billion.
“For the coming months, GIR could still increase due to proceeds of the National Government’s $2.5-billion global bond issuance in the latter part of August 2024, and the remaining $500-million global bond issuance programmed for the rest of 2024,” Mr. Ricafort said in a Viber message.
Last month, the government raised $2.5 billion from a three-tranche US dollar-denominated global bond offering. In May, $2 billion was raised from the issuance of global bonds.
The government has yet to borrow $500 million out of the total $5-billion borrowing plan for this year.
The BSP expects the GIR level to settle at $104 billion by yearend. — Beatriz Marie D. Cruz
By Beatriz Marie D. Cruz, Reporter
RICE INFLATION may further cool in the coming months once India relaxes a ban on exports, analysts said.
“India may reconsider its export ban, impacting international prices further. The stronger peso will also make imports cheaper, easing inflation further,” Union Bank of the Philippines, Inc., Chief Economist Ruben Carlo O. Asuncion said in a Viber message.
Market participants are anticipating that India, the world’s top rice exporter, could soon ease export restrictions on rice.
Last year, global rice prices spiked after India suspended exports of non-basmati white rice.
Headline inflation eased to 3.3% in August from 4.4% in July due to the slower rise in food and transport costs, the Philippine Statistics Authority (PSA) said last week.
In August, rice inflation slowed to 14.7% from 20.9% a month earlier. This was the lowest rice inflation since the 13.2% print in October last year.
Rice was the top contributor to the August inflation basket, accounting for 32.7% or 1.1 percentage points.
National Statistician Claire Dennis S. Mapa has said rice inflation is expected to fall to a single digit in September due to base effect.
It could be recalled that the consumer price index (CPI) for rice first hit double digits in September last year at 17.9%.
However, the effects of the recent Typhoon Enteng as well as higher oil prices may stoke rice inflation, Security Bank Corp. Chief Economist Robert Dan J. Roces said.
“Rice inflation falling to a single digit in September is possible, but it may be difficult to say for sure at the moment with the extent of the recent typhoon damage,” he said in a Viber chat.
Agricultural damage brought by Typhoon Enteng has risen to P659 million, the Department of Agriculture said over the weekend.
“We must remain vigilant of global factors like oil prices and domestic challenges like the impact of typhoons on rice supply, as these could affect future inflation,” Mr. Roces added.
Last week, the Organization of the Petroleum Exporting Countries and their allies including Russia agreed to delay its oil output increase to October and November as crude prices fell to a nine-month low, Reuters reported.
PSA’s Mr. Mapa also noted that the lower tariffs on rice imports have yet to significantly bring down retail prices.
In the last 45 days, the prices of regular and well-milled rice per kilo dropped by an average of 30 and 40 centavos respectively, PSA data showed.
“It’s slow, but we hope to see bigger drops in the coming months,” Mr. Mapa said.
In June, President Ferdinand R. Marcos, Jr. reduced the tariff on rice imports to 15% from 35% until 2028 to tame rice prices.
While the tariff cuts are expected to bring down rice prices, its effects may not be felt by most households, said Ateneo de Manila University economics professor Leonardo A. Lanzona.
“The expected effects of reduced tariffs are concentrated on premium quality rice which the public seldom buys. These types of rice are now relatively cheaper but still more expensive than the locally produced variety consumed by the majority,” he said in a Facebook Messenger chat.
The average price of a kilo of regular milled rice fell to P50.66 in August from P50.90 a month earlier, while well-milled rice prices declined to P55.56 from P55.85, data from the local statistics agency showed.
MORE RATE CUTS
Meanwhile, the Monetary Board is expected to continue with its easing cycle amid the slower inflation in August.
“The recent drop in Philippine inflation, especially rice prices, is a promising sign that our monetary and fiscal policies are working. This should pave the way for more interest rate cuts,” Mr. Roces said.
Mr. Asuncion said they now expect a 25-basis-point (bp) cut in October, and “a probable 1-2% reduction of the RRR (reverse repurchase rate) toward the end of 2024.”
The Bangko Sentral ng Pilipinas (BSP) cut policy rates by 25 bps at its Aug. 15 meeting, bringing the benchmark rate to 6.25% from 6.5% previously.
BSP Governor Eli M. Remolona, Jr. has signaled another 25-bp cut before the year ends. The Monetary Board has two remaining rate-setting meetings this year, on Oct. 17 and Dec. 19.
THE TARIFF COMMISSION (TC) has recommended that the Trade department maintain or consider modification of the safeguard measure on imported high-density polyethylene (HDPE) pellets and granules as it is seen to help the domestic industry become more competitive.
“It can be concluded that the intervention was timely and proper, as it has provided breathing space for the domestic industry and has mainly contributed to its increasing competitiveness,” the Tariff Commission said in a report dated Sept. 5.
Based on the results of its monitoring, the Commission said the Trade secretary may “opt to maintain the imposition of the safeguard measure as previously determined or consider modification.”
The TC said that the modifications should reflect the efforts undertaken by the domestic industry, changes in economic circumstances, competitive discipline, and public interest, among others.
In 2022, the Department of Trade and Industry (DTI) imposed three years of safeguard duties on imports of HDPE pellets and granules to protect the domestic industry.
A safeguard duty of P1,271 is being imposed on each metric ton (MT) of imported HDPE pellets and granules. The current most favored nation rate on HDPEs is 10%.
HDPE resins are used in consumer and industrial packaging.
Under the Safeguard Measure Act, a review and monitoring of the developments in the industry must be done after more than a year of implementation of a general safeguard measure.
Based on the TC’s monitoring, import volumes dropped 14% to 110,622 MT last year from 129,083 MT in 2022, while JG Summit Olefins Corp.’s market share recovered to 49%.
JG Summit Olefins, the sole producer of HDPE pellets and granules in the country, saw a 15% year-on-year rise in sales to the domestic market in 2023, which the TC saw as “indicative of the [measure’s] effectiveness in discouraging imports.”
JG Summit Olefins previously cited oversupply of petrochemical products as one of the reasons there is depressed demand for HDPEs.
In its report, the Tariff Commission said the finished goods inventory’s share to the company’s production was trimmed to 17% last year, after the 28% high in 2022.
The Commission also found a 24% decrease in direct material costs, which allowed the company to expand its naphtha cracker plant, bringing the total capacity for ethylene production to 480,000 MT a year.
Despite the 12.58% increase in labor costs last year, JG Summit Olefins’ manufacturing and operating expenses fell 18.9% and 21.3%, respectively. These resulted in a 22.8% decline in total cost to produce and sell in 2023.
Findings in the report also showed that the safeguard measure was effective in making local HDPE pricing at par with imported products.
“In 2023, the safeguard measure increased the cost of importing HDPE. As of the first semester of 2024, the price difference between local and imported HDPE averaged P3,098 per MT, the highest since 2021,” the Commission said.
In terms of income, the Tariff Commission said that the safeguard measure along with JG Summit Olefin’s adoption of cost-minimization projects resulted in a contraction in operation losses.
The safeguard measure also helped in increasing the number of employees involved in HDPE production by 6% in 2023.
However, due to “adverse business conditions,” the domestic industry was forced to control production, resulting in a 37% decline in labor productivity to 162 MT per employee.
“Based on the foregoing, the Commission finds that the imposition of safeguard measures in 2023, which increased the price competitiveness of locally produced HDPE vis-à-vis imported HDPE, led to higher sales and an increased share of the market,” the Commission said.
“As cost of production and sales fell and production responded to business conditions, inventory pile-up was avoided, capacity utilization rates were maintained, and operating losses were cut. Labor productivity is expected to increase once production volumes normalize,” it added. — Justine Irish D. Tabile
BUSINESSWORLD Publishing Corp. celebrates its 37th anniversary with a special report titled “PH Elevate: Trailblazing Transformation.” This edition provides a comprehensive look at the transformative efforts shaping the future of the Philippines’ business landscape.
Highlights include an analysis of the country’s growth outlook, the role of artificial intelligence in corporate strategies, and the adoption of green building standards.
The report also explores the growth of renewable energy, solutions to transportation challenges, and efforts towards digitalization and financial inclusion. Additionally, it covers advancements in manufacturing, cybersecurity, agriculture, retail, health, education, and disaster resilience.
Each section offers insights into how these sectors are evolving to meet contemporary demands.
Check out BusinessWorld’s Anniversary Report on https://www.bworldonline.com/bw37-ph-elevate/
