Offer of Treasury bills awarded fully

August 29, 2018 | 12:02 am

By Karl Angelo N. Vidal, Reporter
THE GOVERNMENT fully awarded the Treasury bills (T-bill) it auctioned off on Tuesday even as rates climbed across all tenors amid strong liquidity in the market.
The Bureau of the Treasury (BTr) borrowed P15 billion as planned at its T-bills auction yesterday using the new National Registry of Scripless Securities settlement system.
The offer was more than twice oversubscribed as demand from investors totalled P35.7 billion, although lower than the P43.1 billion logged at last week’s offering.
Broken down, the government made a full award of the 91-day papers, accepting P4 billion out of total tenders amounting to P8.135 billion. Its average yield climbed 1.5 basis points (bp) to 3.218% from the 3.203% tallied in the previous auction.
For the 182-day T-bills, the Treasury accepted P5 billion as planned out of the P12.525 billion offered by banks and other financial institutions. The average rate likewise rose by 0.6 bp to 4.07% from the 4.064% quoted in the previous offering.
The government also fully awarded the 364-day papers, borrowing P6 billion as planned versus the total offers totalling P15.039 billion. The average yield likewise rose by a basis point to 4.879% from last week’s 4.869%.
At the secondary market prior to the auction, three-month and six-month papers were quoted at 3.1496% and 4.18%, respectively, while one-year securities fetched a 5.0732% yield.
At the close of trading, the debt papers rallied to fetch lower rates across all tenors. The 91-day T-bills fetched 3.1471%, the 182-day papers were quoted at 4.0460% and the 364-day securities finished the session at 4.8357%.
National Treasurer Rosalia V. De Leon said the government saw “very healthy demand” at yesterday’s auction.
“The rates were 0.6-1 bp higher than the previous auction so it is aligned with our estimates according to our model. At the same time, we saw a very healthy demand also for our T-bill auction,” Ms. De Leon told reporters following the auction.
She added that there was liquidity in the market due to maturing government debt.
“Again there is a liquidity because we had a redemption of about P86 billion last Aug. 18. And then of course we have about P9 billion also maturing this week.”
Ms. De Leon noted that the hawkish stance of the US Federal Reserve regarding its gradual rate hike pace was also factored in by the market.
Fed chair Jerome Powell defended on Friday the US central bank’s stance to gradually raise rates.
Speaking at a research symposium in Jackson Hole, Wyoming, Mr. Powell said that “further gradual increases in the target range for the federal funds rate will likely be appropriate” as the economy remains strong.
Meanwhile, a trader said the auction result yesterday was within expectations as demand is still seen in the short end.
“Actually, the demand in the short end will be there for long because so far the market preference is still less than one year. Even six months below,” the trader said in a phone interview.
The Treasury is raising P300 billion from the domestic market this quarter through auctions of securities, offering P195 billion in T-bills and another P105 billion in T-bonds.
The government plans to borrow P888.23 billion this year from local and foreign sources to fund its budget deficit, which is capped at 3% of the country’s gross domestic product.

Lungs is a breath of fresh air amidst the jukebox musicals

August 29, 2018 | 12:01 am

AFTER HAVING produced the successful musical, Eto na! Musikal nAPO!, 9 Works Theatrical is teaming up with Sandbox Collective for its next production, which is the total opposite of its jukebox musical: a straight play without props, costume changes, scene transitions, and intermission, and with only two actors on stage.
Lungs is a quiet but strong piece written by British playwright Duncan Macmillan. An Olivier Award-nominated writer and director, Macmillan is best known for the stage adaptation of George Orwell’s 1984. He also wrote Every Brilliant Thing, and People, Places, and Things.
Sandbox Collective’s managing artistic director Toff de Venecia said he chose Lungs “because of the quality of its text.” He learned of MacMillan, “a little known playwright,” he said, when he was scouting for stories to stage next.
Originally produced in 2011, Lungs is a timely tale of two lovers, M and W, who are trying to conceive a baby amidst a world that is crumbling, no thanks to climate change. Is it worth it to have a child in this day and age?
The straight play runs for 90 minutes with non-stop dialogue between M and W.
M is patient and a musician while M is neurotic, intelligent, and a PhD candidate. The couple has been together for six years when they start their dialogue, and their exchanges will last until they are in their 70s. Lungs will traverse through time.
“Macmillan said outright that the play is to be really simple. So the challenge is to find ways to convey the story without being dependent on the usual devices we normally use, but [focusing on] the characters themselves. Text is really the heart of the show,” said director Andrei Nikolai Pamintuan at a press conference at Privato Hotel on Aug. 8.
The director said the production will include some Filipino language and Pinoy references.
Performing for the first time on stage, TV personality Jake Cuenca will play as M, while W will be played by Sab Jose, who will be performing in a straight play for the first time. She is currently working in the musical, Eto na! Musikal nAPO!
While this is the first time that both leads will be performing in a straight play in the Philippines, they are not newbies. The two have studied theater abroad — he at the Lee Strasberg Theatre and Film Institute in New York, while she at the Guildford School of Acting in England — and the two exchanged notes on how to deal with their characters and chemistry.
“We may have different backgrounds, but we talk about the techniques and the methods we studied from our schools. It helps with our character work,” Ms. Jose said.
Lungs may be fiction but it captures perfectly the anxieties of our society and the pressures of “adulting,” said Ms. Jose.
“I used to think that I wanted to have a baby at 25 and now that I’m 30, I’m like ‘Oh wait! pressure.’ I don’t want to say that most women hinge their worth on motherhood, but that’s what happens, motherhood defines you. I will get there, but for now I am embracing my womanhood through my career,” she said.
Lungs, besides highlighting relationships, parenthood, responsibilities, and anxiety, takes its shape against a background of climate change.
“The takeaway of the story is that sometimes we tend to forget about our environment that we walked on. The characters, on the other hand, are hyper-aware that everything must be politically correct. It teaches us to balance and don’t make those things deterrents to how we live. When you let things bog you down, you tend to forget to just breathe,” said Mr. Pamintuan.
Lungs will have performances at the Power MAC Center Spotlight, Circuit Makati from Sept. 22 to Oct. 7. — Nickky Faustine P. de Guzman

Leighton bags NLEX Harbor Link exit project

August 29, 2018 | 12:01 am

NLEX Corporation awarded Leighton Asia the contract to build the North Luzon Expressway (NLEX) Harbor Link Segment 10 — R10 exit ramp project, the latter’s parent company CIMIC Group said on Tuesday.
In a statement, CIMIC said the project will generate around A$140 million in revenue for Leighton Asia, which is under CIMIC Group’s construction company CPB Contractors.
The company said construction work includes a 2.6-kilometer dual, elevated tollway that will connect the existing NLEX Segment 10 Road to the R10 road, as well as ramps, roadworks, electrical and mechanical works, and landscaping.
The Harbor Link Segment 10 — R10 exit ramp project is targeted to be completed by late 2019.
CIMIC Group Chief Executive Officer Michael Wright noted Leighton Asia has been part of the NLEX project’s development since its first phase of construction in 1998.
“The award of this further work reflects our productive and enduring relationship with both Metro Pacific Tollways Corporation (MPTC) and its subsidiary, NLEX Corporation, and is a testament to the high-quality transport infrastructure solutions we provide,” Mr. Wright was quoted as saying in a statement.
Leighton Asia is also working with MPTC subsidiary MPCALA Holdings, Inc. to build the 28-kilometer, four-lane Cavite-Laguna Expressway (CALAx).
MPTC is the tollways unit of Metro Pacific Investments Corp. (MPIC). MPIC is one of three key 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 a majority stake in BusinessWorld through the Philippine Star Group, which it controls.

Outlook on bank stocks mixed amid Q2 letdown

August 29, 2018 | 12:01 am

By Jochebed B. Gonzales, Senior Researcher
MARKET volatility has sent shares of bank stocks tumbling in the second quarter as earnings fell below estimates.
The Philippine Stock Exchange index (PSEi) reached the 7,800-level in early June, recovering slightly from its first-quarter slump. However, local equities entered bear market territory when the decline from its January peak reached more than 20%. For the quarter, the PSEi posted a 9.85% loss with 7,193.68 as the market closed for the second quarter.
Data by the Bangko Sentral ng Pilipinas (BSP) show the aggregate net incomes of universal and commercial banks (U/KBs)growing by 7.7% in the first half. Net interest margin of 3.11% during the period was slightly higher than 3.09% previously.
But the general increase in earnings in the UK/B category did not reflect in the stock performance of listed banks. The Philippine Stock Exchange financials index — which included the banks — went down by 14.85% in the second quarter compared to a 6.04% decline in the first quarter.
The so-called “big three” banks in asset terms, which are BDO Unibank, Inc., Metropolitan Bank & Trust Co., and Bank of the Philippine Islands, were not spared from the sector’s plunge. Among this group, BPI posted the biggest decline in the second quarter at 24.35% to P88.50 per share from P117 per share in the first quarter. Meanwhile, MBT and BDO suffered second quarter losses of 14.45% (to P73.40/share from P85.80/share) and 9.71% (P125.50/share from P139/share), respectively.
Other listed banks also saw a decline in their stock prices with Rizal Commercial Banking Corp. (RCB) posting a 38.66% fall in the second quarter, followed by East West Banking Corp. (EW, -25.19%), Security Bank Corp. (SECB, -16.67%), Philippine National Bank (PNB, -10.58%), China Banking Corp. (CHIB, -4.55%), Union Bank of the Philippines (UBP, -2.78%), and Asia United Bank Corp. (AUB, -0.34%).
On a quarter-on-quarter basis, market capitalization, which is equal to the stock’s share price at a point in time multiplied by the number of shares outstanding, of the 10 listed UK/Bs were down 14.87% as compared to the 6.43% fall during the first quarter. Banks that underperformed compared to the sector average were RCB (-34.18%), EW (-25.19%), BPI (-22.22%), and SECB (-16.67%).
“Bank stock prices are down year to date due to the broad market downturn,” Zoren Philip A. Musngi, research analyst at Mandarin Securities Corp. said.
“There was some optimism when Metrobank first reported strong earnings, but it quickly died down as BDO and BPI successively reported disappointing earnings against consensus.”
Rens V. Cruz II, senior equity analyst at Regina Capital Development Corp., concurred, saying that the banking industry slipped in terms of valuation with its price-to-earnings ratio of 15.15 times versus the PSEi’s 19.40 times on account of pressures of continued foreign fund outflows due to “macroeconomic concerns.”
“With the exception of a few names, the banking industry in general missed estimates for the quarter, with earnings pressured heavily by non-interest based income despite decent loan growth, solid margin expansion, and a healthy asset quality,” he said.
“The banking sector greeted 2018 with the best rallies so it is understandable why the industry was also the worst hit following this disappointing earnings period,” he added.

‘DISAPPOINTING’
For analysts, the listed banks either “disappointed” or “underperformed” when it comes to their second-quarter earnings.
“Many analysts were expecting bank earnings to benefit from the strong momentum in industry loan growth and net interest margins improvements as loans reprice due to higher interest rates. However, lower trading gains and one-off items have offset these,” said Mandarin Securities’ Mr. Musngi.
COL Financial Group, Inc.’s John Martin L. Luciano was of the same opinion: “Most banks underperformed versus our forecast… In general, higher interest rates caused the banks’ funding costs to increase. Likewise, this also caused most banks to book poor trading performance.”
For Regina Capital’s Mr. Cruz: “[E]ven if interest-based earnings account for about 60% to 80% of a bank’s total income, the weakness in these non-interest receipt still made considerable dent to the bottom line.”
Meanwhile, other analysts blame the less-than-expected earnings results on rising operating expenses (opex), most particularly on the doubling of the documentary stamp tax (DST) on bank checks, certificates of deposit, and similar financial instruments from the Tax Reform for Acceleration and Inclusion (TRAIN) Law that took effect this year.
“A general slowdown in lending in the midsized banks coupled with higher opex resulted in mixed net earnings performances for the banks,” noted Arabelle C. Maghirang, deputy research head at Papa Securities Corp.
Ms. Maghirang added that inflation was “not much of an issue,” saying that in terms of cost, it was still the increased DST that drove up operating costs. “The rate hikes, coupled with regulatory requirements on the funding side, kept interest expenses elevated,” she said.
STOCK PICKS
“We recommend sticking to the big banks: MBT, BPI, and BDO,” AP Securities, Inc. Research Analyst Rachelle C. Cruz said.
“With the big three having the deposit franchise in the industry, they are also the best beneficiaries of the BSP’s rate hikes amid tighter liquidity in the system.”
Meanwhile, MBT is the top pick for COL Financial’s Mr. Luciano: “We continue to like Metrobank as it is expected to be one of the major beneficiaries of the growing demand for loans given its size, and highly liquid and healthy balance sheet.”
Mandarin Securities’ Mr. Musngi recommended BPI shares as a “buy” on account of its “industry-leading” return on equity (ROE) and cost efficiency ratios as well as its robust loan growth and its current price-to-book (P/B) valuation that is “very much below historical averages.”
Also on Mr. Musngi’s buy list is BDO, citing the lender’s core lending performance in the first two quarters while dismissing second-quarter earnings drag as “one-off.”
“We expect the [BDO] to hit its P31-billion net income guidance as lending in the teachers’ segment resumes. We also take into account in our ‘buy’ rating on BDO’s position as the largest bank in terms of assets, its large branch network, and membership in the [PSEi],” he said.
The analyst was referring to the suspension last November of the Department of Education’s (DepEd) Automatic Payroll Deduction System, which catered to the salary loans of public school teachers. The suspension was implemented as DepEd worked on new guidelines.
Aside from BDO, EW and UBP also have considerable exposure to these types of loans.
“We have a HOLD on UBP and EW as its earnings in Q1 2018 have been largely hit by the issues in teachers’ loans, given their large exposures to this segment,” said Mr. Musngi.
“There was uncertainty on whether they can continue lending to the segment, but recent data show that lending to the segment have resumed,” he added, expecting earnings of BDO, UBP, and EW to recover in the third quarter.
SECB has a “hold” rating with the mid-tier bank trading closer to its analysts’ target price.
“[SECB’s] transition towards retail lending seems to be taking long due to their concern of immediately gaining back their double-digit ROE. Competition is also intense in the corporate and middle market segment, where bulk of SECB’s loan book is,” said AP Securities’ Ms. Cruz.
She also gave PNB a “hold” rating for its “choppy non-core income” which contributes to volatility in its earnings: “[it’s] too early to assess sustainability of core income,” she said.
OUTLOOK
The rising interest rate environment may be favorable for the banks’ core lending segments, but the strain in the trading of securities and funding costs may extend through the third quarter.
“While the 1% rate hike year to date bodes well for 3Q18 net interest margin improvement, we are wary of its impact on funding cost as well which may limit the positive impact to the bottom line,” said Papa Securities’ Ms. Maghirang.
“We expect core lending (net interest income) growth to further accelerate on the back of increasing interest rates and the 50-bp hike done by BSP [in August],” said Ma. Katrina Patricia G. Mercado, equity research analyst at First Metro Securities Brokerage Corp., adding that liquidity is “not as ample as before” and could drive up funding costs.
“We would also be looking at the performance of the capital markets, as we have seen sluggish fee income growth by the banks in 1H18 due to lack of capital market deals,” Ms. Mercado said.
For COL Financial’s Mr. Luciano, the long-term outlook for the banking sector continues to be positive.
“However, in the short term, the sector’s performance may be weighed down by the continued rise in interest rates. Note that industry Loan to Deposit Ratio has risen gradually since January 2017 from 69.1% to 73.1% in May 2018, indicating tighter liquidity in the system. We believe that this caused banks to raise deposit rates to attract funding, increasing the funding costs of most banks,” he explained
“Likewise, the higher interest rates also drag the trading performance of banks. However, these risks should be tempered as loans gradually re-price.”
Giving a more upbeat projection this quarter, Mr. Musngi of Mandarin Securities said: “In Q3, we expect prices of banks to recover as they report better earnings and as sentiment for PHL equities generally improve.”
“Bank valuations are currently attractive, with P/B ratios below 3-, 5-, and 10-year averages. We also expect banks to benefit from the expected passage in the TRAIN Package 2, which the government targets to pass by end of this year,” he said, referring to the second package of the tax reform program that aims to reduce corporate income taxes alongside the rationalization of tax incentives. — with a report from MMMR

Strong Singapore dollar signals inflation battle

August 29, 2018 | 12:01 am

THE SINGAPORE dollar reached a record high last week. — *AFP*

SINGAPORE’S DOLLAR is approaching the upper boundary of its trading band as speculation mounts that the central bank will boost the exchange rate for a second time this year to combat inflation.
The currency last week reached a record high against a basket of major trading partners’ currencies, based on HSBC Holdings Plc’s model of the Monetary Authority of Singapore’s (MAS) managed float system. The local dollar has continued to hover in the upper half of the band even after the central bank shifted to a strengthening bias in April.
Core consumer prices rose at the fastest pace in four years in July, increasing pressure on the central bank to act again. The MAS controls inflation by managing the exchange-rate: a stronger Singapore dollar lowers the cost of imported goods and vice versa. In April, it shifted from a neutral stance to seek a “slightly” faster appreciation of the local dollar.
Analysts estimated the move amounted to a gain in the currency of about half a percent per year.
“The latest round of core inflation prints continue to be firm,” said Terence Wu, an economist at Oversea-Chinese Banking Corp. in Singapore. “It may add to further speculation for another round of policy tightening by the MAS in October.”
Core inflation accelerated to 1.9% in July, the fastest pace since 2014. The MAS projected the measure will be in the upper half of its 1% to 2% forecast this year.
“The currency market has started to price in tightening,” said Toru Nishihama, an emerging-market economist at Dai-ichi Life Research Institute Inc. “I see the Singapore dollar weakening to around 1.39 by the year-end, but the decline could be slower if the MAS tightens.”
The Singapore dollar traded at 1.3637 against the US currency as at 1:51 p.m. local time.
As the US exits its easy monetary policy with rate increases, emerging markets such as India, Indonesia, the Philippines and Malaysia have been buffeted by capital outflows this year. The rout has spurred Asian central banks to boost benchmark rates to defend against the selloff in their currencies and bond markets.
“As Asia’s financial center, Singapore can’t remain disconnected from the rising pressure of capital outflows from emerging economies,” said Nishihama of Dai-ichi Life Research. That’s another factor that may prompt a policy tightening by the MAS, he said.
Not everyone’s convinced the central bank will tighten policy at its next review. Year-to-date core inflation has averaged 1.6%, comfortably within its forecast range. Furthermore, economic growth slowed to 3.9% in the second quarter from 4.5% in the previous period, and the government expects further moderation in the second half.
“The recent June-July core inflation prints appear to be meeting MAS’s expectations,” said Marcus Wong, strategist at CIMB Bank Bhd’s treasury department in Singapore. “We reiterate our call for the MAS to maintain monetary policy at its October meeting.”
At the same time, the island’s open economy is faced with the challenges of an escalating trade war between two of its largest trading partners.
Mid-level trade talks between US and Chinese officials ended last week with little progress as both countries imposed even more tariffs on each other. The central bank will need to juggle the sustained pressure from core inflation against the economic impact of a worsening Sino-US trade war. Both factors were cited by the central bank in its April policy review.
“Our core scenario is for a further, but very mild tightening at the October meeting,” said Frances Cheung, head of macro strategy for Asia at Westpac Banking Corp. in Singapore. “Trade remains the swing factor.” — Bloomberg

How PSEi member stocks performed — August 28, 2018

August 29, 2018 | 12:00 am

Here’s a quick glance at how PSEi stocks fared on Tuesday, August 28, 2018.

Philippine Stock Exchange’s most active stocks by value turnover — August 28, 2018

Diokno says local gov’t code allows Palace to reduce IRA

August 28, 2018 | 10:29 pm

THE GOVERNMENT has threatened to invoke a clause in the Local Government Code that allows it to reduce local government units’ (LGUs’) allocation from national taxes if it finds that higher allocations, as ordered by the Supreme Court, will lead to an “unmanageable public sector deficit.”
Budget Secretary Benjamin E. Diokno said that Republic Act No. 7160, or the Local Government Code, allows President Rodrigo R. Duterte to make LGUs share an internal revenue allotment (IRA) pie of as little as 30% of national taxes collected, from 40% under ordinary conditions.
“On the IRA, our response is that there is a provision in the Local Government Code that in the event of an unmanageable public sector deficit, the President has the option to reduce IRA from 40% to 30%. So we’ll use that,” Mr. Diokno said in a panel discussion during the Economic Journalists Association of the Philippines Economic Forum at the Ayuntamiento de Manila on Tuesday.
Asked whether the clause will be the government’s primary means of addressing fiscal risk as a result of the Supreme Court ruling instead of devolving functions to LGUs, Mr. Diokno said: “Yes. It’s provided for in the Local Government Code.”
The court last month ordered the automatic and prospective release of the IRA based on all national government taxes, including collections by the Bureau of Customs — expanding the IRA pie from the current practice of sharing out collections by the Bureau of Internal Revenue.
Economic managers have said that following the SC’s instructions in the upcoming budget will result in a fiscal deficit equivalent to 4% of gross domestic product (GDP) — a percentage point over the 3% cap deemed prudent by many economists, thereby risking a downgrade of the country’s investment-grade credit rating.
“I think the investors will welcome (invoking the clause). It means that we have full control of the fiscal deficit and we are committed of maintaining the fiscal deficit of around 3%. We won’t allow the deficit to increase to about 4%. I think that should be a welcome message to foreign investors,” Mr. Diokno said.
Mr. Diokno also proposed to pass on part of the national budget to LGUs, especially for those operations where LGUs are on the front line, such as conditional cash transfers, the construction of farm-to-market roads, and local health care programs, among others.
However, the economic managers will still wait for the court order to be final and executory before making any moves, after they have filed a motion for reconsideration seeking to clarify the other taxes involved in computing the IRA.
Sought for comment, some economists have said that the move should be credit-positive, and would be fair for LGUs.
“I think that the SC decision endangers our fiscal balance. The Philippines needs arterial infra(structure) that go across many LGU boundaries, not more basketball courts. ‘Build, Build, Build’ targets arterial infra. More money for basketball courts means less money for ‘Build, Build, Build. I support any move that keeps the fiscal deficit at or below 3%,” Raul V. Fabella, a retired professor of the University of the Philippines — School of Economics, said in a mobile phone message.
Bienvenido S. Oplas, Jr. the President of Minimal Government Thinkers, a member-institute of Economic Freedom Network (EFN) meanwhile said in an e-mail: “I think it is fair. If you look at the annual balances of LGUs, they have surplus yearly, P400-P500 (billion)/year [from] 2017-2018.”
Bernardo M. Villegas, an economist from the University of Asia and the Pacific however held that local governments should still get a larger share of national taxes.
“I think that they can just agree to spread out the payment to the LGUs over a longer period (which is consistent with the decision of the Supreme Court) rather than reduce the amounts due to LGUs. This is the way to decentralize effectively the government without the need for federalization.”
“The LGUs will take time before they can raise their own taxes and issue their own municipal bonds. In the meantime, they can already start implementing projects and programs, independently of the national government. This is what decentralization is all about,” Mr. Villegas added. — Elijah Joseph C. Tubayan

DBM holds firm, says Congress bound to implement its budget proposals

August 28, 2018 | 10:29 pm

THE DEPARTMENT of Budget and Management (DBM) said Congress has “no choice” but to work with budget proposals made by the executive branch, and cannot seek more funding, amid a dispute over the new cash-based budgeting system and how long it takes for access to allocated funds to expire.
“The constitution is very clear. It does not actually say whether budgets should be cash-based or obligation-based. But whatever budget we submit to Congress, they have to work with that. They have no choice. There is also a provision in the Constitution that they cannot increase the budget,” Budget Secretary Benjamin E. Diokno said during the Economic Journalists Association of the Philippines Economic Forum at the Ayuntamiento de Manila on Tuesday.
Congress resumed deliberations on the P3.757-trillion 2019 budget yesterday after they stalled briefly when legislators realized that the one-year expiry of budget allocations might effectively reduce their access to funding during an election year, leading some to lobby for a bigger budget to compensate for allocations that expire before they can be used.
The government is transitioning from an “obligation-based” budget system to a cash-based one, in order to accelerate government spending. Under the previous system, agencies had two years to implement funds before losing access to funding.
Mr. Diokno added that some items need not be disbursed within a fiscal year under the cash-based budget system, but they cannot be reallocated for other uses.
He cited as an example the Disaster Risk Reduction and Management Fund (DRRMF) or the calamity fund. “If no calamities happen the funds cannot be spent.”
Some of the legislators’ concerns center on budget cuts in the Health, Education, and Agriculture departments, after the government allocated funds sufficient for projects that can be procured and implemented within a year. The 2018 obligation-based budget with a two-year “use-it-or-lose-it” spending deadline was P3.767-trillion.
Budget deliberations at the House resumed after Majority Leader Rolando G. Andaya, Jr. said last week that the Legislative and the Executive branch of government arrived at a compromise “hybrid” budget that allows expenditures to exceed the one-year timetable for items such as lump-sum allocations.
The House said some challenges to spending in 2019 include the two to three-month spending ban that comes into force before elections.
Mr. Diokno held firm on the overriding objective of getting government to spend more freely to stimulate the economy. ”Cash budgeting has allowed us to correct underspending in the past. We want projects much sooner,” he added.
The DBM has also proposed the Budget Reform Bill, approved by the House of Representatives on final reading in March, to institutionalize cash-based budgeting and prevent a return to the old practice in future governments. — Elijah Joseph C. Tubayan

Hearings resume for 2019 budget as some cuts restored

August 28, 2018 | 10:28 pm

BUDGET hearings at the House of Representatives resumed as scheduled on Tuesday after the chamber and economic managers compromised over the one-year spending deadline attached to allocations under the 2019 National Expenditure Program.
“The hybrid budget we’ve been talking about will go ahead. The budget hearings will continue today. We hope to pass the budget on third reading by Oct. 12,” Majority Leader Rolando G. Andaya, Jr. told reporters in a briefing.
The compromise “hybrid” system, which retains some looser two-year spending deadlines under the old budget system, was reached in a meeting on Tuesday attended by the Majority Leader, House Appropriations Committee chair Karlo Alexei B. Nograles, Budget Secretary Benjamin E. Diokno, Finance Secretary Carlos G. Dominguez III, and Executive Secretary Salvador C. Medialdea.
The House on Aug. 11 suspended budget deliberations after it realized that the quicker-to-expire allocations effectively amounted to budget cuts across all government agencies, particularly for capital outlay items.
The House Appropriations Committee on Tuesday resumed work on the budgets of the Department of Trade and Industry and the Department of Education.
Mr. Andaya said the meeting produced an agreement to restore cuts made to education, health and infrastructure spending items, and that the Department of Budget and Management (DBM) has agreed to assist the chamber in sourcing necessary funds.
“We agreed that some cuts will be restored. We’ll help each other in finding areas where we can source the funds for the items to be restored,” Mr. Andaya said. “We’re looking at options — maybe we can source some from the unprogrammed funds and some from a supplemental budget.”
Supplemental funding is being considered for the plebiscite in the Bangsamoro region as well as the implementation of the Supreme Court decision on the internal revenue allotment (IRA) for local government units.
He estimated the necessary funding for both items at about P140 billion.
He noted, however, that the supplemental budget will depend on sufficient funds.
“Half of budgeting is revenue. If there are no funds, there is no use submitting a supplemental budget. The law requires a certification from the Treasury that there are actual funds to support the supplemental budget,” Mr. Andaya said. — Charmaine A. Tadalan

Pernia sees gov’t spending propping up GDP growth

August 28, 2018 | 10:28 pm

SOCIOECONOMIC Planning Secretary Ernesto M. Pernia said he expects agriculture to weigh on third-quarter economic growth, which will nevertheless remain strong due to government spending on infrastructure.
“We always hope that it’s faster,” Mr. Pernia said in an interview with reporters on Tuesday.
Gross domestic product (GDP) data will be reported on Nov. 8.
According to the website of the “Build Build Build” infrastructure program, the spending target for infrastructure projects is P8-P9 trillion between 2017 and 2022.
GDP grew 6.6% and 6.0% in the first and second quarters, respectively, making for a 6.3% expansion in the first half, compared with 6.6% a year earlier.
Economic managers have noted that the economy needs to grow by at least 7.7% in the second half in order to hit the lower end of the government’s 7-8% target for 2018.
In 2017, GDP grew 6.5%, 6.6%, 7.3% and 6.5% in each of the year’s quarters.
Mr. Pernia also said “It’s hard to tell” if faster GDP growth for the third quarter will actually happen. He listed agriculture as one of the risk areas.
“The performance of agriculture in the third quarter given the typhoons we have now (might be a risk to GDP growth),” he said.
Last month, the Department of Agriculture (DA) reported that agriculture losses due to typhoons were estimated at P1.79 billion.
Mr. Pernia said 7-8% GDP growth remains the official government target.
“That is our target. It is good to set target high,” he said. — Gillian M. Cortez

Senate bill calls for expansion of NEDA powers, independence

August 28, 2018 | 10:27 pm

A BILL that will increase the independence of the National Economic and Development Authority (NEDA) has been endorsed by Senator Sherwin Gatchalian, who claims that the measure will bring the agency’s powers in line with those envisioned under the 1987 Constitution
Senate Bill 1938 “seeks to institutionalize a new and truly independent department that will implement long-term, continuing, integrated, and coordinated programs and policies for national development,” the Senator said in the bill’s introduction.
“It’s a hybrid institution that is different from direct line agencies but it’s also not (at par) with constitutional bodies,” said Mr. Gatchalian in a senate hearing on Tuesday.
Section 9 of Article XVII on the National Economy and Patrimony of the 1987 Constitution states “The Congress may establish an independent economic and planning agency headed by the President, which shall, after consultations with the appropriate public agencies, various private sectors, and local government units, recommend to Congress, and implement continuing integrated and coordinated programs and policies for national development.”
It added, “Until the Congress provides otherwise, the National Economic and Development Authority shall function as the independent planning agency of the government.”
Socioeconomic Planning Secretary Ernesto M. Pernia said of the bill: “The current set-up is no longer adequate for NEDA to be able to fully exercise its oversight function. With various reform initiatives that are often myopic rather than holistic, the government’s planning, policy-making, programming, and budgeting process has become fragmented, uncoordinated, and often interrupted. Implementation of plans, programs, and policies has many times been delayed and inefficient.”
NEDA Undersecretary Rolando G. Tungpalan said the bill will not only help the agency play a role “in medium term development plans but also in long term development plans.”
The bill also calls for additional interagency committees to assist NEDA. The NEDA board currently has seven committees which are the Development Budget Coordination Committee (DBCC), Infrastructure Committee (InfraCom), Investment Coordination Committee (ICC), Social Development Committee (SDC), Committee on Tariff and Related Matters (CTRM), the Regional Development Committee (RDCom) and the National Land Use Committee (NLUC).
Under the proposed NEDA act, additional committees include the Economic Development Committee (EDC), the Science, Technology and Innovation Committee (STIC), the Environment and Sustainable Development Committee (ESDC), and the Governance Committee (GC).
NEDA OIC Assistant Secretary Roweena M. Dalusong said that she expects the agency’s budget and staffing to increase alongside the expanded functions.
“It’s necessary that the manpower complement should be increased so that it will be able to respond to the constituents and we’re sure we’ll able to address the sectoral and geographic concerns,” she said.
“If you’re going to add all the costs of the one-step increment of all the positions, our projections shows we will need as much as an estimated personnel resources requirement of P940,012,631,” she said. — Gillian M. Cortez

Bicol airport hits 50% completion, remains on track for 2020 opening

August 28, 2018 | 10:26 pm

THE Department of Transportation (DoTr) said construction of the Bicol International Airport is has hit the halfway point for percentage of completion.
In a statement on Tuesday, the department said the project is 50% complete with finished works including the runway, taxiway apron and perimeter fence.
It noted that for land-side facilities covering 17 buildings for cargo, air traffic control, material recovery facilities and water reservoir, progress is at 30.39%.
The passenger terminal building is 5.78% complete.
“After being put on hold for 11 years, the Bicol International Airport finally resumed construction this year…. Once completed by 2020, the Bicol International Airport is expected to accommodate 2 million passengers annually,” it said.
The DoTr noted that higher-capacity facilities and safety upgrades are being built at the airport in anticipation of increased passenger traffic. It said it is also improving the safety facilities of the airport.
“This will…boost tourism arrival in Bicol and help Albay become an economic powerhouse,” the statement added. — Denise A. Valdez

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