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SM City Marikina: A Benchmark of Resilience

SM PRIME Holdings, Inc. (SMPH), known as one of the largest integrated property developers in Southeast Asia, opened the doors of SM City Marikina in 2008. A year after it started operations, its resilience was put to a test.

Typhoon Ondoy Experience

In September 2009, Tropical Storm Ondoy (international name: Ketsana) affected 4.8 million people in the country — leaving 464 dead and P11 billion worth of damage in infrastructure. It particularly battered Luzon, leaving cities in Metro Manila submerged in flood. One of those cities severely affected was Marikina City, which witnessed widespread flood like no one has seen before.

Amid barangays sunk in rooftop-deep flood, SM City Marikina remained standing despite being situated within the flood-prone Marikina River Watershed. Marikina River’s water rose to 23 meters during the peak of the storm in comparison to its normal depth of 13 meters.

Science-based Resilient Design

The mall was able to withstand this extraordinary act of nature because it was built on the foundation of resilience. Backed with scientific study, the six-hectare property was designed to sit atop cylindrical stilts without wall enclosures. This design concept enabled the rush of flood water to just pass through the stilts during the typhoon, and prevented damage to the property.

This design is consistent with SMPH Chairman of the Executive Committee Hans T. Sy’s firm belief that building disaster-resilient properties is an investment, especially that the Philippines experience an average of 20 typhoons a year.

“SM considered even the hundred-year flood cycle of Marikina watershed in designing these facilities alongside specialists and local authorities. SM built the mall an additional 20 meters farther than the required 90 meters from the Marikina River to minimize the potential damage of the property. The roads surrounding the mall lay on natural ground level, thus, SM constructed the lower parking level without walls or enclosures, allowing the water to pass through. The upper parking level and the main mall area rests on an elevation of 20.5 meters and operates safely even on times of extreme flood,” Mr. Sy, who is also a member of the UN Office for Risk Reduction’s (UNISDR) Private Sector Alliance for Disaster Resilient Societies (ARISE), said.

Advancing Disaster Resilience

Having a disaster-resilient mall matched with trained employees on disaster preparedness enabled SM City Marikina to immediately respond to the needs of the community. Without stopping its operations, the mall kept its doors open for those seeking help during the three-day peak of Typhoon Ondoy. More than 3,000 individuals took shelter within the mall’s complex; 1,400 of which camped inside the mall building, while the others had their cars safely parked within the vicinity.

Within those days, SM City Marikina distributed food, water, and blankets to those who camped within the mall complex. Moreover, the mall’s staff called on volunteers to address the medical needs of distressed evacuees. SM City Marikina also became one of the driving force behind the city’s bayanihan spirit as local government units and other volunteers partnered with them in order to distribute relief goods in badly hit communities.

Marikina City Vice Mayor Jose Fabian Cadiz told BusinessWorld, “SM played an important role in saving Marikina. It became a refuge for Marikeños because it remained open during the height of Typhoon Ketsana. Several thousands sought refuge here, and they were even given food and water. The supermarket remained open, and the prices of basic commodities remained the same. It paid that the building was disaster-resilient.”

SM Prime allocates 10% of capital expenditure for disaster risk reduction in construction of buildings. By investing in resilience, we minimize vulnerability, better safeguard physical assets, reduce recovery expense, and contribute to local government efforts. Ultimately, we are able to better protect lives, and have safer, healthier, and happier communities. — Hans T. Sy

Replicating the new model for resilient structures

Having withstood the catastrophic level of Typhoon Ondoy, SM City Marikina then became a benchmark of resiliency in their city. Establishments being built post-Ondoy have been modelled after the stilt design of the mall.

“SM City Marikina helped us a lot in designing our buildings after Ondoy,” Vice Mayor Cadiz shared. Within the Marikina City Hall complex, the trade center, and the newly built legislative building were built on stilts. Just outside the complex, Sta. Elena High School also adopted the same design concept.

“We passed an ordinance in 2015 stating that in low-lying areas, houses must be built on stilts. SM City Marikina building was, is, and will be our inspiration,” Vice Mayor Cadiz continued.

As a way to continue its advocacy and vision for building sustainable communities, SM City Marikina is working hand in hand with the local government to regularly conduct seminars regarding disaster resiliency.

The Global Perspective

As the world continues to face the pressing effects of climate change, SMPH takes a proactive role in making sure to relentlessly adapt innovative ways to make their properties resilient and sustainable. This, in return, helps in safeguarding the communities where SMPH operates in, and even inspires other global thought leaders to invest in resilience.

During his speech in Cancun Mexico, Mr. Sy said, “SM Prime allocates 10% of capital expenditure for disaster risk reduction in construction of buildings. By investing in resilience, we minimize vulnerability, better safeguard physical assets, reduce recovery expense and contribute to local government efforts. Ultimately, we are able to better protect lives, and have safer, healthier, and happier communities.”

Resiliency and sustainability as the core philosophy of SMPH was not only recognized locally but also globally. During the UNISDR Global Platform in 2013 in Geneva, Switzerland, Hans T. Sy presented the SM City Marikina’s case study as a model for resilience. From hereon, the UNISDR invited Hans T. Sy to be the only Filipino Board Member of the United Nations International Strategy for Disaster Reduction Office for Risk Reduction’s Private Sector Alliance for Disaster Resilient Societies (UNISDR ARISE) as a way to bring the Filipino voice in the international stage.

In 2017, Hans T. Sy was invited to present the SM City Marikina case study to the Global Platform for Disaster Risk Reduction (DRR) in Cancun. With SMPH, Mr. Sy supported the founding of the Philippines’ National Resilience Council (NRC), a science and technology-based public-private partnership for climate and disaster resilience engaging the government, private sector, academia and civil society, where Mr. Sy also serves as the Private Sector Co-Chair.

A call to action towards securing the future

Addressing the United Nations (UN) General Assembly in 1987, then Norwegian Prime Minister Gro Harlem Brundtland, head of the Brundtland Commission, put it best. 

“Sustainable development is development that meets the needs of the present without compromising the ability of future generations to meet their own needs,” he said.

The Brundtland Commission, which was established by the UN to preserve and protect the environment, its natural resources, as well as prevent the deterioration of economic and social development, called on the nations of the world to enact policies aimed at sustainable and environmentally sound development around the world. Sustainability, it asserted, should become the central guiding principle of governments, organizations and institutions worldwide.

Since the sparks of the Industrial Revolution had ignited the flames of a consumerist way of life, much of the world’s economy relied, and still relies, on unsustainable practices regarding the use of resources. Harmful gas emissions from factories and large-scale mining operations, for instance, have quickened the pace of climate change, inducing global warming which in turn is melting the Earth’s ice caps, raising the level of the oceans, and endangering the world’s coastal cities.

But because such practices are so deeply rooted in the lifestyle of the modern world — not to mention the fact that they are very profitable for those practicing them — the pursuit of sustainable development has been fraught with challenges. 

In the words of Alan Young, Chairman of the Board of the International Institute for Sustainable Development, in the organization’s annual report for 2016-2017, last year: “Last year proved to be rather remarkable, and yes, rather sobering”.

“We experienced a collective whiplash effect in moving from the optimism inspired by the progressive agreements leading to the Paris Agreement and the Sustainable Development Goals, to the largely unanticipated success of populist campaigns, which have challenged the core principles of multilateralism and environmental protection — not to mention evidence-based, rational discourse as a basis for public policy,” he wrote.

“Ironically, while our potential to achieve truly sustainable and innovative economies and communities has never been more closely within reach, the opponents to such change have managed a surge in power that, if unchecked, will set that progress back at a crucially sensitive moment,” he added.

The Paris Agreement is an international pact signed in 2016 within the United Nations Framework Convention on Climate Change aiming to respond to climate change. United States (US) President Donald Trump withdrew the US from the agreement, saying a withdrawal would help American businesses and workers.

Sustainability, however, is not solely concerned with the environment. Peace, human rights, equitable wealth distribution, and economic stability are all goals that fall under the umbrella of sustainable development.

The Sustainable Development Goals (SDGs), also known as “Transforming our World: the 2030 Agenda for Sustainable Development”, are 17 global goals set by the UN, developed to replace the Millennium Development Goals which ended in 2015. The UN Development Programme (UNDP) Philippines defined them as a “universal call to action to end poverty, protect the planet, and ensure that all people enjoy peace and prosperity”.

“The SDGs work in the spirit of partnership and pragmatism to make the right choices now to improve life, in a sustainable way, for future generations. They provide clear guidelines and targets for all countries to adopt in accordance with their own priorities and the environmental challenges of the world at large,” the UNDP said in its Web site.

Covering a broad range of social and economic development issues, the SDGs aim to tackle sustainable development through addressing of issues like poverty, hunger, health, education, climate change, gender equality, water, sanitation, energy, environment and social justice.

The pursuit of these goals, in short, is worthwhile. In the past, the Philippine government has partnered with the UN with the goal of pursuing sustainable growth in the country.

Cooperation is the solution. Towards reducing poverty, the UNDP aims to involve more stakeholders in the development process through innovative public-private partnerships for local and sustainable development. The organization also works with the government and civil society partners in promoting an enabling policy environment for peace and other goals.

“UNDP provides support to governments to integrate the SDGs into their national development plans and policies. This work is already underway, as we support many countries in accelerating progress already achieved under the Millennium Development Goals. Our track record working across multiple goals provides us with a valuable experience and proven policy expertise to ensure we all reach the targets set out in the SDGs by 2030. But we cannot do this alone,” the UNDP said.

“Achieving the SDGs requires the partnership of governments, private sector, civil society and citizens alike to make sure we leave a better planet for future generations,” it added. — Bjorn Biel M. Beltran

Sustainability champions

Sustainable practices have been shown time and again to improve financial performance and relationships with critical stakeholders, and help create significant positive environmental and social impact. Many of the largest Philippine companies have enthusiastically adopted and committed to them, setting a great example in their respective industries. Here are several of them.

A property giant that owns and operates the famous chain of SM shopping malls as well as a number of residential and office buildings, SM Prime Holdings, Inc. has been putting out sustainability reports since 2007, outlining its practices, goals and impact. “As one of the largest property developers in Southeast Asia and with a presence extending across the many regions of the Philippines, SM Prime is aware of the environmental and social impact of its operations. Our long-term success depends on having a positive impact in these areas and our goal is to be a catalyst for development in the communities we serve,” Jeffrey C. Lim, president of SM Prime, said in the company’s 2016 sustainability report.

The company, he noted, had addressed issues that contributed to its environmental footprint, such as those concerning energy efficiency and water consumption. In 2016, for instance, roughly 5,800 megawatts of renewable energy was generated by SM Prime across its installations in the Philippines and China. That amount of energy, Mr. Lim pointed out, could power over 5.8 million homes. Also that year, SM Prime recycled 33% of water it consumed; 4.7 million cubic meters of water, which could fill almost 2,000 Olympic-sized swimming pools, was reused in cooling towers and comfort rooms.

Efficient use of water is where Nestlé Philippines shines. The food and beverage company has equipped all its factories with world-class wastewater treatment facilities. “Manned by highly competent personnel, these treatment plants capture every drop of wastewater discharged from the factories, cleanse the water of impurities, and release it to natural waterways clean enough to sustain marine life,” the company says on its Web site. It adds that the treated water from the factories is tested constantly to meet government standards.

But Nestlé has also explored other ways to optimize water use. For example, it reuses sealing water from vacuum pumps, cooling water from MILO processing, rinsing water and recovered water from reverse osmosis plants. “These initiatives, coupled with simple techniques as the use of sensor-operated faucets that ensure automatic stoppage of water flow, have cut down water consumption throughout Nestlé by about 16% since 1997, or an average of 65,500 cubic meters of water every year,” the company says.

Globe Telecom sees environmental sustainability as its immediate responsibility, in the face of global warming and rising demand for energy, and in response to two of United Nations’ Sustainable Development Goals — responsible consumption and production and climate action. In 2016, the communication services provider invested P2.37 million in environmental protection initiatives, including reforestation programs, solid waste management and hazardous waste disposal and treatment. In addition, it donated P1.4 million as initial grant for 13,500 seedlings to the nonprofit Hineleban Foundation, which advocates environmental conservation and livelihood development.

“Having an expansive network also translates to a large business footprint so it is inevitable for us to recognize our responsibility to mitigate effects of climate change,” Ernest L. Cu, president and chief executive officer of Globe Telecom, said in the company’s 2016 annual report. “We continue to invest in a low-carbon future by encouraging more customers to shift to paperless billing to reduce waste, as well as raise public awareness on adopting lifestyles that are in harmony with nature,” he added. As part of that paperless billing initiative, the company introduced Bill via Text through GlobeMYBILL, which allows a customer to receive a text message from it with a link to his or her latest billing statement online.

In favor of sustainable brands

In recent years, sustainable development has become a crucial factor for consumers — especially the most dominant generation today, the millennials. They have distinct values, behavior and habits when it comes to earning and spending.

On average, millennials — more than other generations — spend more on comforts and conveniences. They most likely spend their money for pricey coffee, clothes, and restaurants, and out of town trips. Despite of this, one good thing about this generation is their strong affinity with sustainable products and services.

According to The Sustainability Imperative report by a global measurement and data analytics company, Nielsen, consumer brands that demonstrate commitment to sustainability outperform those that don’t. It says that consumers are trying to be responsible citizens of the world, and they expect the same from corporations.

As noted in the report, sales of consumer goods from brands with a demonstrated commitment to sustainability in 2015 have grown three times higher than those without. In fact, 66% of consumers said that they are willing to pay more for sustainable brands, 20% higher than the previous year.

“Consumer brands that haven’t embraced sustainability are at risk on many fronts,” Carol Gstalder, senior vice-president of Nielsen Reputation & Public Relations Solutions, said in the report. “Social responsibility is a critical part of proactive reputation management. And companies with strong reputations outperform others when it comes to attracting top talent, investors, community partners, and most of all consumers.”

According to the same report, millennials are the most willing group to pay extra for sustainable offerings. This finding was concluded after more than 30,000 online consumers from 60 countries were polled. Next to millennials, generation Z and baby boomers are the generations who are willing to pay more for products and services that come from companies committed to positive social and environmental impact.

“Brands that establish a reputation for environmental stewardship among today’s youngest consumers have an opportunity to not only grow market share but build loyalty among the power-spending millennials of tomorrow, too,” Grace Farraj, senior vice-president of Nielsen Public Development & Sustainability, said.

Globally, based on the 2015 Nielsen Global Corporate Sustainability Report, the inclination among Filipinos that buy socially responsible brands is among the strongest. It is noted that 83% of Filipinos said that they are willing to pay more for sustainable brands, a remarkable four point increase from the previous year.

“Sustainability is a worldwide concern and this is especially true for consumers in a growing population such as the Philippines to be continually aware of environmental and societal issues,” Stuart Jamieson, managing director of Nielsen in the Philippines, said. “More exposed to the stress in the environment and its effect to the community, consumers are trying to be responsible citizens and they expect the same from corporations.”

Mr. Jamieson said that these consumers are doing their purchase responsibly — they are checking the labels before buying, they are looking at Web sites for information on business and manufacturing practices, and they are paying closer attention to public opinion on specific brands in the news or on social media. — Mark Louis F. Ferrolino

Inside the workhorse engine

Diesel engines are ubiquitous: They power everything from passenger vehicles to delivery trucks to bulldozers to trains to ships. The US Department of Energy (DoE) refers to them as the “workhorse engines.”

But in the past, they had a severe image problem. As the agency notes in a pamphlet detailing the basics of diesels, they were “dirty and sluggish, smelly and loud.”

“That image doesn’t apply to today’s diesel engines, however, and tomorrow’s diesels will show even greater improvements. They will be even more fuel efficient, more flexible in the fuels they can use, and also much cleaner in emissions,” the agency says.

Diesel engine is an internal combustion engine that converts chemical energy in fuel to mechanical energy. It is the mechanical energy that moves pistons up and down in the enclosed spaces called cylinders.

These pistons are connected to the crankshaft, whose movement switches from linear to rotary to propel the wheels.

As the fuel reacts chemically with oxygen, a series of small explosions occurs, releasing energy. In a diesel engine, the fuel ignites on its own.

“Air heats up when it’s compressed,” DoE says. “This fact led German engineer Rudolf Diesel to theorize that fuel could be made to ignite spontaneously if the air inside an engine’s cylinders became hot enough through compression.”

The inventor of the diesel engine calculated that high compression should lead to high engine efficiency. “Part of the reason is that compressing air concentrates fuel-burning oxygen,” the agency says.

And if a fuel has high energy content per gallon and is injected into the cylinders at the right time, it should react with most of the concentrated oxygen to deliver “more punch per explosion.”

DoE says Mr. Diesel’s calculations were correct. “As a result, although diesel engines have seen vast improvements, the basic concept of the four-stroke diesel engine has remained virtually unchanged for over 100 years.”

The first stroke involves the air being sucked into a cylinder while the piston creates a space for it by distancing itself from the intake valve. After the piston swings upward, the air is compressed and heated. Before the piston reaches the top of its compression stroke, the fuel is injected under high pressure and then ignites spontaneously upon contact with the heated air.

“The hot combustion gases expand, driving the piston downward in what’s called the power stroke. During its return swing, the piston pushes spent gases from the cylinder, and the cycle begins again with an intake of fresh air,” DoE says.

Gasoline engines, like diesel engines, work by internal combustion. They have slight differences, though.

“In a gasoline engine, fuel and air is injected into small metal cylinders. A piston compresses (squeezes) the mixture, making it explosive, and a small electric spark from a sparking plug sets fire to it. That makes the mixture explode, generating power that pushes the piston down the cylinder and (through the crankshaft and gears) turns the wheels,” explains Chris Woodford, a British science writer who runs the Web site Explain that Stuff.

Mr. Woodford notes that theoretically the gasoline engine, with its spark plug, should be more efficient than the diesel engine. The reality is different: It is the diesel engine that is substantially more efficient than the gasoline engine.

“In simple terms, that means you can go much further on the same amount of fuel (or get more miles for your money),” he said. One reason is that the fuel is easily compressed in the diesel engine because it requires no sparking-plug ignition system.

“There’s another efficiency saving too. In a gasoline engine that’s not working at full power, you need to supply more fuel (or less air) to the cylinder to keep it working; diesel engines don’t have that problem so they need less fuel when they’re working at lower power,” Mr. Woodford said.

The fuel that diesel engines use also gives them several more advantages. Diesel fuel, which Mr. Woodford described as a lower-grade and less refined petroleum product made from heavier hydrocarbons, contains more energy per gallon because the molecules have more energy locking the atoms together.

“Diesel is also a better lubricant than gasoline so a diesel engine will naturally run with less friction,” Mr. Woodford said.

Philippines’ notable diesel-powered cars

There are many considerations in buying a car, and one of those is choosing its fuel and engine technology. When choosing between gasoline and diesel engines, car experts would often argue that the latter is generally more economical, and some experts even say that it has about 25% to 30% efficiency advantage over the former.

Diesel engines will cost you lower in terms of fuel costs since diesel fuels are cheaper. With higher fuel costs, this has become a major consideration for most car buyers. Moreover, it is also said that diesel engines are less harmful to the environment due to cleaner emissions.

Meanwhile, here’s a round up of some of the best diesel-powered cars available in the market:

Ford Everest

Designed for tough terrain, Ford Everest features an advanced 3.2L TDCi Turbo Diesel Engine that delivers 200 Ps of power and 470 Nm of peak torque without compromising fuel efficiency. Its aerodynamic design also allows more fuel savings because it requires less drag. These features paved the way for its 13th ranking on fuel-efficiency in the diesel category at the 13th DoE Fuel Economy Run 2017. With a powerful yet fuel-efficient engine matched with extraordinary details for interior comfort makes this seven-seater SUV always ready and highly capable for rough rides.

Honda CR-V

Also included in the top 10 fuel-efficient vehicles in the diesel category at the 13th DoE Fuel Economy Run 2017, the Honda CR-V is powered by the i-DTEC Turbocharged Engine, which features a reduced overall engine weight. Still sturdy enough for agile driving, its reduced engine weight results to fuel-efficiency. Moreover, this engine is Euro-4 compliant, therefore, have cleaner emissions.

Hyundai Accent (Sedan)

Hyundai Accent, which ranked second most efficient diesel-consuming vehicle in the 13th DoE Fuel Economy Run 2017 with a total fuel economy rating of 27.80, features a 1.6 CRDi Variable Geometry Turbo (VGT) Diesel Engine. This fuel efficient and environment-friendly engine delivers a maximum power of 136 ps/4,000 rpm and maximum torque of 26.5 kg-m/1, 750 to 2, 500 rpm. Matched with this engine is an exterior designed in the language of “fluidic sculpture” as well as amenities discerning luxury car are looking for, making Hyundai Accent not only dependable but also luxurious.

Isuzu mu-X

This reliable pickup emerged as the most efficient diesel-consuming vehicle at the DoE Euro 4 Fuel Eco Run in 2016 with a fuel economy rating of 38.46; and ranked 12th at the 13th DoE Fuel Economy Run 2017. Matching its muscular exterior is a powerful 4JJ1-TCX Blue Power diesel engine with turbo intercooler, which lets you experience 177 Ps of power and 380 Nm of torque; while at the same time runs quieter, and lets you enjoy the benefits of minimal fuel consumption. Maximum engine output, overall durability, and fuel efficiency makes Isuzu mu-X perfect for driving on highways or even at off-beaten paths.

Toyota Innova (MPV)

Included in the top 20 most-efficient diesel-consuming vehicle at the 13th DoE Fuel Economy Run 2017, this multipurpose vehicle is equipped with a powerful engine with increased fuel economy that lets you go anywhere. Its style, functionality, and added safety features make Toyota Innova one of the best options in the market for family driving.

Mitsubishi Montero GLX 2WD MT

Suitable for both city driving and on rough terrain, this all-time favorite and award-winning SUV is known for its new 4N15 engine, which features a Euro 4-compliant 2.4L clean diesel engine with VGT and Mitsubishi Innovative Valve timing Electronic Control (MIVEC) system. The engine’s power and torque is rated at 181 Ps/3,500 rpm and 430 Nm/2,500 rpm. This new engine also boasts of a low compression ratio, thus reducing fuel consumption, smoke, and nitrous oxide emissions.

Volkswagen Golf GTS

Volkswagen Golf GTS promises “real drive with low fuel bills.” Ranked as the most fuel-efficient vehicle in the sedan category at the 13th DoE Fuel Economy Run 2017, this vehicle is powered by 2.0 TDI Engine, which is known for its economy, drive, and outstanding performance. Moreover, the high torque of its engine enables a sporty driving style while quietly running. According to Volkswagen, Golf GTS is agile as a hatch, drives like a sedan, and has a cargo space of an SUV. — Romsanne R. Ortiguero

BSP: not time to cut reserve requirement

By Melissa Luz T. Lopez
Senior Reporter

CURRENT financial conditions are not yet ripe for planned cuts in bank reserves since the economy remains awash with cash, the central bank chief said.

Bangko Sentral ng Pilipinas (BSP) Governor Nestor A. Espenilla, Jr. said robust growth in money supply and bank lending puts off plans to trim the 20% reserve requirement ratio (RRR) which is imposed on universal and commercial banks.

“While the current manageable outlook for inflation allows scope for a reduction in RRR, domestic liquidity conditions are not unduly tight, as both M3 (domestic liquidity) and credit continue to expand at double-digit rates,” Mr. Espenilla said in an interview with GlobalSource Partners that was published on Jan. 28.

NO NEED FOR MORE STIMULUS
“Moreover, the overall pace of credit growth is also considered to be in line with the requirements of the economy, suggesting that additional stimulus to the real economy is not necessary at present.”

Mr. Espenilla — who took over the central bank’s helm in July last year — has been vocal about his goal of reducing the reserve level required of big lenders, saying that it has since been a source of “inefficiency” in the country’s banking system.

The BSP chief has said that he personally wanted to see the RRR down to single-digit levels.

The 20% RRR is considered one of the steepest in the world, as it forces lenders to keep a fifth of their cash holdings as standby funds which do not generate returns.

The reserve level was last adjusted in May 2014.

Economists have been betting that the BSP will tweak reserve requirements before adjusting interest rates, although some observers are of the view that the RRR cuts may be timed with a rate hike.

Some in the financial sector have been arguing that it may be time to start a gradual reduction of the RRR, as it will free up more cash for them to deploy for loans and investment instruments.

“If the reserve requirement is smaller, then banks have the ability to actually lend more or be more involved in lending activities and treasury transactions,” Hans B. Sicat, country director of ING Bank N.V. Manila, said in a recent interview.

“It’s been the banking sector’s hope that should have happened even before. I guess we’ll wait and see how the BSP reacts.”

Higinio O. Macadaeg, Jr., president and chief executive officer at the United Coconut Planters Bank, shared this view, saying the RRR cut will be “helpful to the economy.”

A one percentage point reduction in the RRR could unleash some P60-70 billion into the financial system, flooding a market already swimming in cash.

Releasing more funds to the system could push prices up if these are not absorbed for productive uses.

Domestic money supply grew by 14% to around P10.4 trillion as of end-November, while bank credit surged by 19.2% to reach P6.96 trillion in the same period, according to latest available central bank data.

Mr. Espenilla said discussions on an RRR cut are ongoing at the BSP, as he noted that the “timing and magnitude” of these tweaks should not disrupt price stability.

The central bank expects Republic Act No. 10963 — or the Tax Reform for Acceleration and Inclusion Act that took effect this month — to add less than one percentage point to overall inflation, even as monetary authorities watch out for second-round effects such as on wages and public transport fares.

Finance dep’t expects inflation to have steadied from December

THE OVERALL INCREASE of prices of widely used goods and services likely steadied this month from December, according to a bulletin which the Finance department e-mailed to journalists on Monday, setting the stage for faster inflation expected to mark this year.

“Inflation rate in January may have remained unchanged from that of December of last year” at 3.3%, the Finance department said, even as it would be faster than the 2.7% clocked in January 2017.

The Philippine Statistics Authority is scheduled to report official January inflation data on Feb. 6.

The central bank expects full-year inflation to average 3.4% in 2018 — past the midpoint of a 2-4% target range — compared to 2017’s actual 3.2%.

Transportation costs rose this month due to the increase in retail pump prices of diesel and gasoline in December and January, according to data provided by the Finance department.

“Inflation of food and non-food items was steady despite the rise in the transport rate which is a lagged response from last month’s fuel rate hike,” the department said.

Republic Act No. 10963, or the Tax Reform for Acceleration and Inclusion Act that took effect this month, raised excise taxes for petroleum products. However, the actual fuel price hike kicked in around mid-January as the new rates did not apply to old stocks since excise taxes are levied upon importation and not at the point of sale.

The food and non-alcoholic beverages commodity group accounts for the biggest chunk of the consumer price index (CPI) — the theoretical basket of goods and services used by a typical household that is the basis of inflation computations — at 38.98%, followed by housing, water, electricity, gas and other fuels (22.46%) as well as restaurant and miscellaneous goods and services (12.03%). All the other subgroups have single-digit contributions to CPI.

“Declines in housing, utilities and fuels, clothing and footwear, and recreation and culture all contributed to offset the upward pressure from the transport sector,” the department said.

Inflation in housing, utilities and fuels slowed to 3.5% from 3.8% in December, while that of the electricity, gas and other fuels subgroup slowed to 6.8% from 8.4%.

Aside from fuel, RA 10963 also imposed higher taxes on automobiles and tobacco products, as well as new levies for sugar-sweetened beverages, among other items.

The law also cuts personal income tax rates to increase individuals’ take-home pay in hopes of spurring household consumption that has long been the biggest anchor of the country’s economic growth.

The overall increase in prices of alcoholic beverages and tobacco picked up to 6.7% this month from 6.4% in December, while that of other commodity groups steadied.

“Good economic growth maintains stable prices and in turn, provides stimulus for further growth. This virtuous cycle tempers adverse external pressures arising from petroleum and transport inflation,” the Finance department added.

The Bangko Sentral ng Pilipinas has said that it expects the new taxes to add “less than one percentage point” to overall inflation, hence, keeping overall price movements manageable. — Elijah Joseph C. Tubayan

Drink producers shun China corn syrup imports to avoid new levy

PHILIPPINE beverage producers are swapping their imports of high-fructose corn syrup (HFCS) for domestic sugar to avoid higher taxes on the alternative sweetener, industry and government officials said, limiting exports from top supplier China.

Losing the Philippine market, or bulk of it, could lead to an oversupply of HFCS in China at a time when Chinese producers are expanding output of the sweetener from huge domestic corn stocks.

The Philippines was the biggest market last year for China’s corn syrup, buying 290,080 tons, or half of China’s exports.

The government on Jan. 1 imposed a tax of P6 a liter on drinks using sugar and other sweeteners versus a tax of P12 on HFCS.

The levies, part of a broader tax reform package, will be used to fund a countrywide infrastructure development program.

“Starting Jan. 1, 2018, we have shifted away from the use of HFCS,” Juan Lorenzo Tañada, director for legal and corporate affairs at Coca-Cola Philippines, the country’s top HFCS importer, told Reuters in a text message.

Mr. Tañada said the move would reduce the impact of the higher tax on its customers, adding the company will “re-export the HFCS that we are no longer going to use due to our shift to sugar.”

Sweetened beverage producers are the biggest HFCS buyers in the Philippines.

Pepsi Cola Philippines, another major HFCS importer, is disposing its HFCS supplies “by selling them abroad little by little, whatever we can sell,” according to a company official who declined to be named because he was not authorized to speak to the media.

China’s HFCS producers may end up flooding their domestic market if they lose their market in the Philippines, said Meng Jinhui, an analyst with Shengda Futures in Beijing.

“If the Philippines does not import any from China, it will add huge pressure on the domestic industry,” Mr. Meng said.

“That part of output would have to be diverted back to the domestic market, further causing oversupply,” he added.

Philippine HFCS buyers will re-export about 20,000 tons of previously imported supplies of the sweetener, the country’s Sugar Regulatory Administration (SRA) said on Tuesday.

The Philippines, which is forecast to produce 2.27 million tons of raw sugar in the crop year ending August, said there is enough local supply to serve the beverage sector, but it would have to curb exports.

The SRA last week raised the domestic allocation of locally produced sugar to 93% from 80% to meet the expected higher demand.

The export allocation for the United States was cut to six percent from 10% and for other countries to one percent from 10%.

Beverage makers used to buy around 250,000 tons of local sugar before making a switch to lower-priced HFCS in 2011, said Jesus Barrera, deputy director of the Philippine Sugar Millers Association.

Mr. Barrera said the higher demand could be met through 2018 production and by drawing from 300,000 tons of sugar left from the last crop year. — Reuters

India expects to regain post as fastest-growing major economy

NEW DELHI — India on Monday forecast gross domestic product (GDP) growth would accelerate to 7-7.5% in the 2018/19 fiscal year, to once again become the world’s fastest-growing major economy.

The government’s economic survey, presented to parliament on Monday went on to say that though the plan has been to reduce the fiscal deficit from an estimated 3.2% this year to 3.0% in 2018/19, a pause in the move toward a lower deficit could be merited in order to give the economy momentum.

Prime Minister Narendra Modi’s nationalist government is gearing up for a general election in 2019, and speaking to reporters after the survey’s release, the finance ministry’s chief economic adviser alluded to political considerations for possibly letting the deficit target slip.

“The cycle calls for ambitious consolidation but the political cycle calls for maybe more modest consolidation so it has to be a balance between the two,” Arvind Subramaniam said.

The survey, an annual report the health of the economy, was released ahead of the government’s budget statement, due to be presented by Finance Minister Arun Jaitley on Thursday.

“A series of major reforms undertaken over the past year will allow real GDP growth to reach 6.75% this fiscal (year) and will rise to 7.0 to 7.5% in 2018/19, thereby reinstating India as the world’s fastest-growing major economy,” the survey said.

A senior official at China’s National Development and Reform Commission (NDRC) wrote in the Beijing daily on Monday that India’s main economic rival in Asia was likely to see growth slow to 6.5-6.8% this year.

Fuelled by stronger private investment and exports, the recovery forecast for India’s growth rate comes after the country posted its slowest growth in three years in 2017/18.

The slowdown was partly a consequence of the chaotic rollout of a nationwide goods and service tax (GST) last year and a shock move to take high value currency notes out of circulation in late 2016.

The budget is expected to step up funding of rural development programmes and help small businesses as Prime Minister Narendra Modi’s nationalist government heads into a national election in 2019.

“GDP growth might be at the lower end of the range but, broadly, the estimates are in line with our expectations,” said Suvodeep Rakshit, senior economist at Kotak Institutional Equities in Mumbai.

“The government will likely focus on rural and urban infrastructure, housing, agriculture as well as bit on the capital expenditure front with a judicious mix of budgetary and extra budgetary expenditure.”

The survey cautioned that persistently high oil prices remained a key risk for a country that relies on imports for much of its fuel needs.

The survey echoes the International Monetary Fund’s (IMF) expectation that India will regain the title of being the world’s fastest growing major economy in the coming fiscal year. The IMF last week predicted India would grow 7.4% in fiscal 2019.

The government also warned that climate change could pare back annual agricultural incomes in India by 15-25% with unirrigated lands being harder hit by rising temperatures and declines in rainfall.

Already, farm incomes have fallen because of the rising cost of production while crop prices have not risen, presenting a potential risk to Modi’s Bharatiya Janata Party in the upcoming election after it barely won re-election in his home state of Gujarat last month. — Reuters

Office vacancy rates seen to hit 10-12%

By Krista A. M. Montealegre,
National Correspondent

DEVELOPERS are bringing to the market a record amount of new office supply this year, which may push vacancy rates to double-digit levels, real estate consultant Santos Knight Frank said.

More than 1.4 million square meters (sq.m.) of leasable office space are expected to be added to the current supply this year compared to the 800,000 sq.m. that went online in the previous year, Morgan McGilvray, Santos Knight Frank senior director for tenant representation, said in a briefing on Tuesday.

Vacancy rates, which have remained at the single-digit mark since 2010, may climb to 10-12% — a level still considered “quite healthy” based on global standards, Mr. McGilvray said.

In the last quarter of 2017, vacancy rates decreased to 4.33%, from 4.66% in the previous quarter.

Lease rates will stay neutral or grow at a slower pace in the next couple of years compared to the 5-6% year-on-year expansion seen in the previous years until the take-up can match the new supply, Mr. McGilvray said.

“Last year was a year of uncertainty and transition. This year will be a year of stability and growth,” Santos Knight Frank Chairman and CEO Rick M. Santos said.

Office take-up or net absorption for the entire 2017 reached about 675,000 sq.m., still up 25% from the previous year when uncertainty brought about by Philippine President Rodrigo R. Duterte’s anti-West outbursts and United States President Donald Trump’s “America First” policy weighed on the market.

The delay in the approval for applications for incentives offered by the Philippine Economic Zone Authority (PEZA) also affected take-up of new supply.

“BPO (business process outsourcing) firms assure no significant changes in operations as they will continue to vigilantly watch for changes in law that would negatively impact their business, just as they have done in every past administration,” Mr. Santos said.

Likewise, the Philippines will continue to reap the dividends from the improved relations with China, which has led to investments in BPOs and gaming companies, said Jan Paul D. Custodio, Santos Knight Frank senior director of research and consultancy.

Chinese groups expressed interest in making real estate investments through acquisition of residential condominium units in bulk or partnering with local companies to undertake projects such as buildings, schools, hospitals and smaller infrastructure projects, Mr. Custodio added.

The Philippine government’s “Build, Build, Build” program will significantly benefit from China’s “Belt and Road” Initiative, with Beijing seeing opportunity in Manila’s population demographics, rising income and urbanization trends.

Meanwhile, the growth in retail development, expected to add 560,000 sq.m. of leasable space until 2019, will fuel demand for logistics property, as the booming traditional retail and e-commerce sector drive the need for warehousing and distribution centers near urban areas, said Kash Aristotle B. Salvador, Santos Knight Frank associate director for investment and capital markets.

The huge demand from inbound and local tourists will also trigger an influx of hotels and resorts to the Philippines, with more than 3,000 hotel rooms anticipated to open this year in the Bay Area, Makati and Bonifacio Global City.

The Philippines remains as a leading real estate market in the region anchored on sound macroeconomic fundamentals, talented labor pool, and a growing middle class that will set the country apart from other Asian markets, Mr. Santos said.

SSS eyes April contribution hike

By Melissa Luz T. Lopez,
Senior Reporter

THE Social Security System (SSS) is eyeing to raise monthly contributions starting April, which is expected to raise P45 billion in additional collections and extend its fund life by 12 years.

SSS President and Chief Executive Officer Emmanuel F. Dooc said the pension firm has submitted a written request to President Rodrigo R. Duterte to issue an executive order that would raise the monthly contribution rate to 14% starting April this year, coming from the current 11%.

The official added that the request also covers their proposal to raise the minimum salary credit to P4,000 from P1,000, as well as the credit cap to P20,000 from P16,000 currently.

“The combined results if we succeed in getting all these requests approved by the President is we will be able to collect more or less P45 billion in additional contribution revenues starting from April to end of this year,” Mr. Dooc told reporters during a press briefing of the agency’s Sulit Conference 2018 at the Crowne Plaza Manila.

Mr. Dooc said the letter was submitted to Finance Secretary Carlos G. Dominguez III last week, who has been reviewing the proposal before endorsing it to Mr. Duterte. After this, the Social Security Commission — the highest decision-making body in SSS — needs to adopt the order before it is implemented.

In January last year, Mr. Duterte approved a P2,000 across-the-board increase in monthly pensions for retired private sector workers. The first increase worth P1,000 has been already disbursed to pensioners in March 2017, while the second tranche is eyed by 2019.

SSS intends to raise its contribution rate by 1.5 percentage points (ppt) on an annual basis until it reaches 17%. Their latest request involves adjusting the rate by three ppts to cover the years 2017 and 2018.

The state-run pension firm had asked Mr. Duterte to increase contribution rates last year, but was postponed so that it could be timed with the reduction in income tax rates for salaried workers. Currently, the 11% contribution rate is being shouldered by the employer (7.37%) and the employee (3.63%).

The SSS is counting on Mr. Duterte’s issuance of an executive order as they await Congressional approval on proposed amendments to the agency’s charter, which will effectively empower its Commission to increase contribution rates by itself.

Mr. Dooc said a presidential decree would be the “faster way” to secure the contribution hike, as the proposed bill is yet to be tackled at the Senate.

The official said the additional collections will prolong the fund life of the SSS, following the bigger benefits they have been paying out since last year.

“We will increase the fund life from the current 2032 to I think 2044, which is even better than the previous fund life before we gave the first P1,000 tranche at 2042,” the SSS chief added.

Mr. Dooc added that the additional P45 billion collections is still a rough estimate, as the figure could go higher should the SSS see more paying members and new employers.

Ideally, the pension fund should last 70 years.

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