INFLATION likely increased at a faster pace in July due to higher food and power costs, economists polled by BusinessWorld late last week said, potentially marking the first time in over a year that the rate breached 2%. Read the full story.
The government’s move to focus on provinces is expected to help rural banks boost productivity of farmers. (AFP)
by Imee Charlee C. Delavin, Reporter
The Duterte administration’s push to develop agriculture and areas outside Metro Manila has cast a ray of hope on smaller lenders wanting to regain their footing, if not expand.
Even while campaigning for the Presidency, then Davao City Mayor Rodrigo R. Duterte has capitalized on the disparity in economic development between what he called “Imperial Manila” and the rest of the country, especially the rural areas.
Rural banks have mirrored the countryside’s neglect, with a growing number of the industry’s members driven to bankruptcy. This forced the Bangko Sentral ng Pilipinas (BSP) and the Philippine Deposit Insurance Corp. (PDIC) to launch a rescue package that includes tax and other incentives for third-party investors willing to avert closures, if not revive forlorn rural lenders.
Despite two extensions of the program, rural banks continue to fall by the wayside, erasing the little amount depositors had earned on their accounts, if not their trust in banks altogether.
Rural Bankers Association of the Philippines (RBAP) President Antonio O. Pasia said rural banks are hoping to participate in the financial inclusion thrust of the new government.
“We’re hopeful, we definitely would like to participate in the programs of the new administration, we would be offering the rural banks to take part in the countryside development,” said Mr. Pasia, who is also president of Batangas-based Malarayat Rural Bank Inc.
“We think the new administration is more receptive towards the needs of the farmers and fisherfolks that’s why we’re offering the services of the rural banks in those areas,” he said.
Rural banks are front liners in countryside development and in financing the needs of farmers, fisher folks and micro, small and medium enterprises (MSMEs).
These lenders serve as the platform for bigger banks to fulfill their required 25% credit quota to the farming sector, as mandated by the Agri-Agra Reform Credit Act of 2009.
The small lenders could also serve as the platform for small and medium-scale enterprises to secure funding for their business expansions through microfinance.
With stiffer competition in the banking space, rural banks would like to strengthen [their] position in [their] own areas and “hopefully compete in the delivery of credit to the countryside” by merging to build stronger lenders, upgrading technology and forging partnerships, Mr. Pasia said.
“Eventually, there will be lesser number of rural banks because of consolidations and mergers but stronger players. I think for those that will stay on, there future will be better,” he said.
Tunas are cleaned for export in General Santos City in this file photo. Rural and thrift banks are optimistic that the Duterte government’s focus on the countryside will help spur regional industries, which, in turn, will also further increase lending. (AFP)
<style=”text-align: left;”>Development of regional industries sought
Economists have welcomed the Duterte administration’s plan to hasten growth in the agriculture and fisheries sectors, which account for roughly 10% of gross domestic product (GDP) but employs almost a third of the country’s workforce.
The World Bank and the Asian Development Bank have said in previous reports that poverty can be addressed by improving the agriculture sector. Business leaders have also included in their recommendations to the administration the delivery of support services like financing, technology, and logistics to farmers and the adoption of value-chain development for rural-based enterprises.
In line with the new government’s thrust to develop the countryside, business leaders also recommended the development of regional industries.
“The Philippines’ growing middle class and the Duterte administration’s focus on promoting rural development could broaden the reach of the banking system, potentially resulting in more revenue streams,” said Land Bank of the Philippines market economist Guian Angelo S. Dumalagan.
Chamber of Thrift Banks President Rommel S. Latinazo said the sector remains “very optimistic” given the new administration’s thrust.
“I think we continue to push for inclusive growth that means when there is development in the countryside, it means more opportunities for lending activities and there’s a need for financing, credit facilities as well as consumer financing — these are the two main businesses of thrift banks,” Mr. Latinazo, who is also RCBC Savings Bank President and CEO, said.
“Of course there’s also that pronouncement from the administration that they’d like to push for the agricultural side and that’s where many thrift banks are positioned… [A]griculture means it’s not going to happen in Metro Manila, it will happen outside Metro Manila, in the provinces and that’s where most of us are positioned like the stand-alone thrift banks, so that’s also an opportunity that makes us positive,” he added.
Mr. Latinazo said consolidations among smaller banks will become more sensible amid stiffer competition in the near term.
“Consolidation remains to be the thrust of government. The BSP has been putting up incentives to encourage more integration, consolidation. That is happening [to] all sectors — rural banks, thrift banks and we see that continuing. Indications are there. A lot of foreign banks are looking at us, either by way of putting up their own or via investment in an existing bank,” Mr. Latinazo said.
Maybank ATR Kim Eng banking sector analyst Katherine Tan said mergers and acquisition “has been quite attractive because there’s a lot of growth potential, as we’re very underserved and the banking space remains underpenetrated.”
“We’ve already seen a lot of big banks acquiring rural banks for the past years and there’s been a lot and it’s still going to continue. We have over 600 banks in the Philippines and the consolidation would continue,” she said.
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Imee Charlee C. Delavin (@charleedelavin on Twitter) covers private banks for BusinessWorld. She loves to travel.
by Julianne S. Ruizol
It’s not easy being an independent Filipino musical artist.
Most of the time fellow musicians, fans, and listeners argue about the intricacies of Original Pilipino Music (OPM). Some say OPM is dead while others insist it’s alive but only in different reincarnations. After all, the local indie music scene is a hodgepodge of genres offering different flavors for everyone’s listening preference: jazz, hip hop, electronica, alternative, industrial, metal, blues — you name it, somebody else is likely to play it.
But the debate about OPM is just one part of living the independent musician’s life.
To survive, most local indie music artists and bands live off gigs and bookings and keep their day jobs, if only to stay true to being the “indies” that they are.
However, artistic integrity has its price.
To be considered as a fully functional band, a lot of investments have to be made.
Besides setting aside cash to pay for rehearsal space — P250 an hour — independent artists also need to bankroll their own music productions with expenses shared between band manager, technical crew, and other helping hands.
“There is no support,” Clarence Garcia, lead guitarist of tide/edit, an indie band, said in an interview. “You support yourself. Gone are the golden days of the music scene wherein you find a place you will regular play at and you will be discovered.”
This is exactly the reason why members of Oh, Flamingo! — a five-piece band which plays indie rock infused with tropical styles and elements — makes themselves available after gigs.
“You don’t leave immediately after your set. Early on, during our first few gig, we made it a point to stick around and really talk to the people who invited us. We were still new and unknown so you have to stay and talk, to establish further rapport, so to speak,” drummer Fries Bersales of Oh, Flamingo! said in a separate interview.
Another technique to sell their music involves at least one member who takes a position near the bar.
“That way, you can be approachable or at the entrance or outside so they know that you [already] played. You’re already available. Your defenses are down. You don’t have friends around you. [People] can already approach you,” Howard Luistro, Oh, Flamingo!’s vocalist and guitarist said.
Limited engagement with music labels
On occasion, bands like Oh, Flamingo! sign up with labels but only for engagements involving limited production releases covered by profit sharing agreements.
“Wide Eyed Records came to us and let us release our EP (extended play) under their label, so instead of just being able to produce 100, around 750 CDs [were produced] and then we agreed on sharing the profit. Everybody’s happy. Everything went back to us. It wasn’t a lopsided deal,” Pappu de Leon, Oh, Flamingo!’s lead guitarist, said.
The label also helped the band with the copyrights of their songs and with the distribution of their album to various commercial establishments including Team Manila and Satchmi. Other local bands who have enlisted the help of Wide Eyes Records are Halik ni Gringo and Ang Bandang Shirley, to name a few.
While their EP — a recording that’s more than a single but isn’t enough for a full album — is released under a label, the band themselves remain independent and do all the work themselves. A new contract would have to be signed if the band is seeking to release another album.
“It works for independent artists because we have creative freedom as compared to being signed to [major labels], you have a six-year contract,” the band said.
Meanwhile, other groups — while striving to keep their artistic independence — also take advantage of label’s e-commerce platforms to raise awareness and attract wider audiences.
Groups such as tide/edit and Fools and Foes are affiliated with A Spur of the Moment Project, along with other local indie bands including Run Dorothy and Tom’s Story.
Fools and Foes released their debut EP “Underneath the Roots” on December 4, 2015, while tide/edit has released an EP (“Ideas,” August 2012) and two full-length albums (“Foreign Languages,” June 2014; “Lightfoot,” November 2015).
Signing up with A Spur the Moment Project allows groups to take advantage of the label’s e-commerce platform.
“The e-commerce platform is a big help for us, for a band that doesn’t do live shows too often,” Lead guitarist Clarence Garcia of tide/edit said. “We’re a band that doesn’t really play live so it’s important for us so it works. We get to ship stuff locally, provincial orders, we get to ship even in overseas. I’m not sure why not everyone is doing it. It’s a basic requirement if you have something to sell. You have to make it [products] accessible for everyone.”
Using Spotify
And speaking of going online to popularize and sell their music, Oh, Flamingo! and Fools and Foes began using the Spotify with the help of their respective labels. Both of them also revealed that putting their music up on the site was mainly for exposure and audience reach and not for a secondary or tertiary source of income.
Being self-made musicians, Oh, Flamingo! had their doubts using the platform at first saying they “thought we could do that on our own through aggregator website, but we realized maybe we won’t be able to manage that given our time constraints and resources.” “We eventually saw Spotify as an opportunity to really exponentially spread our music because at least we can get people who not only buy the CD but [even] one with a smartphone can hear our music,” they added.
Fools and Foes said it “didn’t really upload music in Spotify to get revenue, but to get exposure. For a new indie band like us, it’s important to get our music out there.”
While members of tide/edit remain unsure whether they got traction from Spotify, they nevertheless see tweets tagging them, telling them that their listeners heard them first on Spotify.
Moreover, both Fools and Foes and Oh, Flamingo! believe that streaming and CD albums could go hand in hand with each other.
“It could go two ways. Some listeners can opt to listen to an artist via Spotify instead, while others, because they discovered the artist via Spotify, they could be encouraged to buy the artist’s physical CD. We definitely think online streaming is more rampant than listening to CDs. Technology as well is already phasing out the use of CDs,” said Fools and Foes in an email reply.
It may be too early to tell whether Spotify can help indie bands earn enough to keep them independent.
But for the moment, the music service nevertheless helps them distribute their music despite risks of related investments they’ve made.
So for now, none of them are planning to quit the day job or leave the rat race.
“Our goal is not how to make money,” tide/edit said. “Our goal is how not to lose money. It’s fun to be in a band. We enjoy the process. We enjoy what we’re doing and we want to do this over and over again.”
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Julianne S. Ruizol (@sopraknows on Twitter) covers the Senate and the Department of Foreign Affairs for BusinessWorld. Her wide music preferences range from 90s MTV to current Korean pop hits.
by Raynan F. Javil
The Duterte administration has promised to decongest “Imperial Manila” and reduce its prominence in the country’s national life. In so doing, the government — led for the first time by someone from Mindanao — vowed to bring inclusive growth to the countryside.
While businesses may be prepared to bring their operations outside the capital, are these areas ready to support industry expansion, including the information technology-business process management (IT-BPM) sector, currently the Philippines’ sunshine industry?
That remains to be a work in progress.
But it doesn’t mean that the private sector and the government aren’t working together to enhance the capacity of cities and towns outside Manila.
If the government aims to decentralize the growth, infrastructure should follow, Chermaine B. Muro, director of Premier BPO, Inc., told BusinessWorld in an interview.
“Other provinces outside Manila should be ready to be able to serve what is needed by the BPO industry, especially the connectivity,” said the executive of Premier BPO, which offers back-office processing, financial services, information technology services, among others, to its customers.
Measuring capacities of towns, cities
To this end, IT-BPM has launched road map which serves as a “prescription” for cities across the country to assess their readiness for the sector’s expansion. The IT-BPAP (Business Process Association of the Philippines) listed the criteria the industry uses to measure these towns and cities: human capital, connectivity, and community development.
“We have been publishing what we call ‘The Next Wave City Report’ for how many years now, and what it does is it helps cities across the Philippines to look at on these measures, how are they and what can you actually to improve them,” IT-BPAP Executive Committee Chairman Benedict C. Hernandez said during the initial launch of the new road map 2022, which carried the theme, “Accelerate PH.”
Mr. Hernandez added that aside from “The Next Wave City Report,” the IT-BPAP also named the top 20 emerging cities to watch out for.
In its latest report published in April, IT-BPAP announced the following as the Top 10 Next Wave Cities:
Moreover, the emerging cities seen to sustain the growth of the sector are:
He said that the dialogues between the association and the government are under way to identify the key strengths and opportunities in an area to attract investments.
“I was involved in the last one… in Dipolog. So again looking at what’s available here, how’s the talent, how’s the infrastructure so that’s gonna keep going. So our goal is to keep promoting ten if not 20 cities,” Mr. Hernandez said.
He also expressed optimism that the IT-BPM sector is on track to meet the 1.3-million direct employment target under the 2012-2016 road map. As of 2015, the sector has directly employed some 1.2 million workers, according to its data.
Creating another million jobs
He also said that the Philippines’ IT-BPM is now about a tenth of the industry’s global size.
“Our ambition is to create another one million higher value direct jobs in IT-BPM over the next six years. There’s also an additional three to four indirect jobs created per direct job in our industry, according to research. So in total, we are looking at four to five million new jobs in the country,” Mr. Hernandez said on the new road map.
He also noted that during the past five years, the Philippine IT-BPM sector has been growing more than twice the global growth rate, and with this, the country can shift into high value services.
Part of the ambition of the industry is to diversify its services, Mr. Hernandez said, noting that the Philippines dominated the contact center industry since 2010.
Aside from contact centers, other services that have grown over the past years — and still has the potential to grow even more — are health care information, IT, and the global in-house center service, in which financial institutions establish a base in the country for mid-office operations of credit processing, among others, he said.
Mr. Hernandez noted that 300,000 jobs — roughly 30% of the industry’s total work force — were provided outside the capital and “part of focus of the new road map is how to continue to push more and more investment and job creation outside of Manila.”
Current technological trends present significant opportunities for the Philippines, he said.
Labor pool tricky outside Manila
One of the hurdles in the rapid expansion of the IT-BPM sector is the lack of qualified labor pool “that could actually work in an IT-BPO sector,” Premier BPO’s Ms. Muro also said.
Once you reach out and start expansion outside the capital, “the labor pool gets a little tricky,” Ms. Muro said.
In order to address this concern, Mr. Hernandez said that “the key is making sure human capital is able to get ready” as the landscape in the IT-BPM sector evolves through time.
Moreover, one of the reasons driving the expansion outside Manila, Ms. Muro said, is the cost of rent in the saturated central business districts in the capital.
She said that locating outside Manila is the trend right now for a BPO firm as it is the “cheaper way of expanding.”
BusinessWorld earlier reported that in Bonifacio Global City in Taguig City, rental rates are projected to increase to P1,163 per square meter (sqm) in 2020 from the P957 estimated for this year, CB Richard Ellis Philippines (CBRE) Philippines, Inc. said.
In a separate report, CBRE noted that monthly office rental rates in Metro Manila averaged P870.47 per sqm in the fourth quarter of 2015, up 2.54% from the previous quarter. These comprised rental rates in Makati, Fort Bonifacio, Ortigas, Quezon City, Alabang and the Bay Area.
New agency to help industry achieve milestones
Meanwhile, the IT-BPAP believes that the creation of the Department of Information and Communications Technology (DICT) “will help the industry achieve the new milestones as recommended” in the new road map.
Mr. Hernandez noted that the IT-BPAP was one of the first to call for the creation of the ICT department since the beginning.
Mr. Hernandez said that the DICT will particularly help them execute the provisions of the Anti-Cyber Crime Law and the Data Privacy Law – two laws seen to be critical in making the country more attractive in foreign investors.
Moreover the IT-BPAP said that it looks forward for a “strong partnership and collaboration” with the new administration.
The industry association further noted that “embracing digital trends presents a path for the Philippines to accelerate moving up to the higher value chain.”
“Disruption in technology can be considered a threat or can be embraced to take advantage of its opportunities,” IT-BPAP said.
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Raynan F. Javil (@rajavil on Twitter) covers several beats — including the House of Representatives and the Office of the Vice-President — for BusinessWorld.
by Roy Stephen C. Canivel
The Philippines’ car industry remains in a sweet spot.
Apart from sales rising yearly, the sector also recently received government support — a multibillion dollar financial incentive to help transform the country into a regional auto manufacturing hub.
Understandably, the challenge is daunting, ambitious even.
After all, other countries such as Thailand seem to be a better choice than the Philippines as far as car manufacturing is concerned.
This much is admitted by Rommel R. Gutierrez, first vice-president for Government Affairs at Toyota Motor Philippines.
Take Toyota’s Vios and Innova models, Mr. Gutierrez said.
While both vehicles are made locally and in Thailand, “it’s cheaper to import vehicles than to produce locally,” he said.
This is because Toyota’s local unit has no choice but buy more components from abroad, unlike Toyota’s Thai assembler which sources car parts locally.
“Thailand’s localization is very high, more than 80% while ours are only at 40%,” the Toyota executive said, adding that the industry will become more competitive if it sources its parts locally.
Program seeks to make cars have more local content
Starting 2010, the Philippines found it more difficult to compete when import barriers were pulled down in member countries of the ASEAN Free Trade Area (AFTA).
Under the AFTA’s Common Effective Preferential Tariff (CEPT), taxes on imports — including those previously imposed on vehicles and components — were virtually removed.
As a result, several auto parts suppliers and some car manufacturers left the country since it was no longer competitive, Mr. Gutierrez explained.
After all, it was cheaper to import cars assembled abroad than it was to build them here.
But now, the government — through its Comprehensive Automotive Resurgence Strategy (CARS) program — plans to turn the situation around by increasing localized content to 60% from 40% by 2022.
With locally-built cars containing more parts sourced domestically, companies such as Toyota Philippines “can benefit,” Mr. Gutierrez said.
The CARS program, established by Executive Order 182 that was signed by President Benigno S. C. Aquino III on May 29 last year, provides incentives to three car makers to locally produce three car models with a production volume of at least 200,000 units respectively for up to six years, or an average of 33,333 vehicles per year.
The program also provides auto manufacturers and parts makers operating in the Philippines P4.5 billion in annual support for six years, or P27 billion in total, as well as other non-fiscal measures.
For its part, Toyota Motor Corp. plans to invest P3.22 billion ($70 million) in its Philippine division to increase local output and qualify for a new tax incentive. The Japanese automaker will build 230,000 Vios subcompact sedans.
This would help “close the cost gap” between importing and local production, he said, adding that the domestic sector needs to achieve economies of scale, bringing down cost of localization and resulting in more competitive production.
“You need to produce a lot because you need to spread the cost,” he said. “It’s not easy, but we are more than willing to take the challenge kasi (because) that’s the requirement.”
The Toyota executive, who is also president of Chamber of Automotive Manufacturers of the Philippines, Inc. (CAMPI), said that it has been a year since the “start of motorization,” which he said signaled a spike in total industry car sales reflecting the stronger purchasing power of the local market.
Toyota, Mitsubishi qualify for car program
Toyota has consistently reported the biggest sales in the Philippines, taking 45.12% of market share as of June this year alone, according to a monthly report issued by CAMPI together with the Truck Manufacturers Association.
By 2020, total market sales is expected to reach 500,000 units. However, this may be reached earlier than anticipated since 320,000 units were delivered last year, meeting the 2018 target of 300,000 way ahead of schedule.
As of this writing, only two companies qualified for the program: Toyota and Mitsubishi Motors Philippines. They received their certificates of recognition last June.
The fate of the third player that would help reach the program’s goal of producing 600,000 units is still unknown.
“We still don’t know if we’re going to open it up,” Trade Undersecretary Ceferino S. Rodolfo told reporters last June while at the sidelines of Mitsubishi’s groundbreaking ceremony of its Laguna stamping facility.
Manufacturers need to meet “the production volume that is needed for the Philippines to surmount the economies of scale and be regionally competitive,” he said.
“If they are accepted into the program, that does not mean that they will be already receiving the incentives. It depends on their performance,” he told reporters. Incentives would only be enjoyed by the manufacturers after they produce their first 100,000 units.
Meanwhile, as the country’s consistent top-selling car maker, Mr. Gutierrez says that the growing traffic does not necessarily post a harm on Toyota’s performance, citing increasing industry growth on the back of solid consumer demand.
“Traffic doesn’t seem to have an effect on our sales,” he said. “In fact, people would rather buy a car than suffer through our public transportation. That’s the irony of it.”
He also pointed out that car sales in the provinces — where roads are not as congested — remain substantial.
A lot of dealerships are now being put in the provinces and, as a result, sales are being dispersed across the region, he said. Sixty percent of its sales are in Metro Manila while the rest are divided among the rest of the areas.
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Roy Stephen C. Canivel (@roycanivel on Twitter) covers telecommunications and trade for BusinessWorld. He likes reading a good book and occasionally checks their summaries on several Web sites.
