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Corporate bonds this year expected to hover around 2017’s record level

By Krista A. M. Montealegre
National Correspondent

THE Philippine Dealing and Exchange Corp. (PDEx) expects new corporate bond listings to match last year’s record level.

The volume of fresh corporate debt listed in 2017 totaled P207.43 billion, the highest level of new corporate bond listings since the public market opened in 2008 and surpassing the level of new listings in 2016 by 23%, according to data from the PDS Group.

“Hopefully, we can match last year’s level,” PDS President and CEO Cesar B. Crisol said in an interview, noting that there are six applications in the pipeline.

Demand for these securities will be driven by robust liquidity in the financial market, Mr. Crisol added.

First Metro Investment Corp. sees corporate bond floats to hit P212 billion this year, buoyed by the positive outlook for the domestic economy.

SM Prime Holdings, Inc. announced last week that it is raising up to P20 billion from the sale of long-term bonds to retail investors — the third tranche of its P60-billion shelf registration of fixed rate bonds approved by the Securities and Exchange Commission in 2016.

“Maliit na lang ang balance ng shelf registration because they issued more last year. We hope to see more applications for shelf registration,” Mr. Crisol said.

Companies can use the shelf registration program to raise funds as they are needed or when market conditions become favorable to them.

“The capital market is very active on the debt side and on the equity side,” Virgilio O. Chua, first vice-president and investment banking group head at China Banking Corp., said in a separate interview.

“There are a lot of issues that were postponed last year. Hopefully, we’ll see them come to fruition this year.”

Two of the country’s biggest banks — Metropolitan Bank & Trust Co. and Bank of the Philippine Islands — are leading the way in raising from capital through the Philippine stock market, with plans to raise as much as P110 billion from the sale of shares to existing investors.

“The increase in economic activity obviously requires funding and that’s where the bank comes in,” Mr. Chua said.

Proposed investment treaty terms leave India’s foreign partners cold

NEW DELHI — Having cancelled investment treaties with about 50 foreign governments last year, India is struggling to convince some to accept new terms that make it harder to seek international arbitration for disputes, sources familiar with the talks said.

From New Delhi’s perspective those treaties, mainly struck in the 1990s when it was desperate for foreign capital, left it too exposed to potential claims awarded by international arbitrators.

To reduce that exposure, India has drafted a new model agreement that legal advisors say is similar to those used by other big emerging market economies like Brazil and Indonesia, but some of its foreign partners are balking at the more restrictive approach.

“India is getting nowhere with the negotiations,” said one of the sources, who is aware of the meetings with government officials over the past 10 months, but does not want to be named as the discussions are private.

Negotiators from countries including Australia, Iran and the European Union have told the Indian side that investors are waiting to come in but the new treaty terms give too little protection, the source said.

Foremost among their concerns are a requirement for investors to fight any case in the Indian courts for at least five years before going for international arbitration, and other provisions narrowing the scope for companies to make claims, the source said.

The new model treaty also has no provision for investors to bring claims against India for any tax-related matters and for disputes arising due to actions taken by local governments.

Currently, India is entangled in more than 20 international arbitration cases, and could end up paying billions of dollars in damages if it loses.

Companies like Vodafone Group, Cairn Energy and Deutsche Telekom have initiated arbitration proceedings against India seeking to protect their investments against retrospective tax claims and cancellation of contracts.

Covered by a bilateral trade and investment agreement between New Delhi and Tokyo, Japanese automaker Nissan is the latest company to sue India, claiming damages of over $770 million in unpaid tax incentives.

While several countries limit the type of tax-related claims that can be made, lawyers say India’s step to omit all tax matters goes too far and could expose investors to sudden changes in tax rules or retrospective claims.

NEGOTIATING POSITION
These days, India appears to be in a far stronger negotiating position than it was during the 1991 balance of payments crisis.

Prime Minister Narendra Modi has a strong mandate and there is more confidence in the ability of his pro-business government to get the under-achieving economy moving than there has been in any of its predecessors.

Since Modi came to power in 2014, annual foreign direct investment flows into India have doubled to $46 billion in 2016 from $22 billion in 2013. But the rate of growth in inflows is slowing, and the amount is lower than the $59 billion that a United Nations report says Brazil received in 2016.

A European Commission official termed India’s unilateral decision to terminate treaties as “unfortunate” saying it discriminates between existing investors, who will continue to be protected by the old treaties for a few years after termination, and new ones who will have fewer safeguards.

The Commission is exploring ways to re-establish protection for European investors and resume negotiations on a free trade agreement with India that will include investment, the source said.

Canada has been in talks with India since 2004 to sign its first treaty, but there has been little progress and its trade minister told Reuters in November that Canadian investors are holding back until there is one in place.

“India needs further investments and Canada is willing, but we need a framework. What investors want is to have certainty, stability and predictability,” Francois-Philippe Champagne said in Mumbai during his visit to India as part of a trade mission.

While the sources told Reuters that Australian and Iranian officials had raised concerns in private meetings with Indian counterparts, neither the Australian High Commission in New Delhi or Iran’s ministry of industry, mines and trade responded to emailed requests for comment.

A spokesman at India’s ministry of external affairs also failed to respond to an e-mail seeking comment.

Meantime, some countries, especially those that receive more investment from India than they send, are more open to signing, said the first source. Israel, for instance, does not oppose some of the provisions and the two nations could soon sign an accord, Business Standard, an Indian newspaper, reported on Wednesday last week.

And while India remains a capital deficient country, some of its biggest companies have made major investments overseas and would be reassured if there were bilateral treaties in place to protect their interests.

For now, the draft model treaty is a starting point for negotiations, the second source said, but India is in a good position to press for better terms.

“India is finally flexing its muscles,” the spokesman said. — Reuters

T-bonds to fetch higher yields

TREASURY BONDS (T-bonds) on offer Tuesday are likely to fetch higher yields after 10-year US Treasury yields rose to their highest levels in three years as the US government shutdown spooked investors.

The Bureau of the Treasury plans to raise as much as P20 billion during Tuesday’s auction of fresh three-year T-bonds set to mature on Jan. 25, 2021.

“I think yields of three-year bonds will move higher due to increased yields of the US Treasuries,” a trader said over the phone on Friday.

Last week, yields of the 10-year US Treasuries soared to as much as 2.6407%, its highest level since September 2014’s 2.6256%.

Bloomberg reported yields of US debt papers were rising on the back of market expectations on the Federal Reserve’s interest rate hikes this year as well as increased borrowing to finance the widening budget deficit.

Meanwhile, another trader said the US government shutdown will provide some headwinds.

“That’s the only black swan for now. But we’re seeing demand on the short-end so [the government] will be able to sell the P20-billion target given the higher US Treasury yields,” the second trader added.

On Saturday, the US government shut down after a standoff between Republican and Democrat lawmakers over a short-term spending bill. Democrats demanded spending legislation include protections for young undocumented immigrants, while Republicans refused to negotiate on immigration.

A second trader expects the fresh papers to rise 4% to 4.25%, while the first trader gave a slightly higher projection of 4.25% to 4.325%.

Meanwhile, the first trader expects the demand to be tepid, saying the new bond issuances are less attractive compared with the old ones.

“I’m expecting just the right demand because it will be short tenor but because it’s a new issue, [the demand will be tempered]. They prefer the old issue,” he said. — Karl Angelo N. Vidal

PSE pursues PDS takeover despite Landbank plan

By Krista A. M. Montealegre,
National Correspondent

THE Philippine Stock Exchange (PSE) assured the government it is working to comply with ownership rules, with state-run Land Bank of the Philippines (Landbank) set to compete with the stock market operator for the acquisition of a majority stake in the Philippine Dealing System Holdings Corp. (PDS).

Landbank President and Chief Executive Officer Alex V. Buenaventura plans to recommend to its board of directors this week the lender’s acquisition of “a majority stake or at least 66.67%” in PDS, complicating the plan of the PSE to unify the country’s capital market infrastructure. Landbank’s board meeting is scheduled on Jan. 23.

“Yes, all the more!” PSE Chairman Jose T. Pardo said in a mobile phone message when asked if the local bourse will pursue the acquisition of PDS.

“Our focus though remains in completing our stock rights offering which we expect to happen end-February,” Mr. Pardo said.

Last week, the Securities and Exchange Commission (SEC) approved the share sale that will raise P3.16 billion to raise financing for the acquisition of PDS, among others.

Mr. Pardo said he has guaranteed Finance Secretary Carlos G. Dominguez III that the proposed stock rights offer will bring down the ownership of trading participants in the local bourse to 19% — one of the key requirements before the PSE can secure the corporate’s nod for a merger with PDS.

“[N]o industry or business group shall beneficially own or control, directly or indirectly, more than 20% of the voting rights of the Exchange Controller,” according to Rule 33.2 (c) of the SRC.

Mr. Dominguez singled out the failure of the PSE to be compliant with the above-mentioned rule as the reason for Landbank’s move to take control of PDS.

Currently, the Landbank owns 1.56% of PDS through the Bankers Association of the Philippines (BAP).

“With waivers of preemptive rights made by all existing shareholders, ownership levels will now comply with the law. This was a separate commitment we made to the DoF [Department of Finance] Secretary,” Mr. Pardo said.

“We likewise assured him that PSE, with SEC oversight, will have in place a system which will automatically stop trade beyond the 20% per industry ownership level,” he added.

Sought for comment about the PSE’s plan to acquire PDS, SEC Chairperson Teresita J. Herbosa told reporters last week: “They have to do some little things before we get to that point.” 

“We have to see that the stock rights offering will achieve its purpose which is to make the share structure in accordance with what the law provides, which is one should not achieve the industry limit of 20%.”

The SEC approval for the PSE-PDS merger is one of the final steps in closing the deal that began back in 2013, when the PSE proposed to merge the two markets for synergies in operations. The corporate regulator initially rejected the merger in 2016 after denying the local bourse’s petition for an exemption to the SRC rule.

The PSE has made renewed attempts to buyout the PDS shareholders after signing new share purchase agreements with them that gave the former a 69.03% total stake in the latter.

Since June last year, the PSE has inked SPAs with the BAP; Whistler Technologies Services, Inc.; Investment House Association of the Philippines; The Philippine American Life and General Insurance Co.; FINEX Research and Development Foundation, Inc.; San Miguel Corp. and Tata Consulting Services Asia-Pacific Pte. Ltd.

‘AGGRESSIVE BID’
Meanwhile, Mr. Dominguez, who is an ex-officio chairman of Landbank, on Friday said the bank is planning to make an “aggressive bid” to secure a majority stake in PDS.

“Landbank asked my permission, so I said if it’s a good business for you, yes. If it doesn’t make money for you, don’t do it. But they said they will make money from it and Landbank has to increase its profits because the more money they make, the more dividends they give to the government. So it only happens if it makes commercial sense. So go ahead, it will achieve our goals to improve the efficiency of the capital market,” the Finance secretary told reporters.

Mr. Dominguez said he been talking to PSE officials since September 2016 to bring down the broker ownership, but has not made progress ever since.

“It’s been 16 months. Maghihintay pa ba kami? (Will we still wait?) In the meantime,  we cannot improve the domestic capital, we cannot really push the improvement of the domestic capital market. Landbank looked at it, it’s a profitable business, they said they’re willing to acquire it,” said Mr. Dominguez. — with Elijah Joseph C. Tubayan

Yields on gov’t securities show mixed movements

By Jochebed B. Gonzales,
Senior Researcher

DOMESTIC YIELDS saw mixed movements last week as market players took cues from data releases in the US even as they factored in the temporary shutdown of the federal government.

Prices rose as yields on government securities (GS) dipped by an average of 2.97 basis points (bps) week on week, data from the Philippine Dealing and Exchange Corp. as of Jan. 19 showed.

“Yields fell this week by 2.96 bps due to mixed US data on retail sales and inflation as well as safe haven buying amid fears of a US government shutdown from a possible failure to pass a short-term spending bill,” said Guian Angelo S. Dumalagan, market economist at Land Bank of the Philippines (Landbank).

US headline inflation picked up 2.1% year on year last December from 2.2% in the previous month while core inflation, which excludes volatile prices of food and energy, was up 1.8% from clipping 1.7% in November. Retail sales expanded by 5.4%, closing with a strong growth of 4.2% for the entire 2017.

In other news, the US government has been on a shutdown after Republican and Democratic lawmakers failed to pass the federal funding bill on a Friday midnight deadline. Until a deal is reached between the two opposing parties, wherein at least 60 of the 100 senators must vote in favor of the bill, most government workers will be placed on unpaid leave.

Meanwhile, the local GS market saw more demand on shorter-dated securities than those in long-end whose yields tread higher last week.

Security Bank Corp. Head of Institutional Sales Carlyn Therese X. Dulay noted of the gains in yields on medium- to long-term debts.

“Government securities yields traded slightly higher this week in line with higher UST (US Treasury) yields as influenced by the possibility of more Fed hikes this year as well as more debt issuances to fund the US’ widening deficit,” she said.

A bond trader also agreed, saying: “Profit taking ensued at the end of the week due to Bangko Sentral ng Pilipinas Gov. Nestor A. Espenilla, Jr.’s comments that the coming board meeting might be an interesting one in terms of assessing the appropriateness of the current policy rates.”

He added that volume traded was “better” as it reached P21.6 billion on Tuesday, and averaged more than P10 billion during the rest of the week.

At the secondary market on Friday, the yield of the 182-day Treasury bill (T-bill) shed the most, by 38.08 bps week on week to end with 2.8960%. It was followed by the 364-day T-bill whose yield decreased by 35.32 bps to 2.7983%.

The yield 91-day paper also slid by 7.42 bps to 2.2077%, while that of the two- and three-year treasuries dipped 5.20 bps and 8.06 bps, respectively, to close at 3.9015% and 4.1514%.

On the other hand, double-digit gains were observed on the yields of the four-, seven, 10- and 20-year bonds as they increased by 11.22 bps, 16.28 bps, 15 bps and 19.62 bps, respectively, to finish with 4.9354%, 5.4807%, 5.9450% and 5.9714%.

The yield of the five-year bond fetched 2.30 bps to 4.7359%.

“Expect yields to stay within range this week as market continues to wait for more direction and ahead of the new 3-year FXTN issuance [this] week (FXTN 3-23) with market expecting it to print at 4.25-4.375%,” said Security Bank’s Ms. Dulay.

For Landbank’s Mr. Dumalagan: “Yields might correct upwards amid likely firm Philippine growth data and possibly hawkish signals during the ECB (European Central Bank) monetary policy meeting.

Weaker US data on existing US home sales might limit the rise in yields.”

The Bureau of the Treasury will offer P20 billion worth of three-year bonds on Wednesday, the same day the Philippine Statistics Authority will release results of the fourth quarter and full year 2017 gross domestic product.

PSEi seen to hit 9,300 but market correction looms

By Arra B. Francia, Reporter

INVESTORS should wait for a market correction in the coming months if they are to buy more aggressively, as looming interest rate may weigh on the Philippine Stock Exchange index (PSEi).

This is according to stock brokerage COL Financial Group, Inc., noting risks such as higher-than-expected inflation due to the tax reform program, impending rate hikes by both the United State Federal Open Market Committee (FOMC) and the Bangko Sentral ng Pilipinas, and a rise in 10-year bond rates, may prompt the market to take a pause after reaching another record high last week. 

“There’s room for rates to correct… The market is anticipating inflation of 3.6%, 10-year bond rates of 5.3%, two to three rate hikes from the Fed (FOMC), and two rate hikes from our own BSP. But what if inflation goes above 3.6, and the 10-year bond rate goes above 5.3%,” COL Financial Research Head April Lynn C. Lee-Tan said in a press briefing on Friday. 

“I think there will be some level of confusion, and negative reaction if those risks actually materialize… Yes, we are positive, but now is not the time to be overweighing the market. Wait for the market to correct to buy more aggressively,” Ms. Tan added.

With corrections expected over the next 12 months, COL Financial predicted the market to reach the 9,300 level by yearend, around 400 points away from it recent close above the 8,900 mark. Factors boosting this performance would be the implementation of the Tax Reform for Acceleration and Inclusion (TRAIN) law, as well as the growth of the global economy. 

The brokerage noted this is not a conservative projection, as investors’ positive sentiment has been priced in at its current level. It noted the market has already climbed 12.5% since TRAIN was approved by House of Representatives in May 2017. 

Another engine for growth would be the rise in government spending, as the country targets a gross domestic product (GDP) growth of 7-9%. COL Financial said government spending has lagged behind in the past, accounting for only 13% of the country’s GDP in 1998, and dropping to 10% in 2016.

“With them actually increasing their spending, we can finally see that 7-9%. This is why we’re very confident that maybe this time it’s really different. It’s not just consumer spending, but government spending as well,” Ms. Tan said.

A survey of the brokerage’s active investors showed 40% of respondents expected earnings growth of listed companies to be the market’s top driver in 2018, followed by foreign fund flows (33%), and performance of global markets (17%).

COL Financial has a positive outlook on the property, gaming, retail and restaurant sectors, while it remains negative for the telecommunications, food manufacturing, and cement industries.

“Concerns of a third player still hurting sentiment for (telco) stocks,” the firm said.

Among the stocks the brokerage recommends are Ayala Land, Inc. and Megaworld Corp. for property, Bloomberry Resorts Corp. for gaming, Metropolitan Bank and Trust Co. for financials, D&L Industries, Inc. and Shakey’s Pizza Asia Ventures, Inc. for consumer, Semirara Mining and Power Corp. and Aboitiz Power Corp. for power, and Ayala Corp. for conglomerates. 

Peso to strengthen vs US dollar this week

By Karl Angelo N. Vidal

THE PESO is seen to regain its strength against the US dollar this week, as solid fourth quarter Philippine economic growth, and the continued US government shutdown, will likely temper the greenback’s rise.

On Friday, the local currency strengthened against the greenback as it gained eight centavos to close at P50.72-per-dollar. This was attributed to the US currency’s weakness due to weak housing data and worries over the US government shutdown.

“After unexpectedly rising last week amid soft domestic reports and US rate hike expectations, the dollar might show a downward bias this week due to likely firm Philippine GDP (gross domestic product) data,” Guian Angelo S. Dumalagan of Landbank said in an e-mail on Saturday.

The Philippine Statistics Authority (PSA) is scheduled to report fourth-quarter GDP data on Jan. 23.

Multinational lenders such as the World Bank and Asian Development Bank expect the Philippine economy to have grown by 6.7% in 2017, well within the 6.5-7.5% target set by the government.

“The potentially upbeat growth report could divert investors’ attention to the country’s sound prospects this year,” Mr. Dumalagan said, adding that the upward revision of the country’s third-quarter GDP growth as well as weaker-than-expected reading on US consumer sentiment may further strengthen the local currency.

The PSA reported GDP expanded by 7% in the third quarter of 2017, slightly higher than the 6.9% initially. The slightly upgraded July-September estimate kept the average of 2017’s first three quarters at 6.7%.

Meanwhile, Ruben Carlo O. Asuncion, chief economist of UnionBank of the Philippines, said the US government shutdown will be unpleasant for the greenback.

“It definitely doesn’t look good for the US dollar. The shutdown communicates that US policy makers need to get their act together seriously,” Mr. Asuncion said in a text message on Sunday.

On Saturday, the US government shut down as Republican legislators failed to secure enough votes to pass a short-term expenditure bill, forcing some government services to be halted. This was the first US government shutdown in four years.

“The greenback’s decline may persist until the last day of the week, especially since US reports on existing home sales, services and manufacturing are generally expected to show weaker readings,”

Mr. Dumalagan added.

The likely hawkish tone of the European Central Bank meeting may provide some boost to a basket of currencies including the peso, he noted.

For this week, Mr. Dumalagan sees the peso moving between P50.30 and P51, while Mr. Asuncion gave a slimmer range of P50.50 to P50.90.

Lucio Tan says PAL Holdings to conduct re-IPO in 2nd quarter

THE COUNTRY’S flag carrier intends to push through with a plan to sell shares to the public this year, the Philippine’s second-richest man said.

PAL Holdings, Inc. Chairman Lucio C. Tan, Sr. said in an interview last week the airline operator can embark on the re-initial public offering (IPO) in the “second quarter” of the year. He did not elaborate.

PAL entered the Philippine Stock Exchange in 2007 via the “backdoor” with a takeover of Baguio Gold Holdings Corp. Proceeds from the share sale will bankroll its expansion.

PAL is undertaking a capital restructuring to clean up the company’s balance sheet, as it seeks the entry of a new investor group to help the company manage its fleet and reach five-star full service carrier status by 2020.

PAL can give up a stake equivalent to a maximum percentage allowable by law. Under the Philippine Constitution, foreigners cannot own more than 40% of certain industries, including transportation.

The company secured the approval of the Securities and Exchange Commission (SEC) for the valuation of shares for a proposed share-swap transaction with Zuma Holdings and Management Corp., another company controlled by the tycoon and owner of budget carrier Air Philippines Corp. The transaction will allow PAL to issue 19 shares for each Zuma share surrendered.

The consolidation of Mr. Tan’s airline business is a move seen helping increase PAL’s appeal to investors.

The corporate regulator likewise cleared the decrease of PAL’s authorized capital stock to P13.5 billion from P30 billion, resulting from the reduction in par value of each share to 45 centavos from P1.

The SEC further approved the increase in par value of each share to P1 from 45 centavos, as a result of the decrease in the number of shares corresponding to the authorized and subscribed capital stock of the company.

Despite higher revenues, PAL booked a comprehensive loss of P3.55 billion for the first nine months of 2017, a reversal of the P2.96 billion booked in the previous year, because of higher expenses as a result of the increase in flight frequencies and introduction of new routes. — Krista Angela M. Montealegre

Business groups weigh in on charter change

By Minde Nyl R. dela Cruz

THE SENATE is looking to invite business groups Makati Business Club (MBC), Management Association of the Philippines (MAP), and the Financial Executives Institute of the Philippines (FINEX) in its next hearing on charter change following a joint statement recommending a focus on amending the economic provisions of the 1987 Constitution.

“We welcome their inputs, especially on [separate voting and constitutional convention]. The Senate committee on constitutional amendments would invite them in the next hearings,” Senator Francis N. Pangilinan, chair of the Senate committee on constitutional amendments and revision of codes, said in a text message to the BusinessWorld.

In a joint statement issued on Sunday, Jan. 21, the business groups called for separate voting of the two chambers of Congress as being “more democratic.” They also urged the holding of a constitutional convention as “the appropriate body to amend the Constitution.”

The business groups also expressed “strong support” for Resolution of Both Houses (RBH) No. 2, as filed by former House Speaker and Quezon City Representative Feliciano R. Belmonte, Jr. That resolution, from way back the 16th Congress, proposes the lifting of economic restrictions by inserting the phrase “unless otherwise provided by law” in the 1987 Constitution.

RBH No. 2, however, is also adopted by the much more recent House Concurrent Resolution (HCR) No. 9 which the House of Representatives approved last Tuesday, Jan. 16. HCR No. 9 calls on Congress to be convened into a constituent assembly, ahead of provisions being crafted on the watch of the House committee on constitutional amendments that aim to overhaul the present system of government into a federal structure.

The business groups, for their part, noted that amending the economic provisions “would allow Congress to pass future laws to change the current Constitutional restrictions.”

“The Philippines’ population has more than doubled since 1987. Government should maximize the amount of foreign investment generated as a means to drive down unemployment and underemployment levels. While there has been a very significant increase in FDI since 2010, amounting to over $8 billion in 2016 and the same level forecasted in 2017, this represents only 8% of total FDI in ASEAN, which is small, considering that the Philippines accounts for 16% of the population of ASEAN,” the joint statement in part reads.

The businessmen added that removal of the economic restrictions “would mean a fresh infusion of financial resources for our undercapitalized sectors, the introduction of new technologies to spur greater innovation and efficiency in our industries, and the promotion of healthy competition that will drive businesses to operate more efficiently, leading to better-quality and more competitively priced products and services for the people.”

MBC, MAP, and FINEX said “there is no better time than now to begin the process of updating the outdated economic restrictions in our Constitution,” and stressed that “it will be unfortunate if the Philippines fails to take advantage of this golden opportunity.”

The businessmen further stated that a separate voting of the two chambers of Congress will “avoid diluting the voice of our Senators in this critical process,” and added that a Con-con will “offer a more diverse, independent, and prospective approach.”

“While such mode would entail greater costs to implement and probably more time, it should be seen as a justifiable investment that will result (in) significant social returns in the long run,” the group stated.

House Speaker Pantaleon D. Alvarez has been pushing for joint voting in amending the Charter by the Senate and the House as a constituent assembly. The Senate, on the other hand, maintains its position on separate voting, and thus the matter of Congress convening as a constituent assembly has reached a deadlock.

BUDGET REFORM
For his part, Senator Panfilo M. Lacson said he plans to revive a bill he filed in 2016 called the “Budget Reform Advocacy for Village Empowerment (BRAVE).”

“Now I’m thinking of reviving it and reporting it out on the floor so that we can have an alternative in case, for example, disagreements continue regarding discussions on (charter change) paving the way for federalism. This is the best alternative method or means to spread out development in many areas of our country,” Mr. Lacson said in Filipino in a radio interview Sunday.

This would, in part, address the matter of local government leaders flocking to Congress during budget deliberations to ask funds for their projects, he added.

“The proposal aims to assign funds to all provinces, municipalities, cities, and barangays from the national budget. It would allocate P5 million per barangay, P100 million per municipality, and P1 billion each for all the 81 provinces. But these funds would only be used for development, livelihood and infrastructure, and not for MOOE (Maintenance and Other Operating Expenses) because it might be abused. Development will then spread,” Mr. Lacson also said.

The senator said he had presented this proposal to Cabinet Secretary Leoncio B. Evasco, Jr.

“He (Mr. Evasco) said after my presentation, ‘If the President sees this, he will forget federalism because this is his goal,’” Mr. Lacson said.

The senator also noted that his budget reform bill does not yet have a counterpart bill in the House of Representatives. — with Camille A. Aguinaldo

Debt to remain at ‘prudent levels,’ DBCC says

THE Development Budget Coordination Committee (DBCC) said that national government (NG) debt will remain at prudent levels over the medium term even though the government is pushing to finance infrastructure investments with loans.

“A debt sustainability analysis (DSA) projects NG debt-to-GDP (gross domestic product) ratio remaining within prudent levels,” the DBCC said in its Fiscal Risk Statement 2018.

The DBCC projects a 90% probability that the debt-to-GDP ratio will settle below 43.9% by 2022, and a 50% likelihood it will stay between 36-41.4%.

The government targets a 37.9% debt share of GDP in 2022, from 42.5% in the first half of 2017.

“The DSA shows that NG debt continues to demonstrate resilience against various macroeconomic shocks, and despite higher funding requirements over the medium term,” it added.

Outstanding national government debt was P6.437 trillion at the end of November, up 5.4% from a year earlier.

Assumptions for the latest Fiscal Risk Statement for the year include 6.4% GDP growth in the first half of 2017 and a 3.1% inflation rate in the eight months to August 2017.

Among the macroeconomic risks that it identified were the impact of the government’s fiscal reform program, and the pending petitions for adjustments in electricity rates, which present upside risks for inflation.

“Meanwhile, slower global economic growth due to policy uncertainty in advanced economies and geopolitical tensions continues to be the main downside risk to inflation,” the DBCC said.

It added that a faster-than-expected interest rate hike by the Federal Reserve could trigger further portfolio rebalancing, resulting in tighter financial market conditions, and could contribute to higher domestic and foreign interest rates.

A potential shift to inward-looking trade and investment policies in the US could dampen overseas remittances — money sent from that country currently accounts for 33.1% of overall remittances — weaken the Philippines’ business process management sector that currently caters mostly to US companies, result in withdrawals from free trade agreements, and possibly introducing an element of foreign exchange volatility.

Moreover, the DBCC also cited the absorptive capacity of government agencies as continuing to pose “one of the major sources of fiscal risk,” with government underspending attributed to “structural weaknesses in program/project preparation and implementation.”

Local government units (LGUs) likewise face fiscal risks over the cancellation, closure and suspension of mines and mineral production sharing agreements by the Environment department in February 2017.

The DBCC said that affected LGUs stand to lose some P899.35 million in revenue collected from mining firms amid their already-deteriorating position in terms of locally sourced funding.

Locally raised revenue growth from provinces slowed to 10% in 2016 from 28% in 2016, while cities’ growth was 10% in 2016 from 12% in 2015.

“If this continues, local revenues will be overshadowed by the growth of NG revenues, which means LGUs will continue rely on the national transfers for the delivery of public goods and services,” the DBCC said. — Elijah Joseph C. Tubayan

TNT races to 2nd win in row

By Michael Angelo S. Murillo
Senior Reporter

AFTER having it up and down early in the PBA Philippine Cup, the TNT KaTropa finally got some semblance of winning pattern after defeating the Meralco Bolts, 99-81, yesterday in their matinee engagement at the Ynares Center in Antipolo City

Towed by their steady shooting, especially from beyond the arc, the KaTropa kept the Bolts at bay throughout the contest to finally win back-to-back games in the season-opening Philippine Basketball Association (PBA) tournament and improve to 3-2 while adding to the woes of Meralco (1-3) which has now lost three straight games.

TNT got off to a flying start with forward Troy Rosario leading the way.

The former National University stalwart strung up three straight triples in the first two minutes of the opening frame to help his team to an early 9-1 advantage.

The KaTropa held a 16-3 lead midway into the first canto before settling for a 27-18 advantage at quarter’s end.

Control remained on the side of TNT at the beginning of the second quarter as it outscored Meralco, 11-7, to hold a 38-25 cushion with seven minutes to play in the first half.

Meralco would go on a 7-0 mini run to come within six points, 38-32, at the 3:18 mark before Jayson Castro, Mr. Rosario and Ryan Reyes led a counter by TNT to jack up their lead back to double digits, 46-36, by the halftime break.

In the third period it was the Bolts’ turn to have a fast start, racing to an 11-6 run with just three minutes lapsing to come within 52-47.

But the KaTropa would stand their ground, making sure not to give their opponents much real estate thereafter to close out the third canto with a 73-62 distance.

TNT opened the payoff quarter with back-to-back triples care of Anthony Semerad and Mr. Castro to extend its lead to 16 points, 79-63, with 10:42 left to play.

The KaTropa stretched it further to 22 points, 92-70, six minutes later, which pretty much took the game away from the reach of the Bolts.

Mr. Rosario led TNT with 22 points, 18 of it coming from beyond the arc, to go along with 10 rebounds.

RR Garcia had 18 points and eight assists while RR Pogoy and Mr. Castro came off the bench to chip in 15 and 12 points, respectively.

Meralco, meanwhile, was paced by Baser Amer with 20 points with Jared Dillinger finishing with 14 points.

“I just felt the rhythm early on so I just kept on shooting,” said Mr. Rosario of his steady shooting from three-point land during the game, going 6-of-10, which started it all for TNT.

“It’s something I practice a lot and give time to develop so I’m happy I hit the mark today,” he added.

TNT returns to court on Saturday, Jan. 27, against the Magnolia Hotshots (4-1) while Meralco makes another go at snapping its skid against the Kia Picanto (1-4) on Wednesday.

Ruthless Wozniacki joins Suarez Navarro in quarters

MELBOURNE — Ruthless Caroline Wozniacki kicked into full gear Sunday to storm into the Australian Open quarterfinals where she will pit her wits against experienced Spaniard Carla Suarez Navarro.

On an overcast and muggy day at Melbourne Park, the world number two turned on the style to take another step towards a maiden Grand Slam title.

The assured Dane, a semifinalist in 2011 who has never quite lived up to the hype in the majors, annihilated 19th-seeded Magdalena Rybarikova 6-3, 6-0 on Rod Laver Arena in her most impressive performance to date.

“She really mixes up the pace, I just tried to calm down, get my returns in and wait for the opportunities to attack,” she said after crushing the Slovak, who made the semifinals at Wimbledon last year.

“I think you can tell my confidence is pretty good at the moment.”

Her easy passage sets up a last eight clash with the gritty Suarez Navarro, who battled back from a set and 4-1 down to shatter the hopes of 32nd seed Anett Kontaveit.

The Estonian had been bubbling with confidence after despatching French Open champion Jelena Osteopenia in the third round, but nerves got the better of her.

The Spaniard, who has made the quarterfinals in Melbourne twice before, most recently in 2016, credited her fightback with a conscious decision to be more aggressive.

“I was thinking that I was playing good, but not too aggressive. I want to play like this, but sometimes you cannot,” said Suarez Navarro, one of the few who still use a one-handed backhand.

“My team all the time they say me, play aggressive, play aggressive. That’s I think what I did.”

Looking ahead to Wozniacki, she added: “I know how she plays. I know how tough she is. It will be a really interesting match.”

FORM PLAYER
Spanish world number one Rafael Nada has been in imperious form, showing no mercy in dismantling his first three opponents as he sets his sights on a 17th Grand Slam title.

The top seed is up later on center court against 24th seed Diego Schwartz man, ahead of an anticipated night match between Nick Kyrios and Gregor Dimitrov.

Nadal is gunning to make the last eight for the 10th time and knows he needs to be at his best to get past the dangerous Argentine.

“He’s won three matches here, playing at very high level. He’s a very complete player,” said Nadal, who is chasing his second Melbourne title after beating Roger Federer in the 2009 final.

“He’s a player that if I don’t play my best, probably I am not going to win. Tough one.”

If he does progress, sixth seed Marin Cilic will be waiting for him.

Croatia’s Marin Cilic won his 100th Grand Slam match as he mastered Spain’s Pablo Carreno Busta in four sets to reach the quarterfinals of the Australian Open on Sunday.

The former US Open champion won the big points in putting away the 10th seed 6-7 (2/7), 6-3, 7-6 (7/0), 7-6 (7/3) in 3 hours 27 minutes on Margaret Court Arena.

Ordinarily Nadal, as the top seed, would have top billing on Rod Laver in the evening, but not with local star Kyrgios in action.

The maturing Australian 22-year-old dispatched French veteran Jo-Wilfried Tsonga in the last round and now faces third seed Dimitrov, who has struggled so far.

Kyrgios has an edge — he beat the Bulgarian on his way to winning the Brisbane International earlier this month.

The winner will play either Briton Kyle Edmund or Italian veteran Andreas Seppi.

Fourth seed Elina Svitolina — one of the form players after winning in Brisbane — is also in action as she looks to make the quarterfinals for the first time.

She will fancy her chances against Czech qualifier Denisa Allertova and a date with either 81st-ranked Croat Petra Martic or Belgium’s Elise Mertens. — AFP

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