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Palawan-Sabah sea route eyed by March

A ROLL-ON, roll-off (Ro-Ro) ship is planned for launching by March between Palawan and Sabah as part of initiatives to boost trade within the Brunei Darussalam-Indonesia-Malaysia-Philippines East ASEAN Growth Area (BIMP-EAGA). Romeo M. Montenegro, deputy executive director of the Mindanao Development Authority, the Philippine Coordinating Office for the BIMP-EAGA, said the new shipping service will cover the ports in Buliluyan, Bataraza in Palawan, and Kudat in the northern part of Sabah. “It can very well promote economic activity across Palawan and Malaysia,” Mr. Montenegro said in an interview. A vessel owned by Philippine-based Archipelago Shipping, with a capacity of 275 passengers and 35 vehicles, will initially be used, he added. Palawan and Mindanao are the Philippine focus areas for the BIMP-EAGA.

DAVAO-GENSAN-BITUNG ROUTE
Meanwhile, Mr. Montenegro said they have created an interagency task force for the Davao-General Santos-Bitung route to support and facilitate the shipping service that has been bogged down by lack of cargo load. “You have to look in that context (where) some airlines in some parts of the world, when they start smaller routes, smaller operations, you don’t expect that to be 100% load factor in its initial run, but eventually, later on, it will pick up,” he said. “That’s the nature of this specific investment. It will eventually pick up so long as there is a consistent support from the government and the integration of all other members of the business community and sector that are part of that particular project,” he added. The Davao-GenSan-Bitung route was launched in April last year by President Rodrigo R. Duterte and Indonesian President Joko Widodo. — Maya M. Padillo

Quezon-Bicol Expressway study starts

THE FEASIBILITY study (FS) for the Quezon-Bicol Expressway (QBEx), to be undertaken by the Department of Public Works and Highways (DPWH), is planned for completion this year, with project implementation set to start by 2022. “By fourth quarter this year, we plan to begin the Tender Process of QBEx, then by fourth quarter of 2019 the Detailed Engineering Design, followed by Right-of-way Acquisition starting fourth quarter of 2020 so we will be able to proceed with the construction by first quarter of 2022,” DPWH Public-Private Partnership (PPP) Director Alex G. Bote said in a statement. The QBEx, which will be implemented under the PPP scheme, will span about 180 kilometers from Pagbilao, Quezon to the existing Maharlika Highway in San Fernando, Camarines Sur. The indicative project cost will be determined upon completion of the FS. “For the longest time, Daang Maharlika Highway also known as Pan-Philippine Highway is the only route of motorists heading and coming from Bicol Region to Manila. With QBEx, traveling will not only be faster but also safer since motorists can avoid traversing through mountainside and other fragmentary roads of Maharlika Highway,” Mr. Bote said.

LTFRB-6 okays P10 jeepney fare in Iloilo but subject to national approval

THE LAND Transportation Franchising and Regulatory Board (LTFRB-6) approved on Monday, Feb 5, a P10 minimum fare for public utility jeepneys (PUJ) in Iloilo, up from the current P6.50. The decision, however, is subject to the final approval of the LTFRB central office. Transport groups in Iloilo City and Iloilo province sought the fare hike amid the looming higher fuel prices due to the tax reform law. LTFRB-6 Director Richard Z. Osmeña said they approved the petition based on the recommendations of the National Economic and Development Authority and the Department of Trade and Industry. The fare hike petition was filed by the Iloilo City Loop Alliance of Jeepney Owners and Drivers Association (ICLAJODA), Iloilo City Alliance of Drivers’ Associations (ICADA), and Confederation of Iloilo Provincial Jeepney Owners and Drivers Association (CIPJODA). Mr. Osmeña noted that officials of the LTFRB national headquarters have recently announced that there will be no fare increase until March. “The approval may still come after March,” he said. — Louine Hope U. Conserva

Nation at a Glance — (02/07/18)

News stories from across the nation. Visit www.bworldonline.com (section: The Nation) to read more national and regional news from the Philippines.

Duterte won’t extend selection deadline for telco ‘third player’

PRESIDENT Rodrigo R. Duterte has rejected a request by the Department of Communications and Information Technology (DICT) for more time beyond March to select a “third player” for the telecommunications industry, Palace Spokesperson Herminio L. Roque, Jr. said.

“There was a request from DICT Officer-in-Charge Secretary [Eliseo M.] Rio, Jr. that they be given two additional months or until May to award and to ensure that the third telecoms carrier is up and about. This was not approved at yesterday’s Cabinet meeting,” Mr. Roque told reporters at a briefing on Tuesday, Feb. 6.

He added, “So we stick it out with the original time frame of a third telecoms player by March of this year.”

Sought for comment, Mr. Rio told BusinessWorld in a text message that “[a]s much as possible, the President wants the end of March schedule followed. But due to the Chinese New Year and the Holy Week falling in the first quarter of 2018, maybe the middle part of April will be more reasonable.”

According to Mr. Roque, the President was “emphatic and issued a warning to the detractors of the entry of the third telecoms player not to test the will of the government.”

The spokesman also said the President was particularly displeased with the new entrant having to find new frequency in order to operate.

“He was displeased with the fact that the frequency given to a shell company CURE (Connectivity Unlimited Resources Enterprises) which apparently was given for free would have to be bought back by government in order that the third player could be given these frequencies.”

“The President rejected that proposal, that we pay for frequencies that we gave out for free and he warned everyone involved not to test the resolve of the President in allowing a third telecoms carrier to enter the country.”

CURE, a unit of PLDT, Inc., surrendered third-generation (3G) frequency to the government to the National Telecommunications Commission (NTC) as a condition of its acquisition of Sun Cellular.

The NTC was due to auction the 3G frequency but failed to do so.

Mr. Roque explained that frequency is owned by the state. “They were given for free, and [the President] will not allow the holders to benefit from a free privilege by charging us anything to enable the third telecoms carrier to operate.”

A third player will need 300 mHz. “Three hundred will be given to the third telecoms carrier which would have been enough and that this would be sourced from various sources, including frequency from a shell company that has since been bought by a very big telecoms company now,” Mr. Roque said.

He pointed out as well that the National Transmission Corp. (TransCo), which has its own fiber optic network and right-of-way assets, could become a platform for the third player.

“There was also talk about using TransCo and the President said, we will use TransCo because that is ours — the facilities of TransCo.”

Hastings Holdings, Inc., a unit of PLDT Beneficial Trust Fund subsidiary MediaQuest Holdings, Inc., has a stake in BusinessWorld through the Philippine Star Group, which it controls. — Arjay L. Balinbin 

House panel expects corporate tax cut bill within two weeks

A HOUSE BILL providing for a corporate income tax cut and the rationalizing of incentives is expected to be filed later this month, its chair said.

“Give me two weeks… before two weeks definitely,” Ways and Means Committee Chairman Dakila Carlo E. Cua told reporters on Monday.

However Mr. Cua said that he has no details on the bill, as he is awaiting more data from the Finance department.

The Department of Finance (DoF) submitted the second tax reform package to Congress on Jan. 16, and hopes to have the bill approved by mid-year ahead of its implementation in 2019.

The measure seeks to gradually cut corporate income tax rates to 25% from 30% currently to match those of the Philippines’ Southeast Asian competitors, while withdrawing fiscal incentives from firms that do not need them.

Package 2 is not the only reform measure to be discussed this year under the DoF’s comprehensive tax reform program.

The committee is currently discussing Package 1B — the follow-up package for Republic Act No. 10963 or the Tax Reform for Acceleration and Inclusion Act (TRAIN) — which includes the general and estate tax amnesty, a relaxation of the bank secrecy law, and a hike in the motor vehicle user charge.

Mr. Cua said that the committee does not need to approve Package 1B first before filing the succeeding reform proposal.

“Obviously package 1B comes before Package 2. But we don’t need to do that, we can do simultaneous consultations,” he said.

The constitution requires that all tax laws originate from the House of Representatives, although the Senate can hold parallel public hearings without formally approving such measures until after the House does so.

The DoF also plans to submit this month another follow-up to the second tax reform package called Package 2+, which raises tobacco, alcohol, and mining taxes further while removing value-added tax exemptions for coal and casinos.

The department also said that it wants to submit to Congress its proposal for the third and fourth reform packages that involve rationalizing property and passive income taxes, respectively.

Mr. Cua said that it will be “very challenging” to take on the measures altogether under his committee.

“It’s very challenging. We have to take up many things at the same time,” he said, but responded in the affirmative when asked if the DoF’s timetable is doable. — Elijah Joseph C. Tubayan

Dominguez says digital push will wait on infrastructure dev’t

MODERNIZING infrastructure is a necessary first step to digitizing the economy, the Finance department said.

Speaking during Alibaba Business School’s New Economy Workshop in Hangzhou, China last week, Finance Secretary Carlos G. Dominguez III said the Philippines has a lot of catching up to do before going into the digital space.

“The Philippines has to catch up first like China. You invested a lot in infrastructure. After the catch-up, we go beyond certain steps… but first we have to raise money and convince people, encourage new industries,” Mr. Dominguez was quoted as saying in a statement issued by the Department of Finance (DoF).

Brian Wong, the Alibaba Group’s vice-president and head of the company’s Globalization Initiatives, said the Philippines can start by cultivating entrepreneurship in e-commerce and coming out with regulations supportive of digital trade and electronic payment systems. 

Mr. Wong said that electronic transactions were nonexistent in 1999 when China was still testing the waters of digital commerce.

In 2016, Chinese electronic transactions were worth $790 billion, Mr. Wong noted.

“That is the type of change that can happen in the country. In the Philippines with a hundred-plus million population, it has a massive market that can be developed. Like the secretary said, you can catch up and leapfrog,” Mr. Wong said during the workshop.

Lecturers from Chinese universities and e-commerce firms discussed innovations that paved the way for digitalization, such as favorable state policies, the role of digital finance in eliminating poverty, a smart logistics network that can keep up with growing demand generated by e-commerce, and cashless payment systems.

Dr. Long Chen, chief strategy officer of Alibaba Group’s Ant Financial, also discussed the firm’s Green Digital Finance Alliance, which was set up in partnership with the United Nations (UN) Environment Program that seeks to reduce the world’s carbon footprint through the use of digital technology. 

Participants in the initiative are encouraged to encourage low-carbon behaviors in their daily life, such as walking instead of driving to work, from which users earn “green energy credits” on their mobile phones. The UN will then plant a tree if users amass a certain level of credits. 

“As of the end of 2017, more than 280 million users have joined Ant Forest initiative and planted 13.14 million trees in Gansu Province, Inner Mongolia Autonomous Region and other areas in China, reducing carbon emission by 2.05 million tons,” Mr. Chen said.  

Alibaba’s workshop was the first overseas government training program organized by the Alibaba Business School. The program will be expanded to more countries in Southeast Asia to promote the digital economy, and its role for a more inclusive trade and development system.

“Our experience here in China is very important to look at what the future would be. It is helpful for us to be consulting with (Alibaba founder) Jack Ma and his group because they are visionary and they have actual field experience in bringing the future to reality using the power of cloud computing, the Internet, and computers to analyze big data,” Mr. Dominguez said.

Aside from Mr. Dominguez, those that participated in the workshop include Foreign Affairs Secretary Alan Peter S. Cayetano, Budget Secretary Benjamin E. Diokno, Bangko Sentral ng Pilipinas Deputy Governor Maria Almasara Cyd N. Tuaño-Amador, and Bases Conversion and Development Authority President Vivencio B. Dizon. — Elijah Joseph C. Tubayan

Biodiesel industry bats for more coconut in diesel

HIGH DIESEL prices might provide an opportunity to add more coconut-based biodiesel into the blended-diesel fuel mix, the head of the biodiesel lobby said.

Dean A. Lao, Jr., president of The Philippine Biodiesel Association, said rising diesel prices coupled with a decline in coconut prices make this a good time to use ore coconut-based biodiesel, known as coconut methyl ester (CME).

“You can see that petroleum prices are on the way up while coconut prices are on the way down. The two will meet,” Mr. Lao said in an interview on the sidelines of a Senate hearing.

He said the latest Philippine Energy Plan (PEP) drafted by the Department of Energy (DoE) calls for the increase in the percentage of biodiesel in blended diesel to 5% from 2% by 2020, giving ample time for the industry to gradually adjust.

“If the coconut oil supply continues to increase — and that’s caused by favorable weather, fertilization and better production — the price will continue to fall, so the timing is getting better,” said Mr. Lao, who is also managing director of biodiesel processor Chemrez Technologies, Inc.

Aside from the rising prices of fuel on the international market, local diesel pump prices were further pulled up by the excise tax on fuel because of Republic Act 10963 or Tax Reform for Acceleration and Inclusion (TRAIN).

Mr. Lao said that using a reference price of P35 per liter for diesel and P90 for biodiesel, which he said has recently dropped to P80, every percentage increase in the contribution of biodiesel to the blended fuel would add about P0.40-P0.45 per liter to pump prices.

A yearly increase of P0.40-P45 per liter until 2020 might be the “smoothest way” implementing the PEP requirement, he said.

“It can also be 5% in a sudden jump and they can be ahead of the Philippine Energy Plan,” he added.

He said official figures from the Philippine Coconut Authority (PCA) show the country’s production of coconut oil at a little over 1 million tons, which means a shift to 5% would translate to 490,000 or 45% to 49% of supply can be covered by existing production.

“(If there is a further increase in) production then it would be even easier,” he said.

However, Teddy M. Reyes, executive director of Philippine Institute of Petroleum, said an increase to 5% should be carefully studied, suggesting a review of whether Republic Act No. 9367 of the Biofuels Act of 2006 has achieved its goal.

He said his calculation of the increase in diesel pump prices if the biodiesel component is raised to 5% is about the same as Mr. Lao’s — at P0.30 to P0.40 per percentage point increase. But he disagrees on the availability of coconut oil supply.

“There are two schools of thought. One sector says, there’s not enough. Even DoE said that. The reason why they cannot go 5% at once is because there is not enough feedstock, meaning to say, the raw material,” he said in an interview.

“The other side, PCA says there is enough supply because the production of coconut significantly increased,” he added.

During the hearing on biofuels on Tuesday, Sen. Sherwin T. Gatchalian urged the National Biofuels Board, an advisory body to the DoE, to take into consideration whether an increase to 5% is warranted.

Marissa P. Cerezo, director of the DoE’s renewable energy management bureau, said the increase will be on the board’s agenda when it meets this quarter. The DoE chairs the board. — Victor V. Saulon

US tax reform seen cutting MNCs’ appetite for FDI

THE US TAX reform program could reduce the supply of funds available for foreign direct investment (FDI) as companies confine their investment activity to the US and repatriate as much as $2 trillion in profits held overseas, according to the United Nations Conference on Trade and Development (UNCTAD).

UNCTAD said in a report released on Tuesday that the reforms affect US multinationals that account for up to 50% of global FDI.

UNCTAD said in Issue 29 of its Investment Trends Monitor that tax reform could cause US multinationals to reduce retained earnings held in overseas units and may ultimately lead to a “re-shoring of manufacturing activity” previously outsourced to low-wage countries.

American Chamber of Commerce of the Philippines executive director Ebb Hinchcliff told BusinessWorld in a text message that it may be too early to tell what the impact of the reform may be on FDI.

“My guess is the tax bill is too recent to have an impact,” he added.

When asked to discuss the ultimate impact of US tax reform, Mr. Hinchcliff said he is unsure if the effects will be noticeable.

The US under President Donald J. Trump has adopted an “America First” stance, and adopted the tax reform program in December with a view to incentivizing companies through the tax code to fund more economic activity within the United States, boosting domestic jobs.

UNCTAD said the reforms are particularly directed at stimulating activity in companies with high capital investment requirements, by making capital expenditures (capex) on equipment fully deductible.

“A few large firms, including AT&T, Boeing and Apple, announced significant new investments in the United States shortly after the adoption of the bill,” UNCTAD said.

“If such funds do flow out [from the Philippines] they should begin to be reported in BSP (Bangko Sentral ng Pilipinas) monthly data several months from now,” American Chamber of Commerce senior adviser John D. Forbes told BusinessWorld in a text message.

The Philippines received $7.98 billion worth of FDI in 2016, up from $5.64 billion in 2015.

Trade Secretary Ramon M. Lopez did not comment on the possibility of reduced FDI, though he remained confident that the Philippines will remain an attractive destination overall.

“We are bullish on Japan’s FDI this year. [This is] following through on the investment cooperation agreement signed,” he said in a text message. — Anna Gabriela A. Mogato

Coca-Cola PH lays off workers amid restructuring

Coca-Cola FEMSA Philippines Inc. relieved an undisclosed number of workers amid an “organizational restructuring”.

In a statement on Tuesday, the soft drinks manufacturer said this was due to “changes in the beverage industry and business landscape”, referring to the increased excise tax on sugar-sweetened beverages.

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 high fructose corn syrup (HFCS).

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

“Rest assured that we will treat the people who will be affected with dignity, fairness, and respect throughout this process,” it read. “Everyone will be given career transition support, as well as separation packages that go beyond what is mandated by law.”

Coca-Cola said that the organizational structure assessment, which led to the layoffs, entailed the review of roles and responsibilities of company employees.

“It was carried out only after an exhaustive and conscientious assessment of the evolving regulatory environment, our operational efficiency, and consequent performance in the market.” — Anna Gabriela A. Mogato

Peso rebounds amid BSP rate hike bets

THE PESO strengthened slightly against the dollar on Tuesday as the faster inflation print last month increased the probability of a rate hike by the Bangko Sentral ng Pilipinas (BSP).

The local currency ended yesterday’s session at P51.46 against the greenback, five centavos stronger than Monday’s P51.51-per-dollar finish.

The peso opened weaker at P51.65 against the dollar, which was also its worst showing yesterday. Its close was also its intraday high.

Dollars traded slid to $920.3 million from the $981.1 million that switched hands in the previous session.

“The peso recovered slightly [yesterday] amid mixed signals domestically and abroad,” Guian Angelo S. Dumalagan, market economist of Land Bank of the Philippines (Landbank), told BusinessWorld in an e-mail, adding that the peso initially strengthened in the morning session on the back of faster inflation print. 

Data from the Philippine Statistics Authority showed inflation in January quickened to 4%, faster than the 3.3% reading in December and the 2.7% print in the comparable year-ago period.

The January figure was also the fastest reading in more than three years or since October 2014’s 4.3%.

BSP Governor Nestor A. Espenilla, Jr. said the faster January inflation was driven by the recently passed tax reform law as well as higher food and oil prices.

Meanwhile, Mr. Dumalagan added that the faster inflation print in January “[increased] the possibility of some hawkish moves from the BSP on Thursday during its monetary policy meeting.”

“The likelihood of a tightening move at Thursday’s meeting has increased significantly,” Jose Mario I. Cuyegkeng, senior economist at ING Bank-Manila branch, also said.

However, Ruben Carlo O. Asuncion, chief economist of UnionBank of the Philippines, said: “I do not think that BSP will tweak monetary policy until first half of 2018.”

Landbank’s Mr. Dumalagan noted that the peso’s gain was, however, “partly erased by…better-than-expected US non-manufacturing data and last Friday’s upbeat US labor reports.”

In a report from Reuters, the US non-manufacturing activity index jumped 3.9 points to 59.9, the highest reading since August 2005. A print above 50 indicates expansion in the services sector, which comprise more than two-thirds of the US economy.

In addition, US created 200,000 jobs last month, higher than the market consensus of 180,000 jobs and the 148,000 jobs booked in December.

“These strong US reports increase the chances of another US rate hike next month,” Mr. Dumalagan added.

For today, UnionBank’s Mr. Asuncion sees the peso moving between P51.20 and P51.50, while Landbank’s Mr. Dumalagan said the local currency “will continue to move sideways.”

“Bets of a hawkish BSP policy meeting are expected to support the peso, but expectations of some hawkish signals from Fed Bullard and Fed Dudley may prevent any massive peso appreciation,” Mr. Dumalagan said. — Karl Angelo N. Vidal

Pence signals openness to talks with North Korea at Olympics

ANCHORAGE, ALASKA — US Vice-President Mike Pence declined to rule out talks with North Korean officials while attending Winter Olympics events in South Korea, even as he urged the isolated regime to abandon its nuclear program.

“I haven’t requested any meeting, but we’ll see what happens,” Mr. Pence told reporters at Elmendorf Air Force Base, Alaska, before departing for Tokyo. “My message — whatever the setting, whoever’s present — will be the same. And that is that North Korea must once and for all abandon its nuclear weapons program and ballistic missile ambitions.”

Mr. Pence said the purpose of his trip to Japan and South Korea was to make sure North Korea didn’t use the event to paper over truth about its regime, adding that the US would “be telling the truth about North Korea at every stop.”

He will be ready with some counter-programming when the two Koreas enter the Olympic opening festivities together under one flag. Beside the vice president in the stands will be the father of Otto Warmbier, the American student who died last year after being jailed in North Korea — a stark reminder of the cruelty undergirding Kim Jong-Un’s regime, an administration official said.

POLITICAL OLYMPICS
The televised stare-down Friday will add to the drama at the opening ceremony for the Winter Olympics in South Korea, as President Moon Jae-in tries to manage tensions between Washington and Pyongyang. During Mr. Pence’s week-long trip to Asia, Mr. Pence will also encounter friction between Tokyo and Seoul on North Korea and historical issues, as he seeks to counter the isolated regime’s provocations and propaganda.

While South Korea has eagerly engaged in talks with Mr. Kim’s regime, the White House has remained skeptical. The ongoing talks — and the decision by both countries to march together under a single flag during the opening ceremony — could be used by Mr. Kim to spread propaganda, officials have said.

North Korea’s athletes came to South Korea on Feb. 1, with the rest of the delegation arriving later this week. Pyongyang will also send a cheering squad, reporters and an art troupe.

“They do want to send out strong messages to counter North Korea’s propaganda arm,” said Patrick Cronin, director of the Center for a New American Security’s Asia-Pacific security program. “North Korea is made for propaganda — it’s a propaganda state in many ways. Look at the delegation that they’re sending — it’s not filled with athletes. It’s filled with celebrities and orchestras.”

EAST ASIAN TENSIONS
The North Koreans have sought to portray themselves as a rational nuclear power pursuing diplomacy while the US stokes the flames of war. Foreign Minister Ri Yong Ho sent a letter to the United Nations last week asking the body to recognize “improved inter-Korean relations,” North Korea’s state-run news agency reported.

The letter accused the US of seeking to make a preemptive military strike against North Korea, even as the country pursues diplomacy with South Korea and prepares to compete alongside its southern neighbor in the Olympic games.

Mr. Pence will also have to balance the delicate relationship between Mr. Moon and Japanese Prime Minister Shinzo Abe, who approach the North Korea threat differently. While South Korea has dubbed the Olympics the “peace games,” Japanese officials have said they are skeptical of Kim’s motives.

“In general we welcome such atmosphere of the dialogue but at the same time our position is that we should be more realistic,” Takehiro Shimada, minister for Communications and Cultural Affairs of the Japanese Embassy in the US, said in an interview. “Because towards North Korea we have a long history of negotiations and we have experienced lots of betrayal from the North Korean side.” — Bloomberg

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