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Factory growth slows ‘noticeably’

By Elijah Joseph C. Tubayan
Reporter

BUSINESS for factories in the country improved further in January, but such growth slowed “noticeably” as new orders and output increased at “the weakest pace in four months,” according to the latest monthly survey IHS Markit conducted for Nikkei, Inc.

The seasonally adjusted Nikkei Philippines Manufacturing Purchasing Managers’ Index (PMI) fell to 51.7 last month from 54.2 in December and 52.7 in January 2017, “signalling only a modest improvement in the health of the sector,” in contrast with “solid expansion in recent months.”

“The latest reading was the third-lowest in the survey history” that began in January 2016 for the Philippines and the lowest since September 2017’s 50.8, the report read.

A PMI reading above 50 suggests improvement in business conditions compared to the previous month, while a score below that signals deterioration.

The manufacturing PMI is composed of five sub-indices, with new orders having the biggest weight of 30%, followed by output (25%), employment (20%), suppliers’ delivery times (15%) and stocks of purchases (10%).

“January data suggested that demand was partially hit by higher excise taxes which were effective from January 2018,” the report read.

“Growth in new business intakes slowed to the weakest since September, prompting a marked deceleration in output growth,” the report said, while noting that production volumes grew “at one of the slowest rates since the survey started in January 2016.”

Republic Act No. 10963, or the Tax Reform for Acceleration and Inclusion Act (TRAIN) imposes higher excise tax rates on fuel, automobiles, tobacco, coal and minerals, as well as a new levy on sugar-sweetened beverages and cosmetic surgery, among others. At the same time the law strips out some value-added tax exemptions, while reducing personal income, estate and donors tax rates.

IHS Markit Principal Economist Bernard Aw added that the uptick in manufacturing input prices “could pose as a downside risk to future growth.”

January also saw buying levels increase “the slowest since August last year.”

“Survey data showed input costs increasing sharply and at one of the fastest rates in the survey history, pushing Filipino manufacturers to raise selling prices at a record pace,” he said in the report’s commentary.

Aside from the higher excise taxes, Mr. Aw noted that “a weak exchange rate and higher global commodity prices — especially in oil, metal and plastics — all pushed inflation higher.”

Still, elevated business confidence remain seemed to set the stage for the months ahead.

“But other survey indicators suggest that firms are likely to look past the near-term slowdown towards stronger growth in the year ahead. The Future Output Index remained elevated, with a majority of panel respondents anticipating higher production over the next 12 months,” said Mr. Aw, who linked the optimism to higher sales projections, greater operating capacity, new product models, planned business expansion and a robust economic outlook.

Sought for comment, Michael L. Ricafort, head of Rizal Commercial Banking Corp.’s Economics & Industry Research Division, said he expects manufacturing to pick up as reduced personal income tax rates under TRAIN should shore up consumption, while increased imports of capital goods in recent months signal a sustained increase in production.

“Lower individual tax rates will result in higher consumer incomes and higher consumer spending power that would benefit consumer-related industries in terms of higher sales/demand for consumer goods,” Mr. Ricafort said in an e-mail yesterday.

“The continued growth in both local and foreign investments, as well as some recovery in exports, would lead to some pick up in manufacturing activities, especially as additional manufacturing facilities are added, as manifested by increased importation activities in recent months (especially on capital goods, raw materials and other production inputs)…”

Ruben Carlo O. Asuncion, chief economist of the Union Bank of the Philippines, said that aside from the TRAIN, the second tax reform package — submitted by the Finance department to the House of Representatives last Jan. 16 — that will corporate income tax rates to 25% from 30% currently should also boost manufacturing.

“I say it is a foundation because a major pillar of manufacturing growth would be the planned tax rate cut on corporate income taxes expected from Package 2 of the Comprehensive Tax Reform Program of the government,” Mr. Asuncion said in an e-mail.

“Downside risks would be more from external sources. One is if the momentum in the global economy expected this 2018 will soften and demand for our exports decline. Another is connected to the first one: global growth can somehow impact remittances if its pace will not remain strong as market consensus expects. This indirectly impacts much of current domestic demand through growing cash remittances.”

BSP sees even faster Jan. price pickup

By Melissa Luz T. Lopez
Senior Reporter

INFLATION likely accelerated in January to hit the high end of the government’s full-year 2018 target range, driven by rising food and crude prices as well as higher taxes on select goods under the tax reform law, the Bangko Sentral ng Pilipinas (BSP) said.

The central bank expects inflation to have clocked 3.5-4% last month, which would be the fastest rate seen in three months. The estimate also signaled that inflation will likely pick up from December’s actual 3.3% that compared to the BSP’s 2.9-3.6% range for that month.

“The increase in the prices of domestic petroleum products on account of higher global crude oil prices along with higher food prices due to weather-related disturbances could contribute to the rise in inflation for January 2018,” the BSP’s Department of Economic Research said in a statement sent late last Wednesday.

“In addition, higher excise taxes on fuel, sugar-sweetened beverages with the implementation of the TRAIN this month, would lead to additional upward price pressures,” it added, referring to Republic Act No. 10963 or the Tax Reform for Acceleration and Inclusion Act.

“The increase in prices could be partly offset by lower electricity rates in Meralco (Manila Electric Co.)-serviced areas for the month.”

The Department of Finance on Jan. 30 gave a 3.3% estimate that was steady from December.

The Philippine Statistics Authority is scheduled to report official inflation data on Tuesday.

The central bank expects full-year inflation to average 3.4% this year, faster than the 3.2% recorded in 2017 but still within the 2-4% target range.

Retail pump prices saw upward adjustments for four straight weeks last month as world crude prices soared to nearly three-year highs. As of Jan. 23, year-to-date fuel prices went up by P1.35 per liter for gasoline, P2.30 for diesel and P2.15 for kerosene, according to the oil monitor of the Department of Energy.

RA 10963, which took effect this month, imposed an additional P2.50 excise tax per liter of diesel at P3/liter for kerosene. The actual fuel price hike kicked in around mid-January as the new rates did not apply to old stocks, since duties are collected upon importation and not at the point of sale.

Food prices also inched higher year-on-year in the wake of tropical depression Agaton as the year opened. The storm damaged P527.245 million worth of agriculture — particularly rice and corn crops — in parts of southern Luzon and Western Visayas, according to the National Disaster Risk Reduction and Management Council.

Rice is the staple food among Filipinos, accounting for 8.92% of the theoretical basket of items consumed by a typical household that is used to compute the annual inflation rate each month.

The TRAIN law also introduced additional taxes on cars and sugar-sweetened drinks, which likely drove up prices of other widely used goods and services.

BSP Deputy Governor Diwa C. Guinigundo has said that the tax reform law will add less than one percentage point to inflation.

Meanwhile, lower electricity rates charged by Meralco could partially offset these price upticks. The country’s biggest distribution utility said it reduced the overall rate by P0.5260 per kilowatt-hour due to a lower generation charge.

BSP Governor Nestor A. Espenilla, Jr. said the upward inflation trend remains within expectation.

“The first-round price effects of TRAIN and other factors such as oil prices are evolving more or less as expected. We continue to continue to see the upward inflationary effects as transitory,” the central bank chief said in a text message to reporters.

“However, we are carefully assessing next-round effects and how inflation expectations could be affected. These considerations will be at the center of the coming policy discussions.”

Mr. Espenilla previously said that monetary authorities are monitoring requests for wage increases as well as higher costs of other products and services, even if these are not directly caused by the higher or additional taxes.

He pointed out that the central bank “may need to react” if price pressures intensify.

“The ability to meet the inflation target comfortably and mitigating the upside risks are very important to the BSP,” he added.

The central bank will update its inflation forecast for the year during its policy meeting next Thursday, its first of eight reviews planned for 2018.

Competition body walks a tightrope as it intensifies enforcement this year

By Krista Angela M. Montealegre
National Correspondent

COMPETITION authorities will have to strike a balance between allowing investments to flourish and protecting the welfare of consumers as the Philippine Competition Commission (PCC) ramps up enforcement this year.

In a panel discussion at the 2018 Manila Forum on Competition in Developing Countries in Makati City, Ayala Corp. Chairman Jaime Augusto Zobel de Ayala cited the experience of advanced Asian economies whose governments have created an environment for businesses to build strength before putting competition restrictions in place.

The Ayala chief executive noted that the Philippines has a development cycle and a new regulatory framework that, if not handled correctly, can become “burdensome” and limit the long-term success of industry.

“The Philippines is going through a cycle where promoting investments and encouraging investment-led growth should be balanced in some way with consumer welfare and the need to create a competition policy,” Mr. Zobel said.

In its first two years of operation, the PCC has collided with the country’s biggest conglomerates as it implemented the national competition policy.

The most notable case involves a court battle with Ayala-led Globe Telecom, Inc. and PLDT, Inc. after the duopoly acquired the telecommunication assets of potential third player San Miguel Corp. for P70 billion, widely seen as a litmus test for the young agency as it carries out its mandate of curbing anti-competitive practices.

Yesterday, the SM Group, owned by the country’s richest man Henry Sy, Sr., shelved a plan to purchase Goldilocks Bakeshop, Inc., citing changes in the business environment.

It was not clear if the decision — the first deal to be rescinded after being approved by the PCC — was a result of the voluntary commitments SM made to the antitrust body to resolve potential anti-competitive issues stemming from the transaction.

In a briefing on the sidelines of the forum, PCC Chairperson Arsenio M. Balisacan welcomed the comments of Mr. Zobel, noting that it is crucial “to learn from each other, hear their concerns and engage with them.”

PCC Commissioner Stella Luz A. Quimbo acknowledged that awareness of Republic Act No. 10667, or the Philippine Competition Act, which was signed into law in July 2015, remains “very low” in the country.

“Business is not a target. The way we perceive it is we want to work with business to ensure compliance with the law,” PCC Commissioner Johannes R. Bernabe said.

Moving forward, the PCC hopes to step up enforcement after the transitory period that allowed businesses to restructure their contracts to comply with the law ended last year.

“We expect to be very busy in the third year of the PCC and the years ahead with enforcement. Hopefully, we can finish this year some of the guidelines to tighten the enforcement mechanism of PCC,” Mr. Balisacan said.

There is no ideal model for a competition body that fits all situations, Frederic Jenny, chairman of the Organization for Economic Cooperation and Development’s Competition Committee, said, explaining that authorities have to consider issues relevant to domestic circumstances and trade-offs they have to make.

In Europe, competition authorities have enhanced effectiveness by reducing the scope of judicial review and focusing discussions more on remedies and less on the characteristics of the violation, Mr. Jenny said.

“At this stage, I would not waste resources on an active search for the optimal model; rather, for a provisional model shaped in time by a willingness to adapt,” said Raul V. Fabella, academician at the National Academy of Science and Technology.

Yasuyuki Sawada, Asian Development Bank’s chief economist, said rapid growth has elevated Asian economies from low- to middle-income status, and productivity-centered growth is needed for them to reach high-income level, hence, avoiding the middle-income trap.

When small is beautiful

By Zsarlene B. Chua
Reporter

Since it was created in 1975, the Metro Manila Film Festival (MMFF) has been the country’s premiere film festival, drawing crowds numbering in the millions during the holiday season. For filmmakers, the MMFF is the best venue to get their films seen by the widest possible audience — this was the reason the producers behind the indie film Ang Larawan fought so long and hard to be one of the eight official entries in the most recent festival. The latest MMFF iteration raked in more than P1 billion over its two-week run, and while the top earners were, as usual, family-friendly studio films, even the four films that made the least, which include the aforementioned Ang Larawan, were reported by the MMFF to have earned more than P30 million over the festival’s run.

But beyond the MMFF and the multitude of “indie” festivals which fill cineastes’ calendars throughout the year, where does one get to see non-mainstream films in a world filled with multiplexes?

Well, there are microcinemas which provide alternative and more intimate venues for independently produced films to be screened.

From the Cinema ’76 Film Society in San Juan City to the smaller Black Maria Cinema in Mandaluyong City and a handful of others, microcinemas are meant to help and promote films that may appeal to smaller audiences than a Viva or Star Cinema blockbuster, but are certainly not lacking when it comes to quality.

Films such as Ang Larawan, Julius Alfonso’s Deadma Walking, Raya Martin’s Smaller and Smaller Circles, all of which had limited runs in the multiplexes, have found their homes — and audiences — in these cinemas.

“Independently produced films are those that need our help. The top grossers don’t need us,” Mark Shandii Bacolod, programming director of Black Maria Cinema, told BusinessWorld in an interview on Jan. 19.

He explained that at their core, microcinemas are there to help independent producers get their films screened because mall cinemas don’t give much space or time to them.

“You do a quality film or restore a classic film, you put it out in the mall and after one day or two days it gets pulled out because no one’s watching. You need microcinemas to showcase these films because these films reflect our culture,” he explained.

This sentiment is echoed by Vincent R. Nebrida, president of TBA Studios, the company behind Cinema ’76. (TBA [Tuko Film Productions, Buchi Boy Entertainment, and Artikulo Uno Productions] Studios is an independent film production company behind films like Smaller and Smaller Circles, Heneral Luna, and Birdshot).

“There’s at least about seven or eight local film festivals which fund the production of films — which is great for everybody. But at the same time, I was thinking, we have all these movies and then after they play six to eight times during the festival, that’s it. Where do they go?” he told BusinessWorld in an interview on Jan. 24.

He mused that there are around 80 to 100 films produced every year but after the festivals are done, they have nowhere to go.

“Therein lies the problem of distribution because there are few distributors and they are very selective because they want the potential moneymakers — and obviously other independent films are not given the chance to play to an audience,” he explained.

The need for venues of these films is what led to the creation of these microcinemas: Cinema ’76, which opened in Febuary 2016, is a former conference room which was converted into a cinema which seats up to 60 people, while Black Maria’s formerly private screening room, which has been existence since the 1970s, was opened to the public in November last year and can seat up to 30 people.

Other microcinemas around Metro Manila are Cinema Centenario and UP’s Cine Adarna, both in Quezon City, and the Film Development Council of the Philippines’ (FDCP) Cinematheque Centre in Manila.

THE MARKET OF MICROCINEMAS
Both Cinema ’76’s Nebrida and Black Maria’s Bacolod said that they initially thought that their market would be more mature viewers (Cinema ’76 figured theirs would be people aged 40 and above) but what they discovered is their seats are typically filled by people between the ages of 18 and 30.

“I really think that’s why microcinemas are happening, because there is a demand for these movies,” said Mr. Nebrida, noting that some of their customers come from as far as Baguio and Mindoro who marathon watch films.

He explained that due to the lack of cinemas in their provinces (and the lack of variety in what is shown), they opt to come to Metro Manila and seek out these venues — which is a bit surprising, he said, as their cinema is not the easiest place to go to and neither is Black Maria as both are not readily accessible by public transportation.

But audiences do come and they stay the entire day, Mr. Nebrida said as Cinema ’76 typically offers three to four films on rotation every day for the entire week. People can come in, pay P150 for each film, and watch the entire day.

This kind of programming will also be introduced by Black Maria once it finishes its renovations this month.

“I’m treating the programming as if I’m curating art and paintings in a museum… We want to do it as if it’s a festival but with a fewer number of films,” Mr. Bacolod said.

Black Maria will also be screening up to 40 restored films from the archives of ABS-CBN, as well as show foreign-language films in cooperation with foreign embassies. But the main focus will still be presenting “new independent films,” he said. “But those that need immediate help are those who created films three to five years ago who haven’t broken even.”

He said they plan on screening the restored versions of Sa Aking Mga Kamay (1996), Basta’t Kasama Kita (1995), Milan (2004), and Sana Maulit Muli (1995) in February.

Mr. Nebrida acknowledged that it took a bit of time for Cinema ’76 to become as popular as it is now, and laughingly said that the hugot (romantic-drama or romantic-comedy) films are the ones he credits for their popularity. While Cinema ’76 opened in Febuary 2016, it was only in June when they started showing Sleepless (2015) — Prime Cruz’ film about two lonely people who can’t sleep — and Nestor Abrogena, Jr.’s Kwento Nating Dalawa (2015) — about a young filmmaker and an aspiring writer trying to make their relationship work — that the cinema “gained steam,” and they realized their market was much younger than they initially thought.

For Black Maria, Dorota Kobiela and Hugh Welchman’s animated film about Vincent van Gogh, Loving Vincent (2017), which was screened from Nov. 2-8, has been their most successful film so far, attracting full houses throughout the run.

OUTSIDE METRO MANILA
While Metro Manila and its microcinemas predict a future where independently produced quality films will have a fighting chance against the commercial behemoths, outside the capital, a similar movement is being spearheaded by the FDCP as the council continues to roll-out cinematheques in various provinces.

“The objective of microcinemas is to provide venues and platforms for independently produced films. Our difference from other cinemas is since we’re in the government, we’re not that focused on turning profits,” Dustin Donovan A. Guillermo, programming lead officer of the FDCP, told BusinessWorld in an interview.

“It’s really about to empower and educate the Filipino moviegoer. The profits are just a plus,” he said.

By virtue of its proximity to educational institutions such as the Philippine Normal University, Adamson University, the University of the Philippines Manila, and De La Salle University, the “captive audience” of FDCP’s Manila cinematheque (the former Insituto Cervantes along T.M. Kalaw in Manila) are students.

The FDCP currently operates three cinematheques in the country: Manila, Davao, and Iloilo, and there are plans to open one in Nabunturan, Compostela Valley, and another in Bacolod within the first quarter of the year, with more locations to come between this year and the next.

“Whenever we bring films to the regions, we set up a makeshift viewing area and people do come and they do enjoy watching these films,” said Mr. Guillermo before adding, “It’s not just people from Metro Manila who want to watch them. So we try to bring these films to them and in turn bring films from the regions to Manila and other places in the country.”

A GOLDEN AGE?
Asked if the presence of microcinemas signals that the country has entered another Golden Age of Cinema (the last one is generally considered to have lasted from 1976 to the 1980s), Mr. Nebrida and Mr. Bacolod had differing opinions.

Mr. Nebrida said that he thinks the country has been in a Golden Age since 2013 while Mr. Bacolod said that the rise of microcinemas does not indicate a Golden Age but instead highlights the struggle of independent producers for their films to be seen.

“We always deny that there’s a gap or a barricade between mainstream and indie, that it does not exist — but it does exist. The fact that there’s a rise in microcinemas affirms that wall is becoming more prominent,” Mr. Bacolod said.

Mr. Nebrida takes the opposite view. “At some level, the distinctions between indie and mainstream are getting blurred. It’s just about good quality films… I really think that’s why microcinemas are happening — because there is a demand for these movies,” he said.

And this demand, he said, has made it possible for Cinema ’76 to put up a new cinema, this time in Quezon City, which they will unveil within the first quarter of the year.

While details are scarce, Mr. Nebrida said they will have two screens, one with a DCP (Digital Cinema Package) player. (Black Maria also has a DCP player.)

FDCP’s Mr. Bacolod said that this kind of setup would have only worked starting 2016 because the audiences before that were not yet ready for these kinds of cinemas. Mr. Nebrida believes that while the format would have worked four or five years ago, they realized when they opened in 2016 that the time was ripe and it was the best time to introduce the concept.

“Because the audiences are ready for this. I think they’ve been waiting for years now to be able to go see these movies [that] they feel they’ve been missing out on… Because unless mall cinemas change their policies, a lot of these films will be around for only for a day in those cinemas,” Mr. Nebrida said.

Golden Age or no Golden Age, what both agreed on is the need for microcinemas to come together and form an association so they can cooperate and maybe even stage a film festival of their own — and it may just happen sooner than we think.

“It’s going to happen soon. The idea is really to band together so there can be independent films that can open in an alternative chain including the FDCP,” said Mr. Nebrida.

 

Cinema ’76 Film Society is located at 160 Luna Mencias, Brgy. Addition Hills, San Juan, Metro Manila. To contact them call 637-5076, e-mail cinema76fs@tba.ph, or visit their Facebook page (https://www.facebook.com/cinema76fs/) or Web site (http://tba.ph).

Black Maria Cinema is located at 779 San Rafael St., SQ Film Laboratories Bldg., Plainview, Mandaluyong City. To contact them call 782-4566, e-mail cinema@blackmaria.com.ph, or visit their Facebook page (https://www.facebook.com/BlackMariaCinema/).

The FDCP Cinematheque Centre Manila is at 855 T.M. Kalaw Ave., Ermita, Manila, Metro Manila (the former Insituto Cervantes). To contact them call 256-8331, e-mail cinematheque@fdcp.ph, or visit their Facebook page (https://www.facebook.com/CinemathequeMNL/) or Web site (http://fdcp.ph).

SM drops plan to acquire Goldilocks Bakeshop

By Arra B. Francia, Reporter

SM RETAIL, Inc., a company owned by the country’s richest man Henry Sy, Sr., has scrapped plans to acquire Goldilocks Bakeshop, Inc., citing changes in the general business environment.

The two parties announced the dissolution of the deal in separate statements on Thursday, saying it was a mutual decision given the various changes in the marketplace since negotiations began.

“Regarding the proposed acquisition by SM Retail of Goldilocks, both SM and Goldilocks have jointly agreed not to pursue the transaction given changes in the general business environment,” SM Investments Corp. (SMIC) said in a statement issued Thursday.

For its part, Goldilocks said these changes “caused us to re-evaluate our position, and to arrive at a decision that we feel is best for both companies.”

“Meanwhile, Goldilocks remains focused on our plans and strategies. In the past few years, we had double-digit growth. We now have over 600 stores to serve our customers nationwide, and we will continue this expansion in order to be more accessible to our customers,” Goldilocks President Richard L. Yee said in a statement.

Talks for a possible partnership between the shopping mall operator and the bakeshop started in August 2017, when Goldilocks said that it sought an alliance with the SM group to further strengthen its brand.

The decision to call off the deal comes less than a month after the Philippine Competition Commission (PCC) gave SM Retail the go-signal to proceed with the transaction.

“They reviewed the circumstances surrounding Goldilocks, where they reassessed the commercial aspects of the transaction… It would seem like these changes in these circumstances happened after we approved the commitments,” PCC Commissioner Stella Luz A. Quimbo told reporters on the sidelines of a forum in Makati City yesterday.

The country’s antitrust body had earlier vented out competition concerns on the deal, citing the “possibility of partial or total foreclosure in the supply of retail space in SM malls to competitors of Goldilocks after its acquisition by the SM Group.”

SMIC is the parent of SM Prime Holdings, Inc. (SMPHI), the country’s leading mall operator and developer with a total of 67 malls.

Another major concern determined by PCC was the “potential for the SM Group to share a competing mall tenant’s business information to Goldilocks, since the mall operator, through its point-of-sale system, has access to sales records of tenants.”

In response, the SM group pledged that it will be giving Goldilocks’ competitors “a fair shake in their lease at all time.” SMPHI also promised not to give Goldilocks access to competitors’ information, which includes sales data captures by the point-of-sales system of mall tenants.

Ms. Quimbo noted the SM group did not ask for compromises with regards to the commitments the commission requested

“Of course it’s unfortunate that it has ended this way. We were actually quite pleased that they had volunteered to address the concerns. We have come to agreement at certain points but, however, obviously a business decision that we respect,” Ms. Quimbo said.

Shares in SMIC dropped on Thursday, losing a peso or 0.1% to close at P1,024 each at the stock exchange. — with reports from Krista Angela M. Montealegre

RRR cuts not policy shift – BSP

By Melissa Luz T. Lopez,
Senior Reporter

PLANS to reduce bank reserves should not be taken as a shift in monetary policy, the Bangko Sentral ng Pilipinas (BSP) chief said, as such adjustments simply seek to improve access to funding.

“[F]orthcoming reductions in RRR (reserve requirement ratio) should not be mistaken as a change in monetary policy stance. Rather, it should be viewed as part of ambitious financial market reforms that BSP is currently implementing,” Governor Nestor A. Espenilla, Jr. said in a text message to reporters.

Mr. Espenilla has been vocal about plans to gradually reduce the 20% reserve requirement imposed on universal and commercial banks since assuming the helm of the central bank in July last year, dubbing it as an “inefficiency” to the financial system as it constrains lenders from offering additional credit lines to productive sectors.

The reserve level — which was last adjusted in May 2014 — is deemed as one of the highest in the world, as it mandates all lenders to keep a fifth of their cash holdings as standby funds which do not generate returns.

“High RRR policy belongs to the same regime as extensive quantitative FX (foreign exchange) controls that we are also easing. This is more compatible with our more sophisticated financial system and much stronger economy today,” Mr. Espenilla said.

In August last year, the BSP and other government agencies unveiled an 18-month road map meant to deepen the local debt market. The goal is to provide an alternative source of financing for corporates, especially for long-term borrowing for big-ticket infrastructure projects.

The BSP official said the RRR previously stood as a traditional tool for the central bank given “underdeveloped” financial markets and limited tools on the central bank’s disposal for its open market operations (OMO).

“This is no longer the case for the Philippines.  Therefore, continued heavy reliance on RRR has become highly burdensome and distorts the financial system,” the BSP chief pointed out, saying that the shift to an interest rate corridor in 2016 has since allowed the monetary authority to have a better handle in managing money supply.

The new regime involves the weekly offering of term deposits, which allows banks to park their idle funds under week-long or month-long arrangements with the BSP in exchange for a small return. This way, the central bank is able to mop up excess liquidity and prod market rates closer to its three percent benchmark.

Domestic liquidity expanded by 11.9% in December to reach P10.6 trillion, according to latest available central bank data.

In a recent interview with GlobalSource Partners, Mr. Espenilla said current liquidity conditions are not “unduly tight” while credit growth remains buoyant and productive, leaving it unnecessary to introduce a fresh monetary stimulus.

“Shifts in the monetary policy stance of the BSP will be primarily signalled through changes in its policy rates in order to achieve its inflation targets,” Mr. Espenilla clarified.

“The liquidity impact of any RRR reduction will be neutralized through offsetting OMO and transactions with the national government.”

The Monetary Board, which is the highest policy-making body in the central bank, will hold their first policy review for the year next Thursday.

GMR Megawide keen on Davao airport upgrade

By Maya M. Padillo,
Correspondent

DAVAO CITY — GMR Megawide Cebu Airport Corp. (GMCAC), operator of the Mactan-Cebu International Airport (MCIA), is eyeing to take part in the planned upgrade of the Davao International Airport (DIA), which has been put on hold last year as government considers funding other than through the public-private partnership (PPP) scheme.

“As partners, Megawide Corporation and GMR are actively seeking to partner with the government on development of airport projects, including Davao,” GMR Megawide Cebu Airport Corp. Chief Executive Advisor Andrew Acquaah-Harrison told BusinessWorld.

GMCAC is a consortium between Megawide Construction Corp. and Bangalore-based GMR Infrastructure Ltd. It also recently won the contract for the P9.36-billion construction of a new Clark International Airport terminal.

“We are very interested in participating in such projects as we believe we bring significant expertise that will support the government in delivering its infrastructure development plan,” said Mr. Harrison, who was in town yesterday to explore more Cebu-Davao links as part of the company’s push for Mactan airport as an international hub.

Under the original PPP contract for the DIA, also known as the Francisco Bangoy International Airport, the project had a price tag of P40.57-billion, covering development, operations, and maintenance.

The Duterte administration is considering a “hybrid” PPP scheme for DIA wherein the infrastructure development could be funded through official development assistance or national funds, and the operations and maintenance awarded to a private firm. 

Megawide Construction Corp. was among the pre-qualified bidders for the DIA PPP proposal.

In the meantime, Mr. Harrison said the company’s “sales mission” to Davao was intended to assess the demand in the city and the rest of Mindanao as well as the potential market for international passengers from DIA via Cebu.

“Davao is a very important city because it (has) the third busiest airport in the Philippines…  So it is not a question whether there is a market here, it’s just a question whether that market will fly to Cebu or not,” Mr. Harrison said.

Among those in attendance during the event were representatives of airlines such as Air Swift, Cebu Pacific, Philippines Airlines, Air Asia Philippines, China Eastern, Emirates, and Eva Air.

With the opening of the MCIA Terminal 2 in June this year and the launch of new flights from and to Cebu, GMCAC is projecting a traffic of 11.5 million passengers this year, about 12% higher than in 2017.

“Today we were handling 10 million passengers and we believe that we will grow to about 11 million and a half passengers within the next year and we see a sizeable part of that demand from the Visayas and Mindanao region,” Mr. Harrison said.

Metrobank posts higher core income on loans, deposits

METROPOLITAN BANK & Trust Co. (Metrobank) posted higher income on a core basis in 2017 on the back of robust growth in its loans and deposits.

In a disclosure to the local bourse on Thursday, the Ty-led Metrobank booked a consolidated net income of P18.2 billion in 2017, up by 10% on a core basis compared with the same period in 2016.

Metrobank booked a net interest income of P61.4 billion, up 16% year on year and accounting for 73% of the lender’s total operating income.

This was on the back of its net interest margin, which has been steadily moving up to 3.75% or 21 basis points from last year.

Metrobank attributed its “strong performance” to the robust growth of its loans and deposits, which in turn resulted in “improved margins as well as better operating leverage.”

The bank’s loan portfolio expanded to P1.3 trillion in 2017, up by 19% year on year. This was mainly driven by the commercial segment, particularly the middle market as well as small and medium enterprises, as loans for these sectors went up 20%.

Consumer loans also increased by 17% year on year.

Meanwhile, the bank ended 2017 with total deposits of P1.5 trillion. Low-cost deposits, which made up 62% of the current account, savings account ratio, grew 12% from the same period in 2016.

“This provided the stable low cost funding to fuel its healthy loan expansion,” the lender said.

Meanwhile, Metrobank’s non-interest income stood at P22.1 billion in 2017. Broken down, P12.4 billion came from service charges and commissions as well as income from trust, P3.9 billion from trading and foreign exchange gains and P5.9 billion from miscellaneous income.

Metrobank’s non-performing loans ratio stood at 1%, as Metrobank claimed to be better than the industry. Provisions for credit and impairment losses, including one-offs, stood at P7.5 billion.

Its capital adequacy ratio was at 14.4% on a Basel 3 basis, with common equity tier 1 at 11.8%.

Metrobank ended 2017 with 952 branches and 2,352 automated teller machines nationwide, as half of its branches located outside Metro Manila.

“With the greater focus on improving efficiency, expenses for bank-related operations were kept at a reasonable level with recurring cost growth at only 6%,” the lender added.

“We are pleased to report positive results in our core business. The strength of our deposit franchise continues to support our loan growth, particularly in the commercial space as we help finance the expansion plans of our customers,” Metrobank President Fabian S. Dee was quoted as saying in a disclosure.

“Our momentum continues to build up, and we are well-positioned to accelerate our growth plans moving forward.”

Metrobank shares gave up 0.90% to end at P98.60 apiece on Thursday. — Karl Angelo N. Vidal

Peso drops anew against dollar

THE PESO plunged against the dollar on Thursday as the US currency strengthened on the back of the hawkish stance from the US Federal Reserve (Fed).

The local currency finished at P51.58 against the greenback yesterday, 28.5 centavos weaker from its P51.295 close on Wednesday.

The peso traded weaker the whole day, opening the session at P51.30 versus the dollar, which was also its best showing yesterday. Its intraday low, meanwhile, was seen at P51.58 to the greenback.

Dollars traded declined to $878.15 million yesterday from the $943.05 million that changed hands in the previous session.

“The peso weakened today after hawkish signals from the latest Federal meeting despite keeping its policy rates steady [prompted the dollar to climb],” a trader said in an e-mail on Thursday.

As expected, the Federal Open Market Committee (FOMC) left its interest rates unchanged, with the benchmark rate still at 1.25-1.5%.

The January meeting was also the last of Janet L. Yellen as she will step down from the Fed chairmanship and will be replaced by Jerome H. Powell, who will be sworn in on Monday.

It is expected that the Fed will hike again by a quarter of a percentage point in March, the first FOMC meeting with Mr. Powell as the new chair.

Meanwhile, the American central bank said: “Inflation on a 12-month basis is expected to move up” and will stabilize around its medium-term target of 2%, Reuters reported.

The Fed added the US economy will grow at a moderate pace, citing solid gains in employment, household spending and capital investment.

“It seems they (The Fed) are poised to hike [their rates] this March so it was a bullish Fed meeting for the market,” another trader said, adding that this caused the dollar to strengthen against the peso and other currencies such as yen and euro.

Meanwhile, the first trader added that the “stronger-than-expected US private employment data” also prompted the greenback to strengthen.

According to ADP and Moody’s Analytics, private firms hired 234,000 employees in January, bigger than the estimate of economists surveyed by Reuters of 185,000 jobs.

For today, the second trader said the peso will move from P51.50 to P51.70, while the first trader gave a wider range of P51.40 to P51.80. — Karl Angelo N. Vidal

DoubleDragon beefs up tourism portfolio with 1,001-room hotel in Boracay

DOUBLEDRAGON Properties Corp. is ramping up the expansion of its hospitality segment as it plans to build a 1,001-room hotel in the tourism estate of Global-Estate Resorts, Inc. (GERI) in Boracay.

In a statement issued Thursday, the listed property developer said it will be developing Hotel101 Resort-Boracay, which it claims will be the country’s biggest hotel in terms of room count.

DoubleDragon’s subsidiary Hotel of Asia, Inc. is partnering with Newcoast South Beach, Inc. for the project, which is located in Boracay Newcoast.

“It will certainly boost DoubleDragon’s recurring revenues through the years and will also significantly help generate economic benefits to the people of Boracay as well as contribute to pump-prime further the world-class reputation of the island and the Philippines as a tourist destination,” DoubleDragon Chairman Edgar J. Sia II said in a statement.

The hotel will occupy two hectares on the beachfront cove of Boracay Newcoast, which in turn covers a total of 150 hectares. Among its amenities are a pool and outdoor deck, business center, meeting rooms and function hall, and retail, food and beverage offerings.

DoubleDragon said it will be employing eco-friendly initiatives with the construction and operation of the hotel to reduce and reuse energy, waste, and water. Some areas of the property will have solar panels and a rainwater harvesting system as well.

GERI, the leisure and tourism arm of Megaworld Corp., will also be developing in Boracay Newcoast commercial, retail, and residential condominiums surrounded by its own golf course.

“This new development by Hotel101 Resort-Boracay group will become a major provider of comfort and convenience for tourists visiting Boracay. Their eco-friendly hotel blends well with Boracay Newcoast’s sustainable development model,” Megaworld Senior Vice-President Kevin Andrew L. Tan  said in a statement.

Boracay will be Hotel101’s fourth location in the country, after Manila, Fort Bonifacio in Taguig City, and Davao City.

“We envision Hotel101 to become the largest and most recognized hotel chain in the Philippines, significantly contributing to the recurring income of DoubleDragon, and at the same time providing the market with an innovative, safe and secure investment platform,” Mr. Sia said.

DoubleDragon is targeting to have 5,000 hotel rooms in the country under its 2020 vision. It currently has around 800 rooms under the Hotel101 and Jinjiang Inn brands.

The company also looks to have a total of 1.2 million square meters of leasable space and 100 community malls under the CityMalls brand during this period.

DoubleDragon booked P812 million in attributable profit in the first nine months of 2017, up 8% year on year, as revenues grew 105% to P4.08 billion.

Shares in DoubleDragon gained 60 centavos or 1.57% to close at P38.80 apiece at the Philippine Stock Exchange on Thursday. — Arra B. Francia

Love sounds: Kris Lawrence joins Kuh Ledesma for QC Valentine’s eve concert

CELEBRATE the eve of Valentine’s with some of the most beautiful voices of the country as Maria Socorro “Kuh” Ledesma and Kristoffer “Kris” Lawrence take the stage on Feb. 13 in a concert titled Love Matters at the ABS-CBN Vertis Tent in Quezon City.

“I made a conscious decision to hold my Valentine’s concert in Quezon City because very seldom are shows done here and I’ve never done a Valentine’s concert here,” Ms. Ledesma told the media during a press conference on Jan. 29 in Vertis North mall in Quezon City.

Ms. Ledesma popularized songs like “Dito Ba,” “Bulaklak,” and “Paano Kita Mapasasalamatan,” all from her self-titled debut album released in 1980.

Her other hits include “Til I Met You” and “I Think I’m in Love,” among others.

Ms. Ledesma has come out with a total of 21 albums and performed in over 1,000 concerts here and abroad in her almost four decade career.

“In my entire career, I’ve only missed performing on Valentine’s two or three times,” Ms. Ledesma said.

While she didn’t reveal what specific songs she’ll sing during the Feb. 13 concert, in keeping with the theme, she said she’d be singing love songs

“It’s so much fun to sing love songs. It’s a no-brainer because it comes naturally to me. The mushier [the song is], the better,” she said.

Joining Ms. Ledesma on stage are R&B singer and so-called “Prince of R&B” Kris Lawrence.

Mr. Lawrence burst onto the music scene in 2006 after releasing a self-titled debut album which featured “Kung Malaya Lang Ako” and a cover of Bad English’s hit “When I See You Smile.”

His second album, Moments (released in 2009), included covers such as George Michael’s “Careless Whisper,” Richard Marx’s “Right Here Waiting,” and Christopher Cross’ “I Will Take You Forever.”

He has released four albums so far, with the most recent being the Most Requested Playlist in 2015.

“We’re spreading love and good vibes. And it will be such a great honor performing with one of our most-respected pop icons,” Mr. Lawrence said in a press release.

Also performing on stage are Ms. Ledesma’s daughter Isabella Gonzales, and actor Gabby Concepcion.

“We’re performing in front of a virgin audience… I do hope they appreciate [our performance,]” Ms. Ledesma said.

Love Matters is on Feb. 13, 8 p.m. at the ABS-CBN Vertis tent located at Luna, Vertis North,Quezon City.

Tickets are available at TicketWorld (891-9999 or www.ticketworld.com.ph) and at the Ayala Malls concierge at 901-5700 (TriNoma), 621-3275 (UP Town Center), or 718-5000 local 6366 (Vertis North). Tickets are at P4,500 and P3,200. — Z.B. Chua

Legal experts, local execs divided over ‘Cha-cha’

By Camille A. Aguinaldo

LEGAL EXPERTS and local government leaders bared a sharp difference in views in Thursday’s Senate hearing on Charter change.

Local officials called for Charter change in order to empower local government units, especially in terms of access to the government’s revenues. But legal experts warned about the possible effects of amending the Constitution to pave the way for federalism, the system of government being pushed by President Rodrigo R. Duterte.

Former Supreme Court associate justice Vicente V. Mendoza warned that federalism would weaken and divide the country as it would “open fissures and promote regional difference” in society.

“A shift to a federal system will weaken our Republic and render naught the years spent to attain national unity, when regional development can be more effectively achieved by meaningful and more vigorous decentralization of national power without need of constitutional amendment,” he said.

He proposed instead the implementation of “greater decentralization” in the country.

“I would say stop at decentralization because beyond that is a cliff into which we might fall and never be able to come back,” Mr. Mendoza said.

Lawyer Christian S. Monsod, one of the framers of the 1987 Constitution, criticized the proposed federalism model of the ruling Partido Demokratiko Pilipino-Lakas ng Bayan (PDP-Laban), describing its version as “disappointing.”

“Why is it pushing for a federal-parliamentary system which they admit does not directly, but only indirectly, address the twin problems of mass poverty and gross inequalities?…” he said.

Mr. Monsod also questioned the motives of PDP-Laban over its 11-year transition to federalism.

“If the plebiscite is held in May 2019, the transition will end at the earliest in 2030. During the transition, with existing local government officials constituting the Regional Commission with both executive and legislative powers until the organic laws for each region are enacted, and the regional officials are elected, that’s the carrot for them to deliver the votes for the Cha-cha train — a term of 11 years from 2019-2030,” he said.

While clarifying that he was not against federalism, Mr. Monsod stressed that it was not yet the right time to transition toward that system.

“A messed-up structure change is virtually irreversible and may lead to the ruin of our democracy. I submit that there may be an alternative to consider rather than an immediate structural change by 2019,” he said.

He said the issues raised on the need to shift to federalism could be solved through legislation, such as enacting a fiscal decentralization measures and an anti-dynasty law.

Meanwhile, in its position paper, the Catholic Bishops’ Conference of the Philippines (CBCP) expressed its reservations on federalism over concerns on Muslims and Lumad groups in Mindanao.

“A major objection to a federal system that devolves power to the Federal States on an equal basis will not satisfactorily address the aspirations of the Muslims and Lumads in Mindanao for self-determination and respect for ancestral rights,” the CBCP said in part.

Batangas Governor Hermilando Mandanas of the League of Provinces of the Philippines (LPP) argued the Constitution should be changed, especially on its provisions on local autonomy.

Mr. Mandanas said local government units wanted to increase their share in the national government’s internal revenue collection from 40% to 60%. He also urged greater control and supervision of LGUs of their natural resources.

He also recommended Charter change through people’s initiative, another mode of amending the Constitution where amendments may be directly proposed upon a petition by at least 12% of registered voters.

Cavite City Governor Jesus Crispin C. Remulla, meanwhile, underscored the need to change the Constitution in order to address the disparity of budget allocations among local government units.

“If we are allowed to decentralize through federal system, our country will be strengthened. The problem is that people under the centralized form of government will never yield the power of the purse to local government. That needs to be seized,” he said.

Assistant Secretary Jonathan E. Malaya of the Department of Interior and Local Government (DILG) cautioned against “piecemeal legislation” on Charter change, saying this would only lead to “stunted growth” instead of economic development.

“If you wish to improve the lives of the vast majority of people… we have to adapt true decentralization. To us, federalism is a more viable alternative. It is the highest form of decentralization,” said Mr. Malaya, executive director of the PDP-Laban Federalism Institute and a contributing author in the book, The Quest for a Federal Republic: The PDP-Laban (Partido Demokratikong Pilipino-Lakas ng Bayan) Model of Philippine Federalism 1.0, which was launched also on Thursday.

At the book launching, Senate President Aquilino Martin L. Pimentel III said Senator Francis N. Pangilinan had given his “commitment (that)…we will not be an obstructionist.”

House Speaker Pantaleon D. Alvarez had earlier pointed that the agenda to pursue constitutional amendments cannot push through in the Senate because the Senate committee on constitutional amendments and revision of codes is chaired by Mr. Pangilinan, the president of the opposition Liberal Party.

Mr. Pimentel, for his part, said his “only request” to Mr. Pangilinan is to “be fair” and “keep an open mind.”

“(W)e will, in good faith, adhere and pursue all the referrals to this committee. We will proceed at a reasonable pace, and then also be open and transparent,” Mr. Pimentel said.

Mr. Pimentel said the committee on Mr. Pangilinan’s watch “may now study the proposal from the administration or ruling party.”

“So if ever we can come up with an agreement, mayroon na pong produkto ’yan (there’ll be a product), that is a bipartisan report,” the Senate leader also said.

On a related matter, he said Congress is looking at May 2019 being the target date for the plebiscite but added that, in case the proposed amendment is so simple and can be done by June or July this year, there will be no need to wait until that time.

He said Congress can spend at least P7 billion to P8 billion for a stand-alone plebiscite if the situation calls for it.

Mr. Pimentel further clarified there will be elections by 2022 and no term extensions.

For his part, Julio C. Teehankee, one of the members of the consultative committee organized by President Rodrigo R. Duterte and also a contributing author in the book, said Mr. Duterte gave them six months to complete their review of the 1987 Constitution .

Mr. Malaya, for his part, said the department will “head the campaign for federalism.”

“Since the change of the Constitution requires approval of the people, then the DILG is going to undertake a long period of campaigning up to the barangay level and we will be producing materials to help the people understand better why federalism is important and why the President is pushing for federal system,” he said. — with Minde Nyl R. dela Cruz

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