Facebook Instagram Linkedin Twitter Youtube
Home Blog Page 1349

BSP sees room to keep rates steady

People buy rice at discounted rates at a Kadiwa store in Manila, Aug. 1, 2024. — PHILIPPINE STAR/EDD GUMBAN

By Luisa Maria Jacinta C. Jocson, Reporter

THE PHILIPPINE central bank would probably keep policy settings on hold given “evolving inflation conditions,” Governor Eli M. Remolona, Jr. said on Monday, even as he signaled a less restrictive stance if price pressures continue to ease.

“Evolving inflation conditions show that the BSP (Bangko Sentral ng Pilipinas) can hold its policy settings steady for the time being,” Mr. Remolona said during a Development Budget Coordination Committee (DBCC) briefing before the House Committee on Appropriations on Monday.

“If price pressures continue to ease, it will be possible for the BSP to consider a less restrictive monetary policy stance.”

In June, the BSP kept policy rates unchanged at an over 17-year high of 6.5% for a sixth straight meeting. Mr. Remolona has previously signaled that the central bank is on track to cut rates by August, possibly by 25 basis points.

The Monetary Board’s next rate-setting meeting is on Aug. 15.

Mr. Remolona said lingering supply concerns and geopolitical tensions warrant continued and close monitoring of risks to the inflation outlook.

Headline inflation likely accelerated to 4% in July, according to a BusinessWorld poll of 15 analysts conducted last week, mainly due to high food and electricity prices.

If realized, this could mark the eighth straight month that inflation settled within the BSP’s 2-4% target band.

July inflation data will be released today (Aug. 6).

Mr. Remolona said the balance of risks to the inflation outlook has tilted to the downside mainly due to the recently approved tariff cut on rice imports.

“In the BSP’s latest forecast, the rice tariff reduction will have a very significant downside impact on the inflation trajectory until 2025,” he added.

In June, President Ferdinand R. Marcos, Jr. signed Executive Order No. 62, which slashed tariffs on rice imports to 15% from 35% previously, until 2028.

This is part of a reduced tariff regime for other agricultural products such as pork and corn intended as inflation-containment measures.

Mr. Remolona said the recent order will be “helpful in our efforts to tame inflation.”

“Since August 2023, however, inflation has been dominated by rice prices. If inflation were driven just by demand, there would be a more even distribution of these different components of inflation.”

“Our survey showed that when people worry about higher prices, when we ask them why, over 90% will say it’s because of the price of rice,” he added.

Rice inflation eased to 22.5% in June, marking the third straight month of slower rice inflation. Rice accounted for almost half of overall inflation during the month.

As of Aug. 2, the price of a kilogram of well-milled rice averaged P48-P55 from P41-P49 in the same period a year ago. Regular-milled rice averaged P45-P55 from P37-P44 a year earlier.

“Indeed, there is strong empirical evidence that suggests that rice prices affect inflation expectations to a very large extent. And these inflation expectations lead to second-round effects,” Mr. Remolona said.

Meanwhile, Mr. Remolona said he sees inflation settling within the 2-4% target this year and in 2025, as well as inflation expectations remaining “well-anchored.”

However, he still cited upside risks to this outlook.

“These risks will come from higher domestic prices of food items other than rice, from transport charges, and from electricity rates,” Mr. Remolona said.

National Economic and Development Authority Secretary Arsenio M. Balisacan also cited other factors that could stoke inflation, such as wage adjustments.

“Risks related to inflation, such as potential adjustments in fare, wage, and service utility fees, have the potential to significantly curb spending. It is imperative that we carefully consider these factors in our economic planning and decision-making processes,” he told lawmakers.

Last month, the Regional Tripartite Wages and Productivity Board approved a P35 minimum wage hike for workers in the National Capital Region, which took effect on July 17.

Programs like Pambansang Pabahay Para sa Pilipino Housing (4PH) may also have unintended inflationary impacts, Mr. Balisacan said.

“The projected rapid economic growth, particularly with the implementation of the 4PH program, could lead to upward inflationary pressures and stall economic gains.”

The 4PH is the government’s flagship housing program. The government seeks to build a million housing units yearly under the program until 2028.

Economy on track to outgrow debt — DoF

REUTERS/THOMAS WHITE/ILLUSTRATION

ECONOMIC GROWTH is on track to outpace the rise in the National Government’s (NG) debt, with borrowing costs expected to go down as global central banks cut interest rates, the Department of Finance (DoF) said on Monday.

During the Development Budget Coordination Committee’s (DBCC) briefing before the House Committee on Appropriations, Finance Secretary Ralph G. Recto said the cost of borrowing remains manageable as it is “much lower” than the country’s gross domestic product (GDP) growth.

“In fact, our effective interest rate for next year is only 5.3%, which is very cheap considering that the average term of our debt is 7.5 years. If we remove inflation, our real interest rate is only 2.3%, far lower than our expected real GDP growth of 6.5%, which means we are on track to outgrow our debt,” he said.

A country’s debt is more appropriately measured on the size of its economy as this identifies its capacity to pay its obligations, Mr. Recto said.

“From 60.9% (debt-to-GDP ratio) in 2022, it fell to 60.1% in 2023. And we are determined to continue pushing it below 60% so we have enough buffer in case another crisis hits us,” he said.

According to the Bureau of the Treasury, the debt-to-GDP ratio is expected to inch up to 60.6% by end-2024. It sees the debt-to-GDP ratio falling to 60.4% in 2025, 60.2% in 2026, 58.4% in 2027 and 56.3% in 2028.

“The continuous decline in our debt-to-GDP ratio since the pandemic is one of the reasons why our credit ratings remain high… This means that we not only have the capacity to pay our debts, but we can have more access to cheaper financing,” he said.

The DBCC is targeting 6-7% GDP growth this year and 6.5-7.5% GDP growth in 2025.

As of end-June, the NG’s outstanding debt rose to a fresh high of P15.48 trillion, up 9.4% from a year ago. Debt is expected to reach P16.06 trillion at the end of 2024 and P17.35 trillion by end-2025.

“Mukha mang patuloy na lumalaki ang ating utang ngayon, pero patuloy naman na mas lumalago ang ating ekonomiya. Ibig sabihin, kayang kaya nating bayaran ang ating mga obligasyon (Even if it looks like our debt is growing now, but our economy is also expanding faster. This means we can repay our obligations),” Mr. Recto said.

Mr. Recto said the government is now paying off the “pandemic borrowings” inherited from the previous administration.

“We are now refinancing the large borrowings contracted during the low-interest rate period in 2020 to 2022 with new debts that bear higher interest rates. This is the reason why our interest payments for next year are higher by around 11%,” he said.

For 2025, the NG set its borrowing program at P2.55 trillion, 0.97% lower than this year.

The government is also allotting P2.05 trillion for its debt servicing program next year, up 1.19% from this year. Of this, P848.03 billion will go to interest payments.

Mr. Recto said he expects the growth in interest payments to moderate as central banks begin cutting policy rates.

Last week, the US Federal Reserve kept its key policy rate at the 5.25-5.5% range last week, but could start easing by September.

The Bangko Sentral ng Pilipinas has signaled a potential 25-basis-point cut at its Aug. 15 meeting.

Mr. Recto reiterated that the government’s current debt level is not a cause for concern.

“There is nothing inherently wrong with a country having debt, as long as the money’s used for the right purposes, such as growing the economy, which in turn creates more jobs, increases income and provides more revenues for the government,” he said.

“In our case, we are using debts to spur our stronger economic recovery by investing in more infrastructure and human capital development projects which have the highest multiplier effect on the economy.”

Meanwhile, Mr. Recto said that the country’s budget deficit is also still manageable.

“As a percentage of GDP, our deficit remains very manageable, at 4.5% in the first quarter,” he said.

The government set the budget deficit ceiling for this year at P1.48 trillion or equivalent to 5.6% of GDP. For next year, the budget deficit ceiling is at P1.54 trillion or 5.3% of GDP. — BMDC

Experts: PHL can learn from Malaysia’s tighter social media regulations

A person using a smartphone is seen in front of displayed social media logos in this illustration taken on May 25, 2021. — REUTERS

By Aubrey Rose A. Inosante, Reporter

THE PHILIPPINES could combat the growing number of cybercrimes by following Malaysia’s recent move to require social media platforms to secure regulatory licenses to operate in the country, experts said.

However, there should be safeguards to ensure that regulations for social media networks would not suppress free speech, they added.

Malaysia’s internet regulator is requiring all social media and internet messaging services that have more than eight million users to apply for a license by Jan. 1, 2025. 

“Under the ASEAN (Association of Southeast Asian Nations) ambit, there have already been discussions in terms of how we can protect the consumers on this particular issue. I think the Philippines may want to take a leaf from what Malaysia has done,” Malaysia Ambassador to the Philippines Dato’ Abdul Malik Melvin Castelino bin Anthony told BusinessWorld on the sidelines of an event on July 30.

“Of course, we are very willing to share our knowledge and our process and how we enacted this law,” he added.

The Malaysian ambassador said the law is meant to ensure that cybercrime is not perpetrated in Malaysia, and to protect consumers and companies.

However, he said the law drew mixed reactions back home, raising concerns that it could stifle freedom of expression. “But for us, I think the whole idea is to protect the industry and also the consumers,” he said.

Social media networks that fail to apply for licenses with the Malaysian government by Jan. 1, 2025 would face fines, imprisonment or even suspension.

The Philippines is also trying to combat cybercrime such as financial fraud, scams, child pornography and ransomware.

From January to June this year, the Philippine National Police Anti-Cybercrime Group reported 8,177 cybercrime incidents, down 36.16% from a year ago. The bulk of these cybercrimes involved online selling scams, investment scams and debit or credit card fraud.

“We want to regulate OTTs (Over-the-top media services) and social media. Although, we would like to reiterate that currently, we have a good relationship with social media providers,” Jeffrey Ian C. Dy, undersecretary for Infostructure Management, Cybersecurity, and Upskilling of the Department of Information and Communications Technology (DICT) told BusinessWorld over the phone last week.

He said the DICT has no signed agreement with Meta, YouTube, and TikTok, but has access to their reporting mechanism, which was used when a “deepfake audio” of President Ferdinand R. Marcos, Jr. falsely ordering the military to attack China surfaced.

Mr. Dy said it is the discretion of these platforms to proceed to appropriate action, either tagging it as misleading or subject to removal if it violates the community guidelines.

For other social media platforms like X (formerly Twitter), DICT has no “working relationship” as X does not have an office in the country.

“Due to the lack of regulation, all of these are pakiusap (request). We need to appeal to them based on their community guidelines, most of which are more permissible than our laws,” he said.

For example, Mr. Dy said the Anti-Online Sexual Abuse or Exploitation of Children law requires that pornographic material that involves a child should be automatically blocked.

“In contrast, the evidence is now to prove that you have no negligence and compliance there and the product there on the platform, and then in the internet service provider. Because it is written in the law, it should also be blocked,” he said.

Mr. Dy said there are pending bills that propose regulation, but these should be balanced with the rights and freedoms protected by the Constitution.

“We leave it up to the legislature to define harmful content in a harmful media,” he said.

House Bill No. 129 mandates the authentication of identity before the creation of a social media account, while House Bill No. 8789 criminalizes the creation of fake news.

Surigao del Norte Rep. Robert Ace S. Barbers called on the Philippines to implement a social media policy similar to Malaysia, noting how these outlets have been used to slander people.

“For those who use the social media platforms to destroy someone’s name, someone’s identity, someone’s image, that is not freedom of expression,” he said in a phone call last week.

“[In] my opinion, maybe we should use the Revised Penal Code as our basis. What is the definition of slander? Those are crimes punishable under the Revised Penal Code. If we identify what the law will do, maybe we won’t be far from our existing laws.”

Mr. Barbers said social media users should be made aware of possible penalties that can be imposed for violations.

Sam V. Jacoba, founding president of the National Association of Data Protection Officers, said the country can learn a lot from this approach by Malaysia.

“It is a welcome development as for the longest time, social media platforms have been sidestepping their accountability on the content posted and proliferated on their platforms,” Mr. Jacoba told BusinessWorld via Viber message on July 29.

More than 80 million Filipinos have social accounts, and they are often vulnerable to misinformation, disinformation, and foreign malign influence, he said.

“Perhaps, they are more focused on generating more revenues than securing the digital lives of their users. Just benchmark their investments in sales and marketing activities versus their investments in data and content protection,” he said.

Mr. Jacoba even suggested that the Philippines could compel owners to allocate a portion of their net revenues, like 20% in fighting cyber criminals and scammers on their platforms.

BusinessWorld sought comments from social media platforms Meta, X, and TikTok but has not received replies as of press time.

BSP eyes use of QR code for transport payments

Commuters purchase their tickets at the LRT Antipolo Station. — PHILIPPINE STAR/ WALTER BOLLOZOS

THE BANGKO SENTRAL ng Pilipinas (BSP) is proposing to identify strategic use cases for its national QR code standard such as for transportation payments.

In a draft circular, the BSP said it is seeking to introduce the payment use cases involving QR Ph for sectors such as transportation “which shall be serviced by payment service providers (PSPs) without fees, including interbank charges, or free of charge to end-users.”

New sections are to be added to the Manual of Regulations for Payment Systems to include strategic payment use cases.

The BSP defined strategic payment use cases as those that “support the achievement of the objectives outlined in national development plans and strategies.”

These also have a “particular focus on enhancing financial inclusion and modernizing key sectors of the national economy, which ultimately foster sustainable economic growth of the country.”

For a payment use case to be considered strategic, the BSP will also consider its impact, accessibility and inclusivity.

“Strategic payment use cases shall be interoperable, consistent with the principles under the Section 201 on the National Retail Payment System (NRPS) framework and created independently and separately from existing payment use cases.”

“Interoperable payment use cases, which have already been established under the NRPS framework and are currently operating, cannot be converted into a strategic payment use case,” it added.

The strategic payment use cases shall also be offered to end-users without fees, including interbank charges, or free of charge, the BSP added.

Under the draft circular, the central bank said that payment service providers must ensure that QR-enabled payments be “accorded appropriate treatment in the determination of applicable fees.”

“PSPs offering interoperable QR-enabled payment services for strategic payment use cases… such as but not limited to the use of the national QR code standard for payments in the transportation sector, must provide these services without fees, including interbank charges, or free of charge to end users.

“PSPs shall ensure that the threats and vulnerabilities arising from their QR-enabled payment and financial services are identified, measured, monitored, and controlled accordingly,” it added.

QR Ph is the country’s QR code standard based on the Europay-Mastercard-VISA (EMV) standard, a global standard for secure payments.

The share of online payments in the total volume of monthly retail transactions rose to 52.8% in 2023 from 42.1% a year earlier. This surpassed the BSP’s target of digitializing 50% of payments by end-2023.

The central bank is targeting to achieve a 60-70% share of digital payments over total retail payments volume by 2028, in line with the Philippine Development Plan. — Luisa Maria Jacinta C. Jocson

MPTC acquires gov’t stake in NLEX, boosts ownership to 73.39%

METRO PACIFIC Tollways Corp. (MPTC) has acquired the government’s 2.61% stake in NLEX Corp. for P2.5 billion, increasing its total ownership of the toll road to 73.39%, the company announced on Monday.

This acquisition aligns with the government’s strategy to divest assets for revenue generation, MPTC said in a statement.

“We recognize that we, too, are in public service under a private entity. Our commitment is to provide efficient, safe, and convenient travel to our motoring public, as well as connect people and transform communities,” MPTC President and Chief Executive Officer Rogelio L. Singson said.

According to NLEX Corp.’s website, MPTC, through MPT North Corp., owns 70.78% of NLEX; BDO Unibank, Inc. holds 11.7%; Global Fund Holdings has 3.9%; Egis Investments Partners Philippines, Inc. has 10.16%; and the government holds 3.46%.

In June, the Department of Finance announced plans to dispose of P2.5 billion worth of assets, including the government’s 3.46% stake in NLEX Corp., which is part of MPTC.

The transaction was finalized on Friday, Aug. 2, MPTC said, adding that this move would not only support the government’s effort to secure funds but also affirm the company’s commitment to providing a safer and more efficient road network.

Aside from NLEX, the government, through the Bases Conversion and Development Authority, had previously indicated its willingness to sell its 50% stake in the Subic-Clark-Tarlac Expressway to MPTC for at least P20 billion.

MPTC is the tollways unit of Metro Pacific Investments Corp., one of three key Philippine units of Hong Kong-based First Pacific Co. Ltd., the others being Philex Mining Corp. and PLDT Inc.

Hastings Holdings, Inc., a unit of PLDT Beneficial Trust Fund subsidiary MediaQuest Holdings, Inc., has a majority stake in BusinessWorld through the Philippine Star Group, which it controls. — Ashley Erika O. Jose

PAL working on certification for SAF-powered flights 

By Ashley Erika O. Jose, Reporter

FLAG CARRIER Philippine Airlines (PAL) said the company is on track with its plan to mount green fuel-powered flights to Singapore by 2026.

“Definitely this will push through because it is a policy,” PAL President and Chief Operating Officer Stanley K. Ng told BusinessWorld last week.

He said the company is now working to acquire certification to allow the airline to fly using sustainable aviation fuel (SAF).

“All the technologies that could potentially bring down the [volatility] of the aviation industry are there. This sustainable aviation fuel shows its impact and effectiveness for airlines to be able to achieve net zero by 2050,” he said.

For now, he said PAL is working on obtaining CORSIA certification, which is required to use SAF and participate in the carbon offsetting program for international aviation.

CORSIA, or the Carbon Offsetting and Reduction Scheme for International Aviation, permits airlines to use SAF made from biomass or waste to reduce their carbon offsetting obligations.

Currently, PAL does not operate any SAF-powered flights, but the company aims to incorporate at least a 1% SAF blend into its Singapore flights by 2026. 

This target aligns with the Singapore government’s requirement for flights departing from its airport to use a minimum of 1% SAF by that year.

Additionally, PAL is exploring new routes both domestically and internationally.

“We will be offering non-stop service from Manila to North America and also, possibly, we are thinking of starting a European destination,” Mr. Ng said at a forum last week.

The company is set to launch direct flights to Seattle by October.

The flag carrier also intends to revive some of its routes to Japan.

For this year, PAL is setting aside $450 million, or over P25 billion, to fund its capital expenditures.

Gov’t fully awards T-bills at mostly higher rates

BW FILE PHOTO

THE GOVERNMENT made a full award of the Treasury bills (T-bills) it offered on Monday even as rates mostly rose as the market’s preference shifts to higher-yielding long tenors ahead of the Bangko Sentral ng Pilipinas’ (BSP) anticipated policy easing cycle. 

The Bureau of the Treasury (BTr) raised P20 billion as planned from the T-bills it auctioned off on Monday as total bids reached P47.298 billion, or more than twice the amount on offer.

The demand was higher than the P35.99 billion in tenders seen at the July 29 T-bill auction.

Broken down, the BTr borrowed P6.5 billion as programmed from the 91-day T-bills as tenders for the tenor reached P12.791 billion. The three-month papers were quoted at an average rate of 5.828%, 4.9 basis points (bps) above the 5.779% recorded last week. Accepted rates ranged from 5.8% to 5.865%.

The government likewise made a full P6.5-billion award of the 182-day securities as bids for the tenor reached P12.11 billion. The average rate for the six-month T-bill stood at 6.062%, up by 4.8 bps from the 6.014% fetched last week, with accepted rates at 6.019% to 6.094%.

Lastly, the Treasury raised the planned P7 billion via the 364-day debt papers as demand totaled P22.397 billion. The average rate of the one-year debt decreased by 3.4 bps to 6.074% from the 6.108% quoted for the tenor last week, with the BTr only accepting bids with this yield.

At the secondary market before the auction, the 91-, 182-, and 364-day T-bills were quoted at 5.7871%, 6.0643%, and 6.1631%, respectively, based on PHP Bloomberg Valuation Service Reference Rates data provided by the Treasury.

“Rates were higher week on week because investors would like to lock in rates by buying longer tenors,” a trader said in a text message.

The preference for longer tenors is due to expectations that the BSP will implement its first rate cut in over three years as early as this month, the trader said.

The Philippine central bank can keep policy settings unchanged but can consider a rate cut if price pressures continue to ease, BSP Governor Eli M. Remolona, Jr. said on Monday, Reuters reported.

The balance of inflation risks has shifted to the downside and inflation expectations are well anchored, Mr. Remolona told legislators at a budget hearing.

“Evolving inflation conditions show the BSP can hold its policy settings steady for the time being,” Mr. Remolona said. “If price pressures continue to ease, it will be possible for BSP to consider a less restrictive monetary policy stance.”

The Monetary Board in July kept its policy rate at a 17-year high of 6.5% for a sixth straight meeting after raising interest rates by a cumulative 450 bps from May 2022 to October 2023.

Mr. Remolona earlier said the BSP may begin cutting rates at its Aug. 15 review — the only policy meeting scheduled in the third quarter — as they expect inflation to continue easing this semester.

The Monetary Board could reduce borrowing costs by 25 bps in the third quarter and by another 25 bps in the fourth quarter, he said.

T-bill rates mostly tracked the increase in secondary market yields last week ahead of the release of July inflation data, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort added in a Viber message.

The Philippine Statistics Authority will release July inflation data on Tuesday (Aug. 6).

A BusinessWorld poll of 15 analysts yielded a median estimate of 4% for the July consumer price index (CPI). This matched the lower end of the BSP’s forecast for the month.

If realized, July inflation would be faster than 3.7% in June but slower than 4.7% a year earlier. It would also mark the eighth straight month that the CPI settled within the BSP’s 2-4% annual target.

“Some investors also opted to lock in funds for longer-term tenors before the possible US Federal Reserve and local policy rate cuts in the coming months,” Mr. Ricafort added.

Fed Chair Jerome H. Powell last week said interest rates could be cut as soon as September if the US economy follows its expected path, putting the central bank near the end of a more than two-year battle against inflation but square in the middle of the nation’s presidential election campaign, Reuters reported.

The Fed ended its latest two-day policy meeting with a decision to hold its benchmark interest rate steady in the 5.25%-5.5% range that was set a year ago, but its statement softened the description of inflation and said the risks to employment were now on a par with those of rising prices — neutral language that opens the door for rates to fall after more than two years of tightening credit.

Mr. Powell pushed the message even further forward in his post-meeting press conference, noting that price pressures were now easing broadly in the economy — what he called “quality” disinflation — and that if coming data evolve as anticipated, support for cutting rates will grow.

Investors saw Mr. Powell’s comments as clearly setting the stage for a reduction in borrowing costs at the Fed’s Sept. 17-18 meeting.

On Tuesday, the BTr will offer P30 billion in reissued seven-year Treasury bonds (T-bonds) with a remaining life of four years and nine months.

The Treasury wants to raise P220 billion from the domestic market this month, or P80 billion through T-bills and P140 billion via T-bonds.

The government borrows from local and foreign sources to help fund its budget deficit, which is capped at P1.48 trillion or 5.6% of gross domestic product for this year. — A.M.C. Sy with Reuters

Meralco: Malampaya gas plants not excluded from 1,000-MW bidding

BW FILE PHOTO

MANILA Electric Co. (Meralco) said on Monday that power plants utilizing the Malampaya gas field may participate in its bidding for 1,000 megawatts (MW) of power supply.

“It is important to clarify that power plants utilizing Malampaya gas are not excluded from participating in the bidding process. [T]hey are among the prospective bidders who have shown interest in submitting their offers,” Meralco Senior Vice-President and Head of Regulatory Management Jose Ronald V. Valles said in a statement.

The statement responds to the temporary restraining order (TRO) issued by Taguig Regional Trial Court (RTC) Branch 267 on Aug. 2, which extended the order’s duration to 20 days from three days. 

The TRO stemmed from a petition for injunction filed by members of the Malampaya consortium — Prime Energy, UC38 LLC, Prime Oil and Gas, Inc., and the Philippine National Oil Company-Exploration Corp. — to stop Meralco’s competitive selection process (CSP) for 1,000 MW of new power supply.

“There exists an extreme urgent necessity for the writ as to warrant the issuance of a temporary restraining order… to prevent further damage to the plaintiffs’ interests, the government, and the environment,” Executive Judge Byron G. San Pedro said in a five-page order promulgated on July 31.

Meralco had earlier invited bids for a contract capacity of 600 MW, involving a 15-year power supply agreement targeted to start on Aug. 26, 2025, with a bid deadline originally set for Aug. 2, 2024. It also invited bids for an additional capacity of 400 MW to secure a contract, scheduled to start on Aug. 26, 2025.

Government regulations mandate distribution utilities to select the most cost-effective electricity supply through a CSP.

Mr. Valles said that the company has received the court order on the TRO extension initiated by the consortium, which he noted “does not participate in the CSP as it does not directly supply to or contract with Meralco.”

He said Meralco is reviewing the court order, including its potential impact on the bidding process that may be delayed and could lead to higher power rates.

Mr. Valles also said that the biddings are conducted “in strict accordance” with the rules set forth by the Department of Energy (DoE) and the Energy Regulatory Commission (ERC).

“Notably, the DoE has granted a Certificate of Conformity for Meralco to proceed with the CSPs, and neither the DoE nor the ERC has identified any irregularities in the Terms of Reference for the 1,000-MW CSPs,” he said.

He noted that the DoE and ERC are the administrative agencies that have primary jurisdiction over the bidding processes.

“Both play a crucial role in setting the regulatory framework and ensuring the integrity of the competitive selection process for power supply,” he said.

“Meralco appreciates the public’s understanding as we navigate through this legal process. We assure our customers and stakeholders of our continued efforts to advocate for their best interests and secure a stable and least-cost power supply,” Mr. Valles said.

Terry L. Ridon, convenor of think tank Infrawatch PH, said that the disruption poses “significant risks to the stability and fairness of the power sector, potentially leading to higher electricity costs and unreliable service for millions of consumers.”

“It is baffling and concerning that entities with no qualifications or direct stake in the power generation industry are being allowed to challenge these proceedings,” Mr. Ridon said in an e-mailed statement on Monday.

“This is a clear overreach and should be dismissed outright. Their interference is unwarranted and detrimental to the interests of consumers who rely on a stable and competitive power market,” he added.

ANOTHER BIDDING
Meanwhile, PacificLight Power Pte. Ltd., the Singapore-based subsidiary of Meralco PowerGen Corp. (MGen), is eyeing participation in a bidding to build, own, and operate a new gas power plant.

“We might participate in the bidding for the new plants that Singapore wants to build — two 600 MW units — so we might bid for one, 600 MW,” MGen Chairman Manuel V. Pangilinan told reporters last week.

In June, the Energy Market Authority (EMA) of Singapore launched a request for proposals for new generation capacity to meet the country’s growing electricity demand. EMA invited the private sector to build, own, and operate two new hydrogen-ready combined cycle gas turbine generating units to be ready by 2029 and 2030, respectively. Each generating unit is expected to be at least 600 MW in capacity.

For the first half of the year, energy delivered by PacificLight was down by 1% to 2,875 gigawatt-hours as it conducted efficiency improvements in early months of 2024.

MGen President and Chief Executive Officer Emmanuel V. Rubio said that PacificLight was granted the right to build, own, and operate a 100-MW hydrogen-ready gas turbine in May by EMA.

Based on its website, PacificLight currently owns an 800-MW liquefied natural gas-fired power plant in Jurong Island, Singapore.

Meralco’s majority owner, Beacon Electric Asset Holdings, Inc., is partly owned by PLDT Inc. Hastings Holdings, Inc., a unit of PLDT Beneficial Trust Fund subsidiary MediaQuest Holdings, Inc., has an interest in BusinessWorld through the Philippine Star Group, which it controls. — Sheldeen Joy Talavera and Chloe Mari A. Hufana

Music labels’ AI lawsuits create new copyright puzzle for US courts

Cover ofTift Merritt’s “Traveling Alone”

COUNTRY musician Tift Merritt’s most popular song on Spotify, “Travelling Alone” (https://tinyurl.com/2m3xh6df), is a ballad with lyrics evoking solitude and the open road.

Prompted by Reuters to make “an Americana song in the style of Tift Merritt,” the artificial intelligence (AI) music website Udio instantly generated “Holy Grounds” (https://tinyurl.com/55f5nuc8), a ballad with lyrics about “driving old backroads” while “watching the fields and skies shift and sway.”

Ms. Merritt, a Grammy-nominated singer and songwriter, told Reuters that the “imitation” Udio created “doesn’t make the cut for any album of mine.”

“This is a great demonstration of the extent to which this technology is not transformative at all,” Ms. Merritt said. “It’s stealing.”

Ms. Merritt, who is a longtime artists’ rights advocate, isn’t the only musician sounding alarms. In April, she joined Billie Eilish, Nicki Minaj, Stevie Wonder and dozens of other artists in an open letter warning that AI-generated music trained on their recordings could “sabotage creativity” and sideline human artists.

The big record labels are worried too. Sony Music, Universal Music Group, and Warner Music sued Udio and another music AI company called Suno in June, marking the music industry’s entrance into high-stakes copyright battles over AI-generated content that are just starting to make their way through the courts.

“Ingesting massive amounts of creative labor to imitate it is not creative,” said Merritt, an independent musician whose first record label is now owned by UMG, but who said she is not financially involved with the company. “That’s stealing in order to be competition and replace us.”

Suno and Udio pointed to past public statements defending their technology when asked for comment for this story. They filed their initial responses in court on Thursday, denying any copyright violations and arguing that the lawsuits were attempts to stifle smaller competitors. They compared the labels’ protests to past industry concerns about synthesizers, drum machines, and other innovations replacing human musicians.

UNCHARTED GROUND
The companies, which have both attracted venture capital funding, have said they bar users from creating songs explicitly mimicking top artists. But the new lawsuits say Suno and Udio can be prompted to reproduce elements of songs by Mariah Carey, James Brown, and others and to mimic voices of artists like ABBA and Bruce Springsteen, showing that they misused the labels’ catalog of copyrighted recordings to train their systems.

Mitch Glazier, Chief Executive Officer of the music industry trade group the Recording Industry Association of America (RIAA), said that the lawsuits “document shameless copying of troves of recordings in order to flood the market with cheap imitations and drain away listens and income from real human artists and songwriters.”

“AI has great promise — but only if it’s built on a sound, responsible, licensed footing,” Glazier said.

Asked for comment on the cases, Warner Music referred Reuters to the RIAA. Sony and UMG did not respond.

The labels’ claims echo allegations by novelists, news outlets, music publishers and others in high-profile copyright lawsuits over chatbots like OpenAI’s ChatGPT and Anthropic’s Claude that use generative AI to create text. Those lawsuits are still pending and in their early stages.

Both sets of cases pose novel questions for the courts, including whether the law should make exceptions for AI’s use of copyrighted material to create something new. The record labels’ cases, which could take years to play out, also raise questions unique to their subject matter — music.

The interplay of melody, harmony, rhythm, and other elements can make it harder to determine when parts of a copyrighted song have been infringed compared to works like written text, said Brian McBrearty, a musicologist who specializes in copyright analysis.

“Music has more factors than just the stream of words,” Mr. McBrearty said. “It has pitch, and it has rhythm, and it has harmonic context. It’s a richer mix of different elements that make it a little bit less straightforward.”

Some claims in the AI copyright cases could hinge on comparisons between an AI system’s output and the material allegedly misused to train it, requiring the kind of analysis that has challenged judges and juries in cases about music.

In a 2018 decision that a dissenting judge called “a dangerous precedent,” Robin Thicke and Pharrell Williams lost a case brought by Marvin Gaye’s estate over the resemblance of their hit “Blurred Lines” to Gaye’s “Got to Give It Up.” But artists including Katy Perry and Ed Sheeran have since fended off similar complaints over their own songs.

Suno and Udio argued in very similar court filings that their outputs do not infringe copyrights and said US copyright law protects sound recordings that “imitate or simulate” other recorded music.

“Music copyright has always been a messy universe,” said Julie Albert, an intellectual property partner at law firm Baker Botts in New York who is tracking the new cases. And even without that complication, Ms. Albert said fast-evolving AI technology is creating new uncertainty at every level of copyright law.

WHOSE FAIR USE?
The intricacies of music may matter less in the end if, as many expect, the AI cases boil down to a “fair use” defense against infringement claims — another area of US copyright law filled with open questions.

Fair use promotes freedom of expression by allowing the unauthorized use of copyright-protected works under certain circumstances, with courts often focusing on whether the new use transforms the original works.

Defendants in AI copyright cases have argued that their products make fair use of human creations, and that any court ruling to the contrary would be disastrous for the potentially multi-trillion-dollar AI industry.

Suno and Udio said in their answers to the labels’ lawsuits on Thursday that their use of existing recordings to help people create new songs “is a quintessential ‘fair use.’”

Fair use could make or break the cases, legal experts said, but no court has yet ruled on the issue in the AI context.

Ms. Albert said that music-generating AI companies could have a harder time proving fair use compared to chatbot makers, which can summarize and synthesize text in ways that courts may be more likely to consider transformative.

Imagine a student using AI to generate a report about the US Civil War that incorporates text from a novel on the subject, she said, compared to someone asking AI to create new music based on existing music.

The student example “certainly feels like a different purpose than logging onto a music-generating tool and saying ‘hey, I’d like to make a song that sounds like a top 10 artist,’” Albert said. “The purpose is pretty similar to what the artist would have had in the first place.”

A Supreme Court ruling on fair use last year could have an outsized impact on music cases because it focused largely on whether a new use has the same commercial purpose as the original work. This argument is a key part of the Suno and Udio complaints, which said that the companies use the labels’ music “for the ultimate purpose of poaching the listeners, fans, and potential licensees of the sound recordings [they] copied.”

Ms. Merritt said she worries technology companies could try to use AI to replace artists like her. If musicians’ songs can be extracted for free and used to imitate them, she said, the economics are straightforward.

“Robots and AI do not get royalties,” she said. — Reuters

Residential prices expected to rise 2.2% annually through 2026

PHILIPPINE STAR/RUSSELL A. PALMA

RESIDENTIAL real estate prices in Metro Manila are projected to increase by 2.2% annually through 2026, reflecting a “flattish recovery” amid the exit of Philippine Offshore Gaming Operators (POGOs), according to Colliers Philippines.

“Prices are likely to revert to pre-pandemic levels in the third quarter of 2029,” Joey Roi Bondoc, director and head of Research at Colliers Philippines, said during a briefing on July 31.

The Philippine residential segment will see elevated vacancies as POGOs are set to vacate the country by year-end, according to consulting firms.

Colliers forecasted that rents are set to grow by 1.6% annually from 2024 up to 2026 and will return to pre-pandemic levels in the second quarter of 2028.

“The growth of residential real estate loans is slowing down. From 2017 to 2019, which was a peak period for residential demand across the Philippines, especially in Metro Manila, demand was partly influenced by POGO demand,” Mr. Bondoc said.

President Ferdinand R. Marcos, Jr. has ordered a total ban on all POGOs due to their ties to illicit activities such as financial scams, money laundering, prostitution, and human trafficking.

Metro Manila central business districts currently have 159,000 condominium units as of the second quarter of 2024.

“Currently, vacancy is at 17.7%. With POGO demand, we’re likely to see that inching up to 25.4% by the end of 2024,” Mr. Bondoc said.

The Metro Manila vacancy rate will reach 24.9% in 2025, he said.

He added that for the Bay Area, where POGO employees and residents are mostly concentrated, vacancy is expected to surge to 55% from the current 28% without POGOs by the end of the year, and 53% in 2025.

Meanwhile, Leechiu Property Consultants, Inc. Founder and Chief Executive Officer David Leechiu said the residential sector’s high-end condominium market will continue to be resilient, but the middle market “will be hurt badly.”

He added that the middle market condominium will become cheaper to rent and will fall even faster and deeper than the office segment.

“I think what used to rent for P600 per square meter will very soon be renting for P300 or P250 per square meter in residential,” Mr. Leechiu told BusinessWorld.

POGOs will vacate a million square meters of residential space, he said.

“I think a lot of the consumer sector will also be impacted because these POGOs employ thousands of Filipinos that are local that have to submit their recordings, and then, now, it’s going to be harder,” he added. — Aubrey Rose A. Inosante

PSBank net profit up 18% in 1st half

COMMONS.WIKIMEDIA.ORG

PHILIPPINE SAVINGS Bank’s (PSBank) net income climbed by 18% in the first half amid strong demand for consumer loans and improving asset quality, it said on Monday.

The net profit of the thrift banking arm of Metropolitan Bank & Trust Co. (Metrobank) stood at P2.56 billion at end-June, up from P2.17 billion in the same period last year, it said in a disclosure to the stock exchange.

This translated to an annualized return on equity of 12.5%.

PSBank’s financial statement was unavailable as of press time.

“By prioritizing customer-centricity and a proactive sales approach in our strategy, the bank has seen consistent growth in its core business. Apart from providing top-notch quality service to our patrons, we ensure that the products we offer can pave the way for Filipinos to achieve their financial goals and aspirations. We are hopeful that the positive performance in the first half will be sustained for the rest of the year,” PSBank President Jose Vicente L. Alde said.

The bank’s net interest income grew by 4% year on year to P6.08 billion in the first semester.

Its total operating income, which includes service fees, commissions and other income, stood at P7.74 billion.

On the other hand, PSBank’s operating expenses grew by 5% to P4.62 billion in the period.

The bank’s gross loan portfolio expanded by 10% year on year in the first half.

This growth was mainly driven by an 18% increase in auto loans amid strong vehicle sales in the country, PSBank said.

Even as its loans grew, the bank’s gross nonperforming loan ratio improved to 2.9% at end-June from 3.5% a year ago.

On the funding side, total deposits reached P170 billion.

PSBank’s assets stood at P220 billion at end-June.

Total capital was at P42 billion. The bank’s capital adequacy ratio stood at 24.3%, while its common equity Tier 1 ratio was at 23.2%, both above the regulatory requirements.

PSBank’s shares climbed by five centavos or 0.09% to close at P56.15 apiece on Monday. — A.M.C. Sy

SM Prime’s Q2 income rises to P11.6B, fueled by mall business

SM Prime Holdings, Inc. reported a 16% increase in consolidated net income for the second quarter (Q2), reaching P11.6 billion, up from P10 billion year on year.

This growth was primarily driven by the company’s mall operations, SM Prime said in a statement to the stock exchange on Monday.

The company recorded a 9% rise in consolidated revenue, totaling P34 billion compared to P31.2 billion in the previous year.

The mall segment contributed 58% of total revenue, with rental income climbing 10% to P16.3 billion from P14.9 billion.

SM Prime’s residential business accounted for 29% of consolidated revenue, with earnings up 23% to P10.4 billion, from P8.5 billion in 2023.

For the first half of the year, SM Prime achieved a 13% increase in consolidated net income to P22.1 billion, compared to P19.4 billion previously.

Consolidated revenue for January to June rose by 8% to P64.7 billion from P59.9 billion.

First-half mall rental revenue increased by 9% to P32.1 billion, up from P29.4 billion.

Total mall revenue for the first half reached P37.5 billion, an 8% increase from P34.6 billion in the prior year.

The residential business saw an 8% rise in revenue, totaling P18.9 billion compared to P17.6 billion a year ago, with reservation sales hitting P40.2 billion in the first half.

Additionally, SM Prime’s offices, hotels, and convention centers segments generated P7 billion in revenue for the first six months, marking a 13% increase from P6.2 billion last year. Specifically, the office segment contributed P3.6 billion, while hotels and convention centers generated P3.4 billion.

“SM Prime’s growth in the first half of 2024 remains steady as we realize value from our past expansion projects across our business portfolio. As we celebrate this year our 30th anniversary as a public company, we are determined to continue expanding our core businesses across the Philippines, and introduce innovative and bigger projects in the coming years,” SM Prime President Jeffrey C. Lim said.

“SM Prime remains steadfast in bringing the SM brand closer to more Filipinos through our integrated property developments that promote climate resilience environmental sustainability, and prosperity to all,” he added.

On Monday, SM Prime shares fell by 4.45% or P1.30 to P27.90 per share. — Revin Mikhael D. Ochave

1...1,3481,3491,350...12,724Page 1,349 of 12,724
© 2024 BusinessWorld Publishing.
All rights reserved.
Read our privacy guidelines
Facebook Instagram Linkedin Twitter Youtube