THE Mines and Geosciences Bureau (MGB) said it will inventory the country’s water resources, specifically watersheds where miners are active.

“We can only protect it if we fully understand the behavior of the water both in the surface areas and in the underground areas because it is critical in the sustainability of all activities and communities in the watershed areas,” MGB Director Mario Luis J. Jacinto said on the sidelines of the MGB stakeholders’ forum in Quezon City on Friday

The MGB and its hydrogeologists will draw up a study and determine where the critical watersheds are located and what measures can be implemented to best protect them.

“We hope there will be a harmonization of all the efforts to protect these critical watersheds,” Mr. Jacinto added.

Asked about permits for mines under development that were questioned for being situated near watersheds, Mr. Jacinto clarified that former Environment Secretary Regina Paz L. Lopez did not impose a ban.

On Feb. 14, Ms. Lopez announced the cancellation of 75 mining production sharing agreements located in watersheds as a way to protect the country’s water resources. However, miners affected by the decision reported that the agency merely sent a show-cause order requiring the companies to explain why their permits should not be suspended or revoked.

“The announcement is entirely different from the action that was taken,” Mr. Jacinto added.

The order served on the 75 miners, among others issued by the former secretary during her ten-month tenure, are currently being reviewed to determine whether Environment Secretary Roy A. Cimatu can continue to enforce them. — Janina C. Lim

THE Finance department said macroeconomic fundamentals remain sound and that the risk of the economy overheating, flagged by debt rating agencies, remains farfetched.

Moody’s Investor Service affirmed the country’s Baa2 credit rating last week, but noted “overheating” risks amid a stable growth outlook and sound banking system.

Analysts from Fitch also warned last month of the same risks that warrant monitoring.

“There is ample evidence that the economy is far from overheating,” Finance Secretary Carlos G. Dominguez III told reporters on Friday when asked to respond to the claims of overheating.

He said that headline inflation rates have started to settle down, after hovering at the high end of the central bank’s 2-4% target band since February.

“Number one, growth is only at 6.4%, slightly below our target of 6.5 to 7.5%. Inflation is declining to 3.1% in May, from 3.4% in April, and core inflation is declining from 3% in April to 2.9% in May,” he said.

As of end-May, inflation averaged 3.1%.

Overheating occurs when economic activity generates more demand than supply, which may lead to inflationary pressure.

“Investment growth is robust, faster than consumption, investment growth is topping 7.9% in the first quarter, compared to 5.8% growth in household consumption. Actually it is only a 5% growth rate if we include government,” he added.

“Lending rates are low, real estate rates are second lowest in the ASEAN (Association of Southeast Asian Nations) countries; this implies that investible savings are available for lending, meaning the balance of payments is strong, the deficit is only 1.7% of GDP (gross domestic product), current account deficit is only 0.45% of GDP in quarter one.”

“So I don’t think there is really much danger in overheating,” he added.

Mr. Dominguez also noted that the debt-to-GDP ratio is declining to 43.6% of GDP in March this year, from the 45.9% ratio recorded at end-2016.

The government aims to spend P8.4 trillion over the medium term, in a bid to grow the economy by 7-8% starting next year until 2022.

In its meeting with credit raters in Washington during the World Bank spring meetings, Finance Undersecretary Gil S. Beltran said that the debt rating agencies are more worried about the uncertainty brought about by President Donald J. Trump, in the US rather than developments in the Philippines.

“They raised concerns about Trump, which we think, we don’t have a hold on that so what can we do? Nothing on domestic policy,” he said.

“The capacity of the country is growing with the increasing investment. So we don’t think there is going to be impact on inflation, as a matter of fact, for the latest estimates for June we are expecting a further decline in inflation,” he said.

“With capacity constraints we don’t see it,” he added. — E.J.C. Tubayan

Finance Secretary Carlos G. Dominguez III — THE PHILIPPINE STAR_ KRIZ-JOHN ROSALES

RELIABLE and competitively-priced electricity remains dependent on a “balanced mix” of generation sources, including fossil fuel, said a top official of the country’s second-largest power distribution utility.

“A balanced mix of renewable and thermal energy sources can address the different levels and patterns of power demand in the most efficient and cost-effective way,” said Anton Mari G. Perdices, chief operating officer of Visayan Electric Co., Inc. (VECO).

Mr. Perdices’ statement was sent by AboitizPower Co., which jointly runs VECO along with Vivant Corp. He gave his statement during the SwitchPH Renewable Energy Summit at the University of San Carlos-Talamban Campus in Cebu City.

Mr. Perdices said more than 50% of VECO’s power supply comes from renewable energy (RE), but there continues to be a need for a balanced mix of generation sources.

He said in the long-term, RE would be cheaper than fossil-based technologies, “but the initial investment into RE is high at present.”

He said that although renewable energy sources lessen the country’s dependence on imported fossil fuels and help mitigate the effects of climate change, they also have disadvantages.

Some types of RE are location-specific, Mr. Perdices said, citing geothermal and hydro. Solar and wind power farms cannot provide baseload power due to reliability issues, he added.

VECO’s peak demand in 2016 was 524 megawatts (MW), of which 50.47% mostly came from geothermal sources in the Visayas, AboitizPower said. VECO distributes electricity to Metro Cebu’s towns and cities.

AboitizPower, together with its partners, has a net sellable capacity of 3,954 MW, of which 32% or 1,263 MW comes from RE. That share is expected to expand further with the completion of the 69-MW run-of-river Manolo Fortich hydropower project in Bukidnon, the 8-MW Maris Canal hydro project in Isabela, and the 8.8-MW biomass facility in Lian, Batangas through subsidiary Aseagas Corp.

In April, AboitizPower completed the restoration of the 6-MW binary one plant at the MakBan geothermal plant. — Victor V. Saulon

A balanced mix of renewable and thermal energy sources can address the different levels and patterns of power demand in the most efficient and cost-effective way — Anton Mari G. Perdices, chief operating officer of Visayan Electric Co., Inc. — VECO CEBU

LONDON — So strong is the belief in the growth momentum of the global economy as it enters the second half of 2017, the point has been reached in the economic cycle where data not meeting expectations is dismissed as an aberration.

Flash purchasing managers’ indices for services in Europe in June, for example, were weaker than anyone in a Reuters poll had predicted, but the market paid scant attention. “Way below expectations, but let’s not worry,” was the mantra.

Such economic Panglossianism — all for the best in the best of all worlds — is based on what seems to be a majority view among policy makers and economists that the world is enjoying a broad expansion.

“Faster growth this year reflects a synchronized improvement across both advanced and emerging market economies,” Brian Coulton, Fitch Ratings’ chief economist, wrote in an outlook projecting 2017 would have the fastest world growth — 2.9% — since 2010.

Backing up this view, central banks in the United States, euro zone and Britain are leaning towards tightening, albeit with a cacophony of mixed signals about when.

Financial markets are now pricing in a 90% chance of a euro zone rate hike by July next year, for example, to go with the Federal Reserve’s ongoing upward tweaks.

There are, however, some inconvenient trends out there that will need consideration in the second half.

First, there have been some signs of a dip in economic activity, while inflation remains, in most places, stubbornly nonchalant towards the huge monetary stimulus thrown at it.

The Citi Economic Surprise Index, which moves in tandem with data beating or underclubbing expectations, has plunged for the main industrial nations this year and is at negative levels not seen since 2011.

Real US gross domestic product has been increasing, but the pace has been slower in each of the past two quarters up to the fairly slow annualized 1.4% in January-March.

A report by the Atlanta Fed suggests second quarter growth will bounce back — but as a result of stronger home sales, a reflection of cheap money, offsetting sluggish equipment and inventory investment.

Durable goods orders declined sharply and jobs growth slowed at their last readings.

In the euro zone, the overall picture is relatively positive with a current 1.9% year-on-year growth rate — but there are centers of trouble, such as in Italy, the bloc’s third largest economy. And while deflation may have gone, inflation is still below target.

The jobless rate is lower, but still above 9% (twice that for the young), consumer spending has been easing and wage growth is stubbornly slow.

China, meanwhile, has avoided the slowdown some feared. Indeed, factories grew at their quickest pace in three month in June.

But an official crackdown on excessive debt and shadow banking has been enough of a risk to economic stability to make the central bank cautious about taking further action, particularly ahead of this year’s Communist Party Congress.

In Japan, the government has raised its overall view of the economy because of growth in private consumption. But the latest data showed retail sales rising less than expected with slowing sales of durable goods and clothes.

Britain, facing the huge unknown of leaving the European Union, is a case unto itself, with plummeting consumer confidence.

None of this is to say that the world economy is not in good shape, with (non-British) consumer and business confidence generally rising.

There are “mixed signals,” David Folkerts-Landau, group chief economist at Deutsche Bank, wrote to clients, but these reflect “momentum softening in the margin, but still robust.”

But enough uncertainties exist for the Bank of International Settlements — the central bankers’ banker — to warn of risks ahead from a turning financial cycle, unmanageable household debt, and weak productivity growth among others.

These are hard to track, but there will be a number of data spot-checks in the coming week.

Full purchasing manager indices and equivalents such as Japan’s Tankan will show whether manufacturing and services growth is keeping up with expectations or succumbing to a mild slowdown.

Germany, France and Britain will also release their latest industrial output numbers.

Finally, the end of the week brings the US non-farm payrolls data for June. The number of new jobs is expected to rise from May’s release, but still reflect a much lower pace of job creation than at the beginning of the year.

In addition to the numbers, there will be talk. The Group of 20 nations meets in Berlin at the end of the week — seeking some kind of unity with US President Donald Trump to keep things going through the second half and beyond. — Reuters

DAVAO CITY — Maharlika Agro-Marine Venture Corp. said it has lost its Japanese clients for Peking duck to competition from Thailand, and is struggling to venture into new export markets due to the absence of government-to-government agreements.

“The prospects for Peking duck are not so nice now. Our volume is not so big and we can’t compete against Thailand because their volume is huge,” Maharlika Chairman and Chief Executive Officer Vicente T. Lao said in an interview.

The company started exporting Peking duck products to Japan in 2013 through contracts with Japanese firms Daigo Tsusho Co., Ltd. and Aono Fresh Meat Co. Ltd. These deals that covered up to 28 metric tons (MT) monthly, however, have recently been terminated as the buyers shifted to Thai suppliers.

“We can’t compete with Thailand and China because they have the volume,” Mr. Lao said. “Thailand also has advantage because they can ship their by-products to China through the backdoor and since the by-products like gizzard are three times more expensive, especially during Christmas, they can transfer the cost to these by-products so they can sell their main products at a cheaper price,” he added.

Aside from lower production volume compared with foreign competitors, Mr. Lao said the company is facing difficulties developing other markets because of “protocol problems” arising from the absence of agreements between the Philippines and potential export destinations.

“Protocols mean two countries have an agreement that if one certifies that the meat product is okay, then the other country will accept it if I send the product, and vice versa,” he explained.

The Philippines and Japan, for example, have the Japan-Philippines Economic Partnership Agreement (JPEPA), under which the firm was able to export the duck products to Japan.

Mr. Lao said he has written to the Department of Agriculture (DA) several times to seek help on this, but there has been no response.

“Like I need to talk to an investor in South Korea, but government has not established protocols,” he said.

Maharlika’s prospects for the Middle East, meanwhile, have been put on hold due to Halal certification issues.

In the meantime, Mr. Lao said the local market remains robust, especially with the DA’s importation ban on all poultry products — including dressed and deboned chicken, duck and eggs — following bird flu cases in Europe and Asia.

Maharlika, established in 2006, supplies Philippine buyers with up to 40 MT of Peking duck meat per month, including frozen whole duck and premium cuts, among other products.

The company sources 3,000 duck breeders every three months from Cherry Valley Farms, Ltd. in the United Kingdom. It breeds the ducks in its farms in Manolo Fortich, Bukidnon and in Arakan Valley at the boundary of Davao City and North Cotabato. The ducks are then processed in facilities in Cagayan de Oro and Davao City.

Mr. Lao said he remains optimistic about the business and believes that if given government support, the Peking duck sector has a lot of potential for export growth considering that the Philippines has maintained its standing as a bird flu-free country and the climate is conducive to breeding. — Carmencita A. Carillo

Lower production volume compared with foreign competitors and absence of agreements between the Philippines and potential export destinations are becoming problems of duck product exporters like Maharlika Agro-Marine Venture Corp. — WWW.MAHARLIKA.COM.PH

Suits The C-Suite — By J. Carlitos G. Cruz

One of the greatest business disruptors in recent years has arguably been the rise and exponential growth of the “sharing economy.” An EY report on the sharing economy defines it as comprising new business models empowered by multiple disruptive technologies (i.e. cloud-based collaborative apps riding on high bandwidth, always-on mobile networks and the web) that exploit previously inaccessible information to instantaneously match consumer needs to idle capacity to create economic efficiencies.

Quite a mouthful of a definition but in essence, sharing economy is about how technology-enabled business innovation is giving rise to real-time utilization, empowering entrepreneurs and increasing customer satisfaction. We can see its impact on various industries, notably transportation, hospitality, services and even venture funding, among others. Through real-time, virtual marketplaces, a commuter can instantly hire a car, a traveler can rent someone’s home, and a homeowner can immediately find a trustworthy worker to do repairs.

A large part of the success of sharing-economy companies relies on robotics (automated applications and not physical robots), which maximizes process efficiencies for certain functions, such as calculating fares, estimating trip durations based on crowdsourced real-time traffic updates, managing reservations, and handling basic customer service.

In addition to boosting asset utilization and usage efficiency, the sharing economy is also redefining service levels through rating systems. By enabling customers to give immediate feedback, these business models reward service or asset providers with tangible benefits such as cash bonuses, increased visibility and more bookings. This creates a positive socio-enterprise loop that further accelerates the growth of the sharing economy. In fact, the benefits are already tangible in the following situations:

• Customer satisfaction — Most users delight in their experience, enjoying improved service, lower costs and instant gratification. Not only do customers get more choices, they are also attracted to the higher level of interaction, just like in social networks.

• Individual entrepreneurship — Anyone can now be an entrepreneur. Many sharing economy participants see it as a life-changing experience because the system empowers them to not only advertise and monetize their assets, time or skills, but it also lowers the barriers to market entry by providing the tools and the marketplace. This freedom to work and earn on their terms, and at their own time, makes the sharing economy quite attractive to millennials.

• Boosting developing economies — For emerging markets or developing economies, the sharing economy may provide first-time access to certain assets for a large segment of the population. It allows those who can afford certain assets, e.g. cars, to offset their ownership cost, while offering affordable access to those who can’t afford them. This will likely increase adoption in developing economies.

• Societal benefits — Sharing-economy businesses are also seen to be beneficial to the environment through more efficient use of resources and increased productivity. This translates into concrete benefits, such as reduced traffic, reduced manufacturing, reduced operational costs, and others.

IMPACT ON BUSINESS
The sharing economy has drastically redefined the traditional business paradigms upon which large enterprises are built. Because of the ease by which users can avail of assets or services, overall liquidity in the market is increased. At the same time, since utilization is increased, new value is created because providers are better able to monetize their assets. For example, a car owner who signs up with Uber can earn income from what was essentially a private-use asset; or an Airbnb provider now gets rental income from a family home. Through value creation, liabilities can become income-generating assets.

Sharing-economy businesses may soon open up opportunities for B2B interactions or “industrial mash-ups.” We should anticipate future systems and interactions that provide simplified, automated access to business processes, for example, a company in one country being able to directly manage and utilize the available manufacturing capacity of a factory in another country.

As with any kind of disruption, there will naturally be challenges. Sharing-economy businesses are already triggering increasing levels of government oversight and calls for new regulatory policies in many countries. Governments are still undecided on how they want to participate in the sharing economy, whether to allow, ban or strictly regulate it. The problem is not that sharing-economy companies are trying to bend or break the rules — the problem is that for many industries and situations, the rules don’t even exist yet.

Sharing-economy companies are also seen to disadvantage incumbent businesses and industries, like encouraging customers to switch, or not needing to own their own assets. Their increased flexibility, however, also opens up new business risks, from dealing with their own rapid internal evolution, to IT development and system issues, as well as pressure from regulators and government and the transition to more diverse global markets.

IMPACT ON USERS
As mentioned earlier, the benefits of the sharing economy are seen to be inordinately appealing to millennials and succeeding generations, both as participants and consumers.

First, the concept of freedom and independence is attractive. Asset or service providers can provide availability at their own time and pace, without being tied down to a particular office or company. Many millennials also see entrepreneurship as the key to independence, which ties in directly with sharing economy. On the other hand, millennial consumers see the advantage of being able to use an asset, like a car or a home, without having to buy one themselves.

Second, millennials are experience-seekers who constantly look for new stimulus and interactions. Through the sharing economy, millennials get to engage with new people every time. In addition to the wider social component, having rating systems that positively reward good performance also provides instant gratification similar to how millennials value “likes” and “shares” on social media.

Third, given the fondness of millennials for technology, the online and mobile platforms used by sharing-economy businesses integrate quickly and easily into their daily technology usage and habits. With the almost intuitive grasp millennials have over apps and mobile technology, accessing, utilizing and participating in sharing-economy models feels almost second nature to them.

TO SHARE OR NOT TO SHARE
Incumbent businesses need to consider making rapid choices on how and if they will participate in the sharing economy. Given that the sharing economy is making rapid inroads into every industry, businesses would be remiss if they do not consider adapting its benefits or they risk getting left behind.

Companies may need to take steps in developing new business strategies to fit a sharing-economy world. As more of their existing customers experience the sharing economy, their expectations of incumbent companies are likely to change. Businesses need to constantly find new ways to better listen, address and act on fast-changing customer demands.

Incumbents can leverage on their existing advantages, such as a strong brand resonance with their existing customer base, proven reliability, security and the ability to deliver consistent customer experiences. However, companies cannot be complacent in this aspect — it’s not going to be enough to simply rely on one’s past performance and reputation to maintain one’s future market position.

Another option is to dive right into the sharing economy, perhaps even through mergers and acquisitions. As with most industries, early entry is often a key to longevity. Take for example how some global automobile manufacturers have already launched car-sharing services, or how some smaller hotels have already taken to advertising available rooms in home-sharing marketplaces.

Ultimately, the sharing economy is but one of the technology-based disruptors that are dramatically changing global business. For companies to survive, adapt and even thrive under such conditions, it is vital that an openness to innovation be infused throughout the organization’s DNA — from the basement all the way up to the boardroom.

This article is for general information only and is not a substitute for professional advice where the facts and circumstances warrant. The views and opinion expressed above are those of the author and do not necessarily represent the views of SGV & Co.

J. Carlitos G. Cruz is the Chairman and Managing Partner of SGV & Co.