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Gov’t urged to prepare for expected surge in rice imports

PHILIPPINE STAR/EDD GUMBAN

THE MARCOS ADMINISTRATION should ensure that the lower tariffs on imported rice will not result in a further decline in rice self-sufficiency, the Philippine Chamber of Agriculture and Food, Inc. (PCAFI) said.

In a letter to President Ferdinand R. Marcos, Jr., PCAFI President Danilo V. Fausto aired the group’s “grave concerns” over the recent issuance of Executive Order No. 62 which slashed tariffs on rice to 15% until 2028.

“The challenge to EO 62 is how to implement it without a further decline in self-sufficiency in this age of climate change and geopolitical disruptions,” he said.

Mr. Fausto said the government should reassure the rice sector by preparing for a surge in rice imports through the Special Rice Safeguard under Republic Act (RA) No. 11203 or the Rice Tariffication Law (RTL).

“This means determining the volume or price triggers, as the case may be, as soon possible. The last administration, ignoring the said mandatory provision, did not even bother to compute for either one,” he said.

Mr. Fausto noted the RTL was implemented by the previous administration to benefit traders, to the detriment of consumers and rice farmers. He also claimed the law decreased the country’s self-sufficiency to 75%-80% from 90%-95%.

Under the law, a special safeguard duty on rice “shall be imposed” in order to protect the Philippine rice industry from sudden or extreme price fluctuations.

This is in accordance with RA 8800, or the Safeguard Measures Act, as well as its implementing rules and regulations, the law stated.

Mr. Fausto said that EO 62 has generated “controversy” due to the non-conduct of “genuine and timely consultations.” He said the National Economic and Development Authority’s (NEDA) insistence that the hearings of the Tariff Commission last year constitute compliance with due process “damages its credibility as a crisis manager.”

He said that the system is flawed as NEDA, which proposed the tariff cuts, has jurisdiction over the designated fact-finding body, the Tariff Commission.

“The sectors are left with no choice but to file a case on the issue of due process. By NEDA’s logic, it can go back to hearings conducted 10 or 20 years ago and insist that the proceedings therein would constitute compliance as long as they involved the same sector,” he said.

“This is dangerous. There will be no more new hearings,” he added.

Raul Q. Montemayor, national manager of the Federation of Free Farmers, told BusinessWorld in a Viber message that the Special Rice Safeguard is “very weak.”

“The additional tariff cannot exceed 1/3 of the applied tariff. In the case of rice, the maximum additional tariff we can apply is 5%, and it can be applied only from the time we breach the trigger up to the end of the year, even if the import surge spills over to the next year,” Mr. Montemayor said.

“What will be more effective are the general safeguards, where there are no limitations on the additional tariff that can be imposed, and which can be put in place from 200 days up to 2 years. But this needs real-time data to determine if there is a surge and that the surge is hurting farmers,” he added.

Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said that lower rice import tariffs would mean a 20% discount on imported rice.

“Rice accounts for nearly 9% of the consumer price index (CPI) basket, so imported rice accounts for nearly 1.8% of the CPI basket,” said Mr. Ricafort in a Viber message.

“Thus, lower imported rice tariffs and prices would help reduce headline inflation by about 0.36, on a standalone basis, but more if locally produced rice prices go down as a result of lower prices and tariffs on imported rice,” he added.

“Thus, average inflation towards 3% becoming more feasible, going forward.”

Asked about the imposition of safeguard duties, Mr. Ricafort said that it would “effectively increase the price of imported rice and would help support farmgate palay prices and the incomes of palay farmers.”

Meanwhile, Mr. Fausto also recommended the allocation of more financial resources to help the agricultural sector through “enhanced guarantees for credit and insurance for farmers and millers.”

The government should also create programs to allow local government units to procure agricultural products directly from farmers and cooperatives during “times of surplus or market failure,” he said.

Mr. Fausto said the government should boost the National Food Authority’s (NFA) financial and storage capacity to buy more palay.

He also criticized the EO’s provision that allows the NEDA to review the tariffs on rice every four months.

“NEDA is a very ideological agency. It has a well-known bias against local producers, especially those in agriculture and fisheries,” he said. — J.I.D.Tabile

DoubleDragon’s Sia: 2024 last chance for 8.008% retail bond

LISTED property developer DoubleDragon Corp. (DD) has set the interest rate for its forthcoming 3.5-year retail bond offering at 8.008% per annum.

“I personally believe that 2024 could be the very last year in my entrepreneurial journey that the retail public can participate with a retail bond priced at 8.008% coupon rate given that not only that DD is nearing the blue chip level of balance sheet but also the global high interest cycle is starting to shift to downward interest rate cycle,” DD Chairman Edgar “Injap” J. Sia II said in a statement on Monday.

This retail bond offering represents the initial segment of DD’s shelf-registered debt securities program, which totals up to P10 billion. The offering includes a principal amount of up to P3 billion, with an oversubscription option of up to P3 billion.

DD said the offer period commenced on June 28 and will run until July 10, with listing on the Philippine Dealing & Exchange Corp. scheduled for July 16.

According to its final prospectus dated June 27, the company anticipates generating over P5 billion in net proceeds assuming full exercise of the oversubscription option.

These proceeds are intended to partially finance the redemption of DD’s P9.7-billion fixed-rate bonds issued in July 2017, as well as to cover overhead expenses including working capital requirements.

The 3.5-year retail bond offering has received a “PRS Aaa” rating with a stable outlook from the Philippine Rating Services Corp. (PhilRatings). This rating denotes minimal credit risk, and the stable outlook indicates an expectation of the rating remaining unchanged over the next twelve months.

DD has engaged RCBC Capital Corp., Unicapital, Inc., and Development Bank of the Philippines as joint lead underwriters and bookrunners for the issuance.

“We are glad to tap the peso retail bond market again after over five years. We believe that the pricing of this DD retail bond offering at 8.008% will enable a wide range of people to avail of the good coupon rate for a Triple A-rated retail bond and given the minimum investment size of only P50,000,” Mr. Sia said.

“On top of that, 8 is also believed by many to be an auspicious or ‘swerte’ (lucky) number and having two 8s in the coupon rate could be even more auspicious,” he added.

For 2024, DD anticipates surpassing P100 billion in total equity for the first time.

The company also expects a strengthened balance sheet following the upcoming listing of its hotel subsidiary, Hotel101 Global Pte. Ltd., on the Nasdaq Stock Exchange in the United States.

Hotel101 Global will trade on Nasdaq under the ticker symbol “HBNB” following its execution of a binding definitive merger agreement with special purpose acquisition company JVSPAC Acquisition Corp.

Last year, DD saw a 23.25% increase in its consolidated net income to P15.93 billion as consolidated revenue climbed by 75% to P24.74 billion.

DD shares declined by 1.65% or 20 centavos, closing at P11.90 per share on Monday. — Revin Mikhael D. Ochave

CREC, SMC power arm to boost solar capacity with 153.5-MW plant in Bataan

CREC.COM.PH

CITICORE Renewable Energy Corp. (CREC) has formed a joint venture with SMC Global Light and Power Corp. (SGLP), the power arm of San Miguel Corp. (SMC), to build a 153.5-megawatt (MW) solar power plant in Mariveles, Bataan, the Saavedra-led solar power company said on Monday.

CREC and SGLP recently signed an investment and shareholders agreement to jointly develop, construct, and operate a solar power plant, the company said in a regulatory filing.

“The joint venture will add approximately 76.75MW to the company’s attributable solar energy capacity,” CREC said.

“The parties shall collaborate and cooperate in the financing, construction, ownership, operation, and maintenance of the plant through the subscription to a special purpose entity,” it added.

SGLP, a wholly owned subsidiary of San Miguel Global Power Holdings Corp., the power arm of San Miguel Corp., intends to participate in a special purpose entity (SPE) for the project, subject to several conditions.

These conditions include: incorporation of the SPE; completion of CREC’s due diligence on the SPE within 10 days after its incorporation; transfer of the solar energy operating contract from SGLP to the SPE with consent from the Energy department; CREC’s subscription to the SPE; and execution of energy supply contracts, sublease agreements, and engineering, procurement, and construction contracts with the SPE.

Upon satisfaction of these conditions, both parties will subscribe to the SPE, with CREC initially owning 49% and SGLP owning 51% of the total issued and subscribed capital stock.

During the construction phase, CREC will subscribe to additional shares, resulting in an equal 50:50 ownership between the two companies.

Last month, CREC listed its P5.3-billion initial public offering consisting of 1.79 billion common shares, with a 10% overallotment option of up to 178.57-million secondary common shares at P2.70 apiece.

CREC aims to add one gigawatt (GW) of solar energy capacity annually to the Philippines energy mix, focusing on ready-to-build or under construction projects over the next five years, aiming for a total of around 5 GW by 2028.

First Metro Investment Corp. Head of Research Cristina S. Ulang said that the joint venture aligns closely with SMC’s strategy to pursue additional joint ventures.

“Risk sharing is becoming more a feature of SMC’s renewable energy expansion strategy,” she said via Viber.

Regarding CREC, Ms. Ulang said that the joint venture “lightens up the capitalization and risk burden for them too.”

“They both have the technology and benefit from tech know-how sharing and capabilities,” she added.

At the local bourse on Monday, CREC shares in the company closed at P2.69 each. — Sheldeen Joy Talavera

MPTC, Singapore’s GIC forge $1-B deal for Indonesian toll stake

FREEPIK

METRO Pacific Tollways Corp. (MPTC) announced on Monday a “strategic investment cooperation” with its subsidiaries — PT Margautama Nusantara (MUN) and PT Metro Pacific Tollways Indonesia Services (MPTIS) — and its partner Singapore’s GIC Pte. Ltd. to acquire a 35% stake valued at approximately $1 billion in Jasamarga Transjawa Tol (JTT), a subsidiary of PT Jasa Marga (Persero) Tbk, Indonesia’s state-owned toll road operator.

“JTT is a network of 13 toll roads in the provinces of West Java, Central Java, and East Java,” MPTC said in a statement.

“The combined 676-kilometer long road is considered Indonesia’s crown jewel that allows the efficient flow of 850,000 vehicles daily across Indonesia’s economic powerhouse of Java Island,” it added.

MPTC also said the addition of JTT toll roads is expected to further boost its portfolio to 1,130 kilometers connecting various economic zones in the Philippines and Indonesia.

“This deal fortifies MPTC’s goal to expand in Southeast Asia and enhance our infrastructure portfolio. This expansion in Indonesia aligns well with our commitment to improve our regional presence in toll road operations,” said Rogelio L. Singson, MPTC president and chief executive officer.

In 2023, GIC acquired a 33% stake in MPTC’s MUN for $209.9 million. Consequently, MPTC ownership in MUN decreased to 60.3%, although it retains the majority share. MPTC concurrently collaborated with GIC in the joint bidding process for JTT.

MPTC is the tollway 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. — A.E.O. Jose

Del Monte Pacific expects ‘reduced’ net loss in 2025, focuses on asset sales, cost cutting

DEL MONTE PACIFIC Ltd. (DMPL) on Monday said it saw a net loss of $127.3 million for the fiscal year ending April 2024, a reversal from the prior year’s net income of $16.9 million, primarily attributed to decreased gross profit.

Looking ahead to fiscal year 2025, DMPL anticipates another net loss, albeit reduced, and is focusing on selectively selling assets, injecting equity through partnerships, rightsizing its workforce, and reducing fixed costs, it said in a statement to the stock exchange.

The company cited a 30.4% decline in gross profit to $422.2 million from $607 million, driven by inventory-related costs in its US operations and reduced pineapple supply in Asia.

Although sales increased marginally by 0.3% to $2.42 billion, driven by higher US sales and increased fresh pineapple exports to China and South Korea, earnings before interest, taxes, depreciation, and amortization plummeted by 59.6% to $133.2 million.

Del Monte Foods, Inc., the company’s US unit, contributed $1.74 billion, or 72% of total sales.

Meanwhile, Del Monte Philippines, Inc., reported sales of P38.7 billion, a 5.6% decline in peso terms, due to lower pineapple harvests and increased interest costs stemming from higher interest rates and loan balances.

For the fourth quarter, DMPL’s net loss widened to $76.7 million from $11.9 million a year earlier, attributed to lower gross profit and increased interest expenses.

The company has established a task force to enhance gross margins, particularly in the US and across DMPL, starting in the second half of fiscal year 2025, despite ongoing high inflationary pressures, particularly in the US.

Initiatives include reducing inventory, minimizing waste and write-offs, cutting warehousing and distribution costs, consolidating manufacturing operations, enhancing planning through digitization, ensuring clear organizational accountability, and improving productivity for processed pineapple variety C74 over the next 12 to 24 months.

Additionally, DMPL plans to drive growth through innovations such as Joyba bubble tea in the US and expanding its dairy business in the Philippines. It also aims to bolster its fresh business in North Asia and other export markets through increased investments.

“The group will pursue all these initiatives in fiscal year 2025 but the results will only be fully reflected in fiscal year 2026,” DMPL said.

On Monday, DMPL shares fell by 12.36% or 68 centavos, closing at P4.82 each. — R.M.D. Ochave

Century Pacific Food increases capex to P5 billion for coconut business

CENTURY Pacific Food, Inc. (CNPF) said it has earmarked up to P5 billion as its capital expenditure (capex) budget for 2024, an increase from the previous year, aimed at boosting its coconut business.

“Our 2024 capex budget is around P4 to P5 billion, which is a big jump from 2023 and prior numbers. One main activity here is that we are increasing our coconut processing capacity. That’s taking a significant chunk, about half of our capex this year,” CNPF President and Chief Executive Officer Teodoro Alexander T. Po said during the company’s virtual annual stockholders meeting on Monday.

In 2023, CNPF allocated up to P3.5 billion as its capex budget to fund the expansion of its meat, pet food, coconut, and packaging manufacturing businesses.

“The other half of capex will continue to go to maintenance and cost improvement capex. There’s also some capacity expansion happening in other parts of our company that will require capex, but to a smaller extent than the coconut business. Lastly, there are special efficiency and environmental sustainability projects that we also budget some capex for,” Mr. Po said.

Mr. Po said the company is already in the mid-stages of completing the expansion of its coconut processing due to surging demand.

“We’ve been getting more demand from our principals in the United States and in Southeast Asia. This latest capex will roughly increase our (coconut processing) capacity by about 25%,” he said.

“This is just the first stage of the expansion and if market trends continue, we expect to be double our current capacity in five or seven years from now,” he added.

CNPF previously committed $40 million to expand its coconut processing capacity. The expansion aims to serve both its original equipment manufacturer and domestic coconut business with room for growth.

The commitment is part of an expanded agreement with US-based beverage firm The Vita Coco Company, Inc., which requires approximately 90 million liters of coconut water over the next five years.

For the first quarter, CNPF recorded a 15% growth in its attributable net income to P1.72 billion as total revenue surged by 16% to P18.2 billion.

CNPF shares rose by 2.95% or 95 centavos, ending at P33.10 per share on Monday. — Revin Mikhael D. Ochave

Hollywood pushes climate stories and solutions toward center stage

IN A one-on-one conversation about climate change, United States Department of Energy Secretary Jennifer Granholm talked about growing clean energy production. But her counterpart wasn’t a policy wonk; it was Wonder Woman director Patty Jenkins.

It was a typically atypical pairing at the Hollywood Climate Summit, putting a Washington power player with the director of a film that IMDB says grossed more than $824 million. The four-day event last week highlighted how the entertainment industry can tell better climate stories while also addressing sustainability on set.

“We need help,” Ms. Granholm said to a theater of entertainment-industry workers, calling for assistance to accurately portray climate change and tell more stories focused on the energy transition. Doing so would help the public better understand what the future could look like.

The event’s programming also included film screenings and a variety of plant-based snacks, including eggless eggs and lox made from carrots. The Academy of Motion Picture Arts and Sciences served as the backdrop for the environmental discussions.

“This is the only climate event where you’ll have a conversation about the climate, then get handed a headshot,” said comedian Esteban Gast, one of the summit’s hosts.

Lee Isaac Chung, the director behind the soon-to-be-released Twisters, said that the follow-up film will serve as a more scientifically accurate portrayal of storm chasing, a field that has also faced heavy criticism for needlessly seeking out danger. The movie will also show the effects of natural disasters at a level that movies don’t typically portray, he added.

“We had an opportunity to talk about what people in small towns are dealing with,” Mr. Chung said, highlighting his own experience growing up in Arkansas. The US, where the bulk of the world’s tornadoes happen, has seen an uptick in the number of days that spawn many twisters, a trend that could be driven in part by climate change.

Accurately portraying the impacts of climate change and the energy transition is a major challenge for Hollywood. But so, too, is reducing the entertainment industry’s emissions. The Producers Guild of America released a call to action in 2021 about the need to address “sporadic and wholly inadequate” sustainability efforts on sets.

The average major movie production emits about 33 metric tons of carbon per day, according to a 2021 report put out by a group that includes Netflix, Inc., the Walt Disney Co., and Sony Pictures Entertainment, Inc., among other movie industry titans. That’s more than seven times what the average US vehicle emits annually.

Even though introducing sustainability on set can feel daunting, International Alliance of Theatrical Stage Employees members Max Schwartz and Allison Elvove said sustainable alternatives for production equipment have grown significantly in the past year, including innovations like renewable diesel and electric generators with enough wattage to power portions of the filming process. Electric vehicles and other everyday solutions could further cut the industry’s carbon footprint.

While production emissions are a challenge Hollywood will have to overcome, an even bigger one is addressing climate pollution associated with streaming. That accounts for the vast majority of the entertainment industry’s emissions. Lowering those emissions is an ongoing struggle for companies. But despite the slow progress, Ms. Granholm highlighted the importance of continuing to work on cutting carbon from all facets of the industry — and the rest of the economy.

“May we all bear the scars of the most important fight,” she said. — Bloomberg

Ayala Land breaks ground on Park Villas project in Makati

AYALALAND.COM.PH

AYALA LAND, Inc. (ALI) said it has started development on its Park Villas exclusive residential property in Makati City, expanding its portfolio in the premium residential sector.

Located across Ayala Triangle Gardens, Park Villas will feature 45 villas, with each villa occupying an entire floor of the 51-storey building that offers “unrivaled privacy and space for its discerning owners,” the property developer said in an e-mailed statement on Monday.

The villas will span 610 square meters and will be fitted with floor-to-ceiling windows. The property will offer views of Ayala Triangle Gardens and the Makati City Skyline to the northwest, and Urdaneta Village, and the Bonifacio Global City Skyline to the southeast.

The project is being undertaken by ALI, though its Ayala Land Premier premium residential brand, along with the Tagle Group of Companies.

“Ayala Land Premier has been an integral part of Makati’s development as a vibrant and progressive city. Together with the new Mandarin Hotel, the Park Central Towers, and now, the iconic Park Villas, we are committed to setting a new benchmark in contemporary living and sustainability,” Ayala Land Premier Premier President Joseph Carmichael Z. Jugo said.

Park Villas will also dedicate approximately 2,400 square meters to wellness facilities, including a pool complex, an exclusive residents’ lounge, and open spaces for recreation.

The design of Park Villas will be led by Skidmore, Owings & Merrill for the architecture, and Yabu Pushelberg for the interiors. The property is Leadership in Energy and Environmental Design registered.

On Monday, ALI shares rose by 1.4% or 40 centavos to P28.90 apiece. — Revin Mikhael D. Ochave

The orchestra takes on K-Dramas

BRONTË H. LACSAMANA

By Brontë H. Lacsamana, Reporter

Concert Review
OST Symphony: K-Drama in Concert
June 29
Manila Metropolitan Theater

ANYBODY who is into Korean dramas, or K-Dramas, would have enjoyed OST Symphony: K-Drama in Concert, performed by the Philippine Philharmonic Orchestra (PPO) at the Metropolitan Theater in Manila.

The PPO was joined by several guest singers, one being South Korean pop singer-songwriter Gaho (real name: Kang Dae-ho) who rose to prominence in 2020 for singing the theme songs for various K-Dramas. The section of the show that featured the music of Filipino adaptations of K-dramas featured Julie Ann San Jose and Zephanie Dimaranan as guest vocalists.

For a distinct Korean collaboration within the orchestra itself, renowned concertmaster Kim Mi-jung lent her talents as principal violinist.

“There is a saying in Korea that means ‘red bean bun without red bean,’ which doesn’t sound right. It’s unimaginable to think of one without the other. Similar to how red bean matches the bun, K-dramas and their soundtracks are a match made in heaven,” said Lee Sang-hwa, ambassador of the Republic of Korea to the Philippines, in an opening speech.

“Korean dramas have deeply touched the hearts of the Filipino people. To commemorate the 75th anniversary of Korean-Philippine diplomatic relations, this concert is a token of our gratitude to Filipino lovers of Korean culture.”

True to the promise to make us relive the best, most heartwarming, and most touching moments of K-Dramas, the show opened with the orchestral versions of “My Destiny” from the My Love from the Star (2013) and “You Are My Everything” from Descendants of the Sun (2016).

While conductor Herminigildo Ranera led the PPO in recreating the melodies, a large LED screen onstage played iconic scenes from the shows, care of streaming partner Viu. The red carpet kiss of the leads in My Love from the Star and the dramatic reunion of Captain Yoo and Doctor Kang in Descendants of the Sun were compelling to watch when paired with live music, enchanting even those of us in the audience with only a casual knowledge of K-dramas.

The orchestra then launched into a medley that went by too quickly, featuring soundtracks from the tense Netflix series Squid Game, the endearing 2022 legal drama Extraordinary Attorney Woo, and early 2000s classics (for those who were into K-dramas way before Hallyu blew up!) Jewel in the Palace, Hwang Jini, and All In.

The PPO then played three tracks from the 2016 romance Love in the Moonlight, with Park Bo-Gum’s youthful, cutesy face lighting up the theater for all to admire (or be annoyed with). One K-drama this writer was hoping to revisit, also starring Mr. Park, was the coming-of-age family drama Reply 1988, which boasts poignant music of its own, but it unfortunately wasn’t in the set.

The show then shifted gears to highlight Filipino dramas, too. Zephanie Dimaranan went onstage to sing “Nagbago ang Daigdig,” the theme song of the GMA show My Guardian Alien starring Marian Rivera and Gabby Concepcion. After that, Julie Ann San Jose captivated the audience with her English version of “You Are My Everything” from the Filipino adaptation of Descendants of the Sun, which starred Dingdong Dantes and Jennylyn Mercado.

Both singers, dressed elegantly in Filipiniana gowns, were a perfect representation of the country’s vocal prowess.

At first a jarring switch from the sweet, heartwarming, symphonic melodies, South Korean singer Gaho’s lively pop set eased the hall into a fun mood. He opened with “Yellow Light” from the recent romance K-Drama King the Land and won the crowd with “Running” and “Start Over” from the hit 2020 K-dramas Start-Up and Itaewon Class.

The K-pop vibes of Gaho’s set satisfied many in the crowd who came for the Hallyu and not really for the orchestra. However, the third track saw him singing to “Start Over” with the PPO providing the riveting instrumentals, bridging the two genres in an interesting way.

Nearing the end, the orchestra played the soundtrack of the hit 2019 romance Crash Landing On You (so popular in the Philippines that it is known by its acronym CLOY). Non-fans would have found it amusing to hear the gasps from the crowd as beloved moments on screen accompanied the music.

A sleeper hit that drew awestruck reactions from the audience was the soundtrack of the 2007 medical drama Behind the White Tower, featuring intense call-and-answer moments in the string section. After the concert, people were researching the show out of curiosity and talking about trying it out based on the intriguing soundtrack alone.

The night ended with the complicated, beautiful melodies of the 2017 historical drama Mr. Sunshine, which starred Lee Byung-hun and the wonderful Kim Tae-ri. It would have been a powerful note to end on, but the PPO satisfied romance fans with a heart-stopping encore — a performance of “I Will Go to You Like the First Snow” from the hit 2016 drama Goblin, starring iconic Korean actor Gong Yoo.

It was a successful night of cultural exchange, put together by the Korean Cultural Center, the National Commission of Culture and the Arts, and the Cultural Center of the Philippines. The PPO’s impeccable playing, along with the guest vocalists’ passion and Viu’s projecting K-drama moments on to the screen, brought both Hallyu and orchestral music to Filipinos. It was a joyful experience that will hopefully be brought back in the future for more people to enjoy.

T-bill yields mostly steady amid strong demand

BW FILE PHOTO

THE GOVERNMENT made a full award of the Treasury bills (T-bills) it auctioned off on Monday as average rates remained below secondary market levels amid strong demand and before the release of June inflation data.

The Bureau of the Treasury (BTr) raised P20 billion as planned from the T-bills it offered on Monday as total bids reached P43.025 billion, or more than twice the amount placed on the auction block.

Broken down, the BTr borrowed P6.5 billion as programmed from the 91-day T-bills as tenders for the tenor reached P19.06 billion. The three-month paper was quoted at an average rate of 5.686%, 2 basis points (bps) above the 5.666% seen last week. Accepted rates ranged from 5.668% to 5.698%.

The government likewise made a full P6.5-billion award of the 183-day securities, with bids reaching P11.81 billion. The average rate for the six-month T-bill stood at 5.959%, rising by 2.9 bps from the 5.93% fetched last week, with accepted rates at 5.918% to 5.999%.

The six-month tenor was adjusted from the usual 182-day maturity due to a holiday.

Lastly, the Treasury raised the planned P7 billion via the 364-day debt papers as demand for the tenor totaled P12.155 billion. The average rate of the one-year debt increased by 1.9 bps to 6.05% from the 6.031% quoted last week. Accepted yields were from 6.03% to 6.085%.

The BTr fully awarded its T-bill offer as the tenors fetched average yields below prevailing secondary market rates, it said in a statement.

At the secondary market before the auction, the 91-, 182-, and 364-day T-bills were quoted at 5.7433%, 6.0035%, and 6.0741%, respectively, based on PHP Bloomberg Valuation Service Reference Rates data provided by the Treasury.

T-bill rates were lower than the levels seen at the secondary market as investors awaited the release of June inflation data, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.

Headline inflation was likely steady in June and settled within the central bank’s 2-4% annual target for a seventh straight month, analysts said.

A BusinessWorld poll of 14 analysts conducted last week yielded a median estimate of 3.9% for the June consumer price index (CPI), within the Bangko Sentral ng Pilipinas’ (BSP) 3.4-4.2% forecast for the month.

If realized, June inflation would match the 3.9% recorded in May. It will also be slower than the 5.4% print in the same month a year ago.

The Philippine Statistics Authority is scheduled to release June inflation data on Friday (July 5).

For the first five months, the CPI averaged 3.5%, faster than the BSP’s 3.3% baseline and 3.1% risk-adjusted forecasts for the year but well within the 2-4% goal for the year.

“The awarded T-bill rates moved lower this week as market participants digested the latest softer reading of the US Federal Reserve’s preferred inflation rate, which bolstered expectations of a September policy rate cut,” a trader added in an e-mail.

US monthly inflation was unchanged in May as a modest increase in the cost of services was offset by the largest drop in goods prices in six months, drawing the Federal Reserve closer to start cutting interest rates later this year, Reuters reported.

The report from the Commerce department on Friday also showed consumer spending rose marginally last month. Underlying prices advanced at the slowest pace in six months, raising optimism that the US central bank could engineer a much-desired “soft landing” for the economy in which inflation cools without triggering a recession and a sharp rise in unemployment.

Traders raised their bets for a Fed rate cut in September.

The flat reading in the PCE price index last month followed an unrevised 0.3% gain in April, the Commerce department’s Bureau of Economic Analysis said. It was the first time in six months that PCE inflation was unchanged.

In the 12 months through May, the PCE price index increased 2.6% after advancing 2.7% in April. Last month’s inflation readings were in line with economists’ expectations.

Inflation is receding after spiking in the first quarter as 525 bps worth of rate hikes from the Fed since 2022 cool domestic demand. Inflation, however, continues to run above the central bank’s 2% target.

Financial markets saw a roughly 68% chance that the Fed’s policy easing would start in September compared with about 64% before the data, though policy makers recently adopted a more hawkish outlook. The US central bank has maintained its benchmark overnight interest rate in the current 5.25%-5.5% range since last July.

On Tuesday, the BTr will offer P30 billion in reissued seven-year Treasury bonds (T-bonds) with a remaining life of four years and 10 months.

The Treasury wants to raise P215 billion from the domestic market this month, or P100 billion from T-bills and P115 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. — AMCS with Reuters

Continuing policy reforms in tax and business

FREEPIK

Aside from the economic climate or the various fiscal and non-fiscal incentives that the country offers, another reason to invest in the Philippines is its ongoing policy reforms. These policy reforms signify the government’s willingness to work with investors and address their concerns. But it is important that these reforms be directed toward making business and tax compliance simpler and easier.

One of the more consistently identified factors in determining a country’s investment attractiveness is the ease of doing business in a country. It is not difficult to see why. An opaque and complicated system, especially in the fields of business and tax, are bound to result in some unnecessary costs which can be particularly hindering for businesses.

For instance, one of the major reforms that the Philippines needs to consider is the implementation of a risk-based audit.

In a recent investment mission in Germany, we joined the Philippine Economic Zone Authority (PEZA) and met not only with potential German investors but also existing locators in the Philippines. In these discussions, they identified some concerning issues, such as VAT refunds and the overly burdensome and costly nature of Bureau of Internal Revenue (BIR) audits. While they are given tax incentives, they are still subject to an annual audit that results in additional costs and taxes despite their tax incentive and full compliance.

The concept of a risk-based audit is in line with proposals by the World Bank, and what the idea entails is that higher-risk taxpayers are to be prioritized for audit. To understand what this entails, it is first important to understand how it presently works. Under the current system, the BIR audits businesses on a random basis, albeit with some priority cases. In this current system, the system is still predominantly random, with no particular direction on which taxpayers or what industries to focus on.

The adoption of a risk-based audit system is bound to improve efficiency as the BIR would have to direct its efforts to the taxpayers or the industries which have lower compliance rates and with a significant amount of tax exposure. With the developments in the field of digitalization, it is now easier to gather data on these industries and to be able to make informed and data-driven compliance thresholds.

Of course, the key will be digital transformation. Given the predominance of electronic transactions in recent years, all the relevant data are readily accessible. What is left is to consolidate the data and analyze them to identify taxpayer risks and compliance performance.

Another byproduct of a risk-based system is an increased trust in the government. The present random BIR audit is susceptible to abuse because unscrupulous officers can simply target certain taxpayers and hide behind the guise of “randomness.” However, this will not be the case in a risk-based system because tax collectors would have no discretion on who to audit, since the ones that are required to audit are only those that have poor tax compliance or are considered “high-risk.”

In line with a risk-based system is the need to improve the tax regime for micro-, small- and medium-sized enterprises (MSMEs) amending its classification under the Ease of Paying Taxes (EOPT) Act. These businesses are hardly the main source of the government’s funds, and yet they are subject to the same stringent compliance requirements that larger businesses are subjected to. The difference is that larger businesses can bear those compliance costs, whereas MSMEs may have difficulties in doing so.

It is important that the government’s approach to MSMEs is not to treat them as a source of funds. Rather, MSMEs should be viewed as investments that the government should help succeed. Once these businesses prosper, it is only then that the government should shift gears and focus on collecting taxes from them.

The simplified Tax Regime for Micro & Small Enterprises include the following:

1. Reclassification of taxpayers based on their income level and total assets — an amendment to the EOPT Act;

2. Reduction of the highest income tax rate from 35% to 25% for individuals both for employees and self-employed and professionals — an amendment to the TRAIN Act;

3. Increase the optional tax rate from 8% to 10% and its threshold from 3 million to 50 million-100 million (micro to small taxpayers) — an amendment to TRAIN and the CREATE Act;

4. Mandate use of e-invoicing for medium enterprises and taxpayers who will elect an Optional 10% flat rate — an amendment to the TRAIN and CREATE Act;

5. Removal of the manual Books of Accounts for Micro and Small Enterprises (or Taxpayers) and mandatory use of Computerized Accounting System and electronic invoicing for Medium and Large Taxpayers — amendment to the EOPT Act;

6. Exemption of Marginal and Micro Enterprises or Taxpayers from regular audit and instead subject them to Tax Verification without penalties as the need arises, specifically the newly registered enterprises while Small Enterprises, will be subject to risk-based audit, and Medium Enterprises, including those who avail of tax incentives, will be subject to risk-based audit and regular audit every three years. Large Enterprises will be subject to risk-based audit and regular audit every other year — the risk-based and regular audit will be both computerized and no longer adopt any manual investigation, except for a fraud audit which may require more evidence — amendment to the CREATE and EOPT Act;

7. Revocation of the Certified Public Accountant license for external auditor/s who audit and sign audited financial statements (AFS) that are materially misstated, i.e., have erroneous balance of total assets and/or annual sales, leading to a wrong classification of taxpayers to avoid paying taxes or being audited.

Toward this end, the adoption of a simplified tax regime for MSMEs is crucial to improving the business climate. As a broad overview, a simplified tax regime for MSMEs entails the removal of unnecessary tax compliance requirements for Micro and Small Enterprises and implementing risk-based computer-assisted audit against small, medium, and large taxpayers.

At the core of these proposals is the idea of creating an investment climate where businesses can thrive and business owners are not hassled by unnecessary and non-value adding compliance requirements.

When thinking of business and investment, it is easy to get lost in the big policy considerations, but it is just as important to address issues on the ground. The fact of the matter is that, despite improvements to its ease of doing business, the Philippine business and investment bureaucracy still has plenty of room for improvement. These two proposals are directed toward addressing some of those issues, particularly in the field of taxation.

In light of all this, it is important that we work together with government agencies in making paying taxes easier and doing business simpler. This is why the Asian Consulting Group remains steadfast in its cooperation with the BIR by facilitating dialogue and public discussion regarding new tax policies and helping taxpayers, especially foreign investors, understand and adapt to existing tax rules and new regulations.

This article reflects the personal opinion of the author and does not reflect the official stand of the Management Association of the Philippines or MAP.

 

Raymond “Mon” A. Abrea is an MPA/Mason fellow at Harvard Kennedy School. He is a member of MAP Tax Committee and MAP Ease of Doing Business Committee, the co-chair of Paying Taxes on the Ease of Doing Business Task Force, and chief tax advisor of ACG.

map@map.org.ph

mon@acg.ph

PSE approves Premium Leisure’s voluntary delisting

THE PHILIPPINE STOCK Exchange, Inc. (PSE) said it has approved the voluntary delisting of Premium Leisure Corp. (PLC) effective July 9.

The PSE said in a circular dated June 28 that it has ordered the delisting of PLC shares from the bourse operator’s official registry (electronic board and ticker).

The PSE suspended the trading of PLC shares on May 7 following a tender offer by its parent company Belle Corp., consisting of 6.17 million PLC shares priced at 85 centavos, with a total value of P5.25 billion. The move brought PLC’s public float below the minimum requirement of the local bourse operator.

Belle Corp. is engaged in the integrated resorts business. It is one of the portfolio investments of Sy-led conglomerate SM Investments Corp.

For its part, PLC has a stake in the City of Dreams Manila integrated entertainment and gaming complex in Parañaque City.

In a separate regulatory filing on Monday, the PSE said it secured the approval of the Securities and Exchange Commission on June 18 for the incorporation of PSE Realty, Inc. as part of diversifying its revenue stream.

A wholly owned company of the market operator, PSE Realty will have a capitalization of P1 billion and will have powers to own, hold for investment, develop, manage, and maintain “real property of all kinds.”

 The PSE board approved the incorporation of PSE Realty during a meeting in December 2018. — Revin Mikhael D. Ochave

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