Overseas Filipinos’ Cash Remittances
MONEY SENT HOME by overseas Filipino workers (OFWs) rose by 3.6% in May, its fastest pace in five months, data from the Bangko Sentral ng Pilipinas (BSP) showed. Read the full story.
Philippine revenue performance and the US economy
Philippine government revenues continue to improve even with no new taxes. The high economic growth just helps expand the revenue base. More business activities equal more revenues.
REVENUE PERFORMANCE 2019-2024
There is one revenue source that is lagging — excise tax. Looking at the period of January-May of each year, the highest excise tax collected was in 2019 with P144 billion, then this declined during the COVID-19 lockdown, then recovered to P125 billion in 2022, then declined again to only P113 billion in 2024 (see Table 1).
Among the “public bad” products slapped with an excise tax, only tobacco experiences a consistent decline in revenues. As the tax rate increases, the tax revenue decreases. For instance, a tax of P50/pack in 2021 yielded P176 billion; P55/pack in 2022 yielded P160 billion; P60/pack in 2023 yielded P135 billion. I made my own projection and believe that this year a tax of P63/pack would yield around P111 billion (see Table 2).
The idea that a “higher tobacco tax rate to reduce smoking while getting higher revenues” is not happening. A reduction in smoking is true only for legal tobacco, but when one looks at smuggled and illegal tobacco, there is more smoking happening as their retail prices are low — about P45-P50/pack vs legal tobacco which sells for at least P110/pack as the tax alone is already P63.
Congress should do something about this to arrest the further deterioration in excise tax collections. Every P1 billion in unrealized tobacco tax means P1 billion that goes to smugglers, criminal syndicates, and their corrupt protectors in government.
At the Economic Journalists Association of the Philippines (EJAP) event on July 8, Secretary Ralph G. Recto of the Department of Finance (DoF) said in his keynote message that “While no new tax proposals are on the table, refined revenue reforms await congressional approval that will add an average of P42 billion annually in additional revenues. We are strategically maximizing our non-tax revenues to increase collections and ensure sustainable funding — P100 billion dividends from GOCCs (government-owned and -controlled corporations), P42 billion from privatization of government assets. Along with preventing wasteful expenditures, these strategies will help keep the deficit in check and reduce sustainably.”
On preventing or reducing wasteful public spending, Budget Secretary Amenah F. Pangandaman engaged with the Philippine League of Local Budget Officers (Phillbo) and Public Financial Management (PFM) practitioners last week and encouraged the LGUs to practice sound and efficient management of resources, especially their shares in the National Tax Allotment, and promote timely and effective implementation of local programs and projects.
Keep on this track, Mr. Recto and Ms. Pangandaman. Reducing the public debt stock via revenue improvement while reducing wasteful spending will redound to the public in the form of lower interest payment and no new taxes.
US ECONOMY UNDER TRUMP AND BIDEN
Last Saturday, an assassination attempt was made on former US President Donald Trump. With only four months to the Presidential elections in November, the economy under current US President Joe Biden remains at the top of agenda of most US voters. With limited space I will discuss and compare only inflation management of the two administrations.
From 2017-2020 under Trump, the US inflation rate ranged from only 1.2% to 2.4%. Under Biden, it went up to 8% in 2022. Among the industrial North America and European nations, the US under Biden was the inflation-instigator in 2021 with 4.7%, followed by Canada and Germany.
In East Asia, the Philippines had the highest inflation rate in 2021 and 2023 while Singapore and Thailand led in high inflation in 2022 (see Table 3).
Biden and the Democrats called the high inflation of 2022 “Putinflation,” or inflation instigated by Russia’s invasion of Ukraine. But this is not true. In January 2021, the last month of Trump’s administration, US inflation was only 1.4%. In January 2022, after 12 months of Biden and one month before the Russian invasion, US inflation was already at 7.5%.
In the four years of Trump, there was no new war, nothing from 2017-2020, while he also attempted to pull US troops out from Syria, Iraq, and Afghanistan. The US and the world should go back to that situation. No war or fewer wars, more trade and commerce, more peace and diplomacy in the world.
Bienvenido S. Oplas, Jr. is the president of Bienvenido S. Oplas, Jr. Research Consultancy Services, and Minimal Government Thinkers. He is an international fellow of the Tholos Foundation.
PSEi member stocks performed — July 15, 2024
Here’s a quick glance at how PSEi stocks fared on Monday, July 15, 2024.
Customs confident of exceeding official 2024 target by P30 billion
THE Bureau of Customs (BoC) said it expects to collect up to P30 billion more than its P939.69-billion official target for the year as it strives to beat its internal “stretch” target.
“We’re very much confident that we will hit the target. In fact, what we’re trying to hit now is the internal target of the Commissioner,” Customs Assistant Commissioner Vincent Philip C. Maronilla told reporters on the sidelines of an event on Monday.
For full-year collections, Mr. Maronilla said the internal target is now “a little less than P1 trillion. If we can reach a trillion, then (that would be) so much better.”
Last week, the BoC reported that its collections in the first six months totaled P456.04 billion, surpassing its P442.62-billion target for the period by 3.03%.
The six-month total represents 48.53% of the Bureau’s full-year official target.
However, the “ghost month” — which discourages superstitious Buddhists and Taoists from embarking on important new ventures — tends to produce weak collections, Mr. Maronilla said.
“Our problem, I think, would start about next month because of the ghost month,” he said.
“But for the past years, we’ve been able to overcome that. So, we’re still confident that we will overcome any challenges that will be faced by the bureau for the month,” Mr. Maronilla said.
Mr. Maronilla also shrugged off risks of the weaker peso on the Bureau’s collections, calling currency factors a “give-and-take situation.”
While a stronger dollar increases the value of exports, businesses may be reluctant to import due to higher costs, he said.
The peso closed at P58.48 to the dollar on Monday, weakening by 10 centavos from its finish on Friday, according to the Bankers Association of the Philippines.
“I don’t think that the increase in the value of the dollar right now and its adverse effect on let’s say, import activities, would affect any projections that we have in reaching our collection target,” he added.
However, the BoC said it still prefers a stronger peso as it “means that we have a stronger economy.”
Separately, goods that violate intellectual property rights remain most-seized items by the BoC, it said.
“That’s a commitment that we have — to maintain our good standing in intellectual property law enforcement. So, these remain the top apprehended imported items,” Mr. Maronilla said.
The BoC is also focused on seizing smuggled agricultural, tobacco, and other excisable products.
In the first half, the BoC has seized around P20 billion worth of smuggled goods, roughly 16.15% lower compared to a year earlier. — Beatriz Marie D. Cruz
Local preference urged in gov’t procurement
By Justine Irish D. Tabile, Reporter
THE Department of Trade and Industry (DTI) said domestic producers must be given preference in government procurement to support their development.
“We need to source products that are available locally, as long as they meet the price, quality, and standards,” Trade Undersecretary Rafaelita M. Aldaba said on Monday on the sidelines of the Tatak Pinoy Act Forum.
“The biggest opportunity for our producers is if the market for their products is the government,” she added.
She said that a lot of products can be locally sourced, with preferential procurement within the scope of the Tatak Pinoy Act.
“Right now, they are using this program called domestic bidder preference… we know that it is still hard to compete with imported products because they have lower prices due to their scale,” she added.
She said that if the government sources locally, the government spending will stimulate more economic activity.
“It will have a lot of spillover effects, and at the same time, the government will also be able to help our industries,” she added.
Aside from the Tatak Pinoy Act, Ms. Aldaba said that the DTI is also awaiting the amendment of the Government Procurement Reform Act, which will make it easier for small and medium enterprises to participate in government bids.
The amendments “will remove the difficult regulations that (deter) local companies, especially small ones,” she added.
In terms of priority products, Ms. Aldaba said that the target is to come up with a draft of the Tatak Pinoy Strategy by December.
“This will be a multi-year strategy … we will identify the products that we will target in terms of contribution to gross domestic product and employment as well as the sectors that we will prioritize,” she said.
According to Trade Secretary Alfredo E. Pascual, one of the top priorities of the Tatak Pinoy Act is the semiconductor and electronics industry.
In particular, he said that the goal is to elevate the industry’s position in the global value chain by refocusing on higher-value activities such as integrated circuit design, research and development (R&D), and electronics manufacturing services.
“To achieve this goal, we must invest in R&D infrastructure, forge partnerships with major foundries globally, cultivate PhD-level competencies, and optimize power and logistics infrastructure,” Mr. Pascual said.
“Hence, one of our major initiatives under Tatak Pinoy is to conduct a feasibility study on establishing a lab-scale wafer fabrication facility in the Philippines,” he added.
He said that the facility will support R&D, prototyping, intellectual property development, and experimentation with new materials and manufacturing processes.
Semiconductor and Electronics Industries in the Philippines Foundation, Inc. President Danilo C. Lachica said that there is a long-term need for a wafer fab but noted its low-priority status under the US Chips Act.
“You can’t really blame them since the low-hanging fruit is expanding the assembly, testing, and packaging, and it’s good for us. It’s also good when they say they’ll triple output,” he said.
“It’s also a natural consequence of building up the wafer fab capacity in the US, because if you produce the wafers, you’re going to have to send those wafers elsewhere to do the assembly test and packaging; hence, the Philippines will benefit directly from that,” he added.
However, he said that the Philippines will eventually need to consider having its own wafer fab capacity.
“I think that there’s a real China threat to Taiwan, and Taiwan is the biggest source of our semiconductor wafers, which are used for our electronics industry,” he said.
“When that impacts the supply of wafers, it’s going to be a major detriment to our industry,” he added.
He added that a wafer fab will increase the complexity of the electronic products that the country exports.
“We import about $20 billion to $30 billion worth of parts; if we can localize most of that, possibly with the help of Tatak Pinoy, that’s going to be a big boost to the economy,” he said.
Tatak Pinoy seen encouraging shift to higher-value products
THE Department of Trade and Industry (DTI) said it is betting on a boost from the Tatak Pinoy Act, which it says will incentivize exporters to focus on products with higher-value content where the Philippines enjoys a competitive advantage.
“We will need to define our priority sectors where we have an advantage that we can pursue,” Trade Secretary Alfredo E. Pascual said on the sidelines of the Tatak Pinoy Act Forum on Monday.
“Our main objective is to create products that will improve our export performance because, if you look at our neighbors, we are lagging,” he added.
Republic Act No. 11981, or the Tatak Pinoy (Proudly Filipino) law, aims to elevate the Philippines’ position in the global value chain by encouraging companies to raise the quality of their products.
Mr. Pascual said products of higher complexity tend to raise a country’s export earnings.
Citing the Atlas Economic Complexity report for 2021, he said that the Philippines was 33rd globally in the complexity index and fourth in Southeast Asia, ahead of Vietnam and Indonesia.
However, he said three years have passed since the report was released, and Indonesia and Vietnam have made significant strides in diversifying into more complex product categories.
“Between 2006 and 2021, our country has only ventured into 30 new export products, contributing $41 to our GDP (gross domestic product) per capita. In contrast, Vietnam has ventured into 41 new products, boosting its GDP per capita by almost $1,500,” he said.
He added that export volume of $74 billion pales in comparison to Indonesia’s $231 billion, Thailand’s $266 billion, and Vietnam’s $355 billion.
“This stark contrast highlights the urgent need for a more robust approach to enhance the global competitiveness of our industries and attract more export-oriented high-tech manufacturing companies to make the Philippines their production hub,” Mr. Pascual said.
Bianca Pearl R. Sykimte, director of the DTI’s Export Marketing Bureau, said that the DTI is “cautiously optimistic” that exports will grow this year due to growth in service exports and through the Tatak Pinoy Act.
In particular, she said exports are still expected to hit the targets set under the Philippine Development Plan (PDP) after information technology and business process management (IT-BPM) dollar receipts surpass overseas Filipino worker (OFW) remittances.
“If you look at our dollar receipts in IT-BPM compared to OFW remittances, I think IT-BPM receipts are already at $35 million, while OFW remittances are around $33 billion. So, services are still doing well,” Ms. Sykimte said.
However, she said that although trade is improving, the 2024 total is still lower than that of 2022, which is reckoned to be the start of the post-pandemic recovery.
“This is one of our considerations, but compared to last year, of course, we are faring better,” she added.
She said the Export Development Council is set to recalibrate the targets contained in the Philippine Export Development Plan (PEDP) by the third quarter.
“It may, of course, affect the succeeding targets since the base will be lowered because even at the start of the implementation of the PEDP, we were not able to achieve the targets,” she added.
Meanwhile, she said that the DTI plans to use the Tatak Pinoy Act to deliver for the PEDP, as most of the projects under the law are related to export development.
The PEDP estimates merchandise and services exports for 2024 at $143.4 billion, much higher than the $107-billion export target set in the PDP.
The Philippine Statistics Authority reported that exports totaled $30.84 billion in the five months to May, up 7.8% from a year earlier. — Justine Irish D. Tabile
Red onion import ban extended to August
THE Department of Agriculture (DA) said that it will extend the ban on red onion imports following the buildup of ample supply in storage facilities.
“As of the moment we do not need to import onions yet… for now until August,” Agriculture Secretary Francisco P. Tiu Laurel, Jr. told reporters on Monday.
Mr. Laurel added that the Agriculture department will review onion import policy monthly.
The national onion inventory was 163,503 metric tons (MT) as of July 5. Monthly consumption of red onion is 17,000 MT, while white onion consumption is estimated at 4,000 MT, according to the Bureau of Plant Industry.
The DA has said that the current volume of red onion is sufficient to meet demand for about eight months, or until February.
He said that an extended import ban may be exploited by traders to manipulate supply and cause prices to rise.
“Ang nakakatakot dyan (What I worry about) is that if we announce an extension, traders might restrict the release of stocks,” he said.
According to DA price monitors in the National Capital Region, a kilogram of red onions sold for between P80 and P150, as of July 12.
Mr. Laurel warned that if traders attempt to manipulate the onion supply, the DA will respond with onion imports to stabilize prices.
The DA initially banned onion imports until the end of July due to increased domestic production.
During the first quarter, onion production was 201.25 thousand MT, according to the Philippine Statistics Authority, up 36.8% from a year earlier.
The DA attributed the production gains during the period to a 40% increase in the land planted to onion. — Adrian H. Halili
‘Goods passport’ scheme seen cutting shipment release time
THE Bureau of Customs (BoC) said a “goods passport” system is expected to reduce the processing time for the temporary entry and exit of goods to one day.
“Some complain (that it takes) two weeks,” Customs Assistant Commissioner Vincent Philip C. Maronilla told reporters on the sidelines of an event on Monday, noting that importers in that situation are “forced to actually pay the duties and taxes just to be able to have the items released” in time for events like exhibitions. “And then when the goods are re-exported, the refund is another tedious process.”
The ATA Carnet system, so called because it facilitates “admission temporaire,” serves as a “passport” that temporarily allows the entry of goods free of duty and tax within participating countries.
The ATA Carnet aims to streamline and unify customs border crossing regulations and formalities, provided that the goods are returned to its country of origin within the period approved by the receiving country.
ATA Carnet does away with the need for importers to post a bond to cover the temporary entry of their goods.
“What the ATA Carnet actually addresses is the tedious process that we have right now and the burden of the importer or the one who’s going to use the goods having to post a bond,” he said.
Under the new system, the Philippine Chamber of Commerce and Industry (PCCI) will guarantee the firm’s obligation to allow the freer movement of goods.
Goods covered under the system include commercial samples, items for display or use at international exhibitions, trade shows and similar events, and professional equipment, PCCI said.
On the other hand, the “goods passport” does not cover consumables, perishables or disposables, as well as items considered sold, for processing, repair, or to be given away. It also does not cover alcoholic beverages, tobacco and fuel, and unmounted gems or gemstones.
The faster movement of goods under the ATA Carnet will also help cut shipping, handling or port charges, Mr. Maronilla added.
“Key players can now streamline the cross-border business transactions with ease and conserve time and resources while complying with international trade agreements,” PCCI President Enunina V. Mangio said in a speech.
The ATA Carnet will be in force for a year. — Beatriz Marie D. Cruz
Exporters see weak agriculture, tensions with China as drags to growth
EXPORTERS said a weak agriculture sector and tensions with China are serving as a drag on export performance, alongside high-power prices.
The Philippine Exporters Confederation, Inc. (Philexport) said the year began on a positive note, but a slowdown gradually set in.
“During the beginning of the year, (exporters) were very enthusiastic. They raised their targets, but towards the end of the year, they have had to catch up on orders and deliveries. When the first quarter came, things sort of tapered off,” Philexport President Sergio R. Ortiz-Luis, Jr. told reporters on the sidelines of an event.
Exports in March declined 7.3% to $6.13 billion, from a year earlier the weakest reading since the 13% contraction in November.
In the first quarter, exports rose 4.8% to $17.98 billion, the Philippine Statistics Authority reported.
“Slowly but surely, (exports) will increase, but not to the level that we would like to be,” Mr. Ortiz-Luis said, noting that investors are deterred by issues with agriculture as well as the South China Sea dispute.
When asked if the Philippines can still hit its P143.4-billion export target under the Philippine Export Development Plan (PEDP), he said: “Not in the original time frame. It will take quite a while.”
Mr. Ortiz-Luis has said the Philippines may hit its export target in three years.
Under the Philippine Development Plan, exports are expected to hit $107 billion this year, with $61.58 billion in merchandise exports and $45.42 billion in services exports.
Last year, Philippine exports amounted to $103.6 billion, below the $126.8-billion goal set in the PEDP. It also failed to hit the 5% growth target set by the Department of Trade and Industry last year. — Beatriz Marie D. Cruz
Infrastructure projects completed in Iloilo, Isabela
THE Department of Public Works and Highways (DPWH) said on Monday that it completed rehabilitation projects involving a road in Iloilo and a bridge in Isabela, which are expected to enhance farmer connectivity with their markets.
The DPWH said it upgraded for P38.7 million a three-kilometer portion of an access road to Barotac Viejo, Iloilo.
The project involved a 6.70-meter-wide paved road with 1.50-meter-wide shoulder on each side, the DPWH said.
The DPWH said part of the road will provide easier access to farming areas in Iloilo.
The DPWH added that it completed the rehabilitation of Lullutan Bridge in Ilagan City, Isabela, for P13.3 million.
The bridge’s rehabilitation is expected to enhance connectivity in the Cagayan Valley, reducing the risk of bridge failure or disruption, the DPWH said.
The DPWH added that public works in Mindanao involving 174.50 kilometers of road development and improvement is moving forward.
It said that detailed engineering design for major projects have been approved, with competitive bidding to proceed shortly. — Ashley Erika O. Jose
La Niña expected late in rice, corn harvest, minimizing crop damage
THE Department of Agriculture (DA) said most of the rice and corn crop will have been harvested by the time La Niña sets in by October.
“By that time, many parts of the country will have harvested their rice and corn,” Assistant Secretary and Spokesman Arnel V. de Mesa said in a briefing on Monday.
He added that the DA is advising rice and corn farmers to harvest early to minimize damage to their crops.
Last week, the government weather service, known as PAGASA (Philippine Atmospheric, Geophysical and Astronomical Services Administration) said that there was a 70% chance La Niña will set in by October.
The Agriculture department is projecting palay (unmilled rice) production of 20.44 million MT this year.
“We are continually preparing (for La Niña) in our regional offices and here at the central office,” Mr. De Mesa said.
He added that the DA is fast-tracking the construction of drying, post-harvest, and water impounding facilities.
“We are also on standby with our Quick Response Fund, credit, and buffer stock of seed. These are the immediate measures that farmers can get from the DA,” he said.
Mr. De Mesa added that the department has also stocked fertilizer for handing out to calamity-hit farmers. — Adrian H. Halili
Peso drops amid broad dollar strength
THE PESO weakened further on Monday as the dollar was generally stronger on the back of election bets in the United States.
The local unit closed at P58.48 per dollar on Monday, weakening by 10 centavos from its P58.38 finish on Friday, Bankers Association of the Philippines data showed.
The peso opened Monday’s session weaker at P58.43 versus the dollar, which was already its intraday best. Its worst showing was at P58.58 versus the greenback.
Dollars exchanged rose to $1.095 billion on Monday from $944.01 million on Friday.
“The peso weekend against the dollar due to risk aversion following the failed assassination attempt on [Republican presidential candidate and former US President Donald J.] Trump over the weekend,” a trader said in a phone interview.
The local unit dropped as “the gauge of the dollar versus major global currencies corrected slightly higher from one-month lows after some market volatility after the failed assassination attempt versus Trump that could bolster his chances of winning the US presidency later this year,” Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort noted in a Viber message.
The dollar rose broadly on Monday as trades for a victory by Mr. Trump in the upcoming US elections gathered steam in the wake of an attempted assassination of the former US president, Reuters reported.
Mr. Trump, 78, was holding a campaign rally in Pennsylvania over the weekend when shots rang out, hitting his right ear and leaving his face streaked with blood. His campaign said he was doing well.
Investors reacted by narrowing the odds of a Trump victory come November, which in turn pushed the dollar and US Treasury yields higher on Monday, alongside cryptocurrencies.
The dollar index was little changed at 104.21.
Against the dollar, the euro fell 0.2% to $1.0888, while sterling dipped 0.13% to $1.2973.
Long-dated US bond yields, meanwhile, ticked higher on expectations that a Trump win would see policies that would drive up government debt and stoke inflation.
The benchmark 10-year Treasury yield was last up roughly 3 basis points at 4.2158%.
For Tuesday, the trader expects the peso to move between P58.20 and P58.60 per dollar, while Mr. Ricafort sees it ranging from P58.40 to P58.60. — A.M.C. Sy with Reuters