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Peso may move sideways as market awaits economic data

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THE PESO could trade sideways against the dollar this week as the market awaits the release of local and US data for catalysts.

The local unit closed at P58.65 per dollar on Friday, weakening by seven centavos from its P58.58 finish on Thursday, Bankers Association of the Philippines data showed.

Week on week, the peso declined by six centavos from its P58.52 finish on June 7.

The peso declined on Friday as the dollar strengthened amid easing expectations of a rate cut from the US Federal Reserve this year following cautious signals from policy makers, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.

However, the weakness was slightly tempered by inflows ahead of the long weekend, Security Bank Corp. Chief Economist Robert Dan J. Roces said in a Viber message.

The Federal Reserve held interest rates steady on Wednesday and pushed out the start of rate cuts to perhaps as late as December as policy makers sketched out their view of an economy that remains virtually unchanged across its major dimensions for years to come, Reuters reported.

With growth and unemployment lodged at levels better than the US central bank considers sustainable in the long run, Fed Chair Jerome H. Powell said policy makers were content to leave rates where they are until the economy sends a clear signal that something else is needed — through either a more convincing decline in price pressures or a jump in the unemployment rate.

So far, Mr. Powell noted in a press conference after the end of a two-day policy meeting, inflation had fallen without a major blow to the economy, and he said there was no reason to think that can’t go on.

The result is the Fed accepting a slow expected decline in inflation back towards its 2% target, with the central bank’s preferred inflation measure — the personal consumption expenditures price index — virtually unchanged at the end of this year from its current level and the number of rate cuts held to a single quarter-percentage-point reduction.

Those rate reductions are projected to gather pace next year, with Mr. Powell deferring on the timing.

Inflation data published hours before the release of the policy statement and updated projections showed the consumer price index rose not at all on a month-to-month basis in May, causing some analysts to argue the latest projections were already “stale.”

Mr. Powell himself said the decision about the rate path was a “close call” for many policy makers, and that to some degree the Fed had merely traded an earlier start to rate reductions this year by tacking an additional anticipated cut onto 2025.

Still, he called the decision to start policy easing “consequential,” and the drop in expectations for this year completes a broad swing in sentiment from just six months ago when policy makers in their December 2023 forecasts envisioned an imminent kickoff to three years of steady rate reductions.

Under the current projections, absent a surprise in upcoming inflation or jobs data, the cuts would likely not begin until December, moving the Fed’s decision out of the Nov. 5 US presidential election cycle.

The policy statement issued on Wednesday combined an acknowledgement of “modest further progress” on inflation in recent months with a restatement of language that rate reductions won’t be appropriate until officials have “gained greater confidence” that price pressures will continue to ease.

The Fed raised rates aggressively in 2022 and 2023 to curb inflation that had surged to a 40-year high in the aftermath of the COVID-19 pandemic.

For this week, the market will monitor the release of the US retail sales report and Philippine remittances data, Mr. Roces said.

Policy comments from Monetary Board members and Fed officials could also affect foreign exchange trading, Mr. Ricafort added.

The Bangko Sentral ng Pilipinas (BSP) will probably cut its policy rate after the Fed, which has signaled it may start easing as late as December, Finance Secretary Ralph G. Recto said last week.

Asked if the BSP would begin its easing cycle once the US central bank cuts rates, Mr. Recto, a member of the Monetary Board, said this was “highly probable.”

The Monetary Board has kept its benchmark rate steady at a 17-year high of 6.5% since October 2023.

BSP Governor Eli M. Remolona, Jr. has said that the earliest the central bank can begin cutting rates is in August, noting they do not need to wait for the Fed to begin its own easing cycle.

The Monetary Board’s next policy meeting is on June 27.

Mr. Ricafort expects the peso to move between P58.30 and P58.80 per dollar this week. — A.M.C. Sy with Reuters

PSE index drops further on monetary easing bets

REUTERS

THE MAIN INDEX dropped further on Friday as investors pocketed their profits and repositioned before the long weekend and amid bets on monetary policy easing at home and in the United States.

On Friday, the bellwether Philippine Stock Exchange index (PSEi) fell by 0.11% or 7.13 points to close at 6,383.70, while the broader all shares index rose by 0.13% or 4.75 points to finish at 3,447.75.

Week on week, the PSEi declined by 2.07% or 135.06 points from its 6,518.76 close on June 7.

“The local bourse dropped as investors took more gains, while others chose to stay on the sidelines ahead of the long weekend,” Philstocks Financial, Inc. Research Analyst Claire T. Alviar said in a Viber message.

Philippine financial markets are closed on Monday (June 17) in observance of Eid’l Adha or the Feast of Sacrifice.

“Uncertainty over the direction of the Philippine interest rates in the near term provided negative sentiment following the remarks of Finance Secretary Ralph G. Recto that the Bangko Sentral ng Pilipinas (BSP) may only ease monetary policy after the Fed makes the first cut. This could mean that the current high interest rates may stay longer than anticipated,” Ms. Alviar added.

The BSP will probably cut its policy rate after the Fed, which has signaled it may start easing as late as December, Mr. Recto said last week.

Asked if the BSP would begin its easing cycle once the US central bank cuts rates, Mr. Recto, a member of the Monetary Board, said this was “highly probable.”

The Monetary Board has kept its benchmark rate steady at a 17-year high of 6.5% since October 2023.

The US central bank on Wednesday kept its benchmark overnight interest rate in the current 5.25%-5.5% range, where it has been since last July, Reuters reported. Fed officials pushed out the start of rate cuts to perhaps as late as December, with policy makers projecting only a single quarter-percentage-point reduction for this year.

“A short trading week saw local equities revisit 6,300 levels, after the International Monetary Fund’s lower gross domestic product projection and comments that suggest BSP to follow Fed’s move,” online brokerage firm 2TradeAsia.com likewise said in a market note.

“That being said, regional central banks are not fully divorced from the Fed’s and while first half inflation drivers have decelerated, uncertainty related to the impact of La Niña, utility rate hikes, among others, remain valid impediments to any upward lift to sentiment,” 2TradeAsia.com added.

The PSEi showed “bearish developments” as it dropped to the 6,300 level, Philstocks Financial, Inc. Senior Research Analyst Japhet Louis O. Tantiangco said in a Viber message.

“With its decline, the bourse has broken below the 6,400 level, which was considered as a support. The market’s 50-day exponential moving average has also gone below its 200-day counterpart… which indicates the possibility of a downtrend moving forward,” Mr. Tantiangco said. — R.M.D. Ochave with Reuters

LGUs to receive P1.034-trillion NTA in 2025

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LOCAL government units (LGUs) will receive a National Tax Allotment (NTA) of P1.034 trillion in 2025, the Department of Budget and Management (DBM) said.

In a memorandum, the DBM said P237.96 billion will be released to provinces, P239.05 billion to cities, P350.68 billion to municipalities, and P206.92 billion to barangays.

NTAs are the 40% share of National Government (NG) revenue from three years prior. The 2025 NTA is thus based on government revenue reported in 2022.

The DBM reported that 43,622 LGUs will be receiving NTAs — 83 provinces, 149 cities, 1,485 municipalities, and 41,905 barangays.

The Calabarzon region will receive an NTA of P122.71 billion, followed by Central Luzon (P100.72 billion), the Western Visayas (P81.4 billion), the Central Visayas (P73.08 billion), and the National Capital Region (P62.32 billion).

NTA provided by the Bureau of Internal Revenue stood at P776.56 billion, with the Bureau of Customs supplying P258 billion. Other agencies certified by the Treasury bureau will provide P41.36 million.

Alongside the NTA, some LGUs will be given a share of the proceeds from resources generated within their jurisdictions, such as the excise tax on Virginia tobacco as well as burley and native tobacco.

Several local governments are also entitled to gross income taxes paid by businesses and enterprises within economic zones, a share of value-added tax and of fire code fees.

“The LGUs concerned are advised to coordinate with the appropriate revenue-collecting agencies and government corporations to reconcile their records with those of the collecting agencies to determine the amount of their shares from the said taxes,” DBM said.

The NTA and other resources should be devoted to providing basic services and facilities before they are spent for other purposes, the DBM said.

“Local budget plans and goals shall, as far as practicable, be harmonized with national development plans, goals, and strategies to optimize the utilization of resources and to avoid duplication in the use of fiscal and physical resources,” the DBM said.

LGUs are required to allocate 20% of its NTA on development projects, and 5% on a Disaster Risk Reduction and Management Fund.

LGUs 2025 annual budgets must also include programs, projects, and activities for gender and development, senior citizens and persons with disabilities, prevention and care against Human Immunodeficiency Virus/Acquired Immune Deficiency Syndrome (HIV/AIDS), and the implementation of programs for the protection of children.

Barangays are required to allocate 10% of their general fund to the Sangguniang Kabataan council.

The NG spending plan for next year is at a record P6.2 trillion, up 7.5% from this year and equivalent to 21.4% of gross domestic product. — Beatriz Marie D. Cruz

Four irrigation dams in Cavite to supply potable water to Maynilad

THE Department of Environment and Natural Resources (DENR) said it has cleared four irrigation dams in Cavite to be tapped for potable water.

Undersecretary Carlos Primo C. David said the dams controlled by the National Irrigation Administration (NIA) will supply Maynilad Water Services, Inc.

“One of the dams is already online and we are getting water from that dam, supplying water to Cavite residents. The three others will be supplying within the next few months,” Mr. David said at a seminar hosted by Maynilad last week.

The NIA manages 22 dams in Cavite, where farms are dwindling due to the conversion of much of the land to residential development.

“A small policy innovation that we have signed was to convert all these dams into multi-purpose use. And therefore, companies like Maynilad can now access that water to provide water to their residents,” Mr. David said.

Last year, the DENR announced that it will offer 135 water projects to private investors in 2024 hoping to “increase the number of persons with access to drinking water and generate inexpensive hydropower.”

Mr. David has said that the water projects involve water rights held by NIA.

In February, he said that the department has opened up 112 more water projects for public-private investment involving combined capacity of 100 to 170 million liters per day.

Maynilad serves the city of Manila, except portions of San Andres and Sta. Ana. It also operates in Quezon City, Makati, Caloocan, Pasay City, Parañaque, Las Piñas, Muntinlupa, Valenzuela, Navotas, and Malabon.

It supplies the cities of Cavite, Bacoor, and Imus, and the towns of Kawit, Noveleta, and Rosario, all in Cavite province.

Metro Pacific Investments Corp., which has a majority stake in Maynilad, is one of three 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 an interest in BusinessWorld through the Philippine Star Group, which it controls. — Sheldeen Joy Talavera

Toll Board acquires 1.3-hectare property in Pandacan from NDC

SAN MIGUEL CORPORATION FB PAGE

THE Toll Regulatory Board (TRB) said it acquired a 1.3-hectare Pandacan property from the National Development Co. (NDC), on which it plans to build part of Metro Manila Skyway Stage 3 (MMSS3).

In a statement sent over the weekend, the NDC said that it signed with TRB a memorandum of agreement (MoA) and two deeds of absolute sale last week for the acquisition of the property.

The agreement aims to ensure a “smooth and equitable process” for the acquisition and marks the reaching of a consensus that upholds the interests of all stakeholders.

“This agreement reflects our commitment to responsible urban development and community welfare. We extend our gratitude to TRB for their cooperation throughout this process,” said Antonilo DC. Mauricio, general manager of NDC.

“The signing of the MoA underscores our shared commitment to delivering infrastructure projects that benefit the public while respecting property rights and promoting sustainable development,” TRB Executive Director Alvin A. Carullo said.

In total, NDC’s property in Pandacan, Manila, is a single five-hectare parcel that was split into three irregular fragments due to Skyway construction, including the 1.3 hectares acquired by the TRB.

“There were two deeds of sale because one is for the area affected by the main alignment of the MMSS3 Project and the other one is for the area affected by the interconnection structure,” the NDC said.

NDC said that the property is strategic for MMSS3, as a Skyway component sits on the property while there may be plans to build another connector stage.

Asked about the value of the acquisition, the NDC said: “Since it’s a transaction between two government entities, the property valuation can’t be disclosed.”

“We wanted to release this because both parties are now happy with finally concluding this lengthy process because it clears the property up for use in road construction and development for TRB’s joint venture with San Miguel Corp.,” it added.

MMSS3 is an 18-kilometer elevated expressway from Buendia in Makati to the North Luzon Expressway in Balintawak, Quezon City. — Justine Irish D. Tabile

Weak global trade seen hampering PHL recovery

ICTSI

DISRUPTED trade is hindering the economy from returning to its pre-pandemic levels with consumer spending, the main driver of the economy, remaining weak, analysts said.

“The country is susceptible to a decrease in export demand and disrupted supply chains due to subdued global growth and trade fragmentation,” Security Bank Corp. Chief Economist Robert Dan J. Roces said in a Viber message.

The impact of the pandemic continues to be felt in weak consumer spending and elevated living costs, Pantheon Macroeconomics Chief Emerging Asia Economist Miguel Chanco said in an e-mail.

“In the Philippines’ case, one of the biggest and ongoing structural headwinds against faster consumer spending growth is the damage caused by the pandemic and, subsequently, the global cost of living crisis, on household savings,” he said.

Consumption would have helped expand the economy further if the  government focused on upscaling domestic industries during and post-pandemic, Ateneo De Manila economics professor Leonardo A. Lanzona said.

“Instead, we remain reliant on imports for consumption, remittances for our external funds, and unskilled workers and services as our production sector. On top of this, we have been embroiled with the maritime tensions with China,” Mr. Lanzona said via Messenger chat.

Household consumption, which accounts for more than a quarter of gross domestic product (GDP) growth, expanded 4.6% in the first quarter, the weakest reading since the pandemic. Government spending only grew 1.7%, contributing 0.2 percentage points (ppts) to GDP. 

In its Global Economic Prospects report, the World Bank said global growth is expected to be a half percentage point lower than in the past decade due to geopolitical tensions, fragmented trade, and upside risks to inflation, prompting central banks to delay rate cuts.

To mitigate global trade and policy risks, the Philippines must diversify its exports and bolster domestic demand and infrastructure, Mr. Roces said.

It must also invest in human capital and utilize sound fiscal and monetary policy to minimize risk, he added.

Elevated interest rates will continue to slow private investment in the Philippines, delaying its return to pre-pandemic levels, Mr. Chanco said.

“Private fixed investment has yet to return to pre-COVID levels, and part of the problem is, in our view, the overly aggressive tightening cycle of the BSP (Bangko Sentral ng Pilipinas) in response to a predominantly supply-driven inflationary shock that can’t be corrected by monetary policy,” he said.

The World Bank also noted that the faster-than-expected US growth would benefit exporting economies in the East Asia and the Pacific.

The bank its global GDP growth projection to 2.6% from 2.4% in January amid the US economy’s sustained growth.

However, changes in world food and oil prices pose bigger threats to the Philippines than global trade slowdowns, Foundation for Economic Freedom President Calixto V. Chikiamco said.

“Exports remain a small percentage of Philippine economic growth, and consumption remains the biggest driver of Philippine GDP growth,” he said via Viber.

Net exports of goods and services accounted for 1.2 ppts of GDP growth in the first quarter, according to the Philippine Statistics Authority.

“Global food and oil prices will have a much bigger impact on the Philippines as the country is a major importer of energy and food,” Mr. Chikiamco added. — Beatriz Marie D. Cruz

PHL shipbuilder Propmech bats for incentives, supplier clustering

PROPMECH.COM

By Kyle Aristophere T. Atienza, Reporter

THE PHILIPPINES needs to grant incentives and develop supplier clusters for shipbuilders to help them become competitive exporters, shipyard operator Propmech Corp. said.

The lack of such support is preventing the industry from achieving economies of scale, affecting its export-competitiveness, Propmech Director Glenn Tong told BusinessWorld during a media tour of its Subic freeport shipyard last week.

Apart from Subic, Propmech operates yards in Mandaue City, Cadiz, Negros Occidental, General Santos City, Puerto Princesa, and Zamboanga City.

“Shipbuilding in the Philippines is something that we can develop not only for ourselves but for exports in the future. The government should look into creating high-value products that can be utilized for exports.”

Mr. Tong said the industry will require marine-related businesses like ship repair and maintenance and parts makers to cluster in key areas, simplifying supply chains.

“In other countries, they patronize their own shipbuilders and give them support and locations where they can operate. Over time, they dominate world markets,” he said.

Incentives for shipbuilders are also necessary over the medium term, noting that it will take “some time” for their business to become profitable under present conditions.

Propmech supplied 12 of Philippine Navy’s Multi-Purpose Attack Craft (MPAC) — the company’s flagship vessels — between 2009 and 2019, three of which recently completed comprehensive maintenance and refurbishment work at its Subic facility.

“In this specific batch, they wanted to bring all the equipment back to new,” Mr. Tong said, referring to a batch of three MPACs acquired in 2016.

“We were able to bring the vessels back to new — back to original performance,” he said. “It is more of a return to original form.”

The missile-capable MPACs are “a testament to us being able to build a vessel that no other country was interested in building,” Mr. Tong noted.

Mr. Tong said his company hopes to supply government agencies with more vessels.

“We are talking with the Department of National Defense, the Navy, and the Philippine Coast Guard and other entities to provide some equipment. It’s under negotiation. There are discussions ongoing.”

Propmech said its “versatile” MPACs have been active in the Navy’s counterterrorism and territorial defense mission.

Joshua Bernard Espeña, vice-president at Manila-based International Development and Security Cooperation, said the shipbuilding industry needs to “identifying where the country can establish a niche position in parts of the ship/combat system.”

“While going independent sounds patriotic, it needs to be put into perspective. The global defense industry is vast with relatively more mature industries out there,” he said in a Facebook Messenger chat.

“It should identify where it can niche, perhaps hull design or installation of weapons for small ships like patrol boats or frigates, and eventually consider competing in the global market,” he added. “The Philippines can consider looking into compatible and efficient designs for other parts of maritime platforms.”

Philippine shipyards numbered 124 in 2022, up from 116 in 2021, according to the Maritime Industry Authority.

The shipbuilding industry, which has had to contend with weak domestic demand, also has to deal with expensive electricity and high production costs, being dependent on imports of key materials for making ships such as steel and resin, according to Mr. Tong.

The shipbuilding industry is also vulnerable to shocks like conflict in key global waterways, according to George N. Manzano, a trade expert at the University of Asia and the Pacific.

“Geopolitics (and) trade embargoes can create shocks to the shipping industry and thus indirectly affect shipbuilding,” he said in an e-mail.

It is also among the industries under pressure to employ sustainable and environmentally friendly practices as governments seek to advance the transition to clean energy, he added.

The shipping industry accounted for 1.015 million tons of carbon dioxide emissions globally from 2007 to 2012, according to an International Maritime Organization report.

The government should incentivize shipyards and “make regulation of shipyards and general maritime operations more efficient and simpler,” Mr. Manzano said.

Propmech has over 900 employees, but it said it is threatened by a declining appetite among young people to take on industrial jobs.

“The number of young people who want to do the harder manual labor jobs has gotten less. Everyone wants to work in an office,” Mr. Tong said.

Mr. Manzano said education agencies should work together to make the workforce responsive to the demands of the maritime industry. The government should also support training institutions offering maritime courses and help them adopt shipbuilding curricula in line with international standards, he added.

“Foreign investment can bring in the expertise in terms of training because there could be skill gaps particularly in aspects of more advanced shipbuilding technology,” he added.

BIR urges online platforms to carry only vape products with tax stamps

PHILIPPINE STAR/ RUSSELL PALMA

THE Bureau of Internal Revenue (BIR) issued a warning to online platforms to ensure that vape sellers are duly registered and comply with the tax stamp rules.

“Online platforms should only allow duly registered online sellers with the BIR, to sell vapes online,” it said in a statement.

“The BIR is monitoring both online platforms and brick-and-mortar stores selling vape products for possible violations of BIR regulations on vape products,” it said.

The BIR had required all vape products to bear the internal revenue stamps starting June 1.

The stamps allow the government to distinguish between legitimate and smuggled products.

BIR Commissioner Romeo D. Lumagui, Jr. said that sellers should take down posts or offerings that are non-compliant with the BIR regulations.

“We have been receiving reports that online sellers of vapes are actively selling their products at low prices because they are not paying their taxes. These online sellers of illicit vapes destroy the livelihood of legitimate vape sellers,” he said.

“The BIR protects legitimate businesses and closes illegitimate businesses. Online platforms should do the same.”

Apart from the tax stamps, the BIR reminded sellers to comply with the minimum floor price and other rules.

In March, the BIR seized illicit vape products from a warehouse in Laguna on which P75.7 million in tax was not paid. — Luisa Maria Jacinta C. Jocson

Responsible AI: Transforming risk management in the Philippines

IN BRIEF: 

• The rise of AI in the Philippines signals a transformative shift in risk management practices.

• With AI’s growing prevalence, businesses must adopt responsible AI principles to navigate ethical, security, and transparency risks.

• The integration of AI in various sectors offers both opportunities and risks that require careful management.

As the digital age continues to evolve, artificial intelligence (AI) is rapidly becoming a cornerstone of innovation and efficiency. In 2021, the Philippines launched the National Artificial Intelligence Roadmap, which prioritizes inclusive, resilient, and sustainable development. Furthermore, the President believes that AI can uplift the lives of citizens, drive enterprise productivity, and increase the economy’s competitiveness.

According to a recent study by IBM’s Institute for Business Value, three out of four CEOs think that organizations with the most advanced generative AI (GenAI) are at an advantage, with nearly half utilizing GenAI to guide their strategic decisions. As organizations expand their AI adoption, it is imperative that they adhere to responsible AI practices, which promote the ethical, transparent, and beneficial use of the technology.

AI ADOPTION IN THE PHILIPPINES
AI adoption is evident across multiple Philippine industries, each harnessing its capabilities to enhance operations and manage risk.

• Financial institutions. Some universal banks are leveraging AI for risk assessment, fraud detection, and customer service, utilizing solutions provided by tech giants such as Microsoft.

• Healthcare. Some healthcare platforms are leveraging AI for medical data analysis, improving patient care, and expanding telehealth services.

• Telecommunications. Telecom companies employ AI for network optimization, customer service enhancement, and predictive maintenance.

• E-commerce/Retail. Online marketplaces and retailers utilize AI-driven recommendations and predictive analytics to refine the customer experience and operational efficiency.

AI’S IMPACT ON RISK MANAGEMENT
AI is revolutionizing risk management by offering enhanced data analysis, predictive capabilities, real-time risk assessments, and advanced cybersecurity measures. These technologies enable businesses to identify and respond to risk with unprecedented speed and accuracy.

However, the integration of AI into risk management is not without its challenges. Concerns around data privacy, algorithmic bias and fairness, transparency, and regulatory compliance must be addressed to ensure the responsible use of AI.

• Data privacy and security. AI systems rely on data. There’s a risk that sensitive customer or business information could be exposed, particularly if appropriate cybersecurity measures are not in place.

• Algorithmic bias and fairness. AI systems are only as good as the data they’re trained on. If the data are inaccurate, incomplete, or biased, it can lead to unreliable or discriminatory decisions.

• Lack of transparency. Complex AI models may lack transparency, making it challenging for stakeholders to understand how decisions are made. If the reason behind a decision by AI can’t be explained, it can lead to legal and ethical implications.

• Regulatory compliance. The legal environment for AI is complex, fluid, and still developing. Companies can face risks relating to non-compliance with data protection regulations and other industry-specific laws.

NAVIGATING AI RISKS WITH RESPONSIBLE PRACTICES
Responsible AI covers transparency, fairness, accountability, ethical use, privacy protection, reliability, safety, sustainability, inclusivity, and governance.

To integrate responsible AI into risk management, companies can adopt the following best practices:

• Ethical framework development. Create a comprehensive ethical framework that aligns with regulatory standards and industry-specific best practices.

• Data governance and privacy protection. Implement data governance practices to ensure data privacy and transparency in AI models.

• Transparency and explainability. Make AI outputs understandable and provide justifications for AI-generated decisions.

• Bias detection and mitigation. Conduct thorough bias assessments to identify and mitigate biases in AI models.

• Human-AI collaboration. Augment human expertise with AI, promoting collaboration through accessible interfaces like visualizations and interactive dashboards.

EXAMPLES OF RESPONSIBLE AI IN ACTION
• Banks. Major banks are incorporating AI in risk management, with a focus on fraud detection. Responsible AI usage involves stringent data protections and privacy measures.

• Telecommunications. Providers use AI to manage infrastructure risk and predict outages. Ensuring responsible AI usage means preventing wrongful service denials.

• E-commerce. Some platforms employ AI for product recommendations, with a responsibility to avoid discriminatory biases.

• Health Tech. Certain companies use AI for disease diagnosis, requiring the protection of sensitive health information.

THE TRAJECTORY OF RESPONSIBLE AI IN THE PHILIPPINES
The future of responsible AI in the Philippines includes broader AI adoption, enhanced regulation, and workforce upskilling, among others. With the Philippines set to propose the creation of a Southeast Asian AI regulatory framework to ASEAN in 2026, responsible AI could become a standard in business operations.

As AI becomes more pervasive in the business landscape, its impact on society will be profound, shaping the future of work, influencing broader socio-economic development, and driving positive change. It is therefore imperative for organizations to embrace responsible AI principles in risk management and collaborate with stakeholders to navigate the opportunities and challenges presented by AI-driven innovation.

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

 

Christiane Joymiel C. Say-Mendoza and Joseph Ian M. Canlas are business consulting partners of SGV & Co.

SIM registration law has not deterred scams linked to POGOS, says senator

PHILIPPINE STAR/EDD GUMBAN

By Kyle Aristophere T. Atienza, Reporter and Chloe Mari A. Hufana

SCAMMERS linked to Philippine Offshore Gaming Operators (POGO) have exploited regulatory failure to implement a 2022 law that mandated the registration of Subscriber Identity Module (SIM) cards, a senator said on Sunday. 

“The National Telecommunications Commission (NTC) should do its job of ensuring effective implementation of the SIM registration law,” Senator Sherwin T. Gatchalian said in a statement after a number of SIM cards used for fraud were found in recent raids of illegal POGO sites. 

“The goal of this legislation is to provide accountability for those using SIM cards and to support law enforcement in tracking perpetrators of crimes committed through phones. Because the NTC has apparently forgotten its responsibility, scammers in the POGO industry continue to use SIM cards unabatedly,” he added.

The NTC did not immediately reply to an e-mail seeking comment.

Mr. Gatchalian was referring to raids conducted against Smartweb Technology Corp. in Pasay City, Zun Yuan Technology in Bamban, Tarlac and Lucky South 99 in Pampanga.

Authorities seized SIM cards with false identities and phones and scripts for scamming during the raid of Zun Yuan’s site in March, Mr. Gatchalian said, adding that these were “used in undertaking love, cryptocurrency and other investment scams.”

The raid of Lucky South’s site earlier this month also yielded phone devices, he said. 

But since the enactment of the SIM Card Registration bill in October 2022, fraudulent activities have risen significantly, said Mr. Gatchalian, who co-authored the measure.

“SIM registration is an important tool in combating online crimes that make use of a phone. The NTC should stop sleeping on its job so we can realize this goal,” he said.

At the weekend, the Presidential Anti-Crime Commission (PAOCC) said it was keeping an eye on 58 banned POGOs.

Its spokesman Winston John R. Casio told reporters some of those based in Pampanga, Cavite, Laguna, Palawan and Cebu might still be operating based on social media monitoring.

The agency is struggling with its lack of manpower, with only 49 agents, he said. There are 43 legal POGOs in the Philippines, according to PAOCC.

Meanwhile, American and British executives said POGO raids would not affect the appeal of the Philippines to investors.

“Most seemed to be surprised at the scale and possible Chinese influence, but most believe the Philippine government will be managing it properly,” American Chamber of Commerce of the Philippines, Inc. Executive Director Ebb Hinchliffe told BusinessWorld in a Viber message.

“Most foreigners wouldn’t have a clue what a POGO is, let alone the issues surrounding them,” he added.

British Chamber of Commerce of the Philippines Executive Director and Trustee Christopher James Nelson said illegal POGOs are a specific crime that British investors do not pay attention to.

Foreign investors are focusing more on the Philippines’ economy, the ease of doing business and key legislation, he added.

He said most foreign investors are more interested in the direction of interest rates and the peso. “What is going to happen with interest rates? Linked to that is where is the peso [going]?” he said by telephone.

Mr. Nelson said the Philippines remains attractive to foreign investors because of its skilled workforce.

A POGO ban is unlikely to dissuade foreign investors, he added.

American Chamber of Commerce adviser Katherine Stuntz said the government of President Ferdinand R. Marcos, Jr. should continue to address the issue of illegal POGOs. “It’s important to consider the broader economic context and other factors shaping investment decisions,” she said in a Viber message.

Economists have said POGOs complicate Philippine efforts against money laundering and may hinder its ambition to become an investment hub.

The country has been on the Financial Action Task Force’s (FATF) gray list of countries under heightened monitoring for dirty money since 2021, partly because of its loosely regulated gaming sector.

Legislators under the past administration passed a law legalizing POGOs by taxing them amid concerns about the social costs of gambling.

The Chinese Embassy in Manila last week issued a statement urging the Philippine government to ban POGOs.

It said the embassy has implicated about 3,000 Chinese nationals in POGO-related crimes since 2019.

Last year, it helped the Philippines in closing five POGO hubs and repatriating about 1,000 Chinese citizens.

“We ppeal to he Philippines to ban POGOs at an early date so as to root out this social ill,” it said in a statement on Friday. “We firmly oppose any baseless ccusation and smearing against China in connection with POGOs.”

Manila winning battle vs China in international community — lawmaker

AN AERIAL VIEW of the BRP Sierra Madre at the contested Second Thomas Shoal on March 9, 2023. — REUTERS

A GROUP of Seven (G7) statement opposing China’s dangerous maneuvers in the South China Sea shows that the Philippines is winning the battle in the international community in its sea dispute with Beijing, according to a congressman.

Beijing has become a “pariah” in the international community due to its attempt to change the status quo in the waterway, Cagayan de Oro Rep. Rufus B. Rodriguez said in a statement at the weekend.

“The G7 declaration of support, together with similar pronouncements from allies of the Philippines in this part of the world… is proof that we are winning the battle against China in the international community,” he added.

The G7 on Saturday called out China for its increasing use of dangerous maneuvers and water cannons against Philippine vessels. It opposed Chinese “intimidation activities” in the South China Sea.

In a communiqué after the G7 Summit in Apulia, Italy, the leaders of the powerful economic bloc raised concerns about the situation in the East and South China Seas, reiterating their “strong opposition to any unilateral attempt to change the status quo by force or coercion.”

“We continue opposing China’s dangerous use of coast guard and maritime militia in the South China Sea and its repeated obstruction of countries’ high seas freedom of navigation,” they said in the statement.

China claims more than 80% of the South China Sea based on a 1940s nine-dash line map, including areas within the Philippines exclusive economic zone.

The Permanent Court of Arbitration in 2016 voided China’s sweeping claims for being illegal.

Beijing has deployed an armada of coast guard and militia vessels in the South China Sea to assert its claims.

“Beijing’s aggression is taking place inside our own 200-[nautical] mile exclusive economic zone,” Mr. Rodriguez said.

China’s coast guard has repeatedly used high-pressure water cannons to dissuade Philippine vessels from entering highly contested areas within the country’s exclusive economic zone including Scarborough Sho and Second Thomas Shoal. — Kenneth Christiane L. Basilio

House to prioritize 2025 budget when sessions resume

PHILSTAR FILE PHOTO

THE HOUSE of Representatives will prioritize the 2025 national budget once Congress resumes sessions next month, Speaker and Leyte Rep. Ferdinand Martin G. Romualdez said on Sunday.

The government of President Ferdinand R. Marcos, Jr. is proposing a P6.2-trillion budget for next year, 7.6% more than this year, he said in a statement.

The Speaker said the Budget department is expected to submit the proposed appropriations after the president’s state of the nation address on July 22. “That is the biggest and most important piece of legislation.”

The House will discuss the budgets of the different agencies from August to October.

House leaders last month said they are looking at increasing the budgets of Defense agencies and the Philippine Coast Guard amid Chinese aggression in the South China Sea.

Tensions between the Philippines and China have worsened in the past year as Beijing continues to block resupply missions to Second Thomas Shoal, where Manila grounded a World War II-era ship in 1999 to assert its sovereignty.

A United Nations-backed tribunal based in the Hague in 2016 voided China’s expansive claims in the waterway for being illegal.

The 19th Congress will open its third and last session next month. — Kenneth Christiane L. Basilio