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‘High incidence’ of money laundering seen in gaming

A woman holds a Philippine flag at a store in Manila. — PHILIPPINE STAR/RYAN BALDEMOR

By Luisa Maria Jacinta C. Jocson, Reporter

THE PHILIPPINES is likely to exit the “gray list” of the Financial Action Task Force (FATF) soon despite a “high incidence” of money laundering, mainly in the gaming sector, Moody’s said.

Choon Hong Chua, Moody’s senior director and head of the Financial Crime Practice Group for Asia and the Pacific and the Middle East, said that the Philippines is “on track” to exit the gray list.

“It is clear the country is committed to strengthening anti-money laundering and counter financing of terrorism (AML/CFT) controls and has implemented more stringent requirements,” he told the BusinessWorld in an e-mail interview.

The Moody’s Grid database showed that from 2018 to 2023, the Philippines was among the top five countries in Southeast Asia with money laundering activity events added over the five-year period.

“From 2022 to 2023, the number of money laundering events added in the Philippines increased 45%,” it added.

Mr. Chua said that there has been a “high incidence” of money laundering events in the country related to gaming activities, citing online gambling, casinos and betting centers.

“Besides these activities, a large proportion of money laundering activity in the region is also linked to organized crime and complex scam operations, some of which are set up in the Philippines,” he added.

The Philippines has been on the FATF’s list of jurisdictions under increased monitoring for dirty money activities since June 2021.

The FATF Plenary, which is the organization’s decision-making body, usually meets in February, June and October.

“We have seen the current regime take an active step to improve the level of AML competency in the banking sector — from the implementation of new regulations to active communications with the covered entities. This stemmed from some of the weaknesses observed,” Mr. Chua said.

He noted the government’s ongoing initiatives to “implement stricter controls, reporting requirements, and enforce compliance within the financial sector.”

Early this year, President Ferdinand R. Marcos, Jr. ordered all concerned government agencies to hasten efforts to help the country exit the gray list as soon as possible.

The Anti-Money Laundering Council  also earlier said it is working to increase the investigations and prosecutions related to dirty money this year.

“The private sector also has a part to play by adhering to the requirements promptly to lift the Philippines out of the gray list. This requires a concerted effort and engagement from both the public and private stakeholders,” Mr. Chua said.

“The private sector will also need to invest to build capabilities that enable a shift towards a faster, more efficient, digitized system.”

Financial institutions and the overall private sector must “participate in anti-money laundering efforts.”

Mr. Chua also recommended measures to boost the private sector’s capacity to combat money laundering activities and strengthen third-party risk management capabilities to help institutions mitigate various risks.

Emerging technologies such as artificial intelligence (AI) and machine learning (ML) can also be used to strengthen financial crime detection and reporting, Mr. Chua said.

“AI and ML can enhance Know Your Customer (KYC) workflows when it comes to the screening, onboarding, and due diligence processes for compliance,” he said.

“KYC workflows can be enhanced with access to trusted internal and external datasets. Embedding an AI capability, such as a chat interface or copilot tool, within a client lifecycle management platform, can also help highlight critical information and provide more datapoints to make an informed decision.”

Mr. Chua said there must still be humans involved in the compliance teams to maximize the potential of these technologies and workflows as well as “ensure a fair, quality outcome.”

Mr. Chua said AI can be used in screening technologies to “reduce false positives in the name matching process.”

“True alerts can be prioritized to reduce time-to-decision when assessing risk,” he added.

‘Most exciting chapter’ for PHL yet to come — WEF

The Philippine economy is expected to be one of the fastest-growing economies in the region this year. — PHILIPPINE STAR/MIGUEL DE GUZMAN

By Beatriz Marie D. Cruz, Reporter

THE Philippines could become one of the drivers of global growth in the future, if the government continues to ease foreign ownership restrictions and ramp up partnerships with the private sector, according to a World Economic Forum (WEF) executive.

“We feel that the most exciting chapter of the country is yet to come. So, we remain very hopeful that there would be ongoing collaboration with both the government and private sector going forward,” Joo-ok Lee, head of the Regional Agenda, Asia-Pacific at the WEF, said on the sidelines of the BusinessWorld Economic Forum last week.

Mr. Lee said there is “robust” interest from the private sector and investors towards the Philippines.

“In the medium and longer term, we feel very optimistic that there’s a lot of opportunities for the country… There are many things that Philippines has going for, the economy, the demographic dividend, but also the regulatory kind of reforms and changes that we’re seeing,” he said.

“As long as the current trend continues, investments in key sectors and infrastructure as well as emphasizing the need for public-private collaboration, I think the Philippines will emerge as one of the stronger players in driving global growth.”

The Philippines is expected to be one of the fastest-growing economies in the region this year with the government targeting 6-7% gross domestic product growth.

The Philippines can become a $2-trillion (around P116-trillion) economy in the next decade, WEF President Børge Brende said in March.

However, geopolitical tensions like the trade war between the United States and China, as well as territorial dispute in the South China Sea, may pose threats to the outlook.

“The geopolitical tensions between superpowers, especially in the setting of the Philippines, poses some threats because you don’t want to be in a situation where you’re forced to take sides,” Mr. Lee said.

The Philippines must ensure a “strategic balance and ongoing constructive relationship” with the US and China, he added.

“It further emphasizes the need to remain resilient, to have an open economy that can adapt towards the changing environment,” he added.

Hansley A. Juliano, a political science professor at the Ateneo de Manila University, said the Philippines must strengthen its trade partnerships with other countries like Japan and Australia amid heightened tensions between the US and China.

“It would be good to increase their share in our balance of trade or potentially crowd out Chinese economic activity in the Philippines,” he said in a Facebook Messenger chat.

Meanwhile, WEF’s Mr. Lee also cited the need to ease economic restrictions in the 1987 Constitution to allow foreign ownership in more sectors.

“We understand that some of the regulations are there for a reason,” he said. “But purely looking at it from an outsider’s perspective, the easing of those regulations would be perceived as being more inviting for foreign investors to claim a stake and also be a partner rather than just a player.”

In March, the House of Representatives passed a proposal to lift foreign ownership limits in the 1987 Philippine Constitution.

The Senate has yet to continue deliberations on the proposed Charter change.

“The Constitutional amendments are necessary but are not sufficient. We still need to transition the current extractive institutions into efficient and inclusive ones,” Leonardo A. Lanzona, an economics professor at the Ateneo de Manila University, said in a Facebook Messenger chat.

Government eyes sale of assets to GSIS, SSS

DOF.GOV.PH

THE FINANCE department is aiming to raise around P100 billion from the sale of government assets, mainly to the Government Service Insurance System (GSIS) and the Social Security System (SSS).

“We need to privatize a lot but we’re going to sell them most likely to GSIS. We’re offering them to GSIS and SSS so it’s government to government transactions,” Finance Undersecretary Catherine L. Fong told BusinessWorld on the sidelines of the Asia Pacific Loan Market Association Loan Market Conference on May 9.

The Department of Finance (DoF) is hoping to close a deal with GSIS before midyear to help reach the P100-million target.

Ms. Fong said the amount raised so far this year from sales and dividend income were “not substantial yet.”

“Well, there’s the NAIA (Ninoy Aquino International Airport) upfront payment which will be released. It’s currently in escrow, so it will be released around September,” she said.

A consortium led by San Miguel Corp. won the P170.6-billion project to rehabilitate the NAIA. The group paid P30 billion upfront when the contract was signed in March.

Ms. Fong said GSIS is “very liquid” and could maximize the value of the assets.

“I mean, we could bid the assets out. Some assets are very lucrative, but it takes time just to procure an appraisal. I’m sure the private sector will be interested… but since we’re kind of in a hurry, it will likely be sold to the GSIS,” she said.

Meanwhile, Ms. Fong said the Philippine Amusement and Gaming Corp. (PAGCOR) is still planning to sell its casinos.

“PAGCOR thinks that they need a charter amendment to allow them to sell the casinos. According to them, they’re still willing to sell it so I’ve already followed up with [PAGCOR Chairman and Chief Executive Officer Alejandro H. Tengco], but he says their charter is currently, I think, in Congress for PAGCOR’s extension of life,” she said.

The DoF’s Privatization and Management Office is working with PAGCOR on its plan to privatize the 45 casinos that it operates by 2025.

PAGCOR is transitioning to become a purely regulatory agency from its current dual role as a regulator and operator.

Finance Secretary Ralph G. Recto also said earlier this month the DoF was exploring ways to raise more revenue without imposing new taxes.

Mr. Recto said the DoF was looking to sell the government’s stake in the Subic-Clark-Tarlac Expressway to state pension funds to boost revenues.

“This is an innovative way to sell especially profitable assets of the government that would also benefit the pension funds, using surplus funds, while allowing the National Government to have one-time proceeds to help narrow the budget deficit and also reduce the need to borrow and curb the increment of the NG outstanding debt,” Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.

The government aims to borrow P2.57 trillion 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.

Reyes Tacandong & Co. Senior Adviser Jonathan L. Ravelas said in a Viber message that it would be more ideal to improve tax collection and efficiency as it would translate to higher recurring income.

“Selling government assets only results in one-time gains and will never occur again. So, if the government can efficiently use the asset and give substantial returns, (enough to cover cost and a little income return of 5-10%) that is good,” he said. — Aaron Michael C. Sy 

3 German firms considering PHL expansions, PEZA says

THE Philippine Economic Zone Authority (PEZA) said three German companies in the automotive, semiconductor, and pharmaceutical industries are planning to expand their Philippine operations.

In a statement Sunday, the investment promotion agency (IPA) said it found out about the expansion plans after business-to-business meetings on a visit to Germany this month.

PEZA did not disclose the names of the companies but added that one of the companies is already preparing to apply for registration with the IPA.

“We (will) announce the identities of these companies once they file their application with PEZA,” PEZA Director General Tereso O. Panga said.

One of the companies, PEZA said, makes automotive safety sensors in the Philippines.

“They mentioned their plans to expand their operations (and are currently testing) their new products,” PEZA said.

The second company is one of “the world’s largest manufacturers of discrete semiconductors and passive electric components” with automotive, industrial, computing, military, aerospace, and medical applications.

“(It) discussed with PEZA plans to expand its operations in the Philippines to cater to their new products,” the IPA said.

PEZA also met with a German company that makes pharmaceutical laboratory and medical equipment calibrating devices, which is now preparing its application with PEZA.

“PEZA was also able to secure a meeting with one of the world’s biggest pharmaceutical companies that is into life sciences, healthcare, and electronics and with one of the world’s leading car makers headquartered in Germany,” it added.

PEZA was in Germany for a week-long investment mission on May 13–17, during which it attended the IFAT Munich 2024 trade show.

“This event is important to PEZA as we are transforming our ecozones into smart and sustainable locations for investments,” Mr. Panga said.

Citing a report by Sumitomo Mitsui Banking Corp., PEZA said that German companies primarily consider demographics and the availability of supply chain networks when investing in the Philippines.

It added that German companies are also testing the waters on locating outside of China.

“Given this positive outlook for the Philippines, we remain aggressive in our efforts to promote the country as a smart high-tech manufacturing hub and as an enviable investment destination in Asia,” Mr. Panga said.

To date, PEZA houses 37 locator companies with German equity, which accounted for P30 billion in investment and 20,000 jobs. — Justine Irish D. Tabile

Megaworld allots initial P5B for 150-ha beachside golf estate

LISTED property developer Megaworld Corp. said it has earmarked an initial P5 billion to develop a Batangas beachside golf estate in the next ten years.

The company, through its subsidiary Global-Estate Resorts, Inc. (GERI), is developing the 150-hectare ha) Lialto Beach and Golf Estates in Lian town, Batangas, marking its 32nd township development, Megaworld said in an e-mailed statement over the weekend.

Lialto Beach and Golf Estates will include a residential village, an 18-hole golf course by the bay, a beach clubhouse featuring a 20-meter tall lighthouse, landscaped gardens, and nearly one kilometer of coastline.

The residential village of the property will offer lots ranging from 300 square meters to 1,200 square meters in size, including those situated along the fairways and on elevated areas.

“We designed this development for people who want to be surrounded by the beautiful vistas of the beach and the sea, while also enjoying an unparalleled golf lifestyle,” Megaworld Global-Estate, Inc. Vice-President of Sales and Marketing Javier Romeo K. Abustan said.

The property’s beach clubhouse will be exclusive to property owners and their guests. It will feature a modern, resort-inspired reception lobby, swimming pools with cabanas and lounge areas, changing rooms, children’s playground, a multi-purpose covered court, outdoor tennis court, yoga area, pocket parks and open spaces, and a viewing deck.

“Lialto came from the words ‘Lian,’ which is the municipality where the development is located, and ‘Alto,’ which means high altitude or height, a vivid description of how this development stands on an elevated area in this side of Batangas,” Mr. Abustan said.

The property will also have solar-powered streetlights. It will also adopt a mangrove area along the beach that will become the community’s protected marine sanctuary, the company said.

The project is approximately 2.5 hours away from Metro Manila and about 45 minutes away from Tagaytay.

From Makati or Taguig, it can be accessed via the South Luzon Expressway and the Cavite-Laguna Expressway leading to the Calatagan-Lian Highway.

Other GERI communities include Eastland Heights in Antipolo, Rizal; Twin Lakes in Laurel, Batangas; Boracay Newcoast in Boracay Island; The Hamptons Caliraya in Lumban-Cavinti, Laguna; Sta. Barbara Heights in Iloilo; Arden Botanical Estate in Trece Martires-Tanza, Cavite; Southwoods City in the Laguna-Cavite boundary; and Sherwood Hills in Trece Martires, Cavite.

Megaworld shares were last traded on May 24 at P1.85 apiece. — Revin Mikhael D. Ochave

Bb. Pilipinas goes green

SOME of the Bb. Pilipinas candidates wearing sustainable fashion. — BBPILIPINAS OFFICIAL WEBSITE

Candidates walk the runway showing sustainable fashion

ALL 40 candidates of the 2024 edition of Bb. Pilipinas, as well as past crowned beauty queens, went on the runway for a fashion show at Gateway Mall 2’s Quantum Skyview on May 16. For the “girls,” walking on the runway is just another Thursday, but not for this fashion show: Reinvent showcased clothes made sustainably.

Eleven designers took on the task of dressing the contestants, and then some. The clothing was by Jean Alta, Don Cristobal, Russ Cuevas, Adam Balasa, James O’Briant, Rannel Espaldon, Doms Abustan, Uly Marquez, Mark Combe, and Allan Laserna. All the contestants wore accessories by Christopher Munar.

Jean Alta created a collection made with roughly woven strips of stiff material that gave the dresses some body. Don Cristobal’s collection was made of mismatched patches of cloth, coming together for more modern Filipiniana looks. Russ Cuevas did the same, but with more uniform textiles (think denim or gingham).

Mr. Balasa’s clothes were decorated with pleated fabric, making the outfits look fresh. Mr. O’Briant’s clothes took on an earthy look with woven natural materials and traditional beadwork. Mr. Espaldon’s and Mr. Abustan’s designs, meanwhile, express summer with vibrant colors and native textiles.

Mr. Marquez combined white and gold for his outfits, while Mark Combe seemed to channel shipwrecks with his torn-up clothes looking as if they had just come out of the water. Finally, Mr. Laserna cleansed the palate with all-white outfits and chic straw hats.

Former beauty queens joined the 40 hopefuls on the runway, including Bb. Pilipinas International 2022 Nicole Borromeo and Bb. Pilipinas International Hannah Arnold. The show had its wrinkles: the lights and music turned off near the finale of the show, when the candidates should have been making their final walk while the Bb. Pilipinas theme song by SB19 played in the background. The hair and makeup teams and the girls’ fans saved the day by singing the theme song themselves.

PERSONAL SUSTAINABILITY PRACTICES
Anna Lakrini, last year’s Bb. Pilipinas Globe (who was 2nd Runner-up at the global competition) told media about her own sustainability practices. “Wherever I go, close friends of mine know that I always bring my own reusable straws.” Wearing a gown made of deconstructed jeans by Mr. Cuevas, she said, “I also buy secondhand, actually. And you never notice! These clothes are not bad just because they (have been) worn before.

“I don’t think it’s only important for pageants,” she said about sustainability, which has hit more mainstream runways in the past few years. “We’re living in one world, one Earth, and we only have to protect that. We have to reinvent ourselves.”

Meanwhile, Angelica Lopez, last year’s Bb. Pilipinas International who is set to compete in Japan later this year, takes a more personal stance with sustainability. Her hometown, after all, is in the biodiversity center that is Palawan. Since she was a teenager, she has been participating in environmental seminars, segregating her trash, planting trees, and doing coastal cleanups. “Our province is one of the best islands in the world. We get our source of income from our tourists as well. So, if we do not take good care of our environment, it will really affect our economy,” she said.

“I believe that it’s our moral responsibility as humans to really practice sustainability,” she said. — Joseph L. Garcia

Nice packaging, but…

By Zsarlene B. Chua

Product Review
Exo Celestial Skincare

THE PHILIPPINE skincare industry is a fast-growing sector, with a 2022 GlobalData report predicting a compound annual growth rate (CAGR) of 7.7%, reaching P74.8 billion by 2026. With the growth of the skincare industry, new players keep popping up in the market, each touting new formulations that are perfect and tailored for the needs of the Filipino skin.

One of the new entrants in this segment is EXO Celestial, a brand that prides itself for being “the first and only skincare regime[n] and non-invasive treatment with microsurgical effect that combine the power of exosomes and nicotinamide mononucleotide (NMN)” said to be specifically for skin regeneration.

If you think that’s a mouthful for a skincare brand, yes, yes it is. But I digress, what exactly are exosomes and NMN? Exosomes are delivery systems that are said to stimulate cell growth and skin repair while NMNs are antioxidants that can “contribute to maintaining the vitality of the skin…and potentially helping to reduce the signs of aging.” (according to the EXO Celestial website).

With these two powerful ingredients, EXO Celestial created a four-step skincare regimen that includes an Anti-Pollution Amino Acid Cleansing Cream (100 ml), Advanced Nano Exosome Repairing Essence (30 ml), Nano Exosome Peptide Revival Cream (30 ml), and UV Expert Sunscreen SPF 30 (30 ml).

But the real question is, are they any good? I was provided the set to try out and have been using it in place of my regular routine — and before I go to the specifics of my experience, a few general observations about the brand.

First, the packaging looks premium with each product encased in silver packaging with the essence and cream in what I believe are airless pumps, which is appreciated as it means you’ll have less problems getting all the product out if you finish it. The packaging makes for a good vanity display, though I did notice that the labels did get worn out after the few weeks I’ve been using it. Plus, the box and the product are numbered so the user knows which one to use first — very helpful for those who are starting out on their skincare journey.

Second, I scoured the website and the social media profiles of the brand and I cannot for the life of me see how much the entire skincare regimen costs as it looks like it’s more of a direct selling kind of company rather than retail as it advertises buying five sets to get one for free and a personalized website, said to be worth P50,000 but no mention of the price of the set. It just asks that you register your interest in getting the set via the website and someone will contact you with the details.

Did that raise a few red flags? Yes. But questionable business practices, aside, I’m only here to review the product. Sadly, I won’t be able to judge whether it’s worth the money as I don’t know how much it is.

Third, the ingredients list is so long! I reckon it’s one of the longest I’ve seen in a while since some local brands have followed The Ordinary’s lead of focusing on just one active ingredient and keeping the ingredient list to only the necessities like water and stabilizers. For EXO Celestial, it seems like “more is more” as the cleansing cream has a whopping 43 ingredients (give or take one or two, I got dizzy counting). I wasn’t able to find exosomes but I did fine Nicotinamide around the middle of the ingredients list as Beta-Nicotinamide Ribose Monophosphate. It has a lot of plant-based ingredients like witch hazel water, butcher’s broom root extract (an anti-inflammatory and antioxidant), Gotu kola or just Centella Asiatica leaf extract (also an anti-inflammatory), Pot Marigold flower extract (also an anti-inflammatory), etc. and that’s just for the cleansing cream.

Moving on to the products themselves. While it’s touted to be usable for those with dry skin (like mine), the Anti-Pollution Amino Acid Cleansing Cream didn’t really work for me as Salicylic Acid and Mandelic Acid (BHA and AHA) or chemical exfoliants really dry out my skin. I only use these products once a week or so.

The cleansing cream has a good lather and good texture but it did leave my skin very tight and dry after, which I did not enjoy so after a few uses, I returned to my usual product or in this case, the Dermorepublic Face Wash with Niacinamide and Botanical Extracts.

After the cleanser, you’re instructed to use the Advanced Nano Exosome Repairing Essence. Essences are products that sit in the space between toners and serums in that they usually have a more liquid texture reminiscent of toners but with concentrated ingredients like serums. These products are perfect for people who want to keep their routines to the very basics.

EXO Celestial’s Essence also contains a ton of ingredients — I didn’t have the patience to count them all, but it also has Nicotinamide alongside Niacinamide which improves collagen production and skin barrier function. Out of all the products in this regimen, I liked the essence the most as using it after my Human Nature Nourishing Face Toner did give me that very hydrating base that I love. I did try it without the toner, but it didn’t hydrate my skin enough after becoming dried out by the cleansing cream.

Used with the Human Nature toner, it makes my skin soft. It has some emollient effect that keeps my skin from drying further, which I really enjoyed.

The Nano Exosome Peptide Revival Cream, which also has a dizzying number of ingredients, meanwhile, was an okay product. It contains the usual suspects — botanicals and nicotinamide, with added ceramide which is perfect for hydration and anti-aging, but it’s dead last on the ingredients list so its concentration might be very little. I did like the texture — it’s light, which is perfect for those with oily to combination skin, and it is hydrating. But it wasn’t enough for me — my skin sucked all that hydration and, while it left it less tight than when I started, it was still tight.

After a few days, I had to use it with beauty oils like the Human Nature Sunflower Oil to make it more hydrating.

Finally, the product I liked the least, the UV Expert Sunscreen SPF30. As an advocate for using sunscreen as part of your daily routine even if you plan on staying inside all day, I like my sunscreens to be at least SPF50 for better sun and UV protection. Second, it leaves a white cast on my face which I dislike greatly.

If you’re looking for good sun protection products, there are so many good local sunscreens to choose from, ranging from my holy grail Belo Essentials Tinted Sunscreen SPF50 for that perfect light makeup base to the gel-type Hello Glow 3-in-1 Lightweight Sun Care Gel SPF50+ for those who want untinted and very lightweight sun protection.

At the end of the day, the EXO essence stayed the longest in my routine while the others are sitting on my vanity as decoration.

Overall, this brand didn’t really work for me, and I believe there are other local skincare brands that will be more effective, transparent with their pricing, and have more targeted ingredients.

 

Zsarlene Chua is a former BusinessWorld reporter who is now a fledgling PR girl. She’s all about skincare, makeup, and video games. None of the products reviewed are the writer’s clients. Contact the author at zsarlene.chua@gmail.com.

First Gen says 80MW geothermal projects set for 2024 launch

FIRST Gen Corp. targets to have 80 megawatts (MW) of geothermal energy projects completed by 2024, the company’s president said.

This comes after the completion of the 29-MW Palayan Binary Power Plant, First Gen President and Chief Operating Officer Francis Giles B. Puno said on the sidelines of BusinessWorld’s economic forum last week.

“That just started operating, so it is ideal when there’s a need for supply. That’s new capacity that’s coming as well,” Mr. Puno added.

First Gen subsidiary Energy Development Corp. (EDC) announced the construction of the binary power plant in Albay in 2021.

Last year, EDC said it would pour in P60 billion in the next three years to drill 40 additional wells in Leyte, Davao, Albay, and Sorsogon.

“When you look at it, there’s P60 billion invested in geothermal, and then for LNG (liquefied natural gas), we invested close to $400 million. And on top of that, the lease of FSRU (floating storage regasification unit),” Mr. Puno said.

In 2023, First Gen and Prime Infrastructure Capital, Inc., through their subsidiaries, signed a 15-year lease agreement over the former’s LNG FSRU in Batangas.

Mr. Puno said that they are waiting for the approval of the Department of Energy to operate at full capacity.

When queried about the necessity for another delivery of LNG cargo, he said: “I believe so. We did not anticipate the surge in demand for electricity due to the elevated temperatures this year.”

First Gen has awarded a contract to Chinese company CNOOC Gas and Power Trading & Marketing Ltd. for the supply of one LNG cargo at approximately 130,000 cubic meters.

The LNG will be used by First Gen’s existing gas-fired power plants in the First Gen Clean Energy Complex.

The awarded contract stemmed from the initiated fifth tender process for LNG cargo in March. — Sheldeen Joy Talavera

What’s really happening in Vietnam?

JET DELA CRUZ-UNSPLASH

Last week, Vietnam’s national assembly elected a new president, To Lam, who is the former minister for public security, and a national assembly chairperson, Tran Thanh Man. The week before, it announced four new members for the politburo, the highest decision-making body within the Communist Party of Vietnam (CPV), which has run the country since reunification in the 1970s.

The appointments were necessary because Vietnam’s leadership ranks have been decimated in recent years by the anti-corruption “blazing furnace” campaign initiated in the mid-2010s by CPV general secretary Nguyen Phu Trong. Senior officials that have been removed include Deputy Prime Ministers Pham Binh Minh and Vu Duc Dam in 2022; President Nguyen Xuan Phuc in 2023; and Tranh Tuan Anh, President Vo Van Thuong, and National Assembly Chair Vuong Dinh Hue in 2024. Before the announcement of the four new politburo members, its number had gone down to 12 from 18.

The anti-corruption campaign has its roots in the country’s economic crisis in the late 2000s to early 2010s. After the 2007-2008 global recession brought about the financial crisis in the US, Vietnam’s government implemented a stimulus program worth about 6.8% of GDP, which was larger than most emerging market countries except for China. Much of the money eventually found its way to the large state-owned enterprises (SOEs) as low-cost loans, which the SOE’s then spent like the proverbial drunken sailors — investing in unrelated businesses ranging from banks to taxi companies to real estate that they had no capacity to effectively manage. Eventually, many of these investments proved to be value-destroying.

The worst case was the Vietnam Shipbuilding Industry Group (Vinashin), which was supposed to be the state champion of shipbuilding, as its name implies, with the goal of becoming one of the world’s top companies in the industry, in the vein of the Samsung, Hyundai, and Daewoo shipbuilding giants.

However, mismanagement and overexpansion, fueled to a good part by the stimulus program and either corrupt or negligent Vinashin officials, resulted in debt growing to unserviceable levels. In December 2010, the shipbuilder defaulted on its interest payments, triggering fears of possibly much bigger problems in the state sector and of the risk of bad SOE debts cascading throughout the banking system and triggering a systemic financial crisis. Rating agencies downgraded the country because of Vinashin’s problems, and a multi-year effort to clean up the SOEs followed. Eventually, new rules were issued to limit how much SOEs could invest outside of their core businesses.

The CPV laid much of the blame for SOE problems, as well as the country’s other economic ills such as inflation during that time, on the leadership of then prime minister Nguyen Tan Dung. The narrative was that corruption within his government and the too-close-for-comfort relationship between politicians and policymakers on the one hand and the SOEs and other rising business groups on the other hand led to the serious mismanagement of the economy. Conservatives within the party won the argument that the economic crises that could be precipitated by this type of malfeasance could increase social discontent and eventually threaten the legitimacy of single-party rule. This led the rise of Trong and his conservative allies in 2011 and the evisceration of Dung’s political networks. It is this overarching belief that corrupt ties between politicians and businesses could undermine not only Vietnam’s economic future, but the future of the communist party itself that formed the narrative for “blazing furnace.”

But the anti-corruption campaign also has a more immediate political context. CPV general secretary Trong, who is the highest-ranking official of party (and effectively the country), is expected to step down in 2026, after leading it for 15 years. Competition over who is to succeed any CPV general secretary is intense, with much of the political maneuvering taking place behind the scenes and away from public eyes. There is therefore a sense that the intensified implementation of “blazing furnace” over the past few years is part of the elimination process among the different factions and individuals that are competing to succeed Trong. Numerous high-ranking officials both within the government and the Politburo who are contenders for leadership positions or lead competing factions have thus fallen because of corruption-related vulnerabilities in their dossiers, either directly, among their family members or close inner circles, or when they oversaw provinces as party secretaries.

For foreign investors, many of whom have been enamored by the promise of Vietnam as the main alternative to China for manufacturing, the political churn at the top can be unsettling. For one, the campaign has had measurable effects on the economy, with bureaucrats slower to act because they fear that any corruption in the projects that they approve, implement, or oversee could face increased scrutiny and, eventually, result criminal prosecution under the anti-corruption initiative. And this generates concerns that key infrastructure projects could be derailed, particularly in power and logistics.

Also, the seeming elevation of officials with strong ties to the police and internal CPV security groups could compromise governance, with the communist party focused more on directly protecting itself against social discontent or political enemies rather than on sustaining long-term economic growth. Corruption is an endemic problem in Vietnam and across all levels of the government and solving it will take much more time.

Of course, these fears can fade after a couple of years, once the leadership transition concludes in early 2026. Export-oriented growth remains the key pillar of Vietnam’s long-term economic ambitions. But how well it can balance its immediate political priorities and its longer-term goals will depend on the composition of the next set of leaders.

The frontrunners for now to become CPV general secretary are Prime Minister Pham Minh Chinh, who has been in office since 2021, and the new president, To Lam. But neither has a lock on the position and other candidates are possible since there are still 18 months to go until January 2026. Political maneuvering to the last minute is not uncommon. Thus, the recent changes may only be the end of the beginning for the leadership transition. In the meantime, investors would do well to expect sometimes indecipherable political moves, endless conspiracy theories, cautious bureaucrats and, inevitably, some handwringing on how Vietnam may be wasting some precious years — which is par for the course for any emerging market entering an election cycle.

 

Bob Herrera-Lim is a managing director at Teneo, a New York-based consulting firm that advises companies and investors globally. He covers all of Southeast Asia for the firm’s clients. He is also a fellow of the Foundation for Economic Freedom.

T-bill, bond rates may be mixed

BW FILE PHOTO

RATES of Treasury bills (T-bills) and Treasury bonds (T-bonds) on offer this week may be mixed as US Federal Reserve officials continued to signal that rates will likely stay higher for longer.

The Bureau of the Treasury (BTr) will auction off P15 billion in T-bills on Monday, or P5 billion each in 91-, 182-, and 364-day papers.

On Tuesday, it will offer P30 billion in reissued three-year T-bonds with a remaining life of two years and seven months.

T-bill and T-bond rates could track the mixed movements in secondary market yields following hawkish signals from Fed policy makers, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.

US Federal Reserve officials are not ready to say inflation is heading to the central bank’s 2% target after data last week showed a welcome easing in consumer price pressures in April, with several on Monday calling for continued policy caution, Reuters reported.

“It is too early to tell whether the recent slowdown in the disinflationary process will be long lasting,” Fed Vice Chair Philip Jefferson told the Mortgage Bankers Association conference in New York, even as he called the April data “encouraging.”

Speaking separately at a conference held by the Atlanta Fed, Fed Vice Chair of Supervision Michael Barr, said “disappointing” first-quarter inflation readings were “did not provide me with the increased confidence that I was hoping to find to support easing monetary policy.”

Like Mr. Jefferson, Mr. Barr reinforced the Fed’s overarching message that rate cuts, highly anticipated by markets, are on hold until it is clear inflation will return to the Fed’s 2% target.

“We will need to allow our restrictive policy some further time to continue its work,” Mr. Barr said.

Consumer prices cooled in April, and retail spending did not increase at all, two welcome signs that the economy may be losing some steam in the face of a policy rate that the Fed has held in the 5.25%-5.5% range since last July.

But Fed policy makers, stung by a string of higher-than-expected inflation readings for the three months prior, remain cautious and want to make sure pricing pressures are fully on track back to the Fed’s 2% target rate before starting to cut its benchmark interest rate.

The Fed’s next policy meeting is June 11-12. Traders in contracts tied to the central bank’s policy rate currently do not expect an interest rate cut until September.

At the secondary market on Friday, the 91-day T-bill went down by 1.1 basis points (bps) week on week to yield 5.78811%, based on PHP Bloomberg Valuation Service Reference Rates data published on the Philippine Dealing System’s website. Meanwhile, the 182-day and 364-day T-bills went up by 4.23 bps and 0.81 bp to end at 5.9429% and 6.0323%, respectively.

For its part, the three-year bond saw its yield rise by 1.49 bps week on week to close at 6.3867%.

Secondary market traders were mostly cautious on Friday, resulting in “flattish” rates, a trader said in an e-mail.

This week’s three-year bond auction could see strong demand amid the limited supply of the tenor in the market, the trader added, noting the papers could fetch rates ranging from 6.325% to 6.45%.

The papers to be offered on Tuesday were last auctioned off on Jan. 30, where the government made a full P30-billion award for an average rate of 6.007%, 0.7 bp higher than the 6% coupon rate.

Meanwhile, last week, the BTr raised P15 billion as planned from the T-bills it offered as total bids reached P59.345 billion or nearly four times the amount on the auction block.

Broken down, the Treasury borrowed P5 billion as programmed from the 91-day T-bills as tenders for the tenor reached P19.105 billion. The average rate for the three-month paper went down by 1.5 bps week on week to 5.712%. Accepted rates ranged from 5.67% to 5.725%.

The government likewise made a full P5-billion award of the 182-day securities, with bids reaching P19.36 billion. The average rate for the six-month T-bill stood at 5.864%, down by 2.9 bps, with accepted rates at 5.843% to 5.875%.

Lastly, the Treasury raised the planned P5 billion via the 364-day debt papers as demand for the tenor totaled P20.88 billion. The average rate of the one-year debt dropped by 3 bps to 6.007%. Accepted yields were from 6% to 6.013%.

The BTr wants to raise P210 billion from the domestic market this month, or P60 billion from T-bills and P150 billion via T-bonds.

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

Grab PHL eyes more locations for services by second half 

GRAB Philippines plans to expand its ride-hailing and food delivery services to key “tourist areas” by the second half of the year, a company official said.

“We are going to continue to expand to more cities, Luzon, Visayas, and Mindanao for the second half of 2024. Part of the reason for that is because the LTFRB  released slots for the Visayas and Mindanao,” Grab Philippines Country Head Grace Vera-Cruz said on the sidelines of the BusinessWorld’s economic forum last week. 

The Land Transportation Franchising and Regulatory Board (LTFRB) has opened slots for transport network vehicle service (TNVS) in Visayas and Mindanao regions.

According to a resolution dated May 7 and signed by its chairman Teofilo E. Guadiz, the LTFRB opened additional TNVS units — 2,300 in Visayas and 2,200 in Mindanao — to “respond to the needs of modern commuters and address the large demand for transport services.”

“For those regions that are open, we are really looking to work with the local government units to ensure that we deliver a good service in those areas,” Ms. Vera-Cruz said. 

Under the LTFRB resolution, the slots opened in Visayas encompass Western Visayas, Central Visayas, and Eastern Visayas.

For Mindanao, new slots are allocated in the Zamboanga Peninsula, Northern Mindanao, Davao Region, Caraga, and SOCCSKSARGEN (South Cotabato, Cotabato, Sultan Kudarat, Sarangani, and General Santos City).

“Our transport business will continue to grow because we are enabled by the LTFRB in opening those regions for us,” she said.

The company is also looking to expand its food delivery services to tourist areas.

“For the food business, we still want to grow but we are looking at tourist cities and see if there is enough volume right now,” Ms. Vera-Cruz said.

Last month, Grab Philippines said it would expand its food delivery services to at least seven new areas in the country within the year. — Ashley Erika O. Jose

Exotic dancer drama Anora wins Cannes Film Festival’s top prize

CANNES, France — Anora, a darkly funny and touching drama about a young exotic dancer who becomes involved with a Russian oligarch’s son, won the Cannes Film Festival’s top prize, the Palme d’Or, on Saturday.

The film by US director Sean Baker beat the 21 other films in the competition line-up, including entries by established directors like Francis Ford Coppola and David Cronenberg.

Anora continues a streak of sex worker-focused films by Mr. Baker, including the 2021 Cannes entry Red Rocket and 2017’s The Florida Project starring Willem Dafoe.

This win is dedicated to “to all sex workers past, present and future,” he said as he accepted the award, while also thanking the film’s star, Mikey Madison, as well as Samantha Quan, his wife and producer.

“This has been my life’s goal, so to reach this place is… I’m going to have to do some thinking tonight about what’s next,” Mr. Baker told Reuters after the ceremony.

Jury president Greta Gerwig, the director behind the pink-hued hit Barbie, called Anora an “incredibly human and humane film that captured our hearts” when announcing the award that was handed out by George Lucas, of Star Wars fame.

Mr. Lucas was on stage to receive an honorary award during the festival’s closing ceremony from his longtime friend Mr. Coppola, whose passion project Megalopolis was also in competition.

“I’m just a kid who grew up in the middle of California, surrounded by vineyards, and made films in San Francisco with my friend Francis Coppola,” said Mr. Lucas at the ceremony.

The Grand Prix, the second-highest prize after the Palme d’Or, was awarded to All We Imagine As Light, marking the first time an Indian director had won the prize.

Director Payal Kapadia’s debut feature about the friendship between three women was the first Indian film in competition in 30 years.

“The fact that we could be here is a testament that if you stick to one thing and don’t give up hope, then the film could possibly be made, and we are here,” she said.

Iranian director Mohammad Rasoulof, who was in Cannes about two weeks after announcing he had gone into exile, was given a special award for The Seed of the Sacred Fig, about an Iranian court official who grows increasingly controlling and paranoid as protests begin to swell in 2022.

DOUBLE HONORS
Emilia Perez, a musical about a Mexican cartel boss who transitions from male to female, was doubly honored.

Director Jacques Audiard received the jury prize on stage, while the best actress prize was expanded to include all the film’s female stars, with jury member Lily Gladstone saying Emilia Perez celebrated the “harmony of sisterhood.”

Zoe Saldana, Selena Gomez, Karla Sofia Gascon, and Adriana Paz all star in the film that Vanity Fair magazine called “a movie unlike any other.”

“I want to dedicate this to all the women, trans and non-trans, in the world, this is for you, for all the minorities who are not left in peace when we simply want to go on living,” said Ms. Gascon, who is the first transgender actress to win the prize.

Jesse Plemons was named best actor for playing three different parts — a struggling police officer, a cult member, and a man whose every action is controlled by his boss — in director Yorgos Lanthimos’ absurdist triptych Kinds of Kindness.

Best screenplay went to The Substance, a Demi Moore-led body horror about the perils of youth and beauty, while Miguel Gomes took best director for Grand Tour, an eclectic trip through Asia by a British civil servant and his pursuing fiancée.

BLACK DOG WINS UN CERTAIN REGARD
Black Dog, about a man released from prison who returns home to his remote town in China to rid it of stray dogs before the Olympics, only to befriend one of them, won the Cannes Film Festival’s Un Certain Regard competition on Friday.

Un Certain Regard focuses on arthouse films and runs parallel to the main competition, the Palme d’Or.

Eddie Peng, who stars as Lang in the film by director Guan Hu, attended the ceremony at Cannes along with greyhound Xin. It was the second prize in one day for Xin, who donned the Palm Dog red collar after being picked for the Grand Jury Prize at a separate ceremony celebrating canine performances.

The Un Certain Regard jury prize went to the French film The Story of Souleymane, director Boris Lojkine’s feature about a Guinean immigrant’s struggle to survive in Paris.

The best director prize was given to both Italy’s Roberto Minervini for The Damned and Zambian-Welsh auteur Rungano Nyoni for On Becoming a Guinea Fowl, while Norah, by Saudi Arabian director Tawfik Alzaidi, received a special mention.

Canadian filmmaker and actor Xavier Dolan headed this year’s five-strong jury. There were 18 films in total competing for the prize. — Reuters

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