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S&P upgrades Meralco’s credit rating to ‘BBB’

PHILSTAR FILE PHOTO

CREDIT WATCHER S&P Global Ratings has upgraded Manila Electric Co.’s (Meralco) credit rating to “BBB,” noting the company’s strong financial position and steady cash flow.

“We raised our long-term issuer credit rating on Meralco to ‘BBB’ from ‘BBB-’,” S&P said in its report on Meralco’s credit upgrade e-mailed to journalists on Wednesday.

A “BBB” rating indicates that Meralco has an adequate capacity to meet its financial commitments but remains more vulnerable to adverse economic conditions.

S&P affirmed a stable outlook for Meralco, reflecting expectations of steady cash flow from its regulated distribution business and prudent management of leverage and growth spending over the next 12-24 months.

“We expect financial ratios to remain strong, despite heavy capital spending on the power generation businesses,” S&P said.

The agency anticipates Meralco will maintain a strong ratio of funds from operations (FFO) to debt of 39% to 45% over the next two years, surpassing the previous 30%.

S&P said that Meralco’s support will come from improving profitability in power generation and steady cash flow from distribution.

The agency also noted favorable power purchase agreement contract terms for Global Business Power Corp. (GBPC) and additional earnings from the local contingency reserve market.

Meralco is expected to undertake capital spending of approximately P120 billion in 2024 and P30 billion to P40 billion in 2025, including acquisitions. This includes sizable distribution-related growth capital expenditure of P23 billion to P25 billion annually for network strengthening and asset renewal.

Additionally, Meralco plans to ramp up investments in power generation assets, including renewables, over the next two to three years.

The company has announced a proposed joint venture with Aboitiz Power Corp. to invest in two gas plants of San Miguel Corp. and a liquefied natural gas import terminal, with an expected cost of P70 billion to P75 billion for its effective 40.2% stake.

Meralco will likely provide capital injections of up to P40 billion to SP New Energy Corp. for a 3.5-gigawatt Terra Solar Project over the next two to three years. The actual capital spending will depend on the project’s final financing and ownership structure.

S&P cautioned that it could lower Meralco’s rating if the company’s ratio of FFO to debt declines sustainably below 30% or if its financial policy becomes more aggressive.

POWER SUPPLY DEALS
Meralco expects a “swift” approval of its power supply agreements (PSAs) from the Energy Regulatory Commission (ERC) so that customers can enjoy lower rates, a company official said on Wednesday.

The power distributor recently announced that it had secured the best bids from two generation companies, San Miguel Global Power Holdings Corp. and Aboitiz Power Corp., following a competitive selection process (CSP) for 600 MW of baseload capacity.

“We are happy that the main objective of the CSP, which is to secure the least cost supply for our customers, has been achieved. We hope that there will be no further delays as we work towards immediate signing of the PSAs resulting from the 600-MW CSP,” Meralco Senior Vice-President and Regulatory Management Head Jose Ronald Valles said in a statement.

“We trust that ERC evaluation and approval will also be swift so customers can enjoy these very low rates upon scheduled delivery date in August 2025,” he added.

Meralco’s controlling stakeholder, Beacon Electric Asset Holdings, Inc., is partly owned by 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

No longer just the past

REENACTORS in corporate setting.

Every time I visit Mum to check on her, I find her seated in front of a television set or her laptop, her eyes glued to some historical drama series on NHK.

One flick which I watched with her was about one of the Meiji Restoration’s top reformers. It has never ceased to amaze me that an ordinary Japanese like her could rattle off milestones and key dates in the lives of that country’s heroes or historical organizations, and explain their significance to life in her homeland today.

Chances are that many of us Pinoys have perceived a general lack of interest among our countrymen in our origins as a nation. This was so long before kids asked actor Jeffrey “Epy” S. Quizon why Apolinario Mabini — the hero he played in the 2015 historical flick Heneral Luna — was portrayed seated throughout the film. True, Mabini was not an invalid since birth, losing use of both legs only in his early 30s after contracting polio in 1895, but the disease had incapacitated him by the time the Philippine Revolution ignited the following year.

It is a flaw that some foreigners have noticed. One visiting Brit who joined me on a historical tour in Quezon province in the early 2000s said that he would never fail to take his two half-Filipino daughters on similar excursions whenever his family visited this country, as he lamented a general lack of familiarity among many Pinoys with their own history.

I have yet to come across research explaining the link between historical consciousness, patriotism, and socioeconomic development (there must be one, of course), but there seems to be enough of a casual correlation for governments to appeal to patriotism as they remind their constituents to fulfill their civic duties like paying the right amount of taxes.

AWARENESS ERODED
Ricardo T. Jose — a graduate of Tokyo University who has been teaching history for decades at the University of the Philippines in Diliman, Quezon City and specializes in the Philippine Commonwealth period, the Japanese occupation of the Philippines, Japan-Philippine relations, and Philippine diplomatic history — said in a recent chat that a sense of history “gives you perspective” in dealing with current socioeconomic and political issues.

“History… enables you to better appreciate where you stand today, whether you are better or worse off. How can you prepare for the future if you have no basis to appreciate what the present is all about?” he said.

“Aside from giving you a sense of perspective, it also gives you a sense of pride, a sense of belonging. You are part of a bigger picture and a continuing evolutionary trend.”

He noted, however, that “the level of [historical] awareness of our people has gone down” over the years.

The problem lies, perhaps, in the way History is taught, especially amid the confluence of factors like the proliferation of misleading information on the internet, and the fact that younger generations no longer read and have generally poor comprehension.

“People just no longer read, and without reading, you do not get to appreciate what we have,” Mr. Jose said, adding that “students are just not interested” in history.

And this comes at a time of disinformation, historical revisionism, as well as information on the internet that is generally “biased” for the developed world’s perception of history.

Since he began teaching in 1979, he said that he has had to supplement lectures with “articles students could see and touch,” to the point that he would occasionally bring artifacts or even occasionally don period costumes for his lectures. The need for more visual modes of instruction has just grown over the years.

“Today’s generation is visually oriented, but how do one visualize ideas like the philosophy of History?”

ENTER HISTORICAL REENACTMENT
One phenomenon that could prove useful in addressing this situation is the proliferation of historical reenactors.

Beginning with a group of professionals — none of them career historians — who formed the group Buhay na Kasaysayan (Living History) in the early 2000s that would reenact events in the Philippine Revolution and Philippine-American War, there are now similar groups scattered across Metro Manila and the Visayas (check out the likes of the Renacimento Manila cultural group, as well as the Republica Filipina Reenactment Group and Historia Viviente Manila on Facebook).

Composed of professionals and students who share a zest for Philippine history — especially the Philippine Revolution, the First Philippine Republic, the Commonwealth period, and the Second World War — a few of these volunteer groups have been recognized by some local governments and offices like the Intramuros Administration and the Armed Forces of the Philippines which have tapped them to add color to ribbon cuttings, conferences, and other events.

Even as Mr. Jose said some reenactments seem to be little more than cosplay for some participants, others “can be very concerned about accuracy.” The reenactors can be very knowledgeable about particular details of Philippine history, and use the reenactments as a platform to show the results of their personal research.

Mr. Jose said he himself has invited some reenactors to basic History classes, describing this as “a learning tool” that has captivated students. “It is a limited way of showing history, but it inspires people to read more,” he said, recalling that one spectator had told him once that “if you teach history that way, then more people would be interested.”

STARTING POINT
So it is a starting point for becoming more aware of Philippine history and its contemporary significance. Hopefully, it goads spectators to read more or even do their own research. That way, they learn to be more discriminating and deal better with the flood of information — both truth and errors — on the internet.

One of the original reenactors, Pedro Antonio V. Javier — a practicing electronics and communication engineer with an MBA — would attend Dec. 30 ceremonies in the City of Manila dressed as Jose Rizal, or as Mabini on some other occasions. He even appeared as the First Philippine Republic officer who barked a command at the funeral procession near the closing scenes of Heneral Luna. Reenactment is a family affair for him, with his wife and son joining him occasionally in 19th Century costumes.

He is one of the better-informed reenactors and can field questions from bystanders at such events. His research has been cited by some foreign collectors of Spanish-American War artifacts.

For him, reenactment can help instill idealism, heroism, and other values even in the private sector. His electronics company employed this theme in its audiovisual presentation for employee service awards. “It’s a kind of edutainment through historical reenactment” that will “influence Filipinos to be heroes in their own special way, whatever career they choose in life,” Mr. Javier said.

Local reenactors have even linked up with their foreign counterparts here in Asia, as well as in the United States and Europe, some of whom can be very comprehensive in and known for their research.

Professor Jose noted that Philippine history is enriched by the unique stories of the country’s provinces. Provinces, cities, and municipalities looking to cash in on the potentials of tourism — long touted as a compelling growth sector for the country — may consider tapping reenactors to lend flavor to local tourism events, as is done in some historical centers of Japan. That, in turn, should help reenactors themselves hone their knowledge.

Hopefully, taking reenactment to the next level will add to quality historical TV series and indie films as effective tools for keeping our identity as a people intact and alive in an increasingly globalized environment.

 

Wilfredo G. Reyes was editor-in-chief of BusinessWorld from 2020 through 2023.

Mid-Autumn Festival offers

THE ASIAN Mid-Autumn Festival falls on Sept. 17, so there is still time to grab these mooncakes, a symbolic (and tasty) way of celebrating the holiday.

Kee Wah Bakery

Kee Wah Bakery created mooncakes that boast of the modern and authentic taste of Hong Kong’s rich heritage. The Kee Wah Supreme Mooncakes come in the bakery’s signature tin can decorated with a classic emperor’s portrait. The cakes are made with lotus seed paste, peanut oil and salted egg yolks. Flavors include White Lotus Seed Paste Mooncake with Two Yolks and Golden Lotus Seed Paste Mooncake at four pieces in a tin for P3,600. It also has mini variants, with each mooncake weighing around 60 gm. The Mini Golden Lotus Seed Paste Mooncake with Yolk and Mini White Lotus Seed Paste Mooncake with Yolk come in eight pieces per box for P2,800. Additional flavors include: Red Bean Paste Mooncake, Assorted Nuts Mooncake, and Red Bean Paste Mooncake with Two Egg Yolks (prices starting at P3,100 for four). Kee Wah is also releasing new flavors, such as Egg Custard and Dried Figs. For every P5,000 order of mooncakes, customers will receive freebies (a Mini Panda Cookie Tin or a Mini Shortcake Tin). Visit its stores at Robinsons Magnolia, S Maison, and The Podium. The products are also found on Lazada, Shopee, Pickaroo, Metromart, and GrabMart.

The Hilton Manila

The Hilton Manila at Newport World Resorts unveils its Lunar Legacy collection, handmade mooncakes crafted by chef Kevin Xu Qiao Yuan. The Lunar Legacy collection offers the Traditional Set for P3,088++, the Boutique Set for P2,888, the Snow Skin Set for P2,888++, the Shanghainese Set for P988++, and the Do-It-Yourself Set for P788++. Each mooncake set comes in ruby red packaging adorned with intricate gold trim and patterns, inspired by a traditional Chinese cabinet. Hilton Manila also offers a luxury hamper featuring a box of six of either Traditional, Boutique, or Snow Skin mooncakes paired with a bottle of Dalmore 12 Years whisky for P12,888++. The Lunar Legacy collection is available until Sept. 17 via 7239-7788 or www.hiltonmanila.com.

The Marriott Manila

The Marriott Manila at Newport World Resorts is celebrating the occasion with its own mooncake collection. Presented in gift boxes, the sweet and savory mooncakes come in three flavors: Red Lotus Paste with Yolk, White Lotus Paste with Yolk, and Wine Cranberry. Complement this mooncake experience with pralines available in Chocolate Galaxy and Marble Chocolate flavors. Add-ons include Candied Walnuts and Tie Guan Yin Tea. Available until Sept. 17, the mooncake package starts at P1,488 nett. Every purchase of Marriott Manila’s mooncakes supports a worthy cause with part of the proceeds going to the chosen beneficiary of Marriott Worldwide Business Councils-Philippines. Discounts apply for early bird and bulk orders. For inquiries, call 0917-624-5980 or 0917-584-9553.

MX Durian Mooncake

The MX Durian Mooncake Series, sought after by durian lovers, returns this year with three variants: the Snowy Musang King Durian Gift Box, the Snowy mini 4Musang King D-24 Durian, and the Musang King Durian Molten Mooncake. Every MX Durian Mooncake is filled with 100% Musang King Durian pulp from naturally ripened fruits from Malaysia. For a limited time only, buyers can collect exclusive free gifts for orders of P3,000; meanwhile, delivery is free delivery within Metro Manila for orders worth P6,000 and above. The Hong Kong MX mooncakes are available on Facebook (Hong Kong MX Products Philippines), Instagram and TikTok (@hkmxproductsph), its official website (www.doubledownimportexportinc.com), on Lazada and Shopee (Hong Kong MX Products Phils), through GrabFood, Pickaroo, and MetroMart (various locations of Hong Kong MX Bakery). There are also physical stores at SM Mall of Asia, V-Mall Greenhills, Uptown Mall, and Ayala Malls Cloverleaf.

Unicapital Group sees more IPOs ahead

LOCAL investment firm Unicapital Group expects more initial public offerings (IPOs) to proceed due to a favorable outlook on interest rates.

“I think we’re going to be seeing rate reductions, (and) there will be more to come,” Unicapital Group President and Chief Executive Officer Jaime J. Martirez said during a briefing on Wednesday.

He said that this will lead to a gradual shift in the equity market.

“I see right now that there is a lot of upside, so there would be more interest right now (from companies) to pursue their IPO plans,” Mr. Martirez added.

The Bangko Sentral ng Pilipinas recently cut its target reverse repurchase rate by 25 basis points (bps) to 6.25%, marking its first reduction in nearly four years. The move is in response to an improving inflation and economic outlook. The central bank’s governor also indicated the possibility of another cut before the end of the year.

Unicapital Head of Research Wendy B. Estacio-Cruz expects that the PSE index could reach 7,000 by the end of this year, revising the company’s earlier estimate of 7,200.

“That’s a 9% gain from end-2023. That’s based on our bottom-up analysis, which is based on an 11% earnings per share growth rate and at 12.5% target price-to-earnings,” she said.

Ms. Cruz added that Unicapital anticipates a “more pronounced easing of key policy rates” as early as the next Monetary Board meeting in October, driven by the downward trend in inflation rates.

 “The inflation rate is anticipated to drop further in the coming months due to the recent rice tariff reduction from 35% to 15%. We expect easing key policy rates in the second half of 2024, with up to a 50-basis-point rate cut, driven by a cooling inflation rate,” she said.

Meanwhile, Mr. Martirez hopes more companies will list on the Philippine Stock Exchange (PSE) to spur market activity.

He noted that the main challenge in improving value turnover compared to the Association of Southeast Asian Nations (ASEAN) neighbors is to increase the number of companies listing on the market.

“In terms of the number of listed companies, I believe we still are not in the same breath as our ASEAN neighbors. We’re getting there. It’s just a question of time,” he added.

As of this writing, the PSE has 286 listed companies. The market operator aims to achieve six IPOs this year. 

So far, the local bourse has had three IPOs: OceanaGold (Philippines), Inc., Citicore Renewable Energy Corp., and NexGen Energy Corp.

Founded in 1976, Unicapital Group provides a range of services, including investment banking, financing and lending, treasury services, and securities brokerage. — Revin Mikhael D. Ochave

Water to the people is power to the people

PHILIPPINE STAR/EDD GUMBAN

This Saturday, Aug. 31, is the 117th birth anniversary of the late Ramon Del Fierro Magsaysay, the 7th president of the Philippine republic. Born in 1907, “The Guy” was only 49 when his plane, the Mount Pinatubo, crashed in Cebu in March 1957 killing all but one of its passengers. To many who remember him, he was the country’s best president.

Ramon Magsaysay (RM) was elected to office in November 1953. He did not get to finish his four-year term. He would have gone for reelection in November 1957, and according to some accounts, would have most likely won. But a second term was not meant to be for the “Guy.” His only son and namesake, Jun Magsaysay, would later serve four years in Congress and 12 years in the Senate.

When RM took office in January 1954, he was taking over the government of a country that has just been ravaged by war, and was in the midst of reestablishing its economy as it sought war reparations. The Philippines had significant national debt because of post-war reconstruction; the government was running a budget deficit; economic growth was uneven; and rural poverty was significant.

RM wanted to prioritize rural development and social services, but the government was short of funds. So, in February 1954, soon after taking office, he issued Executive Order No. 11 creating a committee under the Department of Health that would take charge of the construction of artesian wells nationwide. This was in recognition of the people’s urgent need for greater access to clean and potable water.

In rural Philippines, then and now, water is power. Beyond irrigation, access to clean and potable water and proper sanitation facilities are among the factors significantly impacting public health, peace, and economic growth. Realizing this, RM also knew that the cash-strapped government needed the help of the private sector. Under his EO 11, a committee was formed known as the “Liberty Wells Association.” It was tasked to solicit “funds and materials to be used exclusively for the construction and development of artesian wells and other sources of potable water supply for rural communities lacking in financial resources, to provide an adequate and safe water supply.”

The Association was tasked “to see to it that the moneys and materials donated to constitute the fund are used solely to carry out the purposes of the donation,” and to “recommend to the government measures calculated to facilitate and further the establishment of community water supplies.” Also, the Association was to set the rules for the selection of installation sites.

The Secretary of Health was designated ex-officio chairman of the Association, whose members were “donors of P5,000 or more and those who have rendered very signal service to the Association. The members [of the Association] shall be appointed by the President upon recommendation of the Executive Committee.”

EO 11 further states that “all contributions to the Association shall be deposited with any bank or banks designated by the Executive Committee. Disbursements from the fund shall be made with the approval of the Executive Committee upon checks signed by the Chairman and Treasurer and supported by vouchers approved by authorized officials representing the Philippine Council for United States Aid and the Foreign Operations Administration.” And to encourage contributions, the President ordered that all “contributions to the Association fall within the tax exemptions prescribed for income and gift taxes.”

Also, “none of the moneys or materials contributed shall be used for any purpose other than for the labor and materials required to establish artesian wells or develop water supplies. The department heads concerned are authorized and directed to apply public funds legally available for the purpose to defray expenses of surveys, technical supervision, transportation, inspection, administration, and surcharges.”

Admittedly, under today’s procurement and auditing rules, EO 11 would have been questioned. But in RM’s day, lack of government funds would not have been an acceptable excuse not to help, particularly the poor. Not under RM anyway, whose government vowed to give people who have less in life more in law. And so, EO 11 came to pass.

It was, to an extent, the precursor of the Public-Private Partnership. And, maybe in that sense, RM was ahead of his time. He figured the Department of Health was the appropriate lead for the artesian wells program, probably seeing it more as a public health rather than a public works initiative. And perhaps rightly so. Lack of water and sanitation is a public health nightmare.

It may have been a calculated move on RM’s part. An initiative that can win votes particularly in the countryside. One cannot discount the value of donors, obviously. However, while plaques may be affixed at well sites giving credit to donors, people will also remember the very government that started the initiative in the first place. As if RM was not popular enough.

But in this case, I am more inclined to believe that the driving force for EO 11 was RM’s earnest desire to help the rural poor. However, given the government’s limited resources, tapping the private sector was his alternative. Bayanihan may have been foremost in his mind, because he was that kind of man.

Former UP President Jose Veloso Abueva, in his second edition of Ramon Magsaysay: “Servant Leader” with a Vision of Hope, published 2012, wrote about RM: “Restlessly energetic, Magsaysay demanded action and was impatient for results, as reflected in his impulsive personality and kinetic behavior. For he was preeminently a man of action, a pragmatist, an improviser. He absorbed ideas from many sources, even as he generated several of his own.

“Magsaysay was not consciously guided by articulated theories of social reform or economic development. His approach to problems was pragmatic, not ideological,” Abueva wrote. He added that RM also believed that “the government starts at the bottom and moves upward, for the government exists basically for the welfare of the masses”

Truly, as a man and as a leader, RM is worth remembering on his 117th birth anniversary.

 

Marvin Tort is a former managing editor of BusinessWorld, and a former chairman of the Philippine Press Council

matort@yahoo.com

Treasury fully awards reissued 20-year bonds

BW FILE PHOTO

THE GOVERNMENT made a full award of the 20-year Treasury bonds (T-bonds) it offered on Wednesday as rates were mostly in line with secondary market levels following dovish hints from the US Federal Reserve.

The Bureau of the Treasury (BTr) raised P25 billion as planned via the reissued 20-year bonds it auctioned off on Wednesday as total bids reached P45.114 billion, or almost double the amount on offer.

This brought the outstanding volume for the series to P102.7 billion, the Treasury said in a statement.

The bonds, which have a remaining life of 19 years and nine months, were awarded at an average rate of 6.198%. Accepted yields ranged from 6.174% to 6.22%.

The average rate of the reissued papers dropped by 66.2 basis points (bps) from the 6.86% fetched for the series’ last award on June 26. This was also 67.7 bps lower than the 6.875% coupon for the issue.

However, it was 0.6 bp above the 6.192% seen for the same bond series and 2 bps higher than the 6.178% quoted for the 20-year bond at the secondary market before Tuesday’s auction, based on PHP Bloomberg Valuation Service Reference Rates data provided by the BTr.

“The higher tendered rate for the bond auction today reflected the upward correction in bond yields following the recent declines from the dovish hints from the FOMC (Federal Open Market Committee) minutes and the Jackson Hole Symposium,” a trader said in an e-mail on Wednesday.

Demand for longer bond tenors has also declined in recent months as more global central banks embark on their monetary easing cycles, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.

Federal Reserve Chair Jerome H. Powell on Friday endorsed an imminent start to interest rate cuts, saying further cooling in the job market would be unwelcome and expressing confidence that inflation is within reach of the US central bank’s 2% target, Reuters reported.

“The time has come for policy to adjust,” Mr. Powell said in a highly anticipated speech to the Kansas City Fed’s annual economic conference in Jackson Hole, Wyoming. “The direction of travel is clear, and the timing and pace of rate cuts will depend on incoming data, the evolving outlook, and the balance of risks.”

Analysts and financial markets had already widely expected the Fed to deliver its first rate cut at its Sept. 17-18 policy meeting, a view that was cemented after a readout of the central bank’s July meeting said a “vast majority” of policy makers agreed the policy easing likely would begin next month.

With its policy rate currently in the 5.25%-5.50% range, the Fed has “ample room” to reduce borrowing costs to cushion the economy, Mr. Powell said.

Investors are unanimous in bets that the Fed will begin cutting interest rates next month following Mr. Powell’s dovish tilt last week, with the debate now centered on whether or not it will be a super-sized 50-bp cut.

The current pricing sits at a 36% chance for the larger cut, up from 29% a week ago, according to the CME Group’s FedWatch Tool.

Markets, which are fully priced for a 25-bp cut next month, see just over 100 bps worth of easing by the end of the year.

Wednesday’s auction was the last T-bond offering for the month. The government raised the programmed P140 billion from the long-tenored papers as it fully awarded its offerings at all five auctions.

In total, the BTr raised P225.2 billion from the local market in August, higher than the P220-billion plan as it upsized its Treasury bill (T-bill) awards at two auctions.

In September, the Treasury wants to raise P195 billion from the domestic market, or P80 billion from T-bills and P115 billion from 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

PHL AI guardrails must be in line with regional standards, focused on data

REUTERS

By Aubrey Rose A. Inosante, Reporter

SINGAPORE — The Philippines should draw up governance and ethics guidelines or guardrails for the use of artificial intelligence (AI) that are aligned with those in the Association of Southeast Asian Nations (ASEAN) and prioritize data privacy amid a booming digital economy, industry experts said.

“There is no point drafting your own [AI] guardrails or guidelines when not in concert with the ASEAN guidelines,” Raju Chellem, editor-in-chief of the AI Ethics and Governance Body of Knowledge, told BusinessWorld at the sidelines of the annual IBM Think Singapore 2024 conference held on Aug. 14-15.

“It’s better to work together so that we are all together to work for the common good because many countries are looking at AI in isolation and not including data as part of it,” Mr. Chellem added.

The ASEAN Guide on AI Governance and Ethics was released during the 4th ASEAN Digital Ministers’ Meeting chaired by Singapore in February. This is meant to serve as a guide for organizations in the region that wish to design, develop, and deploy traditional AI technologies.

In the Philippines, the Department of Trade and Industry this year released its National AI Strategy Roadmap 2.0, which consists of seven strategic imperatives: building a robust connected and networked environment; improving data access and data value extraction; transforming education and nurturing future AI talents; upskilling and reskilling the workforce; building an AI ecosystem “conscience”; mastering and pushing the boundaries of AI; and accelerating innovation with AI.

According to an IBM Institute for Business Value study, 60% of executives surveyed said they believe the adoption of generative AI (GenAI) comes with major ethical risks that would be difficult to manage without new or at least more mature governance structures.

Mr. Chellem said without AI guardrails, the finance and healthcare sectors, which are considered “supercritical industries,” will be at high risk as both need “high regulation for data privacy, data security, and the use of personally identifiable information.”

“Hackers can do phishing, probably destabilize governments, or ransomware as a service,” he said.

The digital sector has a “massive” contribution to the gross domestic product (GDP) of ASEAN countries, and “a huge chunk of that is because of the power of AI or the power of companies using GenAI,” Mr. Chellem said.

“The current GDP of the Philippines is about $472 billion, and the ICT (information and communications technology) sector contributed roughly about 9.4% to the GDP in 2022,” he said.

To educate people on AI, the Philippines needs to apply the same model it used to boost the nursing sector, which is integrating it in schools, Mr. Chellem added.

“The number one lesson is that the Singapore government does not work in isolation. It always includes the community, industry, and academia. All three work together to form policy and set guidelines, set governance frameworks [in AI],” he said.

Catherine Lian, general manager and technology leader for IBM ASEAN, told BusinessWorld that governance is key in the adoption of GenAI.

“The GenAI adoption that we talk about is all about governance. We have a watsonx.governance model that enables appropriate design principles across governance and building up the enterprise-wide application of multiple AI models,” she said at the sidelines of the same event.

The model ensures that the adoption of an AI-first approach does not compromise the data provided and follows the code of ethics of an organization, Ms. Lian said.

Dining In/Out (08/29/24)


Italian gastronomy at Shangri-La The Fort

FROM Aug. 30 to Sept. 6, Shangri-La The Fort, Manila will host the Executive Chef of Shangri-La Le Touessrok, Mauritius, Luca Gallo. During this time the hotel will showcase lunch and dinner à la carte menus at The Hub crafted by Mr. Gallo, a master of Italian cuisine. Reserve seats by calling 0917-536-3287 or e-mail karenkae.laya@shangri-la.com.


Johnnie Walker Blue Luxury Artist Series out now

JOHNNIE Walker has collaborated with visual artist and art director Anna Bautista to launch the latest Johnnie Walker Blue Label Luxury Artist Series collection. This collaboration features three unique bottle designs inspired by animals of Davao, Bohol, and Cebu. The Davao bottle features the Philippine Eagle, depicted alongside the region’s natural treasures such as the waling-waling orchid, the Mickey Mouse plant, the durian, and Mount Apo. The Bohol bottle celebrates the tarsier amidst fireflies, with additional elements including the cacao plant, wildflowers, and the iconic Chocolate Hills. Finally, the Cebu bottle showcases the Philippine whale shark, or butanding, set against the vibrant marine life of the province, accompanied by the sampaguita, the Cebu Flowerpecker bird, and various aquatic elements. This collection marks Bautista’s second collaboration with Johnnie Walker, following the limited edition Blue Label Liwanag bottle in 2022, inspired by the dance, Pandanggo sa Ilaw. “I wanted to bring forth a collection that would celebrate our heritage by featuring the jewels that are distinct to the rich biodiversity of the Philippines. I am truly humbled to once again have the chance to collaborate with Johnnie Walker. More so that we are able to highlight the rarity of our country’s treasures, mirroring the attributes which have long defined Johnnie Walker Blue Label,” she said in a statement. Available now in limited quantities, these exclusive bottles can be purchased at all S&R branches nationwide.


McDonald’s PHL releases new glass collection

MCDONALD’S Philippines releases new collectible glasses that are a tribute to the 1990s and 2000s. The glasses feature toy designs from collaborations with Coca-Cola, Mattel, and Universal, and its own releases from years past. These include Shrek/Minions, Barbie/Hot Wheels, McDonald’s/Nanoblock, and McDonald’s/Coca-Cola. The McDonald’s Collector’s Meal can be availed for P79 along with a choice of a medium or large extra value meal (any meal with fries and drink). Each glass is individually packaged and sealed in a Collector’s Meal Box and comes in a limited-edition take-out paper bag beverage packaging. “These new collectible cups commemorate some of our most unforgettable designs and global collaborations over the years, allowing longtime fans to relive treasured moments and helping a new generation make their own lasting memories,” said Margot Torres, Managing Director for McDonald’s Philippines, in a statement. The new collectibles are available via the McDonald’s App from Aug. 27 to Sept. 2. They will also be available for purchase via the front counter dine-in, take-out, drive-through and McDelivery starting Sept. 3.


Milkana Creamy Lollipops now available

MILKANA, Savencia Fromage & Dairy’s international brand spotlights its Creamy Lollipops. Milkana Creamy Lollipops are formulated with milk proteins containing essential amino acids, calcium, vitamin D, and are made without preservatives. It comes in four flavors: Fruit Heart (with natural strawberry filling), Yogurt N Fruits, Mixed Berries, and Milky Ice Cream. For more information about Milkana’s Creamy Lollipops, follow https://www.facebook.com/MilkanaPhilippines and https://www.instagram.com/milkanaph/.

Indonesian airline TransNusa eyes Davao-Manado route

DREAMCATCHER-68/FLICKR

DAVAO CITY — Indonesian airline TransNusa Aviation Group has expressed interest in operating direct flights between Davao City and Manado, Indonesia, according to an official from the Mindanao Development Authority (MinDA).

Romeo M. Montenegro, MinDA assistant secretary, told BusinessWorld that he met with TransNusa executives at their Jakarta office on Aug. 21.

“The meeting with TransNusa was also a pitch for Mindanao and presented trade, investment, and tourism opportunities, particularly highlighting Davao. We also cited the passenger stats of previous Davao-Manado flights, the recently extended EAGA travel tax exemption, and other EAGA incentives for airlines,” Mr. Montenegro said.

The meeting took place during his visit to Indonesia for the Brunei Darussalam, Indonesia, Malaysia, and the Philippines-East ASEAN Growth Area (BIMP-EAGA) Special Senior Officials Meeting, which was held with the Asian Development Bank on Aug. 20.

He said TransNusa, which currently operates domestic flights within Indonesia and to several international destinations, is considering the first quarter of 2025 as a potential start date for the new route, with initial flights two-three times per week.

“Right now, Manado is serving as a hub for TransNusa’s ARJ21 aircraft flights,” Mr. Montenegro said. Manado, a major city in North Sulawesi, is known for its vibrant marine life and tourism industry.

To recall, Leading Edge Air Services Corp. (LEASCOR), an aviation services provider based in the Philippines and a subsidiary of ACDI Multi-Purpose Cooperative, was planning to begin servicing the air route between Davao and Manado this year.

LEASCOR and MinDA conducted an exploratory business mission to North Sulawesi in January to evaluate the potential resumption of air connectivity between Davao and Manado.

Mr. Montenegro noted that LEASCOR has not yet finalized its plans, as the company has deployed its ATR aircraft for domestic regional routes, including the Zamboanga-Jolo route. — Maya M. Padillo

Government corporations’ excess funds, rising interest payments, and the NGRP

Last Tuesday, Aug. 27, a magnificent document was released by seven former Finance officials, the “Statement of Former Secretaries of Finance on the Mobilization of Excess GOCC Funds.”

The signatories and their terms of office as Finance Secretary were Cesar E. A. Virata (1970-1986), Roberto de Ocampo (1994-1998), Jose T. Pardo (Jan. 2000 – Jan. 2001), Alberto G. Romulo (January – June 2001), Jose Isidro N. Camacho (2001-2003), Margarito B. Teves (2005-2010), and Cesar V. Purisima (February – July 2005; 2010-2016).

The officials declared with authority that “As former Secretaries of the Department of Finance (DoF), we fully understand and support the DoF’s exercise of its authority to effectively utilize the excess funds of government-owned or -controlled corporations (GOCCs) to finance crucial government projects in areas like health, education, social services, and infrastructure. We believe this move will bring substantial benefits to the Filipino people. Mobilizing these excess funds will enable important public projects that can strengthen our economy and ensure long-term gains through more jobs, higher incomes, and reduced poverty.”

Such a vote of confidence in the policy of current Finance Secretary Ralph G. Recto should quash any serious doubts about the efficiency and rationality of tapping the excess funds of the Philippine Health Insurance Corp. or PhilHealth (P90 billion) and the Philippine Deposit Insurance Corp. or PDIC (P110 billion), among others.

Congratulations, Messrs. Virata, De Ocampo, Pardo, Romulo, Camacho, Teves, and Purisima, for that concise and clear statement.

Disclosure: Former Secretary Gary Teves was my boss when I was working at the House of Representatives. He was a Congressman and Chairman of the Committee on Economic Affairs in the 1990s. Then when he put up a private consulting firm, Think Tank, Inc., which I worked at from late 1999 to 2004.

PROPOSED BUDGET 2025
The proposed budget for 2025 is now undergoing review, agency by agency, both at the House and the Senate. The biggest expenditure areas in the budget are the departments of Public Works, Education, the Interior (including the Philippine National Police), Defense, Social Work, Health, Transportation, Agriculture, and the state universities.

For special purpose funds (SPVs), the biggest expense class, these are the allocations to local governments, the interest payment of our public debt, and subsidy to government corporations including PhilHealth (see Table 1).

Note the huge jump in interest payments, from P380 billion in 2020 to P430 billion in 2021, P503 billion in 2022, P628 billion in 2023, and a projected P670 billion this year. We spend hugely each year, beyond what domestic revenues can cover, so we have borrowed about P2 trillion/year from 2020 to 2023.

SPENDING REFORMS VIA NGPA AND NGRP
The Department of Budget and Management (DBM), as the disbursing office of the trillions of pesos in the annual budget as authorized and legislated by Congress, initiated reforms in public procurement via the newly enacted New Government Procurement Act of 2024 or NGPA (RA 12009). There is also a bill in Congress on the National Government Rightsizing Program (NGRP).

As an advocate of minimal government intervention and minimal taxes, I find these two measures worthy of support. The NGPA should lead to more transparency and reduced waste and corruption in government procurement of goods and services. Even non-participants and observers of government procurement contracts can have access to certain data via the NGPA microsite.

The NGRP is definitely needed, given the huge annual spending on government personnel services, which contributes to the high annual budget deficit and consequent large borrowings and high interest payments.

DBM Secretary Amenah F. Pangandaman said in a press statement the other week, that she wanted a reclassification of vacant positions in government agencies to ensure optimal utilization of manpower resources across the bureaucracy. She added that, “It’s not just removing and consolidating the agencies but at the same time fix[ing] the positions, do[ing] reclassifications within departments and agencies… to have a bureaucracy that is agile and responsive, not a government that is too bloated and the service is not good.”

Go for this, Madame Secretary. I hope that Congress will prioritize this bill this year.

RISING INTEREST PAYMENTS
Yesterday the Bureau of the Treasury released the cash operations report for the year until July. I have compared those numbers with those from January to July of preceding years. Among the things I discovered were the following.

There has been a significant increase in revenues, from P2.27 trillion in 2023 to P2.61 trillion in 2024, even without any major tax hikes. That high-growth Philippines is creating more jobs means more tax-paying businesses and labor.

Government expenditures are not slowing down but are keeping up with the rise in revenues, which should not be the case because we are not in any economic, or health, or political crisis.

Interest payments, in particular, are rising fast. The P457 billion released in January to July implies an average increase of P65.3 billion/month. If this trend continues, then the full-year interest payment in 2024 will be P783 billion, not the P670 billion as programmed in the 2024 budget.

The deficit is still far higher than the pre-lockdown level. In 2019 it was P118 billion, while it was P643 billion this year (see Table 2).

We need more economic growth from the private sector and less spending and borrowing in the public sector to significantly reduce the public debt stock. The call for patriotism should ring louder in the hearts of government personnel, particularly the military and uniformed personnel whose annual pension is rising consistently. This is because they do not contribute for their own personal pensions, and the irrational indexation of their pensions with the salaries of active personnel.

Together, the private and public sectors should sustain high economic growth while instilling fiscal discipline and restraint. Then attaining credit ratings of “A,” and lowering the debt/GDP ratio to below 56% and the poverty level to below 10% by 2028, should come handily.

 

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.

minimalgovernment@gmail.com

Shifting towards smarter search technology on websites

VECTOR search understands the context and meaning behind queries, allowing it to retrieve more relevant results for users’ vague searches.

This growth reflects the growing reliance on the internet for various activities and information-seeking purposes. The increasing number of internet users in the Philippines underscores the importance of adapting to the digital age and addressing potential challenges that come when searching for things.

Nearly 90% of users will not return to a site if they have a bad experience. Take a moment to appreciate that staggering statistic. Site reliability engineers are traditionally focused on the “five 9s,” ensuring a website remains up and accessible 99.999% of the time. Yet, that is only a part of the picture guaranteeing a positive user experience. What else can cause a user to click away from a site and never return?

Not being able to discover what they were looking for.

The frustration of trying to search for something and being unable to find it quickly and efficiently may be one of a user’s most disappointing experiences. You want to build a site where that rarely happens. However, users make it very hard. Oftentimes, they do not know exactly what they are looking for. They have a picture in their mind of what they want but lack the precise terms, and their search ends up being submitted with keywords such as: “the thing that tightens screws.” A human respondent to that search will return an index of screwdrivers. What will your keyword-based search return? Articles about tightening techniques, blog posts on different types of screws and tools that have nothing to do with screwdrivers.

This example happens all the time, every single day, countless times a day.

Facing this dilemma requires a new resource to improve the user experience and bring clarity even when users lack it. Vector search offers possibilities that are not feasible with traditional keyword search alone.

HOW VECTOR SEARCH WORKS
Vector search is a machine learning method that transforms textual data into high-dimensional vectors, capturing semantic relationships between words and phrases. It differs from traditional keyword-based search, which relies on exact matches, by understanding the context and meaning behind queries. This approach enhances the accuracy and relevance of search results, making it a powerful tool for modern information retrieval systems. Vector search interprets the meaning behind queries, identifying relevant documents with related terms. This makes it an invaluable tool for improving user experience by providing precise and accurate search results in response to imprecise or descriptive queries.

Here’s a simple vector search example: -0.024047505110502243.

The process of embedding involves converting textual data into numerical representations, such as vectors, to capture the meaning of words and phrases. This allows models to measure similarity between terms based on their usage and context in large datasets. This transformation leads to more nuanced and context-aware search functionalities, potentially advancing information retrieval and artificial intelligence (AI). For example, a dataset containing the string “Your text string goes here” can be converted into vectors by assigning numerical values to each word, allowing better understanding of relationships and similarities.

These vectors represent the semantic meaning of the words and allow the search functionality to understand and retrieve relevant information based on context rather than just exact keyword matches.

The search engine converts user queries into vector representations using a simple dataset, comparing them with the dataset’s vectors. The vector search identifies that the query’s context and semantics are similar to “Your text string goes here,” allowing the engine to return the most relevant result based on the similarity of the vectors. This process transforms uncertain and unclear user queries into more certainty and clarity.

HOW TO STORE AND RETRIEVE VECTOR EMBEDDINGS
Vector search is a crucial tool for websites that require quick and cost-effective storage and retrieval of vector embeddings. As a site’s data grows, so do the vector embeddings, making any solution highly scalable. A generic database solution is not suitable for vector search needs, as it must be specialized to handle high-dimensional embeddings efficiently, support rapid similarity searches, and optimize storage for large volumes of vectors. This ensures the search system remains performant and responsive, providing relevant results in real-time even as data scales. A vector search database solution should offer advanced indexing capabilities, support multiple data types, and integrate with popular AI frameworks and embedding generation tools. Additionally, it should provide a quality search experience in offline environments, known as delivering computing “on the edge.” Integrating vector search into a site can improve user experience and ensure repeat visits.

 

Genie Yuan is the regional vice-president for APAC Japan, Couchbase.

Asian currencies’ rally likely to slow

BW FILE PHOTO

ASIAN CURRENCIES like the Philippine peso are seen to continue rallying in the coming months but at a slower pace, Capital Economics said.

“We expect most Asian currencies to make further gains over time, even if their biggest rallies may now be behind them,” it said in a report on Tuesday.

It said that Asian currencies have seen “broad-based rallies” despite being under pressure earlier this year. “Indeed, many have now made bigger gains than the yen against the US dollar this month.”

Capital Economics said there is room for currencies to “make some ground and, indeed, fare better than most.”

“But we doubt the rally will be such a break-neck pace as it has been,” it added.

The Philippine peso closed at P56.281 per dollar on Tuesday, strengthening by 5.2 centavos from its P56.333 finish on Thursday. This was its strongest finish in nearly five months or since its P56.255-a-dollar close on April 1.

The peso was previously trading at the P57-58 per dollar level in the past months due to uncertainties over the timing of interest rate cuts here and abroad. BSP Governor Eli M. Remolona, Jr. earlier said the peso’s weakness was due to a “strong dollar” amid safe-haven demand.

The central bank intervened in “modest amounts” to keep markets orderly and control foreign exchange (FX) speculation, Mr. Remolona added.

“There are probably a couple of things going on. For a start, relatively stable interest rates in much of Asia meant that the big fall in US Treasury yields benefitted currencies there more than in many other economies,” Capital Economics said.

“What’s more, valuations – measured, for example, by the deviations of their real effective exchange rates from average – had become quite low in much of the region. The yen was probably the most extreme case of the latter, but the Thai baht and Philippine peso also looked, by this measure, to have very low valuations by past standards.”

Capital Economics said the broad-based rally was amid most Asian central banks managing their currencies “more tightly than most.”

“Those central banks have been, in general, leaning against the depreciation of their currencies for most of the year in various ways (and for much of the preceding two years as well). But they typically dislike volatility, and are probably wary of the economic consequences of a rapid appreciation as well,” it said.

“So some of them may well have leaned against the rally had it not been regionally broad based. And the rebound in the yen – which would have meant large trade-weighted depreciations for much of Asia given Japan’s particularly large share of regional trade – probably gave them implicit permission to allow their own currencies to rally.”

Capital Economics said currency valuations are still low in most countries in the region.

“That’s partly because of the broad-based nature of the rally, which means that not all Asian currencies have actually gained that much in trade-weighted terms.”

“While real effective exchange rates in Malaysia and Indonesia have swung, by this measure, from below- to above-average valuations, in addition to those of the yen and the renminbi valuation in Thailand, the Philippines and Korea still look fairly low.”

It added that if the yen can make further ground, this could “spark a bit of an Asian FX rally.” especially in places where valuations are still low. — Luisa Maria Jacinta C. Jocson