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Exporters warned of new EU rules on deforestation

WIRESTOCK-FREEPIK

EXPORTERS of cattle, soy, coffee, palm oil, rubber and wood will be subject to new European Union (EU) deforestation regulations restricting access to products that benefited from the clearing of forest cover, according to the Department of Trade and Industry (DTI).

“Exporting products to the EU has become increasingly challenging with its new and emerging regulations as part of the EU Green Deal,” the Philippine Exporters Confederation, Inc. said, citing Bianca Pearl Sykimte, director of the DTI’s Export Management Bureau at a seminar.

“These regulations aim to make the EU the first climate-neutral continent by 2050,” it added.

Under the EU Green Deal, exporters of the seven products are required to demonstrate that their products are deforestation-free and not linked to forest degradation or risk not being admitted into the EU.

The deal was first adopted in June to curb forest loss and land degradation, giving companies until Dec. 30 to be compliant, except for micro and small companies which have until June 30, 2025.

The deforestation regulation will cover products derived from the seven commodities, like meat products, leather, chocolate, coffee, palm nuts, and palm oil derivatives, among others.

The regulation takes effect on goods produced after June 29, except for timber and timber products.

Commodities covered by the regulation are required to be deforestation-free and produced in a country with relevant legislation on environment protection. Their producers must also provide a due diligence statement.

Aside from blocked market access, non-compliance could also result in penalties such as fines amounting to up to 4% of the company’s EU turnover, confiscation, or exclusion from public funding or contracts.

The EU was the Philippines’ sixth largest export market in 2023 with $8.4-billion total export sales. — Justine Irish D. Tabile

European consumer industry investment seen creating at least 5,000 jobs in PHL

EMS.COM.PH

AT LEAST 5,000 jobs in the consumer products industry are expected to be created by new investment from Europe, according to EMS Group., a provider of recruitment and engineering services to international firms.

“Successfully, we were able to attract a couple of big investors in the Philippines. So, we’re in the process now of finalizing their entry into the Philippines,” Ferdinand A. Ferrer, chairman and chief executive officer of EMS Group, told reporters on Friday.

“This will be big. You know, our advocacy in EMS is about creating jobs. And this one will probably create 4,000 to 5,000 jobs just for this one company,” Mr. Ferrer said.

He said that the investment will be in partnership with EMS and will cover the operations of a large plant in Batangas that will manufacture consumer products for women.

He said the target for the Batangas site to obtain international certification will be in the fourth quarter with the start of operation set for the first quarter next year.

Meanwhile, he said that EMS is also working on expansion at the Laguna Technopark, banking on the growing interest from foreign companies diversifying from China.

“We’re working on it now. The first phase is now successful in Laguna Technopark. Our phase two, hopefully, is going to be much larger,” he said.

“There’s a lot of (foreign) companies that are saying ‘Anywhere but China’ (ABC) … we don’t want to always have this type of scenario, but the Philippines is in the right spot to take advantage of those who are trying to exit,” he added.

He said the trade war with the US is behind the divestment from China.

“There are several different products or services leaving China. And those are what we are trying to look for a partner here, not necessarily with EMS. If it doesn’t suit us, we will make introductions to other Philippine companies,” he added.

In particular, he said that the group is talking with semiconductor companies from the US and Japan, which could potentially create 2,600 jobs and invest $700 million–$750 million.

“Potentially, EMS could be their partner, but that is not the priority; the priority is to bring them here, potentially to Calabarzon,” he added. — Justine Irish D. Tabile

GOCC subsidies rise in February

SUBSIDIES provided to government-owned and -controlled corporations (GOCCs) rose to P12.715 billion in February, the Bureau of the Treasury said.

Budgetary support to GOCCs rose 35.3% from the P9.401 billion a year earlier.

No subsidies were provided in January.

In February, the National Irrigation Administration received the most subsidies with P7.093 billion or 55.8% of the total.

This was followed by the National Food Authority, which got P2.25 billion.

The Social Housing Finance Corp. was granted P667 million for the month.

Other top recipients in February were the Philippine Heart Center (P303 million), Sugar Regulatory Administration (P284 million), Small Business Corp. (P250 million), Philippine Children’s Medical Center (P228 million), National Kidney and Transplant Institute (P207 million), National Power Corp. (P181 million), Light Rail Transit Authority (P144 million), Philippine Rice Research Institute (P135 million), National Home Mortgage Finance Corp. (P112 million) and Philippine Coconut Authority (P100 million).

Other GOCCs that were given at least P50 million were the Lung Center of the Philippines (P94 million), Philippine Postal Corp. (P70 million), Development Academy of the Philippines (P68 million), Cultural Center of the Philippines (P60 million), and Local Water Utilities Administration (P51 million).

All GOCCs received subsidies during the month.

The government provides subsidies to GOCCs to help cover operational expenses not supported by revenue.

Last year, GOCCs were provided P163.535 billion. — Luisa Maria Jacinta C. Jocson

DENR streamlined-approval rules for exploration, processing due this year

NEW GUIDELINES that will reduce application processing time for exploration permits and mineral processing operations are due out this year, according to the Office of the Special Assistant to the President for Investment and Economic Affairs (OSAPIEA).

On the sidelines of the Philippine Chamber of Commerce and Industry (PCCI) General Membership Meeting on Friday, OSAPIEA Secretary Frederick D. Go said that the guidelines will be issued by the Department of Environment and Natural Resources (DENR).

“Many foreign investors are interested, of course, to look at the exploration opportunities in the Philippines … because we have a lot of potential,” Mr. Go said.

Asked when he expects the guidelines to come out, he said, “Within the year.”

In a speech, Mr. Go named mining as one of the OSAPIEA’s priority sectors for investment, along with electronics and semiconductors, steel, food and agriculture, and pharmaceuticals.

“For mining, we aim to encourage investments by reducing the processing time to get exploration permits going and to follow the roadmap Indonesia has taken for downstream nickel processing,” he said.

“The Philippines is actually the number one nickel ore exporter in the world,” he added. “That means we are exporting the raw material without processing it. So our goal is to go downstream and start processing the nickel to enhance the value that we export.”

Mr. Go said that the end goal is for the country to develop its electric vehicle industry by laying the foundations today.

“So in a perfect world, we go from nickel ore, nickel processing, copper processing, and electric batteries, to electric vehicles,” he said.

“Again, in a perfect world, therefore, we will probably get to electric vehicles far beyond my term. But again, it’s important that we lay the foundations now,” he added.

Philippine Chamber of Commerce and Industry Vice-President for Industry Affairs Ferdinand A. Ferrer said that the chamber is also working on improving foreign ties to find new markets and invite more investment.

“We’re trying to look for new markets for our members, and we’re working with different foreign partners to bring their technology here,” Mr. Ferrer said.

“There is a lot of genuine interest in our country. Maybe it’s because of geopolitical happenings, but regardless of that, now they’re seeing the benefits of the Philippines geographically and also in its people,” he added.

He said that the Philippines has the talent and the resources to process minerals, which is why the country must invest in the sector.

“We have the resources; we have the nickel, as you heard. So why will we just export ore? We must process the mineral and add value to it so that we will not be shortchanged,” he added.

He said that bringing in new technology from overseas will push the country to upskill its human resources.

“That’s why we will bring in high-tech and future-type businesses, and we are working with our government agencies now on upskilling. And we’re not doing it on our own; we’re also seeking collaboration with our international partners,” Mr. Ferrer said.

He said that the PCCI is working with various overseas partners on upskilling and training in preparation for the entry of advanced manufacturing and services projects. — Justine Irish D. Tabile

PHL 53 GW away from hitting RE goal — DoE

FREEPIK

THE PHILIPPINES is around 53 gigawatts (GW) away from hitting its 2040 renewable energy (RE) capacity goal, the Department of Energy (DoE) said.

“We would be needing around 53 gigawatts of additional renewable energy capacity by 2040, with an equivalent of 175 terawatt-hours of renewable energy generation,” Energy Assistant Secretary Mylene C. Capongcol said in a forum in Iloilo City last week.

The government is aiming to raise the share of renewable energy in the power mix to 35% by 2030 and 50% by 2040.

The target is “almost seven times” the current capacity of 8,264 megawatts, Ms. Capongcol said.

In 2022, the Department of Energy (DoE) raised the share requirement of on-grid power suppliers to 2.52% from 1% previously under the renewable portfolio standards (RPS) program.

RPS requires distribution utilities, generation companies, and retail electricity suppliers to source a certain portion of their energy supply from eligible renewable energy resources.

Ms. Capongcol said that the renewable energy goal has yet to include the share of nuclear energy as envisioned in the Clean Energy Scenario 1 and Clean Energy Scenario 2.

“While we have already implemented most of the renewable energy policy and development mechanisms, there are still actions and strategies that we need to undertake,” Ms. Capongcol said.

Aside from RPS, she said that the DoE has been implementing other mechanisms such as allowing 100% foreign ownership of renewable energy projects, the development of an offshore wind policy framework, and the green energy auction program.

“We’re looking forward to renewable energy market operations and soon, we will be coming out with the revised omnibus guidelines for the awarding of the service contract,” Ms. Capongcol said.

As of January, the DoE has awarded 1,282 renewable energy contracts with an equivalent total potential capacity of 130.3 GW. — Sheldeen Joy Talavera

Iloilo power demand growth seen at 6-8%

MOREPOWER.COM.PH

POWER DEMAND in Iloilo City is expected to grow 6-8%, driven by the growth in business activity, according to MORE Electric and Power (MORE Power).

“We’re having a peak of about 132 megawatts this year, that’s our projected (demand) and that’s about 9% higher from last year,” MORE Power President and Chief Executive Officer Roel Z. Castro told reporters last week.

“If the trend continues and barring any other problems, we’re looking at between… 6-8%,” he added.

Mr. Castro said business process outsourcing (BPO) is driving power demand growth, followed by services also powered receiving a boost from BPO investment.

“Right now, it’s still really the BPOs and allied services because (the industry creates) demand for food, transportation, housing, and so on,” he said. “That’s really making things happen in Iloilo.”

Iloilo City Mayor Geronimo P. Treñas said that the city’s economy is growing by 9.6%, resulting in demand for additional baseload power.

“We have not (needed to) increase our real property taxes in 18 years because what was needed for the additional services was provided by the businesses coming in,” Mr. Treñas said.

Among highly urbanized cities outside Metro Manila, Iloilo City had the fourth-highest gross domestic product (GDP) growth per capita, according to the Philippine Statistics Authority.

Mr. Treñas said that the local government is talking to possible investors for a baseload plant in the city.

“(Energy) Secretary (Raphael P.M.) Lotilla is encouraging solar plus battery plus diesel, and maybe later on liquefied natural gas because there’s a moratorium on coal,” he said. — Sheldeen Joy Talavera

Power NGO backs stronger regulation instead of gov’t re-entering industry

PHILSTAR FILE PHOTO

THE GOVERNMENT needs to focus on strengthening its regulatory capacity rather than re-entering the power generation and distribution industry, a non-government organization (NGO) said.

The government’s re-entry into the power sector could result in higher electric consumer charges, according to Nic Satur, Jr., Partners for Affordable and Reliable Energy chief advocate officer, revering to the situation before the Electric Power Industry Reform Act (EPIRA) of 2001 was signed.

“The focus should remain on enforcing existing regulations, enhancing the energy sector’s efficiency, and ensuring reliable and affordable energy for consumers, rather than on expanding the government’s role within the energy sector,” Mr. Satur told BusinessWorld via chat.

The government is currently looking into amending EPIRA, which privatized the electric industry, citing its alleged failure to lower power costs for consumers.

“The idea of the government getting involved in electricity production again is instilling fear among consumers, especially because it might mean higher (electricity) costs,” Mr. Satur said.

House Bill (HB) No. 2153, written by energy Party-list Representatives Presley C. de Jesus and Sergio C. Dagooc, was filed to address the gaps left by the private sector in electricity generation.

The legislators said private electric generation companies should create additional power generation facilities to meet public demand and lower consumer costs.

“The government needs to provide the necessary generating assets so that the consumers would not suffer either from high prices of electricity or no electricity at all,” according to the introductory note of HB No. 2153.

Asked to comment, Terry L. Ridon, convenor of think-tank InfraWatch PH, said the government’s return to power generation would be a win for consumers if it leads to the reduction of power costs.

“(The) government’s re-entry into the power sector can only be successful if its power generation firms can provide the lowest power rates to consumers,” Mr. Ridon told BusinessWorld in a Viber message.

However, Mr. Satur said the government should instead prioritize enhancing collaboration between energy regulators to reduce the cost to consumers.

“What is urgently needed now is not government competition, in an area where it lacks both the technical and financial competitiveness, but rather a collaboration among our energy regulators,” he said.

The Department of Energy, the Energy Regulatory Commission, and the National Electrification Agency should work together to reduce power generation and distribution costs. “They must collaborate closely with power generators, the National Grid Corp. of the Philippines (NGCP), and distribution utilities and consumers to foster a progressive energy sector,” he said.

Amendments to the EPIRA Act are among the priority bills laid out by President Ferdinand R. Marcos, Jr. before the 19th Congress.

House bills seeking to amend the EPIRA Act remain pending at the House Energy Committee level. — Kenneth Christiane L. Basilio

PHL being lined up for more EU offshoring activity — PEZA

By Justine Irish D. Tabile, Reporter

MORE COMPANIES from the European Union (EU) are seeking to enter the Philippines, with information technology (IT) investments from the bloc already surpassing investments from North America, according to the Philippine Economic Zone Authority (PEZA).

In a Viber message, PEZA Director General Tereso O. Panga told BusinessWorld that approved IT projects from the EU more than doubled to P4.11 billion in 2023 from P1.56 billion the year prior.

The investments, he said, also accounted for 55.4% of total IT investments the investment promotion agency (IPA) approved over the same period.

“This only shows that the Philippines has become more attractive to EU information technology and business process management (IT-BPM) companies as a location for offshore services,” Mr. Panga said.

“In fact, their FDI inflows in 2023 have outperformed North American investors, who have dominated the ecozone IT-BPM industry in the last two decades,” he added.

In particular, Mr. Panga said that PEZA has been engaging with Foundever, a contact center company in Luxembourg.

“(It) recently acquired Sitel and Sykes Asia, both well-known IT-BPM companies in the Philippines,” Mr. Panga said.

He added that French bank BNP Paribas visited the Philippines last year with the aim of setting up a back office for financial services to serve its global clients.

Mr. Panga said that the EU-Philippines free trade agreement (FTA) as well as the renewal of the Generalized Scheme of Preferences Plus (GSP+) trade concession will be vital in making the country more attractive to EU investment.

“(Those) will help the Philippines in its bid to attract EU foreign direct investment (FDI) from diverse strategic industries, catering to both domestic and export markets, particularly for the IT-BPM sector, which continues to flourish, even outperforming the global IT-BPM sector in terms of revenue growth and headcount,” Mr. Panga said.

“As one of the IPAs in the country, this will likewise be instrumental in PEZA’s quest towards positioning the Philippines as the ideal base for offshore operations by EU companies hoping to penetrate the much more vibrant ASEAN and Asia-Pacific markets,” he added.

Last month, the EU and the Philippines announced the resumption of FTA negotiations which had been stalled for seven years due to the trade bloc’s concerns over the human rights record of former President Rodrigo R. Duterte.

Trade Secretary Alfredo E. Pascual said that the formal or face-to-face negotiations for the FTA could come as early as the second half of the year, with preliminary talks starting at lower levels last month.

Priorities for financial services firms in the digital age

IN BRIEF:

• Upskilling is one clear priority toward upgrading legacy systems, but 94% of CROs say they need new skills and resources to meet the changing needs of the risk management function.

• Third-party technology in digital transformation efforts can be revolutionary for customers and for internal ways of working, but it can increase a bank’s risk profile.

• Proactive monitoring is key to addressing cybersecurity issues, which remain the top near-term risk for banks around the world.

Political and economic issues are not the sole contributors to the growing complexity of the global financial services landscape. Digital assets and the digitalization of finance, including digital payments and artificial intelligence (AI), are also greatly impacting regulatory standards for effective supervision.

In the Philippines, the digital transformations of the banking and financial services sectors are rapidly accelerating, driven by efforts to integrate more Filipinos into the formal banking system. Data from the Bangko Sentral ng Pilipinas (BSP) shows that approximately 22 million Filipinos acquired access to formal financial accounts between 2019 and 2021. This development indicates an increase in banked Filipino adults to around 56% in 2021, up from 29% in 2019.

This development was driven by the faster growth in digital payments, particularly in merchant payments, peer-to-peer remittances, and business transactions of salaries and wages. BSP aims to digitalize 50% of retail payments and to onboard at least 70% of adult Filipinos into the formal financial system.

Last week, we discussed trends covered in the 2024 EY Global Financial Services Regulatory Outlook Report, which highlights areas of longstanding regulatory interest. This article will focus on four critical areas that financial services firms need to prioritize in the age of digitalization and AI.

UPGRADING LEGACY SYSTEMS THROUGH UPSKILLING
The financial services industry is increasingly focused on modernizing outdated systems and embracing an agile approach across all business functions. Therefore, firms must remodel their operating structures to enhance agility and efficiency.

A key focus is upskilling, particularly for Chief Risk Officers (CROs), who must understand the risks associated with cloud computing and predictive analytics. Moreover, they need to grasp the implications of emerging technologies, such as machine learning, and adapt to new processes and methodologies, such as the agile approach.

Some firms are still struggling to update legacy systems, however, leading to greater regulatory scrutiny. The 12th EY and Institute of International Finance (IIF) Global Risk Management Survey found that 94% of CROs say they need new skills and resources to meet the changing needs of the risk management function, with data science and cyber expertise topping the list.

ENHANCING DIGITAL TRANSFORMATION RESILIENCE
According to the 11th Annual EY/IIF Global Bank Risk Management Survey, CROs expect their senior management team to focus on implementing process automation (88%), modernizing core IT functions (66%), using analytics to improve customer insights (64%), cloud migration and adoption (63%), and customer self-service capabilities (63%) over the next few years.

However, if not integrated effectively, such changes can introduce unwanted risks. Introducing a third-party technology, a common requirement of digital transformations, can be revolutionary for customers and for internal ways of working, but it can increase a bank’s risk profile.

Also, per EY’s 2024 Global Financial Services Regulatory Outlook, regulators will continue raising the standard of digital resilience and tackle increased operational reliance on IT systems, third-party service providers, and innovative technologies, which increases complexity and interconnections within the financial system and is driven by digital transformation.

PROACTIVE MONITORING TO ADDRESS CYBERSECURITY RISKS
Amidst unprecedented levels of volatility and global uncertainty, cybersecurity has remained top of the list of near-term risks for banks around the world.

The 13th EY/IIF Bank Risk Management Survey showed that in the short term, nearly three out of four CROs identified cybersecurity risk as their top concern over the next 12 months (73%) and two-thirds (66%) of respondents naming liquidity risk as the top financial risk for the next year.

The report, which was based on data from 86 banks across 37 countries, explored the dynamic nature of risk management in banking. For example, CROs must be vigilant regarding the rise in fraud and other financial crimes caused by economic stress. Given the constantly evolving cyber threats, socioeconomic disruptions, and third-party risks, organizations must be proactive and agile.

ESTABLISHING CROSS-FUNCTIONAL TEAMS AND AN AI GOVERNANCE FRAMEWORK
AI regulation has advanced in the past years but still lacks overall clarity. International bodies such as the Organization for Economic Cooperation and Development and the United Nations are developing guidelines to support coordinated approaches for responsible AI use.

Various governments are pushing ahead with new legislation. For example, China included a draft AI law in its 2023 legislative work plan, but the process timeline is unclear. Canada also seeks to establish legislation through an AI and Data Act. However, some countries are cautious about government intervention, which might stifle innovation. The US, Japan, South Korea, and Singapore are focusing on voluntary guidelines. Recently, EU institutions have reached an agreement on an AI Act, a comprehensive legal framework regulating AI and a landmark in global AI regulation.

On a micro level, AI adoption will continue to advance in the banking industry, from both a business and risk management perspective. Utilizing advanced technologies will be critical to realizing positive outcomes from digital transformations; therefore, organizations must establish technology- and AI-enabled risk management teams as well as a robust AI governance framework.

FUTURE-PROOFING IN THE DIGITAL AGE
Amidst financial pressures, new competition, regulatory scrutiny, and shifting consumer behavior, banks are under pressure to embrace new technologies and pivot towards digitalization.

While financial regulators are considering the need for new rules to complement their existing authority, financial services firms should focus their attention on building resilience through senior management accountability, developing and implementing an enhanced operational resilience framework, and addressing operational disruptions.

Finally, they should create cross-functional teams for AI projects to manage risk and compliance effectively. Establishing a comprehensive governance framework for adopting digital or new technologies can help organizations realize benefits and minimize risk, strengthening their positions in the digital era.

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

 

Christian G. Lauron is the Financial Services Organization (FSO) leader and Janeth T. Nuñez-Javier is the sector representative for Banking and Capital Markets (BCM) of SGV & Co.

Philippines, US, Japan and Australia likely to collectively act versus China

PHILIPPINE Air Force personnel view the US Air Force air assets displayed at Subic airport as part of Balikatan 2023 exercises in Subic, Zambales on April 23, 2023. — PHILIPPINE STAR/WALTER BOLLOZOS

By Kyle Aristophere T. Atienza, Reporter

THE PHILIPPINES, United States, Japan and Australia are expected to come up with a collective military and cybersecurity action to deal with China’s growing assertiveness in the South China Sea, political analysts said at the weekend.

The four-way partnership shows the US has veered away from its usual bilateral deals with Asian allies, said Joshua Bernard B. Espeña, who teaches international relations at the Polytechnic University of the Philippines.

“Historically, Washington’s Asian alliances have been bilateral compared with the North Atlantic Treaty Alliance, which is collective defense,” he said in a Facebook Messenger chat.

The four countries on Sunday held joint military drills within the Philippines’ exclusive economic zone in the disputed waterway.

The Maritime Cooperative Activity, the same name for Philippines-US joint drills in the sea that began in November, demonstrates their commitment “to regional and international cooperation in support of a free and open Indo-Pacific,” their Defense ministers said in a joint statement on Saturday. 

The activity aims to “strengthen the interoperability of our defense/armed forces doctrines, tactics, techniques and procedures.”

The four nations said their naval and air force units seek to demonstrate “professional interactions.”

Five vessels were expected to be deployed for the activity — two from the Philippines, and one each from the US, Japan and Australia, according to Philippine military spokesman Arsenio R. Andolong. 

The four nations also reiterated that the 2016 arbitral ruling that voided China’s expansive claims in the South China Sea is final and binding.

Mr. Espeña said the Philippines, Japan and Australia, though long-time partners in trade and people-to-people relations, are “keeping up in bolstering interoperability of systems and capabilities” in support of a rule-based order under US leadership.

“Exercises are important to make that happen,” he said. “Each of the allied forces is required to show their capabilities in orchestrating coalition-based operations against a common foe (China).”

“In this case, familiarizing themselves with the operational environment contributes to the deterrence needed by diplomats to leverage a peaceful order.”

Chinese President Xi Jinping last month called on his country’s armed forces to coordinate preparations for military conflicts at sea and help develop China’s maritime economy.

The International Monetary Fund expects China’s economic growth to slow to 4.6% this year from an estimated 5.4% last year.

“Regular military exercises and formalized defense agreements will enable the new quadrilateral grouping,” Chester B. Cabalza, founder of Manila-based International Development and Security Cooperation, said in a Facebook Messenger chat.

“It is likely for all four democracies to continue integrating their defense activities in the long run particularly in the maritime domain given how it is a vital interest of all four countries to keep the South China Sea free, open and rules-based,” Don Mclain GIll, who teaches international relations at De La Salle University in Manila, said via Messenger chat.

The Sunday war games were held amid worsening tensions between the Philippines and China, which claims the South China Sea almost in its entirety.

The Philippine Coast Guard (PCG) on Saturday said the Chinese Coast Guard had harassed Philippine vessels at Iroquois Reef, which is at the southernmost part of oil-and-gas rich Reed Bank and is about 237 kilometers northwest of Palawan province.

PCG spokesman Jay Tristan Tarriela in an X post on Saturday said ships of the PCG and the Philippine fishery bureau, which were accompanied by two fishing boats, were dropping “floating aggregate devices” in the area on April 4 when the Chinese vessels “went as far as pretending to man their water cannons and threatening the Filipino fishermen.”

China demonstrated “unlawful behavior aimed at depriving the Filipinos of their rights to access the resources in our exclusive economic zone,” Mr. Tarriela said.

“The so-called Maritime Cooperative Activity does nothing to ease the tense situation in the West Philippine Sea in light of what’s going to happen in the next few weeks — the trilateral summit in the US, the biggest Balikatan (shoulder-to-shoulder) military exercises and continued building of US military facilities in the Philippines,” Bagong Alyansang Makabayan Secretary-General Raymond Palatino said in a Messenger chat.

American Army engineers arrived in the northernmost Philippine province of Batanes last week for the construction of military infrastructure including a humanitarian logistics warehouse as part of the annual war games between the Philippine and US militaries.

“The military transformation of such an idyllic island is highly deplorable and would further escalate the growing tensions in the South China Sea,” Party-list Rep. France L. Castro said in a statement. “It would also make Batanes a target of attacks as it would be a forward base of the US if China moves against Taiwan.”

The Maritime Cooperative Activity will precede a summit among Philippine President Ferdinand R. Marcos, Jr., US President Joseph R. Biden and Japanese Prime Minister Fumio Kishida in Washington on April 11.

They are expected to advance a trilateral partnership built on historical ties, growing economic relations, shared democratic values and a “shared vision for a free and open Indo-Pacific.”

The three leaders will also discuss how to advance their economic and climate cooperation, according to the White House.

Washington is expected to “reaffirm ironclad alliances” with Manila and Tokyo, which are both American treaty allies.

Congress told to scrap ‘lowest bidder’ rule in gov’t procurement law

FREEPIK

By John Victor D. Ordonez, Reporter

LAWMAKERS should buck the “lowest bidder policy” while considering changes to the country’s Procurement Act to ensure that the government does not get short-changed by contractors, economists said at the weekend.

Awarding contracts to the lowest bidder is not always wise and could bar the state from getting state-of-the-art equipment, they added.

“The lowest bidder policy must be reviewed because this is not proven to be effective in addressing our needs,”  Oikonomia Advisory & Research, Inc. President and Chief Economist John Paolo R. Rivera said in a Viber message.

“It oftentimes results in redoing tasks over and over again because of poor quality. The expected outcomes are not really delivered,” he added.

The Philippine Senate is set to continue debates on Senate Bill No. 2593 which seeks to amend the Government Procurement Act, when it resumes sessions on April 29.

The measure, one of President Ferdinand R. Marcos, Jr.’s priority bills, aims to streamline the procurement process to 27 days from 120 days.

It also proposes to establish a single electronic procurement portal and allow agencies to buy equipment from electronic marketplaces. 

The House of Representatives passed its version of the measure on third and final reading last year.

Mr. Rivera said streamlined procurement would deter agencies from settling for the lowest bidder and getting delivery of subpar goods.

“This bill would lead to greater transparency, efficiency and a level playing field that would also reduce costs for the government through efforts to boost digitization and automation,” Michael L. Ricafort, chief economist at Rizal Commercial Banking Corp., said in a Viber message.

House Senior Deputy Speaker and Pampanga Rep. Aurelio D. Gonzales, Jr. has said the new procurement law would be passed in time for the President’s state of the nation address in July.

In February, the Department of Budget and Management (DBM) proposed allowing government agencies to directly buy goods from suppliers with an acceptable track record.

The method can only be pursued if a previous contract was awarded through competitive bidding and if the supplier agrees to the terms of the procurement contract, Dennis S. Santiago, executive director of the DBM Procurement Service (PS-DBM), said in a letter to the Senate finance committee in February.

“We have really introduced a lot of measures that would open up and give more flexibility in government contracting… especially with the use of fit-for-purpose procurement or proportionality,” he told senators.

Last month, business groups asked Congress to revisit the domestic-supplier preference rules in the proposed New Government Procurement Act, saying the practice could weaken competition due to a smaller pool of potential suppliers.

The bill requires the government to prioritize Philippine products and services in procurement. 

“An overly rigid focus on domestic preference in government procurement sets the country two steps back,” according to a March 22 statement signed by the Foundation for Economic Freedom, the Japanese, American, Korean and European chambers of commerce, and the Makati Business Club.

“Competitive bidding on both accounts of cost and quality would help the government acquire supplies that are state-of-the art and are within the budgetary allocation,” Mr. Rivera said.

Marcos says gov’t infra projects to cause traffic woes

A construction worker is seen working on a new project in Taguig City. — REUTERS

PRESIDENT Ferdinand R. Marcos, Jr. on Sunday appealed for the public’s patience as his government pursues infrastructure projects that could worsen traffic congestion in the capital region.

In a five-minute video, he said developing nearby provinces and cities is one of the long-term solutions to Metro Manila’s traffic woes.

But development projects outside Metro Manila could take time and worsen traffic congestion in the near term, he added.

“These are big projects, so it’s unrealistic to expect the gains tomorrow,” he said in Filipino. “Sometimes, it could even worsen traffic.”

“So be patient because once everything is completed, rest assured that our situation will improve,” he added.

National Economic and Development Authority (NEDA) Secretary Arsenio M. Balisacan told a palace briefing last week the President wants a comprehensive and holistic approach to the capital’s traffic problem, not a “piecemeal approach.”

“In the planning of our transport system, we should be looking at the intermodal transport system and see how they operate efficiently as a whole,” he added.

The Management Association of the Philippines last month called for a state of calamity declaration in Metro Manila to address road congestion through the President’s special powers.

The private sector group had also urged the President to appoint a traffic czar.

Traffic congestion in Metro Manila is costing the Philippine economy at least P3.5 billion daily or P1.27 trillion annually, according to a Japan International Cooperation Agency study. 

MAP Transportation and Infrastructure Committee Chairman Eduardo H. Yap said at a Mar. 21 House of Representatives hearing that events causing P1 billion in damage qualify as calamities.

Mr. Marcos earlier this month signed an executive order creating an inter-agency panel to fast-track the acquisition of land for national railway projects, as Philippine infrastructure plans continue to be hounded by right-of-way issues.

Under Administrative Order No. 19, which was signed on March 25, the Inter-Agency Committee for Right-of-Way Activities for National Railway Projects will “study and devise an efficient and collaborative mechanism to streamline the process of land acquisition necessary for the implementation of all railway projects.”

Transport Secretary Jaime J. Bautista said last month right-of-way issues are threatening the 2029 deadline for the completion of the 33-kilometer Metro Manila Subway project.

Although the construction of the subway tunnels began in January 2023, the government had yet to clear 45% of the area for right of way, he said.

The Marcos administration’s priority infrastructure projects for the transport sector also include the North-South Commuter Railway System, Mindanao Railway project and Philippine National Railway South Long Haul project.

A 2016 law authorizes the government to acquire real property needed as right-of-way sites or for any National Government infrastructure projects through donation, negotiated sale, expropriation or any other mode of acquisition. — Kyle Aristophere T. Atienza

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