Revised 6-7% goal still ‘optimistic’ — analyst

April 11, 2024 | 12:31 am

slum area — PHILIPPINE STAR/MICHAEL VARCAS

By Beatriz Marie D.Cruz, Reporter

THE GOVERNMENT of President Ferdinand R. Marcos, Jr. must temper inflation, cautiously boost spending, and ramp up revenue collection to meet its revised growth targets this year, according to analysts.

The Development Budget Coordination Committee (DBCC) last week lowered the gross domestic product (GDP) growth target range for this year to 6-7% from 6.5-7.5% previously, citing rising prices, geopolitical tensions and trade restrictions.

“We think the downgrade brought the target to a more plausible range, considering economic headwinds including high inflation and slowing global economy,” Makoto Tsuchiya, economist at Oxford Economics Japan, said in an e-mail.

However, the DBCC’s target range is still higher than Oxford Economics’ baseline growth forecast of 5.2% this year, he added.

“The revised (DBCC) target is still quite optimistic in our view,” Mr. Tsuchiya said.

Security Bank Corp. Chief Economist Robert Dan J. Roces said the attainability of the DBCC’s revised target will depend on several factors, including inflation.

Inflation accelerated for the second straight month in March to 3.7% due to the continued increase in prices of rice, a major food staple in the Philippines.

Rice inflation quickened to 24.4% in March, the fastest print since the 24.6% uptick in February 2009.

Foundation for Economic Freedom President Calixto V. Chikiamco said the government must further lower rice tariffs to at least 10% from the current 35% rate.

“Rising food inflation would make Filipino consumers wary of increasing consumption, thereby impacting GDP growth,” he said in a Viber message.

Bangko Sentral ng Pilipinas (BSP) Governor Eli M. Remolona, Jr. on Monday said that upside risks to inflation have “become worse,” prompting policy makers to adopt a more hawkish stance.

The BSP raised its baseline inflation forecast to 3.8% this year from 3.6% previously. It also hiked its risk-adjusted inflation forecast to 4% for 2024 from 3.9% previously.

“The government could boost spending to shore up growth, but then this will further push up the government deficit this year,” Mr. Tsuchiya said.

The DBCC raised its budget deficit ceiling to P1.48 trillion this year from the P1.39-trillion ceiling previously. The deficit as a share of GDP is expected to stand at -5.6% this year from -5.1%

The government is targeting to collect P4.27 trillion in revenues this year, 11.78% up from P3.82 trillion in actual collection last year. It is aiming to spend P5.75 trillion this year, up from P5.23 trillion last year.

“The upwardly revised deficit ceiling provides fiscal space for growth-oriented spending. Achieving these targets requires strong performance from key sectors and prudent fiscal management to ensure debt sustainability,” Mr. Roces said.

Zy-za Nadine M. Suzara, a public finance expert and executive director of the Institute for Leadership, Empowerment, and Democracy, said the government should rein in unnecessary spending to avoid breaching the deficit ceiling.

“The focus shouldn’t only be on revenue collections but improving how public funds are allocated and utilized… Part of the reason why the deficit is higher is due to wasteful government spending. It is a result of misprioritization of the budget, weak planning and budgeting linkage, and poor targeting of government programs and projects,” she said in a Viber message.

Ms. Suzara said these problems are compounded by “massive allocations for non-strategic and patronage-drive pork projects” and rising unprogrammed appropriations.

Albay Rep. Jose Ma. Clemente S. Salceda, who also heads the House Committee on Ways and Means, said the government would have to ensure fund releases are fast-tracked to ensure economic growth momentum continues.

“The most important room for growth in that aspect is unprogrammed appropriations. The faster the DBCC’s members can get loan proceeds, certify the availability of excess funds, or get dividends from government agencies, the better for growth,” he said in a Viber message.

UnionDigital aims to increase loan disbursements to P39B

April 11, 2024 | 12:05 am

UNIONDIGITAL BANK, Inc., the online banking arm of listed Union Bank of the Philippines, Inc. (UnionBank), targets to grow its loans to P39 billion this year as it plans to launch new products and features amid an expected growth in customers.

“Throughout the year, we are excited to unveil a diverse array of new products and features, including an enhanced portfolio of loan options and the introduction of virtual cards,” UnionDigital Bank said in an e-mail.

The bank had a gross loan portfolio of P13.9 billion at end-2023, data from the Bangko Sentral ng Pilipinas (BSP) showed.

The online lender currently offers cash loans on its app as it looks to boost underserved and unbanked communities’ access to credit products.

Applications for cash loans do not have any prerequisites and do not need collateral.

UnionDigital Bank also uses alternative credit scoring methods to increase the chances of approval and help customers establish their credit histories, it said.

“This approach not only broadens financial inclusion but also paves the way for building our customers’ credit scores,” the digital bank said.

The Aboitiz-led digital lender is also aiming to grow its customers to 1.5 million this year from its current 750,000, it said.

The bank said it achieved profitability last year, with its loan-to-deposit ratio standing at 69%, up from 58% in 2022.

“We are the first digital bank in the Philippines to achieve profitability in 2023. As of December 2023, we attained a substantial 65% market share in loan portfolio size, while in deposit, we ranked second among digital banks, with a commendable 25% share,” the lender said.

UnionDigital Bank’s revenues also grew by 13 times to over P5 billion last year, it earlier said.

Its assets stood at P22.47 billion at end-2023, BSP data showed.

Meanwhile, its parent UnionBank saw its net income decrease by 28% to P9.07 billion in 2023 due to one-time integration costs related to its acquisition of Citigroup, Inc.’s consumer business in the Philippines.

UnionDigital Bank is one of six licensed online lenders in the country, along with GoTyme Bank, Tonik Digital Bank, Inc., Maya Bank, Overseas Filipino Bank, and UNObank.

The central bank earlier said only two digital lenders posted a net profit in 2023. The digital banking sector posted a combined net loss of P4.38 billion in 2023, BSP data showed, with total assets at P88.69 billion. As of end-February, the industry’s assets stood at P91.55 billion.

The BSP has capped the number of digital banks in the country at six since 2021 as it wants to foster competition and monitor developments in the sector.

BSP Eli M. Remolona, Jr. last year said they could lift the moratorium on the grant of new licenses “pretty soon” as more entities have expressed interest in entering the market.

UnionDigital Bank said allowing more online banks to operate in the Philippines will increase competition in the sector.

“This environment encourages existing digital banks, including us, to continuously enhance our offerings, streamline user experiences, and adopt new technologies to remain competitive. For UnionDigital, the evolving landscape represents both challenges and opportunities. The entrance of new players could pressure existing digibanks to innovate more quickly and efficiently to retain and grow their customer base. However, it also presents an opportunity for us to differentiate ourselves by leveraging on our existing strengths, particularly our solid foundation with UnionBank as our parent company and the expansive network within the Aboitiz Group supporting us,” it said.

“For us, the key to success will lie in our ability to adapt to the changing industry dynamics, invest in technology and innovation, and maintain a customer-centric approach. This will not only help us navigate the challenges but also seize the opportunities presented by the expansion of the whole Philippine digital banking ecosystem,” UnionDigital Bank added. — A.M.C. Sy

UCC Clockwork opens One Ayala branch, rolls out new menu

April 11, 2024 | 12:05 am

UCC Clockwork, one of the units under the UCC Philippines umbrella, opened on April 10 at the new One Ayala Mall. It also comes armed with a new menu that will be exclusive to the branch for the first two months of its operation, and then rolled out in other branches.

UCC Clockwork belongs to the family of UCC cafes, brought here by the Mugen Group. Under UCC, there are other units like Park Cafe, Cafe Terrace, Vienna Cafe, and at 8 Rockwell, a coffee-and-cocktail concept. Meanwhile, under the Mugen group, they have the franchises in the Philippines for CoCo Ichibanya, Mos Burger, and Mitsuyado Sei-Men; among others.

BusinessWorld sat down to a media preview of the cafe on April 5, where we tucked into Honey Mustard Chicken Karaage, Beef and Tendon Caldereta Omurice, Meatloaf and Gravy, and Miso Mushroom Risotto with Salmon. The Beef and Tendon Caldereta shared a homey and filling quality; while the chicken karaage tasted mild and sweet. Of these, the Miso Mushroom Risotto takes the prize for being the most memorable of the dishes, displaying an earthy quality tempered by a very fine salmon fillet. The dish displays a sophistication not often seen in coffee shops.

Robert Francisco, Director of UCC Coffee Academy Philippines and Coffee Master, discussed the difference of Clockwork among the other UCC units in the Philippines. “Clockwork tends to go to the millennials, but we’re flexible to adapt to newer trends which are of the younger generations, for more sophistication.” Among these trends, he notes more innovation, and fruitier and fermented flavors. “It’s different from the traditional dark roast; simple,” he said. “Clockworks can be more experimental; more trendy.” Clockwork branches are found in Pasig’s Arcovia and Estancia, Bluebay Walk, BGC’s Burgos Circle, Nuvali, Vertis North, and even Cebu and Bacolod.

These are parsed out outside Metro Manila to franchisees, a new key for their expansion game. “Hometown nila iyon, kilala nila iyong market (that’s their hometown, they know the market,” said Mr. Francisco. “They know the community more.” Other UCC units are expected to open at the University of the Philippines – Diliman (UPD) campus, and in Dumaguete.

UCC Ueshima Coffee Co., Ltd. was founded in Japan by Tadao Ueshima as a western food store in 1933, but went into coffee in the 60’s. In the Philippines, it has held a presence for 23 years. “Japan’s UCC does not look like this,” Mr. Francisco noted. “It’s very subtle,” he said, pointing out wood elements and profiles customers as “serious (coffee) drinkers,” and “nothing fancy” with food and cocktails. “UCC Asia Pacific is watching us to observe as a benchmark of all this innovation.”

Speaking of innovation, it is with this word that sets apart UCC and Japanese coffee culture, among the many cafes that dot the Philippines, with chain ones having American parent companies. Mr. Francisco pointed out that UCC came out with the first ready-to-drink canned coffee. “The point is, even UCC Japan is very innovative…a lot of traditional tastes and preparation, but they’re innovative in creating coffee.”

He also notes that coffee does not come from Japan, but like other things they have adopted, when it enters their shores, they come out with an even more superior product (many times, at least) than the original. “When they start roasting it, they don’t want to lose quality. They will choose good inventory. They have actually innovated in reinfusing the aromatics that get lost during roasting and packaging,” he said.

“They will try to find ways to make it better,” he said.

UCC Clockwork One Ayala is located across the street from Uniqlo Greenbelt 5. — JL Garcia

RL Commercial REIT, Inc. sets 2024 Annual Meeting of Shareholders on May 6

April 11, 2024 | 12:05 am

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Filinvest Development targets 20% annual income growth in 5-year plan

April 11, 2024 | 12:05 am

GOTIANUN-LED conglomerate Filinvest Development Corp. (FDC) said it is aiming for at least 20% annual growth in net income over the next five years.

“What we’ve announced is a four- or five-year plan of at least 20% annual growth,” FDC President and Chief Executive Officer Rhoda A. Huang said during a media roundtable last week.

This year, the FDC is hoping to reach or exceed the company’s pre-pandemic net income of P12 billion, she said.

In 2023, FDC’s attributable net income climbed by 58% to P8.9 billion as total revenues and other income increased by 31% to P92.8 billion.

According to Ms. Huang, the previous operating year saw robust growth across all business lines, attributing the performance to a renewed focus on business fundamentals. FDC reported revenue and other income growth in its banking segment at 35%, real estate at 20%, hospitality at 77%, power at 35%, and sugar at 16%.

Ms. Huang also said that FDC is “well-positioned” to take advantage of improving economic data.

“When you look at controlled inflation, interest rates are coming in, there is a drive in terms of a consumer-led economy. I think it is very positive,” she said.

On Monday, the Bangko Sentral ng Pilipinas maintained its benchmark interest rate at 6.5% for a fourth consecutive meeting. The country’s inflation rate rose to 3.7% in March, up from 3.4% in February, driven by elevated food prices.

“We’re well-positioned. Despite the high interest rates, the ability to sell, in terms of sales and revenue for Filinvest Land, Inc. (FLI), there is still a shortfall in available housing in the low to medium segment,” Ms. Huang said.

“We see greater receptivity below the P3.6 million price range,” she added.

She also noted that the conglomerate is keeping an eye on certain risks, such as US interest rates and geopolitical tensions.

The company has allocated between P20 billion and P25 billion for its capital expenditure (capex) budget this year. It invested P13 billion in capex in 2023.

FDC Chief Finance Officer Brian T. Lim has said that 60% of the budget would be allocated to real estate, 15% to renewable energy, another 15% to hospitality, with the remaining 10% allocated to other businesses. FDC’s ongoing renewable energy projects include a 20-megawatt (MW) solar energy project in Misamis Oriental and a 12-MW solar energy project in Cebu.

FDC’s expansion in the hospitality segment includes the ongoing construction of the 200-room hotel in Baguio City under the Grafik brand, which will open in the first quarter of 2025.

FDC is also renovating and expanding its Crimson Mactan Hotel, according to Ms. Huang.

Aside from FLI, FDC is engaged in real estate through Filinvest Alabang. The conglomerate also has presence in the power sector via FDC Utilities, Inc., as well as in the hospitality business with Filinvest Hospitality Corp.

At the same time, the holding company is involved in the banking sector through East West Banking Corp., as well as in the sugar and infrastructure sectors.

FDC shares were last traded on April 8 at P5.51 per share. — Revin Mikhael D. Ochave

Dollar firm before US CPI; yen to face crucial test

April 11, 2024 | 12:04 am

TOKYO — The dollar consolidated on Wednesday ahead of a key inflation report later in the day, while the yen remained a whisker away from what markets believe to be the line in the sand for Japanese authorities to intervene.

The kiwi, meanwhile, briefly jumped to a three-week high after the Reserve Bank of New Zealand kept rates on hold, as expected, but warned of persistent inflation.

The main market focus on Wednesday is US consumer price index (CPI) for March, which traders have been eagerly awaiting for hints on the US Federal Reserve’s policy outlook.

The inflation data follow a strong jobs report last Friday that blew past forecasts, raising questions on how soon and how much the central bank will cut rates this year.

Futures traders reduced bets to the lowest level since October, around 60 basis points in rate cuts this year, LSEG data showed on Monday, amid evidence of continued strength in the US economy.

Ahead of the data, US interest rate futures set the odds of the first cut occurring in June at about 60%, up from 51% on Monday, according to CME Group’s FedWatch tool, although the possibility of a hold has bumped up to 40%.

A solid inflation number could lead markets to price out a June cut, which could propel the dollar sharply higher, said Carol Kong, a currency strategist at Commonwealth Bank of Australia.

“A strong core CPI of 0.3% (month to month) or above will likely break the case for a June rate cut because there are two more CPI readings ahead of the meeting which are likely not sufficient to show a pattern of slowing inflation.”

Even if the data comes in below expectations, the dollar may only dip modestly, with June bets likely to be little changed as hurdles remain, she said.

The US dollar index, which measures the greenback against six rivals, held firm at 104.12.

On the yen, Kong added that Wednesday’s CPI data will be “a big test for Japanese authorities.”

No fresh warnings were issued as the yen remained close to its 34-year low versus the dollar ahead of the data.

Bank of Japan Governor Kazuo Ueda, however, brushed aside market speculation that the yen’s sharp falls could force the central bank to raise interest rates.

The Japanese currency was mostly flat at 151.785 per dollar.

Elsewhere, the Reserve Bank of New Zealand held the cash rate steady at 5.5% on Wednesday, as it reiterated that its previous rate hikes had helped slow the economy and constrain price rises but inflation remained above its target.

The kiwi climbed as high as $0.60775 versus the US dollar, its strongest since March 21, and was last up 025% at $0.6076.

The Australian dollar slipped 0.08% to $0.662.

The offshore yuan edged up to a little over a two-week high against the dollar of 7.2356 as US Treasury yields eased.

It was last at 7.2388 per dollar, with traders also eyeing China inflation and trade data due later this week.

The euro was steady at $1.0855, as the European Central Bank meeting on Thursday fast approaches, while sterling held flat at $1.2680.

In cryptocurrencies, bitcoin last rose 0.28% to $69,332.47. — Reuters

Philippine Eatsperience opens at Rizal Park and Intramuros

April 11, 2024 | 12:04 am

AT THE very heart of Manila, on the first week of Filipino Food Month, the Noli me Tangere Garden in Luneta transformed into a food park. On April 3, assorted vendors from the Kilometer Zero Organization offered up dishes like Cebu lechon, Chicken Inasal, Ilocos Empanada, and Bicol Express. The food park, under the Philippine Eatsperience program, will be open from Friday to Sunday from 7 a.m. to 10 p.m.

Meanwhile, at the Baluarte Plano Luneta de Sta. Isabel in Intramuros, there were more concessionaires (this time offering heavier regional fare; from the Intramuros Community Vendors), also part of the Eatsperience program. This will be open from 7 a.m. to 5 p.m. daily. Along with the food, the food joints also feature a weekly lineup of food demonstrations and activities.

In a speech, Department of Tourism (DoT) Secretary Christina Garcia Frasco said, “Today, we gather here at the Rizal Park not just to savor the sumptuous flavors that our nation offers but to recognize Filipino food and cuisines as pivotal to our cultural heritage. The Department of Tourism is fully committed to the task of preserving and elevating our culinary assets on both the domestic and international tourism markets.”

Eatsperience, launched in time for the celebration of the Filipino Food Month 2024 (Buwan ng Kalutong Filipino) is part of the DoT’s flagship project, the Philippine Experience Program (PEP). “This Philippine Eatsperience is a component of the Philippine Experience, and it highlights one of the most enjoyable things that you can experience when you visit or when you live in the Philippines: the Filipino fiesta,” she said. “Everywhere in the Philippines, wherever you may find yourself, whether up in the north, in Central Philippines or in the south, there is always a fiesta that is celebrated. And in these fiestas we show the best virtues of being Filipinos: compassion, generosity, and a sense of community towards others.”

Ms. Frasco quoted from the National Tourism Development Plan (NTDP) 2023-2028, about its plans for the future of gastronomic tourism in the Philippines. The country’s cuisine as a whole is recognized on various lists and platforms, while in the case of Iloilo City, it has been listed as a UNESCO (United Nations Educational, Scientific and Cultural Organization) City of Gastronomy last year.

“We are crafting unique Culinary Tours and Circuits that allow connoisseurs and travelers alike to explore our gastronomic delights at the grassroots level. Through these, we aim to showcase the diversity and richness of our culinary traditions,” she said. — JLG

Altus Property Ventures, Inc. to hold 2024 Annual Meeting of Shareholders on May 6

April 11, 2024 | 12:04 am

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Telcos poised for strong first-quarter results — analysts

April 11, 2024 | 12:04 am

Briefs 6 telco - BW FILE PHOTO — BW FILE PHOTO

By Ashley Erika O. Jose, Reporter

LISTED telecommunications and information and communications technology (ICT) companies may post strong financial results for the first quarter but may face challenges related to cybersecurity and industry changes, according to analysts.

“The Philippines is undergoing a notable transformation marked by a strategic pivot towards digital services. Looking ahead, the industry faces looming threats that could impact short-term profitability. Despite these challenges, there are several factors that could drive sustained growth,” Globalinks Securities and Stocks, Inc. Head of Sales Trading Toby Allan C. Arce said in a Viber message on Wednesday.

For the first quarter of the year, listed telco and ICT companies are likely to sustain growth mainly due to their innovative and diversified services, he said. “Continued innovation and diversification into digital services beyond traditional telecommunication offerings could attract new customers and increase revenue streams.”

Companies’ efforts to ramp up its infrastructure investments and improvement of broadband coverage are also catalysts for growth, he noted. “Reforms aimed at fostering an environment conducive to foreign investment (align) with the industry’s aggressive rollout of 5G (fifth-generation) technology.”

“This push for advanced connectivity promises to revolutionize communication infrastructure within the country, enhancing the overall digital experience for consumers and businesses alike,” he added.

For Cristina S. Ulang, head of research at First Metro Investment Corp., the expansion of 5G and migration pose risks to companies and contribute to a somewhat bleak outlook for the sector.

“Telcos’ growth is limited by high market saturation and affordability issues facing 5G migration,” she said.

For Regina Capital Development Corp. Head of Sales Luis A. Limlingan, telcos will sustain their growth as the industry is less sensitive to the impact of volatile macroeconomic conditions.

“Companies will likely sustain the growth they have experienced from the last few years, since these industries are less sensitive to the headwinds the market has been experiencing,” he said.

Mr. Arce from Globalinks noted that the industry is likely to face impacts from cybersecurity challenges and various changes within the sector.

“Several catalysts are expected to propel industry growth, including the ongoing expansion of the country’s digital economy and the swift implementation of 5G technology,” he said. “Despite these positive prospects, the industry faces a potential obstacle in the form of cybersecurity attacks, which may persist and escalate in the coming years.”

In 2023, Pangilinan-led PLDT Inc. saw its attributable net income more than double to P26.61 billion from P10.49 billion previously on lower expenses and higher top line.

The company’s combined revenues expanded by 3% to P210.95 billion from P204.36 billion in the same period in 2022, while the its gross expenses declined by 24% to P158.47 billion from P209.43 billion previously.

Ayala-led Globe Telecom, Inc. recorded a core net income of P18.92 billion, 1.3% lower than the P19.17 billion in 2022 due to lower revenues.

Globe saw full-year service revenues of P162.33 billion, marking a 4.5% increase compared to the P107.52 billion recorded a year earlier.

Despite the recorded lower core net income in 2023, Globe is expecting low-to-middle digit revenue growth driven by its business segments.

For 2023, Converge recorded a 22.3% climb in its net income to P9.1 billion as consolidated revenues climbed by 5% to P35.4 billion.

DITO CME Holdings Corp. has yet to release its 2023 financial results.

Cash is king but not for long

April 11, 2024 | 12:04 am

In the Philippines, there is still a general preference for cash to pay for things. Cash is still king, for now. But this may no longer be the case in the coming years given the evolving landscape of digital payments and technology adoption among Filipino consumers. The recently released Visa Consumer Payment Attitudes study sheds light on this.

Apparently, the payment behaviors of Filipino consumers are changing, perhaps also as an offshoot of community quarantines, as well as health protocols during the COVID-19 pandemic from 2020 to 2023. There is a gradual but obvious shift toward electronic modes of payment, indicating growing acceptance and adoption of digital solutions.

The main drivers of this are said to be convenience, security and technological advancements. Personally, I perceive a broader adoption of digital technology, with digital solutions increasingly playing a greater role in everyday life. High technology is becoming more integrated into various aspects of society including finance, education and work.

Smart phones with data connection have practically become an “attachment” of the human anatomy. The ability to use technology is being matched by a more proactive attitude toward embracing its potential and exploring new possibilities. Digital technology is transforming industries and work patterns and is changing consumer behavior through online purchases and e-wallet usage, among other things.

The latest annual Visa Consumer Payment Attitudes study was based on interviews from October to November 2023, covering 1,000 Filipino consumers aged 18-65 across various cities, regions and income brackets, with a minimum monthly income of P12,000.

The study noted that Filipino consumers still preferred cash for everyday transactions including retail purchases, dining out and transportation. But digital payment methods like mobile wallets or e-wallets are gaining traction especially among younger consumers and urban dwellers. Contactless payments or tapping or waving credit or debit cards or smartphones at POS terminals are also on the rise.

Visa noted that cash usage in the Philippines dropped to 87% in 2023 from 96% in 2022. Filipino consumers also spent an average of 10 days without cash without any issues or concerns. The use of card payments including swipe and insert, online and tap-to-pay and contactless payments reached 70% in 2023, while mobile wallet usage hit 87%, matching cash transactions.

Survey results also showed that 43% of Filipinos now carry less cash in their wallets, while there was an increased adoption of cashless payment methods among leading merchant categories including supermarkets, food and dining, and bill payments. There are also more payment solutions now available and more accessible to consumers.

The Visa study also showed that 9 of 10 Filipinos were aware of and interested in using contactless cards and QR codes for their transactions. Specifically, 32% of Filipinos used contactless cards in 2023, driven primarily by the affluent population. Also, 55% used QR codes, with over 50% adoption across age groups except for consumers aged 59-65 (31%).

And among mobile wallet users, QR code payments emerged as the preferred method for 38% of consumers, establishing mobile wallets as the favored funding source for QR payments. In-store QR code scanning was the preferred mode of payment for 78% of users, Visa said in a statement.

Also revealing was the finding that 52% of consumers were OK with going cashless and relying solely on cashless payment methods for at least a week. And that more than a third of the consumers surveyed, or around 37%, thought the Philippines would become a cashless society by 2030, if not sooner.

Among travelers, cards were preferred for cross-border payments, with 55% favoring debit and credit cards for their convenience, time-saving benefits and hassle-free experience. Also, 37% of Filipinos were aware of and willing to try the use of QR codes for cross-border payments.

What favors cash, for now, are factors that include limited access to banking services, concerns about security and fraud and a lack of awareness about digital alternatives. On the other hand, what favors electronic channels are the widespread use of smartphones, the expansion of internet connectivity and the emergence of financial technology solutions. Many consumers still prefer contactless transactions to mitigate health risks.

Today, cash still holds a dominant position in the realm of payments, earning its reputation as the reigning monarch of financial transactions. It retains its throne, but its grip is loosening. The landscape is rapidly evolving, spurred by technological advancements, shifting consumer behaviors and a growing acceptance of digital payment solutions. While cash still wears the crown, its reign is being challenged.

Of course, the digital divide remains wide, with the have-nots still far behind. In this line, more needs to be done to make digital technology more accessible to all. The environment, situation and circumstance — not just choice — can prompt people to adopt a digital mindset. One should start looking beyond what digital technology does and begin realizing what else it can do in the future.

Even as digital technology becomes increasingly pervasive, bridging the digital divide and promoting digital inclusion become crucial objectives for both the government and private sector. Policies and initiatives aimed at expanding access to digital resources and promoting digital literacy can help ensure that everybody benefits from opportunities afforded by digital transformation.

But the digital life is a double-edged sword. It offers opportunities for growth, connection and convenience, but also presents numerous challenges. As technology evolves, so will the ways we live our digital lives. Change is inevitable. But we should accept the reality that the bad can come with the good, and we should be prepared for it.

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

matort@yahoo.com

Challenges and opportunities of Philippine economic digitalization

April 11, 2024 | 12:03 am

digital payment — DAVID DVORACEK-UNSPLASH

OVER the past few years, a substantial improvement in the Philippines’ digital infrastructure has paved the way for further digitalization in both the financial system and economic activities. Despite some challenges, it is encouraging to see authorities’ efforts to facilitate the adoption of digitalization in both the public and private sectors.

DIGITALIZATION EFFORTS
The Philippines’ digital economy contributed 9.4% to GDP in 2022, 11% higher than in the previous year. The sector employed about 6 million people or 13% of total employment. As of end-2022, digital payments accounted for 42.1% of the total volume of payments. The digital banking landscape continues to expand and now comprises six digital banks and 285 fintech companies.

Further development in the digital economy can create jobs and promote long-term growth by improving productivity and competitiveness. Embracing a more technology-driven economy is essential in the longer term to improve productivity and competitiveness.

Philippine authorities have made great strides in their efforts to promote digitalization. The Philippine Development Plan 2023-2028 formulates the long-term economic digitalization plan. The rollout of the national ID or PhilSys ID system accelerates the transition to a digital economy. The central bank’s digital payments transformation roadmap 2020-2023 outlines the plan for financial digitalization with satisfactory progress. Together, these efforts can bring forth major opportunities for people and the government in the long term.

In addition, the delivery of government services can improve and become more efficient and transparent through digitalization. With the goal of achieving “One Digitized Government” for the entire country, the e-Government Master Plan 2022 was introduced as the blueprint for developing a harmonized government information system by digitally transforming all basic services.

On the fiscal front, digitalization has enabled the government to collect taxes more efficiently and generate additional tax revenue from digital service providers. In particular, the House of Representatives approved a 12% value-added tax (VAT) on digital services in 2021. VAT on digital service transactions is expected to generate P10.66 billion in annual revenue, according to estimates by the Department of Finance.

Moreover, financial digitalization could enhance financial inclusion and its further development can help Filipinos to access digital services more conveniently. Financial digitalization has progressed well during the COVID-19 pandemic. Transactions related to digital payments have grown rapidly and the creation of digital banks has led to innovative channels for payments, lending, digital banking, insurance and many others.

CHALLENGES TO OVERCOME
Although authorities’ digitalization efforts promise to bring numerous opportunities to the economy, some challenges should be resolved for digitalization to be successful. They include upgrading labor skills and regulations and enhancing cybersecurity against digital threats and vulnerabilities.

Despite significant progress, there is room for the country’s digital infrastructure development to catch up with its ASEAN peers (Table 1). The absence of reliable and high-speed internet connections in most rural and remote areas could hinder digital inclusion and economic development. Furthermore, the country lags behind its regional peers in key areas of digital development such as digital transformation and trade, digital government and digital security (Table 2).

In other aspects, it is essential for the Philippines to upgrade its soft infrastructure for economic digitalization. For example, the digital skill gaps among the labor force, people’s resistance to digital transformation, and regulatory gaps and loopholes should be addressed effectively.

Moreover, it is hard for the regulatory framework to catch up with the relentless development of technology, such as artificial intelligence (AI), blockchain, the Internet of Things and big data. Developing and implementing appropriate regulations in a timely manner can be challenging.

Appropriate regulations on the use of digitalization would need to be put in place to safeguard consumers from digital threats and vulnerabilities. The Philippines was the second-most attacked nation in cyberspace in 2022, according to Kaspersky. The country’s largest telecommunication company recorded 16 billion cyberattacks in 2023, nearly 90 times higher than in 2022. The country also ranked 45^th among 175 countries in the 2023 National Cybersecurity Index of the eGov Academy.

Philippine authorities are on the right track to formulate policies for promoting economic digitalization. To ensure a smooth digitalization process, they should prioritize investment in infrastructure development, enhance digital skills of the workforce and strengthen the regulatory framework.

Andrew Tsang joined AMRO in September 2021. He is a senior economist focusing on economic surveillance of the Philippines. He is also a backup economist for Cambodia.

Gov’t must roll out ‘credit-worthy’ projects to boost banks’ agri loans

April 11, 2024 | 12:03 am

THE GOVERNMENT needs to roll out more “credit-worthy” projects for the agriculture sector to encourage banks to fund food security and agricultural development initiatives, a member of the central bank’s policy-setting Monetary Board said.

“The banks want to lend money. The problem is they’re having a hard time finding credit-worthy projects… The public goods that are necessary to create and maintain credit-worthy projects are not there,” Monetary Board member V. Bruce J. Tolentino said in a panel discussion at the Asian Development Bank’s (ADB) Food Security Forum on Tuesday.

Banks are careful about lending to fund the government’s agriculture-related programs due to insufficient public support services, Mr. Tolentino said.

“There are not too many agriculture projects that are demonstrably credit-worthy because of inadequacies in basics: transport, power, land tenure, seeds…,” he said in a separate Viber message.

Under Republic Act (RA) No. 11901 or the Agriculture, Fisheries and Rural Development Financing Enhancement Act of 2022, banks must allocate 25% of their total loanable funds for the agricultural and fisheries sectors.

Banks can comply by lending to rural community beneficiaries, including agrarian reform beneficiaries, to finance projects in these sectors, including lending to parts of the agricultural value chain and agri-business enterprises, as well as engaging in sustainable finance.

The law repealed RA 10000 or the Agri-Agra Credit Reform Act of 2009, which required banks to lend 10% to the agrarian reform sector and 15% to the agriculture sector.

Including parts of the agricultural value chain like processors, transporters, mills and warehouse owners, allows banks to finance the development of the sector, Mr. Tolentino said.

“You’re able to enable the banks to lend to a much broader swathe of players in the countryside,” he said.

Since the enactment of RA 11901, less banks are paying penalties for noncompliance with the credit quota as loans to the agriculture sector quadrupled over the past year, Mr. Tolentino noted.

Latest data on banks’ loans to the agriculture sector was not immediately available.

“Reforms to enable the private sector to act according to their best interest, and for government to provide the public goods [are] necessary so that the private sector can act according to their best interest,” Mr. Tolentino said.

In the 2021 Countryside Bank Survey conducted by the Bangko Sentral ng Pilipinas and the Department of Agriculture, 76% of bank branches said they plan to expand lending to the agriculture sector. — B.M.D. Cruz

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