Public-Private Partnerships: Unmasking the reality

March 21, 2024 | 12:04 am

Infra-construction-workers — JCOMP-FREEPIK

(Part 2)

THE PHILIPPINES was one of the first countries in Southeast Asia to use Public-Private Partnerships (PPP) back in the late 1980s. “The indispensable role of the private sector” in the development of the country was anchored in the 1987 Constitution. President Corazon C. Aquino swiftly resorted to PPP schemes (Build-Operate-Transfer) to address the country’s acute power shortage. It was indeed an urgent situation that needed immediate action, although looking back we realize that the country paid a high “rush fee”: the government took the demand risk into a “take-or-pay” format, which resulted in one of the highest electricity rates in the region, which prevails up to today.

Throughout the 1990s, the Philippines became a “PPP champion” as private investments in infrastructure were even larger than investments undertaken by the public sector. At that time, this anomaly may have been regarded as a positive development that would bring efficiency to public services. In retrospective, this retreat of the public sector explains the infrastructure deficit that we are still suffering today.

Energy was the leading sector, followed by water (the Maynilad and Manila Water concessions for Metro Manila) and railway (MRT-3). In the mid-2000s, there was a rebound of PPPs (several power plants, PLDT, Transco). In the 2010s up to today, public investment outpaced private investment, more timidly in the first half (around 2% of GDP), and robustly since 2015 onwards (5-6% of GDP). Meanwhile, PPPs averaged 0.7% of GDP. The latest available figures for Private Participation in Infrastructure from the World Bank (first half of 2023) rank the Philippines as the second largest investor among low- and middle-income countries (MRT-7 explains a significant portion).

The “surrender” of essential infrastructure investment to the private sector, mostly during the 1990s and early 2000s, has positioned the Philippines as the second largest developer of PPPs in ASEAN (second to Malaysia), with a capital stock as percentage of GDP of 7%.

PPP IN THE BUILD, BETTER, MORE AGENDA
After the “all-PPP” and “no-PPP” phases, it seems we are now entering into a more balanced approach to this reality, which is good news. The Marcos Jr. administration wants PPPs to play a larger role in its infra investment agenda, “in light of the tighter fiscal space.” A substantial improvement in the regulatory framework of PPPs shall be credited to this Administration, since it addressed the Material Adverse Government Action (MAGA) issue right after taking office, and by passing a unified PPP Code recently.

However, we do not agree with the rationale that anchors this change in policy. Whereas the country’s public debt/GDP ratio is higher today than before the pandemic (60% vs. 40%), it is not true that the State has to undertake a fiscal consolidation and is therefore “forced” to resort to the private sector to undertake its infra-agenda through PPPs. We argued in the first part of this article (See Public-Private Partnerships: Unmasking the reality – BusinessWorld Online (bworldonline.com)) that sovereign governments like that of the Philippines do not have limited funding resources.

What is the current PPP portfolio and how is it going to support the Build, Better, More program? According to the PPP Center (https://ppp.gov.ph/ppp-program/what-is-ppp/), there are 116 projects in the pipeline with an estimated project cost of P2.4 trillion ($48.3 billion). Out of these, most are at the national level (80%, 94% of the total value), unsolicited (41%, 80% of the total value) and at a very early stage of development. If we look at the latest Infrastructure Flagship Project List compiled by the National Economic and Development Authority (NEDA), 25% of the projects and investment is targeted for PPPs (50% through Official Development Assistance, 17% through Government Appropriations Act), belonging most of them to the Departments of Transportation (Railways, Airports) followed by Public Works and Highways (Tollways).

AIRPORTS
The “PPP of the year” — and most probably of this administration — has been the concession of the Ninoy Aquino International Airport or NAIA to San Miguel Corp. for 15 years. Despite our reservations about how the bid was structured — rewarding the largest government share instead of the largest investment in the facilities — we agree private participation in airport operation has been mostly successful here and abroad. Nevertheless, the largest airport operator in the world (AENA in Spain) is a state-owned company at par with the best airports in the world, proving that it is perfectly possible for the Government to retain the provision of these services.

RAILWAYS
One of the most controversial historic PPP projects is actually in railways, the MRT-3. While acknowledging the critical importance of this project for Metro Manila connectivity, it has been extremely disadvantageous for the State, and ultimately for the taxpayer.

The project reached financial closing in 1997 and was designed as a Build-Lease-Transfer, with the Department of Transportation retaining the operation of the line. The total project cost amounted to $675.5 million (equivalent to $2 billion today) and was awarded to the Metro Rail Transit Corp. (MRTC). This private consortium provided 29% of the total project cost in equity while the rest (71%) was secured through several Official Development Assistance loans. The government bore the whole demand risk, agreeing to provide the consortium an annual lease plus a 15% annual return on equity capital (in US dollars!).

No complex calculations are needed to conclude that the Filipino taxpayer would have paid a much lower price for this project through a non-PPP scheme (just for reference, the US dollar one-year-LIBOR stood at 6% in 1997, peaking at 7.5% in 2000, and below 2% in the aftermath of the great financial crisis).

What is the risk that the government transferred to the private consortium that was so highly priced? None! Why was the equity and secured annual return in US dollars when construction costs are mostly in Pesos? The only good news is that the lease agreement will end in 2025.

We are convinced that such an agreement would not happen today. Nevertheless, we have reasonable concerns about the shift to PPP of railway projects that were initially supposed to be financed through Official Development Assistance and/or the Government Appropriations Act.

TOLLWAYS
It is one of the most active sectors for PPP schemes in the Philippines, and the prospects are bright in the light of the solid economic growth and rising purchasing power in the National Capital Region and surrounding regions. The established operators — San Miguel and Metro Pacific — have a sound understanding of the business model and keep submitting unsolicited proposals for new projects. However, if the announced merger finally materializes, it will jeopardize the already weak competition in the market: from a duopoly to monopoly.

A pending issue for the government is to extend expressways beyond financially profitable projects, as it is a critical element of territorial cohesion. Would, in that case, PPPs be the most efficient option? We doubt it.

ALLOCATING RISK EFFICIENTLY
What should ideally trigger a PPP? It is fundamentally a matter of allocating risk efficiently, assessing what entity is in a better position to assume certain risks. In addition, for a PPP to fly the different elements of the scheme shall make the project bankable. PPPs are not just an alternative when fiscal space is tight, although it has been widely used and even recommended by international financial institutions as such. Even in an economy with 0% Public Debt/GDP and fiscal surplus, there is room for PPPs.

Another issue that should be considered is the real level of independence of economic managers from powerful corporations. This is relevant during PPP assessment and award and throughout the project’s life, particularly when fares are revised. The Philippines has a very oligopolistic political and economic structure, with both strongly intertwined (https://jesusfelipe.net/wp-content/uploads/2023/08/DLSU-AKI-Working-Paper-Series-2023-07-087.pdf). Despite the substantial liberalization derived from the Public Service Act of 2021, there is (still) no real foreign competition in most PPP prone sectors.

Nevertheless, we acknowledge that PPPs may be the least bad solutions during certain crises. Here we can recall the economically disadvantageous PPP entered in power generation in the early 1990s. Despite the fact that no one could defend these PPPs as being ideal (very poor value for money), the power crisis was tackled. The Philippines is today by no means even remotely close to a situation that would justify that kind of “emergency PPP” to safeguard the provision of public services.

Finally, we would like to stress the importance of having a long-term strategy on private participation in infrastructure projects. As we have argued, there is no consistent evidence of better performance by the private sector in the provision of certain public services. The government can therefore decide the sectors where a direct provision of public services is more efficient. This is compatible with entering PPP schemes in the short run when the capacities and expertise of the public sector are (still) not at par with those of the private sector. We are convinced that the Philippine administration — its departments, agencies and Government-Owned and -Controlled Corporations — is capable of excelling in delivering services in many sectors, resulting in a welfare increase for the majority of Filipinos.

Jesus Felipe is distinguished professor of Economics at De La Salle University. Pedro Pascual is a board-certified economist with Spain’s Ministry of Economy & Partner at MC Spencer (Philippines).

BSP has room for more RRR cuts

March 21, 2024 | 12:04 am

THE BANGKO SENTRAL ng Pilipinas (BSP) has room to cut lenders’ reserve requirement ratios (RRR) further, but is looking to further study the impact of lower levels on financial intermediation, its top official said.

“We’ve lowered our reserve requirements quite a bit. I think there’s room to lower them some more, but we have to time it right. But we need good research on exactly what the impact of reserve requirements are on financial intermediation,” Mr. Remolona said at a press briefing on Wednesday.

The BSP chief earlier said they were looking to further reduce banks’ RRR “when the time is right,” possibly as early as this year.

The RRR is the percentage of bank deposits and deposit substitute liabilities that banks cannot lend out and must set aside in deposits with the BSP.

In June last year, the BSP slashed the RRR for big banks and nonbank financial institutions with quasi-banking functions by 250 basis points to 9.5%. The central bank has brought down the RRR for universal and commercial banks to a single-digit level from a high of 20% in 2018.

“We traditionally looked at reserve requirements as a way to control money supply and that was the thinking in the 1960s, I think,” Mr. Remolona said.

“That thinking has gone away. Now, reserve requirements are seen as a distortion of financial intermediation. They drive a wedge between deposit rates and lending rates,” he added.

The BSP chief said intermediation is “burdened” by regulations, including reserve requirements.

“There is a gray market where conglomerates lend to each other — no big contracts — and so we want to bring that activity back into the formal banking system. But that needs more research. I’ve told you that I want to deepen the capital markets. We need research on that,” Mr. Remolona said.

RICE INFLATION
Meanwhile, the BSP chief also highlighted the need to monitor rice inflation.

“In our research, rice prices are what we call salient prices. They have a disproportionate impact on expectations beyond their weight in the consumer price index,” he said. “Because of that, we have to monitor mainly rice prices… There are other commodities affected by El Niño, but rice prices are so dependent on water. We have to monitor their effect on expectations.”

“We’re not going to do monetary policy on rice prices directly, but the second-round effects will affect our monetary policy,” Mr. Remolona added.

Headline inflation accelerated for the first time in five months to 3.4% in February amid elevated food prices, the government earlier reported.

Rice inflation, which accounts for almost half of the headline print, surged to 23.7% in February, or the fastest since the same month in 2009.

The BSP earlier said headline inflation could accelerate above their 2-4% target anew in the second quarter due to the El Niño phenomenon’s impact on agricultural production. — L.M.J.C. Jocson

Easter Dining In/Out (03/21/24)

March 21, 2024 | 12:04 am

1 of 4

THE RELATIVELY free days of the Holy Week break culminate on Easter Sunday, and we’ve got a list of fun, family-friendly activities to do that week.

‘Egg-citement’ at The Peninsula Manila

ON EASTER Sunday, March 31, The Peninsula’s youngest guests can delight in egg-cellent Easter activities in the Rigodon Ballroom, from face painting and trace and color classes, to pin-the-bunny’s ear games, magic shows, and balloon domes. Of course, Easter would not be complete without a visit from the Easter Bunny who will help children fill their Easter baskets with eggs hidden in the Egglandia Maze. Children from one to 12 can join The Peninsula Egglandia Egg Hunt and Merienda Buffet that takes place on Easter Sunday from 2 to 5 p.m. The merienda buffet will be served in the nearby Garcia Villa room. Ticket prices are P5,000 (one child 12 years and below and one adult), with P2,800 for an additional child or adult. Meanwhile, Afternoon Tea at The Lobby has been reimagined for Easter with spring- and Easter-inspired sweet items. Highlights include a White Chocolate Mousse with Strawberry Confit, which has been made to look like bunny ears, and a Mango and Coconut Opera whose mango flavor complements the almond aroma. The selection of savory items features an array of premium ingredients, including Chorizon in a Piquillo Pesto Cream Ciabatta, Egg Salad and Cucumber Tartlet, and Roast Beef Salad and Fig Jam in a Crispy Onion-Mustard Baguette. The rest of the holiday can also be spent within the hotel with the Peninsula Easter Egg-venture Escapade room package, starting at P16,5000 for a Deluxe Room (subject to VAT, 10% service charge, and 12.6% local taxes). The hotel also offers a special Easter Brunch Buffet at Escolta on Easter Sunday at P2,500 for children below 12, and P4,990 for adults. Take the Easter fun home with you with the Peninsula Chocolate Golden Easter Egg: a four-kilo limited-edition Peninsula Chocolate Golden Easter Egg that contains prizes within. Lucky winners will receive an overnight stay in an Executive Suite, a bottle of Peninsula Champagne, a P5,000 gift certificate, or a Peninsula Bear, and many more. Only 30 limited-edition Peninsula Chocolate Golden Easter Eggs are available for P6,000. For inquiries, call The Peninsula Manila at 8887-2888, ext. 6630 or e-mail reservationPMN@peninsula.com for Room Reservations or ext. 6694 or e-mail diningPMN@peninsula.com for Resaurant Reservations, or visit peninsula.com.

Raging Bull Burgers goes fishy

EVEN the Raging Bull has to tone it down for Easter, presenting the Good Catch, a spiced and crispy fried pollock fish fillet drizzled in tartar sauce, available this Lenten season. The fish sandwich is available from March 18 to 31 and is topped with a tomato-shallot-and-coriander relish and romaine lettuce. Good Catch is available for P380 at all Raging Bull Burgers branches: Shangri-La The Fort, The Rise Makati, and Shangri-La Plaza.

‘Eggstra’ savings at Holiday Inn and Suites Makati

HOLIDAY INN and Suites Makati has Easter offers featuring special room rates, starting at P5,200++ for stays from March 22-31. Guests staying from March 29 to 31 will receive a complimentary ticket to the “Hoppy Hues” Easter Activity, along with a buffet breakfast, starting at P6,600++. Kids 12 years old and below can stay and eat for free. Guests can also treat themselves to the Easter Lunch Buffet, priced at P2,588 net. Guests enjoy “eggstra” savings of 22% when they book until March 23. Early birds can enjoy a 10% discount on Hoppy Hues Easter Activity on March 31 for tickets purchased from March 15 to 22. The regular rate is P1,900 net, which includes a bunny drip-painting workshop by Paint-It-Fun and Flying Tiger Copenhagen plus kid’s meal, awards, prizes, and lootbags. For inquiries and reservations, call 7909-0888 or e-mail hism.reservations@ihg.com.

Sheraton Manila Bay’s Easter paradise

THE SEVENTH floor of the Sheraton Manila Bay will become an Easter paradise with an Easter brunch buffet and live performances and games. Little ones can embark on an adventure as they search for hidden eggs within the events hall. Prizes await the lucky explorers, ensuring an “eggciting” experience on March 31. For a relaxing staycation, avail of the F.A.M. at the Bay (Easter Edition) Room Package on March 29 to 30 where two adults and two kids below 12 years old can enjoy a breakfast buffet, cooking classes for two kids, and an exclusive offer of P1,200 net per person for the dinner buffet during their stay. Bookings from March 25 to 31 fall under the Easter Explorer Room Package which has the same inclusions for two adults and two kids under 11 years old with additional access for two persons to the Easter Sunday activities and the self portrait studio. For inquiries, call 5318-0788 or e-mail sh.mnlsb.fnb@sheraton.com.

Marco Polo Ortigas hatches adventure

THIS EASTER Sunday, Marco Polo Ortigas Manila hatches a family adventure for kids and kids at heart, with holiday offers to match the festive season. Enjoy a lunch buffet at Cucina, whose spread includes a grazing table of premium meats and cheeses, fresh prawns, crabs and half-shell mussels on ice, sushi and sashimi, together with an array of garden greens. The carving station features 24-hour braised beef shank with black truffle, tender lamb confit, salt crusted lapu-lapu, and Kurubota pork belly. Seafood tempura and baked oysters with cheese fondue rounds up the spread, along with Easter-themed desserts. Lunch service starts at noon to 2:30 p.m., at P3,400 net per person. Let the kids join the Great Marco Polo Easter Safari on March 31 at Ballroom A from 2 to 5 p.m. for an afternoon filled with a magic show, balloon twisting, face painting, and an egg hunt. Tickets are priced at P1,500 net for children up to 12 years old, and P750 net for accompanying adults, inclusive of heavy snacks. Café Pronto has chocolate goodies for Easter gifts: from a box of delicately hand-painted chocolate eggs to a variety of animal-shaped confectioneries. Available until March 31. Stay at Marco Polo Ortigas Manila this season for two nights, with buffet breakfast for two at 10% off. Get the best available rates, and 15% off food and beverages from restaurants and bars. GHA Discovery members get an additional 10% off the room rate, and a total of 25% discount on food and beverages. Book the Spring Campaign promotion through https://bit/ly/SpringCampaign2024 or call 7720-7777 for more information and reservations.

Shangri-La The Fort, Manila has treats for Every-bunny

HOP on to Shangri-La The Fort, Manila for sweets, feasts, or a quick getaway this Easter. Its various restaurants have special offers for the season. Bake House’s Hoppingly Sweet Treats, roll out on March 18 to 31, at the hotel’s special lobby counter and online at Shangri-La Boutique. Easter cakes start at P1,975 and other Easter goodies start at P160. High Street Café’s Egg-citing Feast will be available for lunch on March 28 to 31 at P2,700 net per person. It’s an Opulent Tea Soirée at High Street Lounge, with a surprise twist from Opulence featuring their Versace by Rosenthal etagere and plates. Available from March 18 to 31 for P2,500 net for two persons. Canton Road has two set menus for the occasion: The Flavors of Spring, good for five persons, and Easter with a Cantonese Flair, good for 10 persons, available for P18,888 and P46,888 net, respectively. The set menus are available from March 25 to 31. Samba offers Semana Santa à la carte specials from March 25 to 31, featuring broiled Boston lobster, river prawns, grouper ceviche, and more. On Easter Sunday, March 31, kids are invited to join Boni the Bull at Adventure Zone for an egg hunt, cookie decorating session, special games with prizes, papier mâché bunny painting, and face painting. These are available at P1,200 for Adventure Zone members, and P1,500 for non-members. For more information on the Easter egg hunt, visit https://www.shangrilafortexclusives.com/; for dining arrangements, e-mail eats.slfm@shangri-la.com.

Alabang Town Center holds Eggylimpics

ALABANG Town Center is hatching an egg-cellent Easter celebration. Running from March 30 to April 1, the Easter Egglympics 2024 bursts with activities to keep kids on their toes. The action goes down at the Egglympics Arena where there will be a digital track run and a basketball shootout, noodle soccer and noodle spear throw. An Easter Egglympics stub (earned receipts, single or accumulated, worth P3,000 from any store) gets a child an armband and a loot bag filled with treats. The Cheer Cam will also capture their cheering moment, displayed on a mini-LED billboard for everyone to see. For those who like surprises, the Easter Egg Vending Machine is like an Easter egg hunt, but with a high-tech twist. Exchange receipts, single or accumulated, worth P2,000 for some Giant Egg Coins to start playing. Both the Egglympics Arena and Easter Egg Vending Machine are exclusive to kids between three to 14 years old. For more relaxing activities, swing by the Easter Egg Painting station or the Soft Play Area, entrance to which is granted with a P1,500 and P1,000 single or accumulated receipts, respectively. The activities are available between March 25 to April 1. Follow @alabangtowncenter on Instagram for updates.

Raging Bull Burgers goes fishy

EVEN the Raging Bull has to tone it down for Easter, presenting the Good Catch, a spiced and crispy fried pollock fish fillet drizzled in tartar sauce, available this Lenten season. The fish sandwich is available from March 18 to 31 and is topped with a tomato-shallot-and-coriander relish and romaine lettuce. Good Catch is available for P380 at all Raging Bull Burgers branches: Shangri-La The Fort, The Rise Makati, and Shangri-La Plaza.

Pizza Hut’s flavorful seafood options

FOR THE Lenten season, Pizza Hut offers seafood dishes, available until 2 p.m. every day (plus a pizza combo that is available anytime). First is the Seafood Lunch for 2 set, which includes one Regular Seafood Supreme Mega Crunch Pizza, one Regular Pasta Shrimp Arrabbiata, one order of Mozzarella sticks, and two servings of Pepsi for P699. For solo diners there is the Seafood Lunch A set, which comes with one Regular Pasta (either Shrimp Arrabbiata or Shrimp Ala King) and one serving of Pepsi for P249; and Seafood Lunch B set, which is available exclusively for dine-in. It comes with a choice of either one Personal Cheese Lovers Pan Pizza or one Personal Veggie Lovers Pan Pizza, two Salad Rolls (a choice of either Shrimp or Crab), and a Pepsi for P199. Finally, there’s the Seafood Pizza Pair, available all day, every day. It comes with one Seafood Supreme Mega Crunch Pizza and one Cheese Lovers Pan Pizza for P599 for Regular and P899 for Large. The Seafood Lunch for 2, Seafood Lunch A, and Seafood Pizza Pair combos are available for dine-in and takeout in all Pizza Hut stores nationwide; and for delivery via the (02) 8911-1111 hotline, www.pizzahut.com.ph, the Pizza Hut mobile app, and Pizza Hut’s official delivery partners GrabFood and foodpanda (prices may vary).

SEC takes sustainability roadshow nationwide

March 21, 2024 | 12:03 am

THE Securities and Exchange Commission (SEC) announced on Wednesday a nationwide roadshow that aims to promote sustainability among small, medium, and large enterprises.

In a statement, the commission said the roadshow aims to introduce sustainability reporting, foster awareness, build capacity, develop measuring tools, and establish monitoring schemes to embed sustainability in business practices.

The roadshow was launched in collaboration with Accelerating Green and Climate Finance project funded by the Canadian government and implemented by the United Nations Development Program.

“Our world is facing complex challenges, from climate change to social inequality, and businesses play a crucial role in addressing these issues,” SEC Commissioner Javey Paul D. Francisco said.

“Sustainability reporting is not just about compliance; it is about creating long-term value for businesses, society, and the environment,” he added.

Small, medium, and large enterprises generate more than 5.7 million jobs and account for 105,000 business establishments in the country.

Only publicly listed companies are required to submit sustainability reports to the SEC.

The commission said it is currently updating guidelines to reflect the latest developments in global sustainability frameworks.

“Moving forward, we envision a future where sustainability is not just a matter of awareness but a standard practice for all small, medium, and large enterprises. By embracing sustainability practices and introducing sustainability reporting, businesses can enhance their competitiveness, attract investors, and contribute to sustainable development,” Mr. Francisco said.

After Cebu, the SEC will bring the roadshow to Davao in June, and Baguio in September. These will be followed by the annual Corporate Governance Forum in November, which is organized by the SEC and the Philippine Stock Exchange. — Revin Mikhael D. Ochave

PHL saw most financial-related phishing attempts in the region

March 21, 2024 | 12:03 am

html-css-collage-concept-computer-laptop — FREEPIK

THE PHILIPPINES ranked first in the Southeast Asian region in terms of the number of financial-related phishing attempts on businesses’ devices in 2023, according to global cybersecurity firm Kaspersky.

In a report released on Monday, Kaspersky reported that the Philippines recorded 163,279 detected and blocked financial phishing attempts last year, three times higher than 52,914 cases recorded in 2022.

This was followed by Indonesia with 97,465 attempts and Vietnam with 36,130 incidents. Thailand and Singapore saw the least number of financial phishing attacks at 25,227 and 9,502, respectively.

“Phishing is a trusted technique for cybercriminals when it comes to infiltrating business networks because they usually work. The rise of generative AI (artificial intelligence) helps cybercriminals to make phishing messages or scam resources more convincing. As a result, it becomes challenging for people to distinguish between a scam and a legitimate communication. That’s why the role of robust security solutions increases,” Kaspersky General Manager for Southeast Asia Yeo Siang Tiong said in a statement.

Kaspersky defined financial phishing as fraudulent resources related to banking, payment systems, and digital shops. Payment system phishing includes platforms or pages impersonating known brands, it said.

“Phishing persuades users to take action which gives a scammer access to your device, accounts, or personal information. By pretending to be a person or organization the users trust, they can more easily infect the victim with malware or steal their information,” Kaspersky said.

“These social engineering schemes ‘bait’ with trust to get valuable information. This could be anything from a social media login, to your entire identity via your social security number. These schemes may urge the user to open an attachment, follow a link, fill out a form, or reply with personal information,” it said.

The cybersecurity firm blocked a total of 455,708 financial phishing attempts targeting companies of various sizes in Southeast Asia last year, it said. This was 44.6% lower than the 822,536 recorded in the previous year.

“Cybercriminals employ various tactics, including financial-related phishing, to deceive employees and trick them into falling victim to an attack… Tools to help safeguard against human error are a vital step forward, but they can’t exclude employee education, skills development, and overall strengthening of the company’s ability to detect and respond to cyberattacks,” Mr. Yeo said.

Firms should prioritize employee education, skills development, and strengthening their ability to detect and respond to cyberattacks, he added. — Aubrey Rose A. Inosante

Senior priority

March 21, 2024 | 12:03 am

Seniors are getting a lot of attention from the government lately, particularly Congress. The Ways and Means Committee at the House of Representatives has just approved two proposed laws: one that gives more discounts to senior citizens and persons with disabilities (PWDs), and another that gives incentives to businesses that hire senior citizens.

Based on the 2020 Census, the Philippines has a population of over 109 million. Of this, people aged 60 years old and over make up 8.5% (9.22 million) of the household population, up from 7.5% (7.53 million) in 2015. And there were more females (55.5%) than males (44.5%) among senior citizens. As of December 2021, there were 9.1 million voters aged 60 and above.

By the next election in 2025, there might be closer to 10 million voters that are senior citizens. So, it should not be surprising that lawmakers — future electoral candidates — are courting the sector. And perhaps rightly so. After all, senior citizens have contributed their share during their more productive years, and deserve more relief from the burdens of life.

By moving to expand the present law granting privileges to them, lawmakers want to include in their discount coverage even promotional items and services. To date, items or services on “promo” are not subject to senior discount as they are already “discounted,” so to speak. Congress also wants senior and PWD discounts on parking and electricity.

Congress is also looking into tax deductions on salaries, wages, benefits, and training expenses for companies that hire elderly workers. In addition, the government will be made to waive all fees for elderly workers applying for government documents needed for employment, such as NBI, police, and barangay clearances.

According to the Philippine Statistics Authority (PSA), as of 2015, more than three million senior citizens were still gainfully employed, with over one million of them in agricultural, forestry, and fishery work. About half a million were doing managerial work. To date, there are no National Government incentives given to businesses that hire senior citizens.

Congress is moving in the right direction as far as seniors and PWDs are concerned. In many instances, older seniors and PWDs already have physical limitations and diminished capacity for work. Some enjoy fixed incomes from pensions, but many rely on younger family members for their sustenance. More discounts and privileges for these seniors and PWDs will be a big help.

I am very much looking forward to reaching the “discounted” age of 60 years old, even as aging comes with health issues as well as concerns over loss of income and productivity. I believe that governments should be more generous to their “senior” and disabled population. As the late President Ramon Magsaysay said, those who have less in life should have more in law.

It is not enough for the National Council for Disability Affairs (NCDA) to assert that the present law on senior citizen discounts does not impose any limitations or restrictions on the amount of food or drink that can be ordered by a person legally entitled to the 20% discount and VAT exemption. Congress is taking this a step further by including promotional items in the discount coverage.

But as lawmakers move on this, I reiterate the call for more studies, research, and data on the rate of abuse, and how to prevent them. The main complaint against these discounts and privileges is that they are prone to abuse. And simply put, those abusing the privilege are also evading taxes, particularly in the case of the 12% VAT exemption.

In addition to more discounts, Congress is also looking into incentives for businesses that hire seniors. In this line, I believe lawmakers should consider this initiative along with a review of existing laws on retirement. Calibration is needed, in my opinion, and the country should strive for consistency in the application of retirement standards.

The retirement age in the private sector is 60 years. In the government, the optional retirement age is 60, and the compulsory retirement age is 65. But lawmakers are considering bills proposing to lower the optional retirement age of government employees to 56; and, for public school teachers to 55, even as they just raised the retirement age for the military from 56 to 57, or upon accumulation of 30 years of satisfactory active duty, whichever comes later.

Meantime, there are no set optional or mandatory retirement ages for presidents, vice-presidents, senators, congressmen, and Cabinet members, or appointed heads of agencies. But in the judiciary, the mandatory retirement age for judges is 70. Incidentally, at the US Supreme Court, and all other US federal courts, there is no mandatory retirement age. However, of those who decide to retire voluntarily, available online data indicate an average age of 78.

In this regard, if lawmakers want to give perks to businesses to hire more seniors, perhaps legislators should also strive for consistency in retirement ages. Maybe we should not be retiring private sector workers at 60. A compulsory retirement age of 65 for both private and public workers may be more appropriate for the times. Perhaps the same should apply to the military and police services as well.

Mandatory and optional retirement ages will ultimately depend on the type and volume of work required from an individual. In this line, more recent studies and research should be reviewed to help set a baseline as well as a standard that can be applied to different types of private and public work. In my opinion, the starting point should be 60 for optional and 65 for mandatory, including the police and the military.

But at age 61, annual assessments should be made whether a worker retains the physical, mental, and intellectual capabilities required for the job. And then incentivize businesses that will hire workers older than 65, or after mandatory retirement. Optional and mandatory retirement ages should be raised not lowered, also to remove the pressure on pension systems that now support a growing number of seniors.

In Australia, the retirement age was raised to 67. In Malaysia, there are plans to increase the retirement age to 65. Thailand has raised its retirement age, while Vietnam and South Korea are both considering increasing the retirement age as well. In Belgium, France, Germany, and Denmark, the retirement age is to be increased to 67. In Ireland, Taiwan, and Japan, the retirement age is to be increased to 68. Obviously, the only way to go is up.

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

matort@yahoo.com

BPI raises $400 million from its first dollar bond issuance since 2019

March 21, 2024 | 12:03 am

BANK of the Philippine Islands (BPI) has raised $400 million from its offering of five-year dollar bonds, it said on Wednesday.

The issuance marked the bank’s first time to tap the international capital markets since 2019, BPI said in a disclosure to the stock exchange.

The Regulation S dollar-denominated senior unsecured notes fetched a coupon of 5.25%, “representing the tightest ever spread on a 5-year bond from a non-sovereign Philippine issuer,” the bank said.

The transaction is expected to be settled on March 26. The notes will be listed on the Singapore Exchange Securities Trading Ltd.

The bank earlier said that proceeds from the bond issue will be used to refinance existing debt maturing in September and for general corporate purposes.

The bonds were issued out of BPI’s $3-billion medium-term note program.

“BPI announced the transaction mandate on Monday, March 18, 2024 and conducted a comprehensive investor marketing exercise involving a global investor call and a series of meetings covering investors across Hong Kong, Singapore, and London. After receiving positive investor feedback, BPI proceeded to launch the transaction bookbuilding on Tuesday, March 19, 2024…,” the bank said.

“Orderbooks saw strong momentum throughout the day, despite a week rife with global central bank policy meetings, with the final books standing at over $1.3 billion, as the notes were 3.3 times oversubscribed. This allowed 35 bps (basis points) of pricing compression from IPG (initial pricing guidance) to final pricing, even as the issue size was increased from the original indications of $300 million, to accommodate the strong oversubscription levels,” BPI added.

In terms of geographic allocation, 81% of the bonds were allocated to accounts in Asia, while the remaining 19% went to Europe, the Middle East and Africa Region and offshore US accounts.

It added that 51% was distributed to fund managers, 29% to banks, 17% to private banks and financial institutions, and 3% to insurance firms.

The bank mandated BPI Capital Corp. as the sole global coordinator and lead arranger for the issue, with J.P. Morgan Securities plc, Mizuho Securities Asia Ltd., Standard Chartered Bank, and UBS AG Singapore Branch being tapped as joint lead arrangers.

BPI’s attributable net income rose by 61.13% year on year to P54.82 billion in 2023 on the back of higher revenues and lower loan loss provisions.

The Ayala-led bank’s shares declined by 90 centavos or 0.73% to close at P121.80 apiece on Wednesday. — AMCS

Belgian fashion designer Dries Van Noten to retire, appoint successor

March 21, 2024 | 12:03 am

BRUSSELS — Dries Van Noten, one of Belgium’s most famous fashion designers, said on Tuesday he will step down at the end of June after designing his last collection and will appoint his successor at a later date.

The designer, 65, said in a post on his Instagram account that he plans to focus “on all the things (he) never had the time for,” though will remain “involved in the House” he “treasures so much.”

The upcoming men’s spring/summer 2025 collection will be his last, Mr. Van Noten said, adding that his studio team will design the fashion house’s spring/summer 2025 collection for women.

“I have full confidence that they will do a great job,” he said.

The son and grandson of tailors, Antwerp-born Mr. Van Noten debuted with a menswear collection in 1986, according to his website. The brand he built up was taken over by Spanish luxury group Puig in 2018.

He has opened stores on the most exclusive commercial high streets around the world and the Musee des Arts Decoratifs in Paris ran an exhibition of his work and inspirations in 2014. He was granted the Belgian noble title of baron in 2017.

Together with pret-a-porter lines for men and women, Van Noten also sells accessories, cosmetics, and perfume.

His last show in February, a fall/winter collection, featured pastels, grey, and light browns, and included coats and bomber jackets with rounded shoulders, as well as tailored suits embellished with bead work. — Reuters

SMIC board OK’s increase in number of directors

March 21, 2024 | 12:02 am

THE Sy family’s SM Investments Corp. (SMIC) said its board has approved a move to increase the conglomerate’s number of directors to bolster its corporate structure.

SMIC will increase its directors to nine from the previous eight following the board’s approval on March 19 to amend the sixth article under its articles of incorporation, the conglomerate said in a regulatory filing on Wednesday.

“The increase in the number of directors of the company from eight to nine will add to the mix of competence, expertise, and experience of the current board, enabling it to enhance its response to the evolving needs and goals of the company,” SMIC said.

“The articles of incorporation of the company is being amended in recognition of the principles of board diversity and independence of business judgment,” it added.

SMIC logged a 25% growth in its 2023 net income to P77 billion. Its consolidated revenues climbed by 11% to P616.3 billion led by stronger consumer spending.

The conglomerate’s core businesses are in banking, retail, and real estate. It also has portfolio investments across various sectors such as logistics, gaming and leisure, renewable energy, bakeshop, and mining.

On Wednesday, SMIC shares were unchanged at P980 per share. — Revin Mikhael D. Ochave

LinkedIn’s verification feature now available in the Philippines

March 21, 2024 | 12:02 am

SOCIAL MEDIA platform LinkedIn Corp. has made its verification badge feature available to Filipino users to help in the identification of genuine accounts.

“We’ve brought our new identity verification feature to the Philippines to help our members make more informed decisions about whether the people and businesses they interact with are real,” LinkedIn Country Lead for the Philippines and Head of Growth Markets Atul Harkisanka said in a statement.

This free feature requires users to submit a government-issued ID that will be vetted by one of LinkedIn’s verification partners. In the Philippines, members can verify their identity through the Persona platform.

“Our aim is for every member of the global workforce to verify at least one attribute of their professional identity, with an aspirational goal of 100 million verified members by 2025,” Mr. Harkisanka said.

There are more than 30 million LinkedIn members worldwide who have a verification badge on their profiles.

LinkedIn currently has 13 million users in the Philippines, including those seeking to connect with fellow professionals and those seeking employment.

The verification feature is integrated into some job postings, Mr. Harkisanka said. About 20% of all job postings on the platform have a verification badge.

Verified profiles can get 60% more views, 30% more messages, and 50% more comments and interactions for their posts, he added. — Aubrey Rose A. Inosante

10 lessons from the PHL Nuclear Trade Mission to Canada

March 21, 2024 | 12:02 am

pylon-power line — KENNY ELIASON-UNSPLASH

This is a sequel to this column’s March 12 piece “Nuclear energy to sustain Philippines’ high economic growth.” Here I summarize the main lessons from my observations as a participant of the Philippines Nuclear Trade Mission to Canada, Toronto leg which was held on March 6-8.

1. We learned that a small nuclear reactor right inside a university campus is not scary or risky. We visited the McMaster University Nuclear Reactor, which was built in 1957. We went inside the structure, saw the staff working there and the uranium fuel bundle at work several meters underwater. The reactor produces electricity plus medical and industrial isotopes for healthcare, radiography and imaging like those in airport X-ray machines.

2. We learned that a mock-up reactor is very useful for public education and training staff in real reactor plants. We visited the Darlington Energy Complex (DEC) owned and operated by Ontario Power Generation (OPG). We went inside a big CANDU (Canada Deutrerium-Uranium) mockup reactor, not a real nuclear plant, which contains all the chambers and important components of a nuclear plant.

3. We learned that Canada’s biggest nuclear power company can energize 42% of the entire Philippines. We visited Bruce Power in their office in downtown Toronto. They have eight CANDU reactors that can produce up to 48 Terawatt-hour (TWh) of electricity in a year, equivalent to 42% of the Philippines’ total generation of 114 TWh in 2022. If we include OPG’s Darlington nuclear generating station with four CANDU reactors that can produce up to 31 TWh of electricity in a year, their combined output up to 79 TWh is 69% of the Philippines’ total electricity production.

4. We learned that the selection of the site of nuclear plants is important. We met the New Brunswick Nuclear team, composed of Opportunities New Brunswick (ONB), New Brunswick Electric Power Corp. (NB Power), and ARC Clean Technology Canada (ARC Canada). They discussed their advanced small modular reactors (SMRs) which are deployed in off-grid island-communities and far away mining operations, and the siting of their SMRs in domains inhabited by indigenous people and how they are able to secure their social acceptance.

5. We learned that the regulatory framework, standards, and protocols on safety and future nuclear waste must be stable. Business uncertainty can occur here so regulation must be simple, transparent, stable, and effectively implemented. This includes whether to do long technology review and licensing, or just relicense imported reactors.

6. We learned that we can expand domestic nuclear manpower expertise via partnerships with nuclear-centered universities abroad. Meralco, for instance, is firming up a partnership with Canada’s OntarioTech University. Other Canadian and US universities, even Korean and Japanese universities, can provide this training too.

7. We learned that the Bataan Nuclear Power Plant (BNPP) can be refurbished and start operation in about four years. We met experienced engineers and scientists from DB2 Consulting, Inc. who also comprise the Philippine Nuclear Services (PNS). They estimate that a full assessment and refurbishment of BNPP can be done in four years, so if the government will allow it, refurbishment can start this year and BNPP can start operation by 2028, generating about 4.6 TWh/year (assuming 85% capacity factor). This is much more than the combined output of wind, solar, and biomass of 4.2 TWh in 2022.

8. We learned that three Philippine energy companies can start nuclear power development in the country. Aboitiz Power Corp., Meralco, and Prime Metro BMC sent their executives to participate in the trip to Canada and have expressed willingness to develop nuclear power in the country. Felino Bernardo, Head of Energy Transition Projects of Aboitiz Power, said that “the mission of delivering stable, reliable, clean, and affordable electricity to power businesses and communities and get people out of poverty should be a human endeavor that surpasses nationalities and geographical divides.”

9. We learned that more countries are turning to nuclear energy and Philippines might be left in a tight space. Doug Burton, President of DB2 Consulting, told me that he mentors the head of global marketing of an Asian energy company and that official told him that his company is bidding to build nuclear plants in 12 of 27 European countries, plus bidding in Canada for the Bruce C nuclear plant. Reactor vendors have limited resources so the Philippines may find itself in tight spot when it comes to vendors if it hesitates too long.

10. We learned that Canada is a Tier 1 nuclear power country and can be a good source for the Philippines’ future nuclear power development. Canada has a wide and long spectrum of capabilities and resources in the nuclear supply chain, from uranium mining and research to power generation and production of medical isotopes. They have exported their uranium fueled CANDU pressurized heavy water reactors to several countries, and are developing several designs and models of SMRs and micro modular reactors (MMRs).

NGCP’S TRANSMISSION CHARGE HIKE
The National Grid Corp. of the Philippines (NGCP) recently released “Customer Bulletin 2024-14” and it showed a huge increase in their transmission charge for the February 2024 billing compared to January 2024. NGCP attributed this to their new Ancillary Service Procurement Agreement (ASPA). This is a nationwide electricity price hike, a long-term price hike. I computed the price increase from January to February — it is a P0.39/kWh increase nationwide, and that is huge (see the table).

The implementation of the reserves market cannot be blamed for the price hike. This is the first time that the prescribed ancillary service (AS) levels were scheduled after the reliability and stability of the grid suffered for years because the NGCP did not make enough long-term AS contracts. It seems that NGCP waited for many battery energy storage systems (BESS) to be ready first before it would make a long-term AS contract.

My hypothesis as to why the AS cost jumped so high is because now the NGCP contracted many BESS — big and expensive batteries — to address power fluctuations from intermittent wind-solar power. So, I checked the numbers from the Independent Electricity Market Operator of the Philippines’ (IEMOP) monthly Market Highlights.

It seems my hypothesis is correct. Luzon has the biggest BESS and pump storage capacity at 1,050 MW and it has the biggest jump in transmission charge. So now consumers will pay higher electricity prices for many years to come for what? Unreliable service in grid stability because of a reliance on BESS in order to “save the planet”?

Still a big question about the reliability of the grid is why the contracts for contingency reserves are still low. Is the BESS also prioritized in contract approvals with uncapped price vs other non-BESS with capped price?

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

Insurance industry posts higher premium collections

March 21, 2024 | 12:02 am

THE INSURANCE industry saw its premiums increase by 2.36% to P389.62 billion in 2023 as all sectors saw higher collections, the sector’s regulator said on Wednesday.

Life insurers saw their premium collections rise by 0.15% to P309.99 billion, the Insurance Commission (IC) said in a statement.

Broken down, premiums collected from traditional life insurance products rose by 11.52% to P105.19 billion, while premiums collected from variable life insurance products dropped by 4.84% to P204.8 billion.

Meanwhile, nonlife insurance companies also posted higher net premiums at P64.24 billion, up by 12.9% from the previous year.

Mutual benefit associations (MBA) saw total contributions increase by 8.29% year on year to P15.38 billion.

The insurance industry posted a combined net income of P48.46 billion last year, up by 3.8% from the 2022 level.

This was driven mainly by the nonlife sector, which saw its net profit grow by 30.07% to P9.107 billion from P7.001 billion, the IC said.

Benefit payments by nonlife insurance companies also increased by 18.85% to P26.10 billion.

Meanwhile, the net income of life insurers slipped by 0.72% to P33.631 billion in 2023 from P33.875 billion.

The net earnings of MBAs likewise declined by 1.55% to P5.727 billion from P5.817 billion.

Benefit payments by life insurance companies and MBAs also decreased by 3.8% and 25.41%, respectively.

The insurance industry’s combined assets rose by 8.02% to P2.31 trillion in 2023 from P2.14 trillion the year prior, while liabilities grew by 9.31% to P1.85 trillion.

The sector’s total net worth increased by 3.13% to P460.78 billion from P446.81 billion. Total paid-up capital and guaranty fund was at P84.01 billion, up by 3.34% year on year.

Total invested assets stood at P2.05 trillion, rising by 12.47% from P1.83 trillion a year prior.

Insurance density, or the amount of premium per capita or the average spending of each individual on insurance, rose by 1.45% to P3,450.97 from P3,401.60.

Meanwhile, insurance penetration, or premium volume as a share of gross domestic product or the contribution of the sector to the economy, went down to 1.6% from 1.73%.

HMO INDUSTRY POSTS BIGGER NET LOSS
Meanwhile, the health maintenance organization (HMO) industry incurred a net loss of P4.269 billion in 2023 due to higher spending on benefits and taxes, the IC said in a separate statement.

This was bigger than the P1.433-billion net loss recorded in 2022.

Data from the IC’s website showed 14 out of 27 HMOs incurred net losses in 2023.

Healthcare benefits released by HMOs in 2023 amounted to P55.46 billion, up by 26.23% from P43.93 billion a year prior.

Meanwhile, total revenues rose by 16.36% year on year to P66.89 billion. Of this amount, P64.94 billion came from memberships, enrollees, and administrative or service only fees. This was a 16.23% rise from P55.87 billion in 2022.

The HMO industry’s assets rose by 8.98% to P60.66 billion, while liabilities increased by 13.38% to P50.41 billion.

Meanwhile, total equity decreased by 8.48% to P10.25 billion.

Total invested assets went down by 1.12% to P16.64 billion amid a decrease in financial assets, investments in subsidiaries, associates and joint ventures, and investment property. — A.M.C. Sy