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Marcos says too early for rate cut, eyes 8% growth

PHILIPPINE PRESIDENT FERDINAND R. MARCOS, JR. — PPA POOL

PRESIDENT Ferdinand R. Marcos, Jr. said the Philippines hasn’t reached the point where it should start cutting interest rates, citing inflation as the main worry for an economy expanding at the fastest clip in Southeast Asia.

“Inflation is still our biggest problem,” Mr. Marcos said on Tuesday in his interview with Bloomberg Television’s Haslinda Amin at the Presidential Palace in Manila. “We’re not yet there,” he said when asked whether he sees room to cut borrowing costs that are the highest since May 2007.

Consumer price gains in the Philippines have hovered above the central bank’s 2%-4% goal for seven straight quarters and are poised to return to target only this quarter — not enough yet for Bangko Sentral ng Pilipinas to declare victory over inflation. Even with the policy rate at a 17-year high, the economy pulled off the region’s quickest expansion of 5.6% in 2023, giving Marcos the confidence that it is capable of an even better showing in 2024.

Gross domestic product growth will probably meet the government target of as much as 7.5% this year — the region’s fastest — and even hit the 8% goal at the latter half of his six-year term ending in 2028, Mr. Marcos said. The nation last posted an expansion at the 8% level in 1976 under the late dictator Ferdinand E. Marcos, the President’s father.

The peso touching a three-month high this month partly reflects the economy’s strength, Mr. Marcos said, welcoming any further appreciation in the currency.

Since taking office almost two years ago, the 66-year-old leader has embarked on about two dozen overseas trips, bolstering the nation’s defense ties with the US and its allies and seeking investment and trade deals along the way. An American delegation arranged by President Joseph R. Biden, Jr. this month yielded more than $1 billion in investment pledges, especially in the areas of tech and supply chains.

The President said he also wants to strengthen physical and digital connections with Asian neighbors. Even the European Union has increased its engagement with the Philippines and the region, he said.

While interest on the Philippines has improved, Mr. Marcos said much still has to be done to boost foreign investment as well as shielding the economy from further shocks and sustaining post-pandemic recovery.

In recent months, his push to loosen economic restrictions in the Constitution has faced criticisms including from his predecessor who warned that such actions may be an attempt to extend power beyond legal limits — just like his father. Mr. Marcos dismissed the rebuke and said there’s no proposal to change the country’s political structure.

By the end of his term, Mr. Marcos said he aspires to end hunger and further lower unemployment.

“It is only growth that will pull us out of the morass that was left after the pandemic,” Mr. Marcos said. “Even in terms of debt ratios, even in terms of unemployment, even in terms of inflation, it really is growth that seems to be the key,” he said. — Bloomberg

From catering the skies to selling arroz caldo online

How MacroAsia pivoted during the pandemic

RHODEL Esteban, Chief Operating Officer and Vice President of Commercial at MacroAsia Food Group, started out as an aeronautical engineer, but has since pivoted his career into airline catering. From selling nuts and bolts, he says, “Now I’m selling peanuts.” Speaking at the Future of Food 2024 conference at Center for Culinary Arts – Manila (CCA) on March 8, Mr. Esteban discussed the pivots their company has made, specifically during the COVID-19 pandemic, the mists of which have only just lifted.

Prior to the pandemic, the MacroAsia Food Group had been responsible for catering not only to Philippine Airlines (PAL), but also to 16 other airlines. “If you have flown out of Manila, [on] any of these airlines, and if you ate the food, you have been our client,” he said.

Diversification was key: they also had many land-based clients, most of them the casinos around the airport, as well as offices around Manila (he noted that they were the source of the Asian Development Bank’s famous crinkles). The company was established 26 years ago, and he had been part of it for 24.

In March 2019, MacroAsia expanded, setting up two more kitchens to better serve their clients. A year later, the COVID-19 virus had become a worldwide pandemic.

In March 2020, flights were grounded and people were locked in their homes. “Walang lumipad, walang pasahero, sarado ang airport. Anong gagawin namin? (Nobody flew, there were no passengers, the airport was closed. What could we do?),” he said. His superiors told him to check their crisis management manual, which included measures resulting from the superficially similar SARS pandemic in the 2000s. Those measures only considered weeks and months of disaster. “Ilang taon nating idinaan? Tatlong taon (How many years did we go through it? Three years).”

Unfortunately, part of the adjustment meant letting go of people. “The saddest part of my 24 years in MacroAsia was to let go of 1,000 people,” he said, showing social media posts of employees bidding farewell.

He said that their commissary kitchen, measuring 7,000 sqm., managed to operate during those times. Part of their strategy was approaching clients who were still operating, no matter how limited their operations. They then won a contract to feed evacuee sailors quarantined in a hotel.

Going online was also a solution: with PAL’s operations frozen, no people were staying at the Business Class lounge, and therefore, no people were eating its Instagram-famous arroz caldo (the spicy rice porridge had become a status symbol for people flying out of Manila on Business Class). They then started selling it online. They also converted part of their kitchen into an industrial butcher, capable of selling cut meat via the Grab App (which he calculated earned them P300,000 a day).

They then concentrated more on land-based clients, citing, for example, catering to a huge furniture store in the SM Mall of Asia complex which had to open in the middle of the pandemic.

While they are now back to catering to airlines again, they have also accumulated many more land-based clients, including cafeteria operations for retail companies, and even the senior high school department of a university. He said that they ended 2023 with P4 billion in gross revenue.

As he said during his talk, “The true measure of who you are is what you do with what you have.” — Joseph L. Garcia

Local wine trends: Wine cocktails on the rise

JP Chenet, a big French wine supplier has their Fresh Fruit Explosion series.

WINE cocktails, where wine is used as the main alcohol base for cocktails, has always been popular in bars, especially with the likes of Sangria, Mimosa, Bellini, and Calimocho being fixtures in cocktail menus, not only domestically but internationally.

When these wine cocktails are made available as RTDs (ready-to-drink) and displayed in retail stores, they are placed in the wine section. And because wine consumption is quite low in the country, wine cocktails actually compete with regular wines in the eyes of consumers and marketers.

Since 2020, during and after the COVID pandemic, sales of wine cocktails RTDs have been on the rise.

THE WINE COCKTAILS AND THEIR MIXTURES
I will give a brief background of each of the wine cocktails.

Sangria is Spanish in origin, but the European Union (EU) also recognized this wine cocktail in Portugal.

Many versions of sangria already exist, but what I found most delectable is when you use 1/3 Spanish wine, preferably a tempranillo varietal and best minimally oaked (joven or young: wine basically), 1/3 orange juice, and 1/3 Sprite to add fizz and sweetness. Ornament the drink with tiny, chopped apples and served with plenty of ice.

Mimosa, which is most likely a French creation, is simply a blend of orange juice with champagne and served like champagne in a fluted glass.

Bellini is an Italian creation blending Prosecco, Italy’s most popular sparkling wine, with peach juice or peach puree. But the Bellini has recently been served with a more reddish color for aesthetics, and when this is done pomegranate juice and strawberry puree are used instead of peach.

Calimocho — or Kalimotxo in Basque — is Spanish in origin and is simply a wine cocktail made with equal parts of a cola-based soft-drink and red wine.

THE PRECURSOR TO THE WINE COCKTAIL RENAISSANCE
In the late 1990s, American wine giants Constellation Brands and E&J Gallo Winery released their versions of wine cocktails via Arbor Mist and Wild Vines respectively.

This was an Arbor Mist-created category back then, this concept of wine with fruit infusion, and it was a huge hit in its early stages. The target markets were young adults and non-wine drinkers transitioning from soft drinks to wines.

E&J Gallo Winery then joined in with their Wild Vines, and from a niche market, it became a full-grown category in the early 2000s. Flavors like Blackberry Merlot, Black Cherry Cabernet Sauvignon, Peach Chardonnay, and Strawberry White Zinfandel became popular “pseudo-wine’ labels.

Back in the early 2000s, these wine cocktails cost less than regular wines and were just around P150/bottle. Then this category entered the doldrums for over a decade or so, and perhaps it was because of the higher prices, now at around P375 to P424 a bottle. This category not only stagnated but dropped.

In 2021, E&J Gallo bought the Arbor Mist brand from Constellation Brands.

SPANISH SANGRIA LEADING THE WAY
This category however would be rescued by Sangria. While the best-selling wine brand in the Philippines, Carlo Rossi from E&J Gallo, had a version of Sangria way back in the early 2000s, it was the newer Sangria from Spain that revived interest in it as a wine cocktail RTD.

Lolea, Carolina, 49 Millions, and Fortunella Sangria are some of the brands that are now available in the country. All these wines are imported from Spain.

Lolea in particular is quite popular, and even during the pandemic, this brand of RTD Sangria could be seen all over social-media platforms. Originally imported by Happy Living Philippines Corp. back in 2019, this premium RTD Sangria made an auspicious impact in the market despite its being relatively pricey — again, this is a Sangria, a form of wine cocktail, not a wine.

First, the packaging is attractive with a modern design and bright splashy colors. Then the bottle is closed with a crown cap which has a unique built-in swing closure, that means you can save unfinished wine.

Aside from sangrias, other brands like Californian Sutter Home and French JP Chenet also have their versions of wine cocktails. Sutter Homes has its Fruit Infusion range, while JP Chenet has its Fresh Fruit Explosion series.

Adding more sparkle to the category (pun intended) is leading Champagne and fashion house LVMH who joined this exciting low-alcohol wine cocktail category with their Chandon Garden Spritz from their Argentine winery. The Garden Spritz is made from a traditional sparkling wine blend of Chardonnay and Pinot Noir but with some Semillon, and blended with natural extracts from hand-picked orange peels, herbs, and spices (as their website indicates).

All of these make a very dynamic category. Only time will tell if it is just a fad or will end up a serious “pseudo-wine” category to contend with. From a strictly wine geek point of view, I am amazed at how this category of wine cocktails is shaping up, as more players join the field, and consumers seem to be buying into this despite relatively stiff prices.

Perhaps, this could be good for the real wine market, as wine cocktails appear at first as simply a transition stage for non-wine drinkers to become wine drinkers. Or it could morph into a serious category for consumers who prefer lower alcohol, fruitier and sweeter versions of wine.

In my opinion, wine cocktails are refreshing and a great aperitif, but I can easily make them myself — especially if the wine or sparkling wine I have is not that good, is tiring, and needs a fruity boost. But drinking the RTD version is something I personally don’t, get especially from a pricing point of view. But that’s just me.

 

Sherwin A. Lao is the first Filipino wine writer member of both Bordeaux-based Federation Internationale des Journalists et Ecrivains du Vin et des Spiritueux (FIJEV) and the UK-based Circle of Wine Writers (CWW). For comments, inquiries, wine event coverage, wine consultancy and other wine related concerns, e-mail the author at wineprotege@gmail.com, or check his wine training website https://thewinetrainingcamp.wordpress.com/services

Cebu Landmasters allocates P14.5 billion for capex

CEBULANDMASTERS.COM

LISTED property developer Cebu Landmasters, Inc. (CLI) has allocated P14.5 billion for its capital expenditure (capex) budget this year.

“A portion is dedicated to land acquisition, particularly for the inaugural Luzon project,” CLI said in a stock exchange disclosure on Wednesday.

The company said it has P27 billion worth of new developments in the pipeline, including expansion projects in various areas such as Butuan.

In 2023, CLI’s capex totaled P12.9 billion, of which 82% was allocated for project development, 12% for investment property, and 6% for land acquisition.

“Our consistent growth fuels our vision to strengthen the company’s current offerings and expand beyond Visayas/Mindanao,” CLI Chairman and Chief Executive Officer Jose R. Soberano III said.

 In 2023, CLI recorded a 29% increase in its consolidated net income to P4.64 billion, led by higher revenues across its portfolio.

 The company’s consolidated revenue jumped by 20% to P18.8 billion following higher demand for its residential properties and business portfolio.

 Real estate sales revenue grew by 20% to 18.5 billion, driven by consistent collections and steady construction progress. Reservations hit P20.6 billion, up by 14% from P18 billion in 2022.

 CLI launched 10 projects in 2023 totaling 4,249 units and an overall value of P18.7 billion. The projects saw a 63% sell-out rate. The company’s completed projects are already 97% sold out, resulting in a blended total portfolio sell-out rate of 93%.

 The property developer’s income from hotel operations rose by 66% to P139 million, while its leasing income improved by 42% to P112 million.

 CLI has about 800 room keys and is set to increase with seven additional hotel projects. It previously expanded its hospitality portfolio with the opening of lyf Cebu City in Base Line Center and The Pad Co-Living in Banilad High Street in Cebu.

 The company’s gross leasable area rose to 36,772 square meters, led by newly completed projects such as Banilad High Street, Base Line Center Phase 2, and Retail Pods in Davao Global Township.

 CLI said the initial project under its joint venture with Japan-based global real estate firm NTT UD Asia Pte. Ltd. (NTTUDA) will be a P6.4-billion two-tower residential complex in Cebu IT Park.

 The first tower of the Japanese-inspired residential complex will be launched by the fourth quarter.

CLI previously partnered with NTTUDA to form a joint venture called CLI NUD Ventures, Inc., marking the Japanese company’s first venture in the Philippines.

 “We are bullish that the strategic capital raise through preferred share issuance and our first-ever international partnership would fortify our growth and expansion,” Mr. Soberano said.

 On Wednesday, CLI shares were unchanged at P2.85 apiece. — Revin Mikhael D. Ochave

Belle Corp. sets tender offer price and period for PLC delisting

BELLE CORP.’S board has set the tender offer price and period for the voluntary delisting of subsidiary Premium Leisure Corp. (PLC).

PLC’s tender offer price is set at 85 centavos per share, with the tender offer period scheduled from March 22 to April 24, Belle Corp. said in a regulatory filing on Wednesday.

As of Wednesday, PLC has a public float level of 20.1%, slightly above the 20% requirement, data from the Philippine Stock Exchange (PSE) showed. The company has 31.22 billion outstanding shares. 

The payment and settlement date for the shares to be tendered will be from April 25 to May 9.

The company tapped BDO Securities Corp. as the agent for the tender offer.

The offer price was issued following a fairness valuation report by First Metro Investment Corp.

The delisting rules of the PSE indicate that the tender offer price is determined based on the higher value, either the highest valuation derived from the fairness valuation report or the volume-weighted average price of PLC shares for one year prior to the posting date of the disclosure on PLC’s board approval of the delisting move.

“First Metro, using various valuation methodologies, considered that PLC is fairly valued at between the 60 centavos to 85 centavos per share. On the other hand, the one-year volume weighted average price of PLC is at 60 centavos per share,” Belle Corp. said.

The PSE’s delisting rules also stipulate that the party proposing the delisting of a listed company must demonstrate that it has acquired at least 95% of the outstanding capital stock.

“For this reason, Belle’s tender offer for the shares of PLC will be deemed withdrawn in the event that the required acquisition of at least 95% of PLC’s outstanding capital stock will not be secured,” the company said.

The board of Belle Corp. approved the conduct of a tender offer on all of PLC’s outstanding common shares on March 11.

Belle Corp. is engaged in integrated resorts business. It is one of the portfolio investments of Sy-led conglomerate SM Investments Corp.

Meanwhile, PLC has a stake in the City of Dreams Manila integrated entertainment and gaming complex in Parañaque City. It also has a 50.1% stake in listed Pacific Online Systems Corp. that leases online betting software and equipment to the Philippine Charity Sweepstakes Office for lottery operations in Visayas and Mindanao.

Ahead of the announcement of the tender offer price, Belle Corp. and PLC both filed for a voluntary trading suspension on their shares, which is set to be lifted on March 21 at 9 a.m. — Revin Mikhael D. Ochave

Chocolate soy sauce dares 800-year-old industry to change

IT’S SWEET and salty, and can be added to steak or ice cream. Chocolate-infused soy sauce is challenging the norms of a traditional industry that’s been slow to change.

Packed into a small jar is the story of Toshio Shinko, the chief executive officer of Yuasa Soy Sauce Co., who created the concoction to broaden the appeal of the condiment. Called Cacao Jang, it gives out an aroma of rich chocolate that’s met with a unique umami flavor distinct from traditional soy sauce.

“I thought they might be surprisingly compatible because they’re both fermented,” said Mr. Shinko, who grew up in Yuasa, considered the birthplace of soy sauce in Japan. He helped out with his family’s brewery since he was in middle school.

At stake is a global industry projected to almost double to $83.8 billion in 2032 from the prior decade, according to researcher Spherical Insights, due to the growing popularity of Asian cuisine and demand for natural, healthy food products. This has also led to terms such as umami becoming a global foodie concept of deepening flavor with a pleasant, savory taste.

“The soy sauce category could grow at a faster pace in the medium term than the other cooking and table sauces such as mayonnaise and ketchup, as consumers across the globe become more experimental with their food choices,” Bloomberg Intelligence analyst Ada Li said. “The competitive pressure in the soy sauce industry is likely to stay elevated.”

Cacao Jang is available as a paste, in a grainy version with cacao bits or another with a smoother texture. Mr. Shinko said he tested various combinations of cacao and soy sauce for four years before arriving at the right formula. The final product fuses cacao beans shipped from Vietnam with a specific type of soy sauce extracted from miso after sitting in large wooden barrels to ferment.

The quiet, narrow streets of Yuasa are lined with traditional wooden buildings, with the aroma of soy sauce wafting near breweries and restaurants. There’s a museum dedicated to the product in what’s now nationally recognized as the Preservation District of Yuasa.

Yuasa Soy Sauce, which has been around for 150 years, is one of few remaining in Japan that still uses the traditional method of brewing in wooden barrels rather than steel vats. While the standard aging time is about six months, Mr. Shinko notes that his product can sit in barrels for as long as two years, bringing out a more intense umami flavor.

Cacao Jang has expanded Yuasa’s reach into restaurants other than the usual sushi or dumpling eateries. ICON, a burger joint in Tokyo’s Shibuya area, serves a teriyaki burger that features Cacao Jang, honey, and butter cream on a savory patty.

“I know so much about chocolate now,” said Mr. Shinko, who turned down an offer to collaborate with Meiji Holdings Co., Japan’s biggest chocolate maker, because he preferred the taste from the cacao fermentation facility in Vietnam.

Mr. Shinko also experimented with making soy sauce in wine barrels when he traveled to France. He opened a restaurant called Pavillon Yuasa in Bordeaux last year in collaboration with the Château Coutet vineyard, serving the soy sauce that has a unique woody flavor from the wine barrels.

“I want to show people around the world that using soy sauce can make food so delicious,” Mr. Shinko said. “It doesn’t even have to be Japanese food. It can make French, German, or American food taste better too.” — Bloomberg

AREIT executes share-for-property exchange worth P28.6B

AREIT, Inc. announced on Wednesday a transaction exchanging shares for five properties valued at P28.6 billion.

The swap deal involves AREIT, Ayala Land, Inc. (ALI) and its subsidiaries Greenhaven Property Ventures, Inc. and Cebu Insular Hotel Co., Inc., as well as ACEN Corp. unit Buendia Christiana Holdings Corp. (BCHC), the listed company said in a stock exchange disclosure.

The deed of exchange involves the issuance of 841.26 million primary common AREIT shares to ALI, Greenhaven, Cebu Insular, and BCHC at P34 per share in exchange for the ownership of Ayala Triangle Tower 2 office building, Greenbelt 3 and 5, Holiday Inn and Suites Makati, Seda Ayala Center Cebu, and a 276-hectare industrial land in Palauig, Zambales.

AREIT is the real estate investment trust of ALI.

 “The properties are expected to contribute further to AREIT’s operating cash flows, boosting dividends per share…,” AREIT said.

“The asset-for-share swap would be accretive and potentially increase the overall yield to approximately 6.96% after the new assets are infused. Estimated yields and total shareholder return are subject to actual operating performance and market conditions,” it added.

In a separate statement, ALI’s hotel unit AyalaLand Hotels and Resorts Corp. (AHRC) said it is aiming to secure Excellence in Design for Greater Efficiencies (EDGE) Zero Carbon certification for its portfolio by 2026 as part of its sustainability commitment.

AHRC said it signed an agreement with the International Finance Corp. to secure EDGE Zero Carbon certification for 2,826 rooms across its portfolio, marking the first for a hotel group in the country.

EDGE Zero Carbon is a globally recognized net zero building certification and the highest of three levels of certification for EDGE.

EDGE is a green building certification system that promotes resource-efficient, low-carbon buildings, requiring a 20% improvement for each of energy use, water use, and embodied carbon in materials compared to the base case.

“While we will initially target EDGE Zero Carbon Certification for 11 of our hotel buildings with 2,826 rooms, the view is to add more to this in the future,” Ayala’s Head of Hotels Group Javier Hernandez said.

AREIT saw a 43% jump in its 2023 net income to P4.93 billion led by increased occupancy rates and asset acquisitions. The company’s revenue increased by 41% to P7.14 billion.

 For its part, ALI recorded a 32% increase in its 2023 net income to P24.5 billion led by strong property demand and consumer activity. Its consolidated revenue jumped by 18% to P148.9 billion

 AREIT shares fell by 0.71% or 25 centavos to P35 while ALI stocks dropped by 3.64% or P1.20 to P31.80 per share on Wednesday. — Revin Mikhael D. Ochave

Yields on BSP’s term deposits inch lower before Fed decision

BW FILE PHOTO

YIELDS on the Bangko Sentral ng Pilipinas’ (BSP) term deposits went down on Wednesday ahead of the US Federal Reserve’s announcement of its policy decision overnight.

The BSP’s term deposit facility (TDF) attracted bids amounting to P275.772 billion on Wednesday, below the P310 billion on the auction block as well as the P338.589 billion seen a week ago for a P400-billion offer.

Broken down, tenders for the seven-day papers reached P164.612 billion, lower than the P170 billion auctioned off by the central bank and the P182.415 billion in bids for a P200-billion offer seen the previous week.

Banks asked for yields ranging from 6.52% to 6.57%, slightly wider than the 6.53% to 6.57% band seen a week ago. The average rate of the one-week deposits declined by 0.29 basis point (bp) to 6.5587% from 6.5616% previously.

Meanwhile, bids for the 14-day term deposits amounted to P111.16 billion, below the P140-billion offering and the P156.174 billion in tenders for the P200-billion offer a week ago.

Accepted rates were from 6.58% to 6.61%, a tad narrower than the 6.579% to 6.615% margin recorded a week ago. With this, the average rate for the two-week deposits inched down to 6.5914% from the 6.5915% logged in the prior auction.

The BSP has not auctioned off 28-day term deposits for more than three years to give way to its weekly offerings of securities with the same tenor.

The term deposits and the 28-day bills are used by the central bank to mop up excess liquidity in the financial system and to better guide market rates.

TDF yields went down on Wednesday in anticipation of the US central bank’s policy decision, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.

“The markets would be anticipating the upcoming Fed rate-setting meeting and decision, as well as the updated Fed dot plot, as source of new market leads,” Mr. Ricafort said.

The Fed was set to announce overnight its policy decision after a two-day meeting on March 19-20.

The Federal Open Market Committee raised rates by 525 bps from March 2022 to July 2023 to bring the target fed funds rate to 5.25-5.5%. — Luisa Maria Jacinta C. Jocson

McCartney Macallan, anyone?

FASHION meets nature meets whisky in a collaboration between The Macallan and the McCartney sisters, Mary and Stella (a photographer and a fashion designer; and ex-Beatle Paul McCartney’s daughters).

The whisky the sisters worked on is called Amber Meadow, under The Macallan’s Harmony Collection. The Harmony Collection is one of the 1824 distillery’s shows of support for sustainability. The McCartney sisters’ whisky is packaged and labeled in paper made from meadow cuttings. Previous iterations from the Harmony Collection included packaging made with discarded cacao pods (in a partnership with pioneering Spanish chef Jordi Roca), while another was made with coffee silverskins (in a partnership with coffee industry leaders).

The whisky was launched on March 14 at The Podium with an installation: The Podium Hall was turned into a glen, with a panoramic photograph shot by Mary McCartney serving as a backdrop. During the tasting, real moss was on the tables. The sisters’ touches were seen on the whisky: Mary’s photographs of The Macallan Estate are depicted on the box, while in the installation, neon lights showed one of Stella McCartney’s favorite phrases: “No smile, no service.” The installation lasted until March 16.

The Macallan Ambassador Hans Eckstein led guests through the tasting, instructing us to sniff into the tulip glasses to detect notes of citrus, vanilla, and coconut. It had the color of actual prehistoric amber and had a bit of a scent of candied lemons combined with grain (like rice, or wheat, or barley). It had a fresh, light taste, and a light peppery heat; though Mr. Eckstein also told us to look for a note of green tea. “Overall, it’s a freshness that reminds you of meadows,” said Mr. Eckstein. “You have more floral characteristics.”

Online liquor stores list it in the P20,000 to P30,000 range, but it was offered at a special price during the installation for about P16,000.

According to Mr. Eckstein, the sisters’ touches on the whisky itself “stems from their memories of spending their childhood in Scotland.” They’ve also collaborated with The Macallan on a collection of barware called “Together,” including glasses and ice tongs, among others.

The McCartney family has long been known for its support for cruelty-free causes: Paul McCartney has been a vegetarian since about the 1970s, along with his late wife Linda. Their four children have closely followed this lifestyle, with Stella McCartney becoming a leading force for leather-free fashion.

Mr. Eckstein says that Macallan also has sustainable practices: aside from the recycled and recyclable properties of the Harmony Collection, they’re also moving towards carbon neutrality by 2030, and are making efforts to shift their entire vehicle fleet to purely electric. — Joseph L. Garcia

CREC breaks ground for 240-MW Pangasinan solar plant

CITICORE RENEWABLE Energy Corp. (CREC) has broken ground for a 240-megawatt (MW) solar power plant in Binalonan, Pangasinan, the company announced on Wednesday.

“This is only the start of renewable energy developments in the province,” CREC President and Chief Executive Officer Oliver Y. Tan said in a statement.

“Through partnerships of this nature, we aim to catalyze growth and prosperity across the entire province,” he added.

Once completed, the project is expected to have an annual generation capacity of approximately 326 gigawatt-hours, enough to power approximately 136,000 households, CREC said.

The Pangasinan solar power plant marks the company’s second groundbreaking this year, following the 69-MW solar power facility in Silay City, Negros Occidental.

Its first phase, comprising a capacity of 168 MW, is slated for commercial operations by the end of 2024, while the second phase, with 72 MW, is expected to produce power in December 2025.

On top of the Binalonan groundbreaking, CREC announced its plans for two other projects in Pangasinan: another 270-MW solar plant, which will start together with the Binalonan project, and a 150-MW onshore wind power project. — Sheldeen Joy Talavera

Public-Private Partnerships: Unmasking the reality

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

BW FILE PHOTO

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

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