Here’s a quick glance at how PSEi stocks fared on Monday, March 18, 2024.
By Kenneth Christiane L. Basilio
A BILL seeking to amend a law designed to revive the post-pandemic economy was approved on final reading by the House of Representatives on Monday.
The chamber approved House Bill No. 9794 with a vote of 238 legislators for, four against, and two abstentions.
CREATE MORE (CREATE to Maximize Opportunities for Reinvigorating the Economy) cuts the corporate income tax to 20% from 25% previously.
It also provides duty exemptions, value-added tax (VAT) exemptions on imports, and VAT zero-rating of local purchases for domestic-market and export companies.
Commenting on the bill, Jose Enrique A. Africa, executive director of think tank Ibon Foundation, said that repeated tax cuts on corporations reduce the National Government’s revenue.
“Taxes on corporations were equivalent to 3.5% of GDP (gross domestic product) in 2008 but tax cuts have brought this down to just 2.2% as of 2022,” he said.
“If the corporate tax effort had stayed the same, this would mean at least P276 billion more in revenue annually,” he told BusinessWorld in a Viber message. “In contrast, indirect consumption taxes (excise and VAT) increased from the equivalent of 2.5% to 3.6% of GDP over the same period.”
The proposed bill also harmonizes the Corporate Recovery and Tax Incentives for Enterprises (CREATE) Act and its implementing rules and regulations (IRR).
“Conflicting interpretations of the VAT regime under CREATE’s IRR also resulted in the loss of some 125,560 manufacturing jobs,” Albay Rep. Jose Ma. Clemente S. Salceda said in a statement, referring to the impact of the CREATE-IRR disparity.
“Manufacturing is sensitive to increases in cost, being a low-margin operation, so any undue increase in taxes in that sector also means job losses,” Mr. Salceda, who is also a proponent of the bill, added.
Filomeno S. Sta. Ana III, Action for Economic Reform coordinator, said that while “CREATE is a reform most lauded,” the problems surrounding its IRR should have been adjusted instead of being amended as a law.
“It undeniably is facing teething problems but that is a question of making implementation adjustments, not amending the law,” he told BusinessWorld via Viber. “The key reform behind CREATE is the rationalization of fiscal incentives.”
He said that the rigorous economic criteria of CREATE, where “economic benefits for the whole society, not private gains, are the prime consideration for the granting of incentives” is now facing amendment by CREATE MORE.
The proposed law returns the power to grant tax incentives to investment promotion agencies (IPA) such as the Philippine Economic Zone Authority and the Subic Bay Metropolitan Authority. The Fiscal Incentives Review Board (FIRB) will be turned into an oversight body for IPAs, according to the bill.
Mr. Salceda noted that the move to turn FIRB into an oversight body is due to the current FDI approval system “that requires multiple stages of submissions,” delaying their arrival in the country. “While the FIRB has resulted in a more complete analysis of where our tax incentives go, it also has the ability to delay the inflow of FDI by requiring multiple stages of submission.”
Ebb Hinchcliffe, American Chamber of Commerce of the Philippines, Inc. (AmCham) executive director, said in a Viber message: “AmCham welcomes final approval by the House of Representatives of the CREATE MORE bill. We look forward to the Senate deliberating and working on approval of its counterpart version when session resumes at the end of April.”
“We are hopeful that the final bill will be responsive to the needs of investors, especially on provisions related to work from home and the grant of incentives and tax refunds,” he added.
Information technology and business process outsourcing companies will also be allowed to “conduct business under alternative work arrangements,” according to the bill.
The bill also offers corporations a 200% deduction for power costs incurred during the Income Tax Holiday period. Trade fairs, missions, or exhibitions will also be allowed to deduct 100% of their accrued expenses.
“High power costs are an existential threat to Philippine industries, especially in the manufacturing sector,” Mr. Salceda said. “Because we cannot afford to subsidize power costs as our neighbors do, an enhanced deduction for power cost will be more targeted towards those who need competitive power rates to create jobs.”
Aside from the CREATE Act, the measure also seeks to amend the National Internal Revenue Code of 1997 and the Ease of Paying Taxes Act.
SLOWER GROWTH in large economies will present downside risks to the central bank’s projection of a narrower current account deficit, analysts said.
“Global economic conditions, such as a slowdown in major economies, could impact Philippine exports and imports, influencing the current account. Fluctuations in oil prices, a major import for the Philippines, can likewise impact the current account,” Security Bank Corp. Chief Economist Robert Dan J. Roces said in a Viber message.
“Finally, overseas Filipino worker (OFW) remittances are a significant source of foreign currency for the Philippines. A sustained rise in remittances could help narrow the current account,” he added.
Last week, the Bangko Sentral ng Pilipinas (BSP) released revised balance of payments (BoP) projections, now seeing the current account deficit narrowing to $6.1 billion this year from an earlier projection of $9.5 billion.
In 2023, the current account deficit was $11.2 billion, equivalent to 2.6% of gross domestic product, according to preliminary estimates.
Mr. Roces said that a narrower deficit will depend on the magnitude of potential shocks.
“The BSP’s revisions seem reasonable based on the flat electronics export projection, but external factors and potential changes in domestic economic activity can still influence the final outcome,” he added.
The Philippine Statistics Authority reported that the trade deficit contracted 24% to $4.22 billion in January.
Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said an improved BoP position and current account estimates would support the peso.
He said this was due to “continued growth in the structural dollar inflows such as OFW remittances, business process outsourcing (BPO) revenue, and the much faster recovery in foreign tourism receipts.”
The central bank reported that cash remittances coursed through banks increased 2.7% to $2.836 billion in January. However, the growth in cash remittances slowed to 2.7% from 3.8% in December. This represented the slowest pace of remittance growth since the 2.6% posted in September.
“On financial accounts, further improvements in net FDI and net foreign portfolio investment inflows would also support better BoP data and could also provide further support for the peso, as possible Fed and local policy rate cuts starting later in 2024 would support market sentiment and foreign investment inflows,” Mr. Ricafort added.
The peso closed at P55.58 to the dollar on Monday, weakening from its P55.53 finish on Friday, the Bankers Association of the Philippines reported. — Luisa Maria Jacinta C. Jocson
ISRAEL’s Ratio Petroleum Ltd. will conduct a 3D seismic survey in the Sulu Sea east of Palawan within the month, according to the Department of Energy (DoE).
In a statement on Monday, the DoE said Ratio Petroleum, the operator of Petroleum Service Contract (SC) No. 76, has contracted Shearwater GeoServices for the use of its seismic survey vessel SW Thuridur.
The goal is to acquire 3D seismic data over an area in the SC 76 block, located about 150 kilometers east of Puerto Princesa.
The DoE said the seismic survey forms part of Ratio Petroleum’s work commitments for SC 76, and enjoys the support of the Palawan government and other agencies.
The other agencies were named as the Maritime Industry Authority, National Security Council, Philippine Coast Guard, Philippine Ports Authority, Department of National Defense, Department of Environment and Natural Resources, Bureau of Fisheries and Aquatic Resources, Bureau of Customs, Bureau of Immigration, Bureau of Quarantine, and Palawan Council for Sustainable Development.
According to the DoE, the survey will seek to acquire high-resolution imaging of the subsurface geology of the area.
The activity will take around 35 days, covering approximately 1,500 square kilometers.
The Ratio Petroleum aims to “enhance its understanding of the basin’s geological characteristics, gather high-quality geophysical data, identify optimal drilling locations with greater precision, and assess the potential for new oil and gas discoveries in offshore East Palawan,” the DoE said.
Ratio currently holds petroleum interests in Guyana, Atlantic Morocco, and the East Palawan Basin, according to its website.
The Philippines has experienced “a significant gap” in seismic surveys over the past eight years, according to the DoE.
“The DoE is confident that the insights gained from the 3D seismic survey will further de-risk prospects and unlock the hydrocarbon potential of East Palawan Basin,” it said.
In 2018, the DoE awarded SC 76 to Ratio Petroleum through the Philippine Energy Contracting Round. The company is expected to spend around $34.35 million for studies, data gathering, and drilling activity during its seven-year contract period. — Sheldeen Joy Talavera
THE Asian Development Bank (ADB) and real estate investment firm Lhoopa, Inc. have signed an agreement of up to $20 million to finance housing in the Philippines, a portion of which will meet green-building standards.
In a statement on Monday, ADB Director General for Private Sector Operations Suzanne Gaboury said this would represent the bank’s first foray into private-sector housing in the Philippines.
The $20-million loan will help Lhoopa acquire, renovate, construct, and sell property estimated to cost an average of $15,000 (P850,000).
“This is ADB’s first private-sector housing project in the Philippines, and Lhoopa is a fitting partner as it caters to people who are often unable to adapt to the impacts of climate change. The project not only provides livable spaces for these communities, but also enhances their climate resilience,” Ms. Gaboury said in a statement.
At least 25% of the houses sold will hold an EDGE (Excellence in Design for Greater Efficiencies) certification, a green building standard developed by the International Finance Corp.
“This will also be ADB’s first infrastructure project to use a revolving credit facility, allowing Lhoopa to repay the loan and withdraw it again as needed, without having to reapply for financing. This innovative facility is well suited for small-scale companies that are experiencing rapid growth,” Ms. Gaboury added.
Lhoopa seeks to build up to 4,000 houses yearly by 2025 and 8,000 by 2028.
“With the ADB facility, we will be able to provide thousands more of affordable homes to Filipino families,” Lhoopa Founder Marc-Olivier Caillot said. “Having such an esteemed institution by our side puts us on a global stage and will allow us to apply our technological solutions on a larger scale, thereby impacting more lives in the process.”
Lhoopa uses a proprietary digital platform that helps identify areas with potential demand. The platform also hopes to engage over 100 local small-scale contractors for renovation and construction and around 4,000 real estate agents to find potential buyers. — Beatriz Marie D. Cruz
THE National Food Authority (NFA) Council has appointed a Department of Agriculture (DA) director as the agency’s officer in charge (OIC).
In a Facebook post, the NFA said that Larry del Rosario Lacson was granted the rank of deputy administrator on March 11 through Special Order No. 371 signed by DA Secretary Francisco P. Tiu Laurel, Jr.
Mr. Lacson is a DA director IV and is a former director of the Bureau of Plant and Industry and a senior vice-president of the Texicon Group of Companies.
“A graduate of BS Agriculture with masters and doctorate degrees in agronomy and crop science, Mr. Lacson is a sanitary and phytosanitary expert and a United Nations Food and Agriculture Organization-trained Phytosanitary Capacity Evaluation facilitator,” the NFA said.
Dozens of NFA staff were suspended by the Office of the Ombudsman due to irregularities in the disposition of rice held as reserves by the NFA.
The Ombudsman has so far lifted the suspension of at least 24 NFA employees out of the 141 suspended.
In a separate statement, Mr. Laurel said: “the NFA Council unanimously appointed Director Larry Lacson as OIC-administrator to make sure the agency runs smoothly, especially during this harvest season.”
“The NFA is an integral part of our effort to ensure food security,” he added. — Justine Irish D. Tabile
A SENATE BILL seeking to create a council that will put together a long-term infrastructure masterplan has been approved by the committees on economic affairs, public works, and finance.
In the committee report dated March 13 for Senate Bill No. 2605, or the proposed Masterplan for Infrastructure National Development Act, the Comprehensive Infrastructure Development Masterplan was to contain plans for digitalization, energy, agriculture-fisheries modernization, water resources, transportation and logistics with a 30-year time horizon.
“The state recognizes the vital role of an efficient and integrated infrastructure system in promoting job creation to drive inclusive economic growth and sustainable development,” according to a copy of the bill, which was sponsored by Senator Joseph Victor G. Ejercito.
The Masterplan for Infrastructure for National Development Council will be established to draft and execute the plan.
It is also tasked with maximizing public and private investment to boost economic activity.
The President will chair the council while the National Economic and Development Authority Secretary will serve as vice-chair.
Industry representatives from the energy, water, information and technology, agriculture-fisheries, transportation and logistics industries will also sit on the council.
The masterplan will be updated every 10 years or earlier to anticipate emerging technologies, emergencies, and other social trends.
“The state hereby adopts a policy to develop reforms in infrastructure planning to achieve higher economic growth trajectory and improve the quality of life of the Filipinos,” according to the measure. — John Victor D. Ordoñez
PROPOSED amendments to a law that privatized the power generation and distribution industries should also include an expansion of the industry regulator’s oversight functions, the Energy Regulatory Commission (ERC) told a House committee on Monday.
“The ERC needs changes to its structure and the authority given to it by Congress almost 25 years ago,” ERC Chairperson Monalisa C. Dimalanta told the committee, which is reviewing proposed amendments to EPIRA (the Electric Power Industry Reform Act).
The House Energy Committee was told that expanded ERC powers will help “protect consumers from the adverse effects of the changes to the industry today.”
“(This would) enable the agency to act more effectively… in promoting greater competition as the way of achieving energy affordability,” Ms. Dimalanta said.
Ms. Dimalanta proposed that the ERC be given the direct authority to fine and penalize private energy corporations failing to adhere to the mandate of “lowering (power) rates.” The ERC should also be allowed to issue permits to power generation and distribution companies.
Her proposal also included giving the ERC the ability to “undertake periodic restructuring and reorganization” to stay flexible, allowing it “to adjust accordingly when the need arises.”
The ERC also seeks to retain some portion of its income for agency improvements. “Limited fiscal autonomy (should be considered) to allow the commission to retain a portion of its income for activities such as capital outlay, training, and innovation initiatives,” Ms. Dimalanta added.
In response, a power consumer group welcomed the proposed amendments, saying that expanding ERC’s functions would empower consumers.
“The current limitations faced by regulatory bodies, such as the Energy Regulatory Commission make them inefficient,” Nic Satur, Jr., chief advocate officer of Partners for Affordable and Reliable Energy, told BusinessWorld in Facebook Messenger. “The ERC’s lack of sufficient quasi-judicial authority to effectively safeguard consumer interests (is undermined) because they are overpowered by courts.”
Mr. Satur said that courts often overturn the ERC’s rulings denying price increases by power companies.
“This leaves consumers powerless and at a loss,” he said. “Strengthening the ERC in these ways would ensure that it has the necessary tools to act decisively and protect consumers from unjust practices in the energy sector,” he added.
“Such authority would not only allow the ERC to make binding decisions in disputes between utilities and consumers but also enforce compliance with these decisions to prevent expensive electricity prices for consumers,” Mr. Satur said. — Kenneth Christiane L. Basilio
LAND BANK of the Philippines (LANDBANK) has entered into a partnership with the Bureau of Customs (BoC) to simplify the bureau’s payments system.
Under the partnership, the BoC will use LANDBANK’s Link.BizPortal to facilitate online payments for both government and private entities, the bank said in a statement on Monday.
“We at LANDBANK hope that our digital solutions and our Link.Biz platform will be able to accelerate collections. So we are doing our part as well for the efficient collection of government dues, and we are very much looking forward to this partnership,” LANDBANK President and Chief Executive Officer Lynette V. Ortiz said.
The partnership will allow clients to pay their dues to the BoC online instead of having to visit LANDBANK branches.
The bank added that the partnership will enhance the operational efficiency of the BoC, reduce red tape, and improve overall service delivery.
“Through LANDBANK’s Link.BizPortal, we are not only facilitating smoother transactions, but also fostering greater transparency and accountability. As we embark on this new chapter, let us continue to strive for greater efficiency in our operations,” Customs Commissioner Bienvenido Y. Rubio said.
Ms. Ortiz and Mr. Rubio signed the Memorandum of Agreement for the partnership on March 4.
The LANDBANK Link.BizPortal will add to the BoC’s existing payment systems, PAS6 and E2M, promising a more user-friendly online payment experience.
LANDBANK added that the partnership supports the Adoption of Digital Payments for Government Disbursement and Collections, in line with Executive Order No. 170, and Republic Act No. 11032, or the Ease of Doing Business and Efficient Delivery of Government Services Act. — Aaron Michael C. Sy
THE Metropolitan Waterworks and Sewerage System (MWSS) is seeking to keep its April water allocation unchanged at 50 cubic meters per second (cms).
“We just reiterated it in our letter last Friday to maintain the 50 cms for April as the March has been maintained,” Patrick James Dizon, head of the MWSS Angat/Ipo operations management division, told reporters on Monday, referring to a request it sent to the National Water Resources Board.
“We laid out the impact in case (of) a reduction in our allocation,” he said.
He estimated that any reduction could result in water interruptions of less than 12 hours during the nighttime hours between 10 p.m. to 4 or 6 a.m.
Angat Dam is the primary water source for Metro Manila, providing approximately 90% of the capital’s potable water.
As of Monday morning, the water level in Angat Dam was 201.48 meters, down from the 201.70 reading the previous day.
These readings were below the normal high-water level of 212 meters.
Mr. Dizon said that the water level in the reservoir recedes 17-19 centimeters per day.
However, he projected stable water levels for the reservoir, citing forecasts by the government weather service, known as PAGASA (Philippine Atmospheric, Geophysical and Astronomical Services Administration).
“I’m still confident on the refilling of our reservoir based on the forecast of PAGASA of rainfall coming May and June because they said that rainfall over our watersheds will go back to normal,” he said. — Sheldeen Joy Talavera
A SIEMENS AG unit, Siemens Healthcare, Inc., has submitted letters of intent (LoIs) to the Department of Trade and Industry (DTI) outlining plans to develop a training center, an innovation hub, and to enter partnerships in digital healthcare.
In a statement, Siemens Healthcare said the plans were submitted to the DTI during the German-Philippine Business Forum in Berlin, which was attended by Philippine cabinet members and business leaders from both countries.
“Each of the three LoIs reinforces the commitment Siemens Healthcare has in becoming a valued partner to contribute to further developing and revolutionizing the Philippine healthcare sector,” the company said.
The first LoI aims to designate a partner hospital into a radiology training center.
“A comprehensive program will be developed to further improve healthcare quality, such as a curriculum on the various aspects of mammography screening, including anatomy, pathology, imaging techniques and interpretation, safety, and patient care,” Siemens Healthcare said.
Meanwhile, the second LoI focuses on the development of an innovation hub serving students, researchers, and working professionals, with the aim of creating “disruptive” initiatives that will improve healthcare.
The third LoI aims to explore digital partnerships in healthcare with the Department of Health to enhance the healthcare infrastructure through initiatives like eHealth, digital health, and AI (artificial intelligence) capacity-building and training. — Justine Irish D. Tabile
