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Government spending to slow in 1st half

Construction of the Metro Manila Subway Project is ongoing along Mindanao Avenue, Quezon City, Jan. 12, 2025. — PHILIPPINE STAR /MIGUEL DE GUZMAN

GOVERNMENT SPENDING is likely to slow in the first half of 2025 due to the election ban on public works and congressional insertions in the national budget, the Department of Budget and Management (DBM) said.

Budget Assistant Secretary Romeo Matthew T. Balanquit said government spending in the first two quarters “might be lower” compared with the same period in 2024 due to the public works ban ahead of the May elections.

The Commission on Elections (Comelec) will implement a ban on public works on March 28 or 45 days before the May 12 elections. Social welfare dole-outs are also prohibited during the period.

The Development Budget Coordination Committee earlier said there “may be a slowdown in project execution during the first half of 2025 on account of the upcoming midterm national and local elections.”

However, the DBM said that infrastructure spending ahead of the election will not be “disrupted” by the election ban, as “the phasing of the projects is already planned, especially in the transport sector.”

“The only infrastructure projects affected are those worth P707 billion, covering over 12,900 projects, the bulk of which are under the Department of Public Works and Highways (DPWH),” DBM Undersecretary Goddes Hope O. Libiran said.

At the same time, Mr. Balanquit said budget releases may be slower as the congressional adjustments under the 2025 General Appropriations Act will be subject to a process called For Issuance of Special Allotment Release Orders (FISARO) before being released.

The SARO will only be released once agencies meet the necessary requirements and secure approvals from the Executive Secretary and the Office of the President.

“Now, the release might not be that significant because of the P757-billion [adjustments], which is around 11% or 12% of the total budget. So, it’s really a big amount,” Mr. Balanquit told reporters on Jan. 16.

Last year, most of the national budget was already released around the first month without the required conditions.

Meanwhile, former Finance Secretary Margarito B. Teves said that spending on public works usually falls in April and May during election years due to the 45-day ban.

“However, we see the impact as minimal given that the National Government always seeks the exemption of infrastructure projects from the ban, particularly those of national significance,” he told BusinessWorld in an e-mail over the weekend.

Mr. Teves added that the ban will affect projects at the local and district levels more than those at the national level.

“Historically, government spending and therefore gross domestic product spending has dipped slightly on a quarter-to-quarter basis, but an uptick is usually shown in the quarter after the elections,” Ateneo School of Government Dean Philip Arnold “Randy” P. Tuaño told BusinessWorld.

He added that the government had already disbursed a “significant amount” on infrastructure projects, months before the election period started.

The Comelec has exempted 48 infrastructure projects of the Public-Private Partnership  Center such as the Metro Manila Subway Project.

“We will expect a continuation of infrastructure growth in the run-up to the May period,” Mr. Tuaño said.

For the rest of 2025, Mr. Teves said the level of public spending on infrastructure will largely depend on the improvement in the absorptive capacity of the DPWH to carry out projects given that it received more than P1 trillion in the national budget.

“Moreover, the frequency and severity of adverse weather conditions such as typhoons could cause disruptions and delays in the implementation of infrastructure projects especially those in the hard-hit areas,” he said. — Aubrey Rose A. Inosante

Second Trump term adds to PHL economic uncertainty

A “Make America Great Again” hat is seen on display on the trading floor at The New York Stock Exchange. — REUTERS

By Luisa Maria Jacinta C. Jocson and Aubrey Rose A. Inosante, Reporters

THE SECOND TERM of US President-elect Donald J. Trump could add more uncertainty to the Philippine economy, which could possibly impact trade prospects, financial flows, and monetary policy, analysts said.

However, the Philippines, which is heavily reliant on the US for business and economic activity, could also stand to gain from some of Mr. Trump’s policies, they added.

Mr. Trump is set to be sworn in as US president on Jan. 20. For his second term, he has vowed to impose tariffs of up to 60% on imports of Chinese goods and 25% for Canadian and Mexican imports, as well as a 10% universal tariff.

Finance Secretary Ralph. G. Recto told BusinessWorld that it is “too early to tell” what would be the economic implications of Mr. Trump’s policies on the Philippines.

“For now, there’s a lot of uncertainty. Having said that, there are also many opportunities,” he said in a Viber message.

Pantheon Macroeconomics Chief Emerging Asia Economist Miguel Chanco said that the economic impact of Trump 1.0 versus Trump 2.0 will be more global.

“Remember that during his first term he was focused mainly on punitive trade measures against China. This time around, he seems to be entering office with a more global anti-trade, protectionist agenda,” he said in an e-mail.

The International Monetary Fund (IMF) in its latest World Economic Outlook update warned about the “intensification of protectionist policies,” citing a “new wave of tariffs.”

These could “exacerbate trade tensions, lower investment, reduce market efficiency, distort trade flows, and disrupt supply chains, while also increasing inflationary pressures.”

“The impact of such policies would unfold differently across countries, influenced by trade and financial linkages, and would depend on the magnitude and nature of policy changes,” an IMF spokesperson said in an e-mail.

OPPORTUNITY
Mr. Recto, however, said he does not expect the US to impose very high tariffs on imports from all trading partners.

The United States is typically the top destination for Philippine-made goods. In November, exports to the US were valued at $969.09 million, accounting for 17% of the total export sales, data from the local statistics authority showed.

The tariffs could also present as an opportunity for the Philippines, Mr. Recto said. “In addition, western companies operating in China and Taiwan may move their operations to the Philippines.”

The recently passed Corporate Recovery and Tax Incentives for Enterprises to Maximize Opportunities for Reinvigorating the Economy Act could encourage investors to move to the Philippines, he added.

“It brings some certain level of comfort to me, however, that the economic team of (Mr. Trump) recently harped on a gradual application of additional tariffs that would give more time for different economies to adjust and recalibrate their own policies,”  Ruben Carlo O. Asuncion, chief economist at Union Bank of the Philippines, Inc. (UnionBank), said.

The Philippines is also not as reliant on exports as its neighbors, Mr. Chanco said.

“As such, should the future Trump administration push through with his campaign pledge to levy wholesale tariffs on all US imports, Philippine economic growth is unlikely to be as affected as its more trade-dependent neighbors,” he said.

“That being said, there’s no escaping the fact that the US remains one of the Philippines’ main export markets, so some pinch would be inevitable,” he added. 

First Metro Investment Corp. Head of Research Cristina S. Ulang said the Philippines could benefit from “friendshoring” given its decades-old alliance with the US.

Friendshoring is defined as a “growing trade practice where supply chain networks are focused on countries regarded as political and economic allies,” according to the World Economic Forum.

“Hopefully, if Mr. Trump’s attitude towards China would be more on bringing down the tensions, that should improve our trade,” Employers Confederation of the Philippines and President Sergio Ortiz-Luis, Jr. said via phone call. 

“We have lost a lot with China in terms of trade, in terms of tourism, and investment,” he added.

At the same time, the Philippines’ Information Technology and Business Process Management sector may face challenges but also opportunities under Mr. Trump’s second term.

“While a second Trump presidency may introduce new hurdles, such as potential shifts in outsourcing trends or tighter trade regulations, the demand for high-quality, technology-enabled services remains unwavering,” Jack Madrid, chief executive officer and president of the IT and Business Process Association of the Philippines, said.

“Protectionist policies, regardless of their origin, challenge us to innovate, upskill, and fortify our value proposition,” he added.

TIGHTER CONTROLS
Meanwhile, analysts warned of the impact of Mr. Trump’s tighter border controls and harsher immigration measures on remittances.

“At this stage, I’m more concerned about the remittance channel. We can’t hide from the fact that there is a not-insignificant number of undocumented Filipinos in the US,” Mr. Chanco said.

“If their status in the country is further compromised by the next administration’s immigration policies, then remittances from one of the country’s largest sources may be impinge.”

Mr. Asuncion also noted that remittance inflows are a “significant economic leg” of the Philippine economy. UnionBank expects overseas Filipino worker remittances to rise by 3% to $35.5 billion this year.   

“Downside risk to the remittance forecast would emanate from President-elect Trump’s tighter immigration policy, likely to reduce the number of unauthorized Filipino migrant workers in the US,” Mr. Asuncion said.

“Nonetheless, we maintain our view that the bulk of the remittances from the US are sent by nearly two million legal Filipino migrant workers all over the US.”

Economists also flagged the impact of these policies on the currency, inflation and monetary policy.

Markets are pricing in the inflationary pressures that could stem from Mr. Trump’s plans for tax cuts and tighter tariffs, which could slow the US central bank’s easing cycle.

GlobalSource Partners country analyst Diwa C. Guinigundo said the US Federal Reserve may keep policy rates higher for longer.

“Since Mr. Trump’s tax and tariff policies are potentially inflationary, the US Fed may not be as sanguine as to be more aggressive in its easing policy,” he said.

The Fed began its rate-cutting cycle in September, slashing rates by a cumulative 100 basis points (bps) last year.

“If this is the case, and with potential weakening of the peso this year, the BSP might be more careful in abandoning its fundamentally tight monetary policy,” Mr. Guinigundo said.

The peso fell to the record-low P59-per-dollar level thrice last year. Several economists, multilateral institutions and think tanks have forecasted that the local unit could breach the all-time low this year amid the stronger dollar.

“A stronger-than-expected US economy supports the strong US dollar narrative,” Mr. Asuncion added. 

Despite this, Mr. Chanco said this is unlikely to significantly impact the BSP’s own rate-cutting moves.

“I doubt, at this stage, that this will materially impact the BSP’s easing cycle, though, as the Monetary Board has plenty of room to ease — with inflation now subdued — given how aggressive its tightening cycle was in 2022-23,” Mr. Chanco said. 

“It’s worth remembering that unlike the US, the Philippine economy is clearly in the midst of a cyclical soft patch,” he added.

Mr. Asuncion said that within-target inflation should also allow the central bank to “ease its policy rate further and support its implicit goal of supporting growth past 6% and more employment.”

The BSP, which cut ahead of the Fed in August, delivered a total of 75 bps worth of cuts last year. This brought the policy rate to 5.75%.

Mr. Asuncion said they expect BSP to cut rates by another 75 bps this year to bring the benchmark to 5%.

“Front-loading the bulk of the three rate cuts this year of 25 bps each in the first half of 2025 would be appropriate amid offshore challenges likely to persist,” he added.

External debt service burden rises at end-Oct.

PHILSTAR FILE PHOTO

THE COUNTRY’S external debt service burden jumped by almost 20% as of end-October, preliminary data from the Bangko Sentral ng Pilipinas (BSP) showed.

Debt servicing on external borrowings climbed by 19.8% to $14.475 billion in the January-October period from $12.078 billion in the same period in 2023. BSP data showed principal payments surged by 23.6% to $7.846 billion from $6.349 billion in the same period in 2023.

Amortization accounted for over half (54.2%) of debt servicing during the period.

Meanwhile, interest payments rose by 15.7% to $6.629 billion in the first 10 months from $5.73 billion in the previous year.

At end-September, the external debt service burden as a share of gross domestic product (GDP) stood at 3.9%, up from 3.5% in the previous year.

Separate data from the BSP showed the Philippines’ outstanding external debt hit a record $139.64 billion as of end-September, higher by 17.5% year on year.

Broken down, this was composed of $86.88 billion in public sector debt and $52.76 billion from private sector obligations.

This brought the external debt-to-GDP ratio to 30.6% at the end of the third quarter.

The BSP’s external debt data cover borrowings of Philippine residents from nonresident creditors, regardless of sector, maturity, creditor type, debt instruments or currency denomination. — L.M.J.C. Jocson

PHL important for US as it counters China

FACEBOOK.COM/USEMBASSYPH/

By Kyle Aristophere T. Atienza, Reporter

THE Philippines will remain a key partner of the United States under President-elect Donald J. Trump, who is likely to tap Indo-Pacific allies as Washington thwarts China’s challenge to its international standing, analysts said.

Mr. Trump returns to the White House on Monday against the backdrop of increasing tensions in the South China Sea, which is claimed almost in its entirety by China that has been on a trade war with the US since the first Trump presidency.

“There is a lot of momentum behind the deepening US-Philippines alliance, and I expect that to continue,” said Gregory B. Poling, a fellow of the Southeast Asia program at the Center for Strategic and International Studies, in an e-mail.

“Nothing is likely to change at the military-to-military level on Jan. 21… On the economic front, it will be important for the US to remain committed to projects in the Philippines, especially the Luzon Economic Corridor and funding for the Philippines semiconductor industry under the CHIPS Act,” he added. 

The Luzon Economic Corridor, a project under the Indo-Pacific Economic Framework’s (IPEF) Partnership Global Infrastructure and Investment (PGI), seeks to boost connectivity between Metro Manila, Batangas province, and two former US military bases — Subic and Clark.

It also aims for other “high impact” infrastructure such as ports and “strategic” investments involving semiconductors, clean energy, and supply chains.

“These will be politically sensitive as President-elect Trump has criticized the CHIPS Act and PGI, but his administration should be made to understand how vital they are to the overall US-Philippines relationship,” Mr. Poling said.

Under outgoing President Joseph R. Biden, the US has elevated its economic partnership with the Philippines.

“We are confident the US-Philippines relationship will remain strong,” American Chamber of Commerce of the Philippines, Inc. (AmCham) Executive Director Ebb Hinchliffe said in a Viber message.

He said the business chamber has worked with American presidents of both parties — including Mr. Trump — “to strengthen economic ties between the US and the Philippines and spur economic growth in both countries.”

“We will always continue to do so under any president.”

Mr. Hinchcliffe said they have been particularly focused on the growth of the Philippine mining, infrastructure, manufacturing and logistics, agribusiness, tourism, and creative industries sectors.

“We have also been supportive of the growth of the Luzon Economic Corridor and hope to see continued progress on this important partnership between the US, Philippines, and Japan,” he added.

The Philippines is pinning its hope on the US government’s “ally-shoring” strategy, Philippine Economic Zone Authority (PEZA) Director-General Tereso O. Panga said, citing Mr. Trump’s trade policy pronouncements.

Mr. Panga said Mr. Trump seeks to further decouple the US from China. Mr. Trump has threatened to hike tariffs on imports from China, as well as other countries.

“In view of our status as one of the best performing economies in the region, the government can position the Philippines as a cost-effective alternative for offshore manufacturing/ally shoring for American and other multinational corporations that are shifting production out of China, Vietnam or Mexico,” he said.

Despite the tariff threats, the Philippines sees a “promising” cooperation with the US under the Trump administration with Manila being its oldest ally in the Indo-Pacific and “given our strong trade and investment relationship,” Mr. Panga said.

“Another compelling factor is the strategic location of the Philippines in the region, making it a vital hub for trade, investment, and logistics.”

The Philippine Statistics Authority said earlier this month the US was the largest destination of Philippine exports in November 2024, accounting for $969.09 million of the total.

Washington is also the fifth-largest source of Philippine imports with $621.30 million in November.

Currently, PEZA is home to 482 electronics manufacturing services and semiconductor manufacturing services (EMS-SMS) companies that provide critical backend support to their principal clients in the US, Mr. Panga said.

“Most of these are longstanding American (registered business enterprises) that have made the Philippines their manufacturing hub in the region.”

He noted that many of these companies have received support from the CHIPS Act’s International Technology Security and Innovation Fund to “enhance the host country’s electronics’ manufacturing capability and supply chain resilience.”

Considering the CHIPS Act, a bipartisan law that has been a cornerstone of the Biden administration’s industrial policy, Mr. Panga said the US and the Philippines will continue to prioritize “infrastructure development, clean energy, and semiconductor supply chains.”

“We are expected to focus as well on technology and other mutual cooperation areas such as Artificial Intelligence, Advanced Manufacturing, Agriculture, Green Ores Processing, Workforce Development, Disaster Prevention, Digital transformation, and Maritime security,” he added.

The stability of the South China Sea and the wider Indo-Pacific region amid China’s expansionist agenda has been at the heart of Philippine-US relations in recent years.

Washington, which has a mutual defense treaty with Manila, has been on the forefront of international of China’s intrusions into Philippines’ exclusive economic zone (EEZ) in the South China Sea.

Mr. Marcos, speaking before the Australian parliament last year, said the Philippines was on the frontline of a battle for regional peace.

“President Marcos can make the legitimate case that the Philippines has been at the vanguard of the pushback against China’s challenge to America’s international standing,” said Raymond M. Powell, a fellow at the Gordian Knot Center for National Security Innovation at the Standford University, noting that Beijing’s goal is to push the US out of East Asia.

“Xi wants to make China great at America’s expense, while the Philippines shares common interests with America in keeping East Asia free as prosperous and independent friends of the US,” he added in an e-mail.

Mr. Trump’s top diplomat pick, Florida Senator Marco Antonio Rubio, last week warned China to stop “messing around” the Philippines and Taiwan, noting that Washington would keep its defense commitments to Manila and Taiwan.

Mr. Powell said Mr. Marcos can further make the case that the US and the Philippines both have common interests in developing economic markets “free from exploitation and manipulation.”

“Philippine economic prosperity and security provide the US leverage against Beijing’s designs to displace America as Asia’s superpower,” he said.

Noting that Mr. Trump is an interests-based leader, Mr. Powell said Mr. Marcos “will win the argument to the extent that he convinces him that US and Philippine interests align.”

“I don’t foresee major threats to the alliance in the near future, beyond of course China,” Mr. Poling said.

“So, the most important thing will be to continue deepening alliance management and contingency planning, and for both governments to reiterate their commitments to uphold alliance obligations,” he added.

Alfredo Panlilio to lead MAP in propelling PHL’s progress through management excellence

MVP Group Chair Manuel V. Pangilinan (6th from left) inducted the Management Association of the Philippines (MAP) 2025 Board of Governors, led by Maya Bank Chair Alfredo “Al” S. Panlilio (5th from left) as the 77th President of MAP. The other members of the MAP Board are (from L-R) MAP Governor Marianne “Maan” B. Hontiveros, managing director of CEO Advisors, Inc.; MAP Governor Rene D. Almendras, consultant of Ayala Corp.; MAP Secretary Gil B. Genio, independent director of GT Capital Holdings; MAP Treasurer Wilson P. Tan, chair and country managing partner of SGV & Co. (EY Philippines); MAP Vice-President Michael “Mike” T. Toledo, director for government and public affairs of Metro Pacific Investments Corp.; MAP Assistant Treasurer Paolo F. Borromeo, president and CEO of Ayala Healthcare Holdings, Inc. (AC Health); MAP Governor Noel P. Bonoan, vice-chair, COO and head of advisory at KPMG R. G. Manabat & Co.; and MAP Governor Rex C. Drilon II, vice-chair of Center for Excellence in Governance.

Alfredo “Al” S. Panlilio, chairman of Maya Bank, Inc. and director of Philippine Long Distance Telephone Company (PLDT) and Smart Communications (Smart), is stepping up as the 77th president of the Management Association of the Philippines (MAP), a prestigious organization in the country that recognizes management excellence across different industries.

When it comes to leadership and business excellence, Mr. Panlilio is a familiar name. The MAP’s president for 2025 served as the president and chief executive officer (CEO) of PLDT, Inc. and Smart, as well as one of the founding members under the Digital Infrastructure pillar of the Private Sector Advisory Council (PSAC).

Mr. Panlilio has excelled in different high-level positions, starting with Senior Vice-President and Head of Customer Retail Services and Corporate Communication of the Manila Electric Company (Meralco) from 2010 to 2019.

During his service under the Meralco Group, he served as chair for subsidiaries Radius Telecoms, e-Meralco Ventures, Paragon Vertical Corp., Powersource First Bulacan Solar, and Pure Meridian Hydropower Corp. He was also the vice-chair of Aclara Meters Philippines and director of the following companies: CIS Bayad Center, Corporate Information Solutions, Customer Frontline Solutions, Meralco Energy, MRail, Inc., Meralco Industrial Engineering Services Corp., Comstech Integration Alliance, and MSpectrum. Mr. Panlilio also took on roles of a trustee for One Meralco Foundation and Meralco Power Academy. He also served as the associate board member of Semiconductor and Electronics Industries in the Philippines, Inc. (SEIPI).

On top of his current role at Maya Bank, Mr. Panlilio serves as the director of Philippine Veterans Bank, MultiSys Technologies Corp., and MultiPlay.

Mr. Panlilio has been recognized for his outstanding leadership in business communication excellence and customer management, earning him multiple accolades from the industry. He was honored as the CEO Excel Awardee of the International Association of Business Communicators Philippines (2013), CEO of the Year at the 2022 Asia Communication Awards, and one of the finalists in the Rising Star (Individual) category at the PLATTS Global Energy Awards (2015).

Alongside his business ventures, Mr. Panlilio is championing sports to boost both local and global relationships. He is a member of the Federation Internationale de Basketball (FIBA) Central Board and the second vice-president of the FIBA Asia Board. He also serves in the following sports organizations: the Samahang Basketbol ng Pilipinas (SBP) and MVP Sports Foundation as president, the Philippine Olympic Committee as first vice-president, and the National Golf Association of the Philippines as chair. During the FIBA Basketball World Cup in 2023, he served as the head of the Philippine local organizing committee.

Beyond sports, Mr. Panlilio also actively contributes to society by focusing on improving education for Filipinos. For instance, he is a trustee at the Ateneo Scholarship Foundation and Kapampangan Development Foundation.

Aside from Mr. Panlilio, the MAP’s Board of Governors this year consist of Metro Pacific Investments Corp. (MPIC) Director of Government and Public Affairs Atty. Michael “Mike” T. Toledo (Vice-President); SGV & Co. Chair and Country Managing Partner and Ernst & Young Global Member Practice Wilson P. Tan (Treasurer); AC Health President and CEO Paolo F. Borromeo (Assistant Treasurer); GT Capital Holdings Independent Director Gil B. Genio (Secretary); Ayala Corp. Consultant and Former Secretary Rene D. Almendras (Governor); KPMG R.G. Manabat & Co. Vice-Chair, COO, and Head of Advisory Atty. Noel P. Bonoan (Governor); Center for Excellence in Governance Vice-Chair Rex C. Drilon II (Governor); and CEO Advisors, Inc. Managing Director Marianne “Maan” B. Hontiveros (Governor).

This year’s board was inducted by MVP Group Chair and MAP Management Person of the Year 2005 Manuel “Manny” V. Pangilinan (MVP), who also served as the guest speaker during the 77th Inaugural Meeting last Jan. 15 at the Shangri-La The Fort in Bonifacio Global City, Taguig.

Leading with more integrity

Carrying the theme “Management Excellence for a Progressive Philippines” this year, the MAP, under Mr. Panlilio’s leadership, is in hopes for sharper impact across the country and the business community.

“I am deeply honored and grateful to serve as the 77th president of the Management Association of the Philippines. It is humbling to be included in the distinguished roster of presidents and leaders who have built MAP to what it is today,” Mr. Panlilio said.

As he begins his term, Mr. Panlilio pointed out the MAP’s clear focus on addressing the top concerns of management executives this year. In the dynamic world of business and management, recognizing the needs and challenges of leaders is paramount towards efficient leadership.

According to a recent MAP survey report, results of which were also shared during the aforementioned meeting, corruption remains a main concern of executives, along with concerns in education, economy, the ease of doing business, cybersecurity, climate change, and dealing with the local government units.

To address such concerns, Mr. Panlilio said, the MAP will focus on its four key areas: member engagement; country competitiveness; environment, social, and governance (ESG) and shared prosperity; and investing in youth. These areas will guide the association in sharpening impact and achieving better management excellence and a more progressive Philippines.

“For 2025, we will once again build on MAP’s legacy and its strengths, while forging forward to a relevant and progressive future. We’ve chosen a theme aligned with MVP’s mission of promoting management excellence for nation-building,” Mr. Panlilio said in his inaugural address.

Furthermore, Mr. Panlilio also shared that one of MAP’s plans is to continue working in addressing corruption through the Anti-Red Tape Authority (ARTA), an agency that plays a pivotal role in ensuring the ease of businesses among all agencies in the Philippine government.

Leveraging his experience at PLDT, Mr. Panlilio saw that ARTA opens a great opportunity to strengthen business management among companies, bringing about real positive changes within them.

“You know, when I was in PLDT, Inc. during the pandemic, we had some issues also; but ARTA came in a big way to help us. Actually, there was a directive by the President then to improve connectivity, and one of the hindrances at that time was the licensing and business permits,” the MAP president added.

With Mr. Panlilio’s enthusiasm about further developing and supporting MAP and its initiatives, the MAP is committed to strive forward to be a steady force in promoting management excellence for nation-building and for the betterment of the lives of Filipinos.

“In general, we will build on MAP’s ongoing activities that benefit our members and other stakeholders. While focusing on the four main thrusts, we will continue to pursue other advocacies and programs to adapt to the developments in the domestic global landscape,” he said. — Angela Kiara S. Brillantes

Maynilad says 2025 capex may reach over P30 billion

MAYNILADWATER.COM

WEST ZONE water concessionaire Maynilad Water Services, Inc. said its capital expenditure (capex) budget for 2025 could be P30 billion or higher as the company sees a better financial year.

“For this year, we’re looking at anywhere between P30 billion and above P30 billion (in capex),” Maynilad President and Chief Executive Officer Ramoncito S. Fernandez told reporters last week.

Mr. Fernandez said the budget will be allocated to water and wastewater projects, non-revenue water management programs and ongoing plant constructions.

Non-revenue water refers to water that is not billed and is lost through leaks or illegal connections.

Last year, Maynilad earmarked P31 billion in capex to fund its water and wastewater developments.

Maynilad is expected to have a better financial performance this year, according to Mr. Fernandez.

“The economy is still growing and definitely demand for water will still continue to grow. Water availability has significantly improved in the past 24 months. We’re looking forward to a much better year,” he said.

“Plus, all of our programs and projects have already started to yield a positive impact on our operations,” he added.

Maynilad Chairman Manuel V. Pangilinan said last week that the water provider was in talks with banks for its initial public offering (IPO). Maynilad’s legislative franchise requires it to list on the stock exchange by January 2027.

In November, Mr. Fernandez said that Maynilad would file its IPO application by the first quarter of 2025.

He added that the water provider was targeting a listing date of either April or July.

Maynilad serves Manila, except portions of San Andres and Sta. Ana. It also operates in Quezon City, Makati, Caloocan, Pasay, Parañaque, Las Piñas, Muntinlupa, Valenzuela, Navotas, and Malabon.

It also supplies the cities of Cavite, Bacoor, and Imus, and the towns of Kawit, Noveleta, and Rosario, all in Cavite province.

Metro Pacific Investments Corp., which has a majority stake in Maynilad, is one of three Philippine units of Hong Kong-based First Pacific Co. Ltd., the others being Philex Mining Corp. and PLDT Inc.

Hastings Holdings, Inc., a unit of PLDT Beneficial Trust Fund subsidiary MediaQuest Holdings, Inc., has an interest in BusinessWorld through the Philippine Star Group, which it controls. — Revin Mikhael D. Ochave

Rates of Treasury bills, bonds may end mixed

BW FILE PHOTO

RATES of the Treasury bills (T-bills) and Treasury bonds (T-bonds) to be auctioned off this week may be mixed after the Bangko Sentral ng Pilipinas (BSP) chief said they have room to further ease their policy stance.

The Bureau of the Treasury (BTr) will auction off P22 billion in T-bills on Monday, or P7 billion each in 91- and 182-day papers and P8 billion in 364-day papers.

On Tuesday, the government will offer P30 billion in reissued 10-year T-bonds with a remaining life of nine years and 14 days.

T-bill rate could track the mixed movements in benchmark short-term papers at the secondary market on expectations of a BSP cut next month, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.

At the secondary market, yields on the 91- and 182-day T-bills went down by 25.38 basis points (bps) and 19.34 bps week on week to end at 5.4973% and 5.6265%, respectively, based on PHP Bloomberg Valuation Service Reference Rates data as of Jan. 17 published on the Philippine Dealing System’s website.

Meanwhile, the 364-day T-bill saw its rate rise by 3.92 bps to 5.8954%.

BSP Governor Eli M. Remolona, Jr. this month said the Philippine central bank still has room to continue cutting interest rates as inflation is well within its annual goal, adding that current benchmark borrowing costs remain “restrictive.”

The Monetary Board has slashed benchmark borrowing costs by a total of 75 bps since it began its easing cycle in August, bringing its policy rate to 5.75%.

Mr. Remolona previously said that while the BSP remains in an easing cycle, 100 bps worth of cuts this year may be “too much” amid inflation concerns. He added that they will continue to bring down benchmark interest rates in “baby steps.”

The Monetary Board will hold its first rate-setting meeting for this year on Feb. 20.

Meanwhile, the reissued 10-year bonds to be auctioned off on Tuesday could climb to mirror the week-on-week increase in the tenor’s yield at the secondary market amid high global crude oil prices recently and cautiousness ahead of the inauguration of US President-elect Donald J. Trump, Mr. Ricafort said.

A trader said that the bonds could fetch rates ranging from 6.3% to 6.4%, with demand possibly reaching around P45 billion.

“The government securities market was very quiet [on Friday] amid a lack of catalysts. Players were noticeably cautious, and this will likely be the case [this] week,” the trader said in an e-mail.

At the secondary market, the 10-year bond went up by 18.48 bps week on week to end at 6.3333% on Friday.

Last week, the BTr raised P27.6 billion from the T-bills it auctioned off, higher than the P22-billion plan, as total bids reached P93.776 billion, more than four times as much as the amount on offer. This was also higher than the P70.975 billion in tenders seen on Jan. 7.

Broken down, the Treasury borrowed P9.8 billion from the 91-day T-bills, higher than the programmed P7 billion, as tenders for the tenor reached P37.863 billion. The three-month paper was quoted at an average rate of 5.588%, dropping by 19.4 bps from the previous auction, with the BTr only accepting bids with this yield.

The government likewise made a P9.8-billion award of the 182-day securities, above the P7-billion program, as bids reached P31.375 billion. The average rate of the six-month T-bill stood at 5.638%, falling by 27.3 bps, with the BTr only accepting tenders with this rate.

Lastly, the Treasury raised P8 billion as planned via the 364-day debt papers as demand for the tenor totaled P24.538 billion. The average rate of the one-year debt decreased by 4 bps to 5.891%, with bids accepted carrying rates of 5.85% to 5.9%.

Meanwhile, the reissued 10-year bonds to be auctioned off on Tuesday were last offered on Dec. 10, where the government raised just P15 billion as planned at an average rate of 5.89%, lower than the 6.25% coupon.

The Treasury plans to raise P213 billion from the domestic market this month, or P88 billion via T-bills and P125 billion through T-bonds. — Aaron Michael C. Sy

Future shock

PHOTO BY KAP MACEDA AGUILA

What does tomorrow have in store for an industry in rapid flux?

SO HERE we are, midway through the decade of the 2020s. It started turbulently with a pandemic, recovered in 2022 and 2023, and is now back to business as usual.

Almost, that is. Geo-political events like the Ukraine-Russia war, the conflict in Gaza, and the ouster of President Bashar al-Assad in Syria have gotten in the way of sure-footed global economic growth. The election of Donald Trump as the new President of the United States has also sent the world spinning in the face of potentially protectionist trade policies.

Tectonic shifts are also happening in the automotive field. The biggest, I believe, is the recently announced potential merger of global Honda and Nissan, with Mitsubishi waiting on the sidelines. This is envisioned to create a powerhouse company with combined sales of over eight million units, third only to Toyota and Volkswagen. Opinion is split about the strategic value of the planned merger, but one thing is clear: Nissan is in really dire straits. How the second largest automaker in Japan ended up in this situation will surely be fodder for many case studies and industry analysts for a long time to come.

Industry observers are already contending that the Honda-Nissan tie-up portends other major alliances or mergers. It would not be a surprise, actually. The stakes in this generational shift in mobility, automotive manufacturing and distribution are extremely high — and expensive. Research and development (R&D) for future technologies in the Connected, Autonomous, Shared and Electric (CASE) field needs very deep pockets. First, transformative technology costs a lot more than evolutionary ones. It’s a build-from-zero gambit that includes creating an entire supply chain and ecosystem, not just the technology. Second, the gestation period for R&D is long. That means payback will take many years and valuable capital will be tied up in an era where technology is very rapidly changing.

China is arguably ahead of the curve in the global race to electrified and autonomous mobility. A research article by Yuan Jia-Zheng and Carlo Braso Broggi in Business History chronicles domestic auto production in China as having only started in earnest in the mid-1980s to mid-1990s. In 2009, they report, the country became the largest automotive producer in the world, and in 2020, it accounted for a third of global auto production. As it grew its industry, the Chinese government bet huge on battery electric vehicles (BEV) or what it calls new energy vehicles (NEV). This allowed the state to focus its resources on building the requisite ecosystem to support electrified mobility.

Yuan and Broggi assert that China used “inward internationalization” to grow its capabilities. The authors explain that this may have included “foreign transactions, joint ventures or other activities that occur when firms lack capacity to invest abroad.”

They continued, “Inward internationalization is not so much driven by market mechanisms as by the necessity of acquiring technological skills and foreign market knowledge.” Global automakers had to play by China’s rules because they needed to be represented in the world’s largest auto market. Today, Chinese automakers have developed their homegrown ability to build cars as well as their savvy for international investment. This, in my mind, is what is driving the wave of exports, new Chinese factories and distribution partnerships that we are presently witnessing — in the Philippines and in many countries across the globe.

BYD is taking the fight to Tesla in terms of sales of electric vehicles. In fact, Statista recently reported that BYD already beat Tesla to become the world’s largest EV manufacturer, albeit by a nose. BYD reported 1,777,965 units produced in 2024 versus Tesla’s 1,774,442 units. In terms of sales, BYD reportedly sold 1.765 million BEVs and an additional 2.485 million plug-in hybrid electric vehicles (PHEVs) for a total of 4.3 millions units sold globally. This represents 41% growth versus 2023. China is teeming with car brands and distribution channels. It is not unlikely that a shakedown and consolidation might take place.

For example — even if it seems like a minor blip on the radar — it was announced last November 2024 that Geely would merge its Lynk & Co and Zeekr brands. Nikkei Asia reported that in a conference call, Gui Shengyue, a senior executive at Geely, said that if the two brands did not merge, it would lead to competition between them and result in a redundant investment, which would negatively impact Geely Auto, their major shareholder. “The integration is imperative as competition in the domestic market is heating up. We need to enhance our competitiveness by (increasing) scale,” Nikkei Asia quoted Gui as saying. Could this be a harbinger of what lies in the wings?

In the Philippines, Chinese automakers have entered in force, introducing a slew of many different brands and models. By varying counts, there are supposedly between 20 to 30 such brands. Adding to the mayhem, the Chinese OEs have tied up with different local partners, with some taking over the distribution in short time. Dealer networks have also been established by each brand. If mergers and alliances among the Chinese brands happen, the pregnant question is how the surviving brand will support the cars on the road of the acquired brand. Also, how will the distributor organizations and dealer networks be integrated given the inevitable overlaps in operations? Case in point are the Lynk & Co and Zeekr brands. How will this merger unfold in the Philippines where Lynk & Co is being distributed by the United Asia Automotive Group, Inc (UAAGI) and Zeekr is handled by the Autohub Group? I am certain the parent company of both brands — Geely Auto — has a plan in mind. Presumably, the same question can be asked of the planned Honda-Nissan (and Mitsubishi) merger. We will have to wait and see.

There is much going on in the auto industry and, to be sure, much more is waiting to unfold. The generational transition in mobility will entail a number of upheavals but, ultimately, this will take us to better days ahead.

Semirara Mining and Power sets P6.9-B capex for 2025

SEMIRARAMINING.COM

SEMIRARA Mining and Power Corp. (SMPC) expects its capital expenditure (capex) budget for this year to reach P6.9 billion, with a significant portion going to its coal business.

Around P5.8 billion is allocated to the coal segment for “refleeting initiatives and additional acquisition of mining and support equipment,” the company said.

SMPC’s subsidiary SEM-Calaca Power Corp. accounted for P0.7 billion, while P0.4 billion is allocated to Southwest Luzon Power Generation Corp. Both amounts are for maintenance activities and initiatives to enhance fuel and feed systems.

The 2025 capex would be higher than the budget the company allocated for last year, which amounted to P6.6 billion.

SMPC reported 16.5 million metric tons (MT) in coal shipments for 2024, higher by 4.4% from the previous year, driven by stronger demand from China and domestic markets.

Foreign shipments increased by 4% to 8.4 million MT, while domestic shipments rose by 4% to 8 million MT.

SMPC President and Chief Operating Officer Maria Cristina C. Gotianun said that the company hit its maximum coal production of 16 million MT under its existing environmental compliance certificate for the third consecutive year.

For the third quarter, SMPC’s earnings grew by 8% to P3.1 billion due to reduced contribution from the coal segment amid stabilizing market indices.

“While we anticipate market prices to further normalize in 2025, we remain focused on strengthening our customer network and enhancing operational efficiencies to effectively support national energy security and meet the growing demand from the industrial and cement sectors,” Ms. Gotianun said. — Sheldeen Joy Talavera

Gov’t readies offshore bond issuance

BW FILE PHOTO

THE BUREAU of the Treasury (BTr) is readying an issuance of offshore bonds but will wait for more favorable market conditions amid elevated US benchmark yields.

National Treasurer Sharon P. Almanza told reporters last week that while an offshore issuance within the first half is “still a possibility,” the government is still deciding on the timing.

“We’re doing all the preparatory work so that we can be ready, market permitting,” Ms. Almanza said. “In the past few weeks, US Treasury yields have been going up. That’s what we’re monitoring. The 30-year US Treasury is at almost 4.9%. It’s close to 5%. So, imagine if we’re the one issuing, it would be almost 6%… That’s too high.”

“We want to borrow at the lowest possible cost.”

On Friday, US Treasury yields turned higher as upbeat economic data and earnings appeared to help investors shrug off any jitters ahead of the US presidential inauguration, Reuters reported.

Yields drifted higher in a choppy session after the upbeat housing and industrial production data supported expectations that the US Federal Reserve would slow the pace of rate cuts.

The yield on benchmark US 10-year notes rose 1.5 basis points (bps) to 4.621% from 4.606% late on Thursday while the 30-year bond yield rose to 4.8535% from 4.845%.

The two-year note yield, which typically moves in step with Fed interest-rate expectations, rose 4.5 bps to 4.283%, from 4.238% late on Thursday.

Meanwhile, Ms. Almanza said the government remains “open” to issuing Japanese yen-denominated bonds this year as part of its offshore borrowing program.

The National Government usually frontloads its borrowings to lock in favorable interest rates.

For this year, gross borrowings are expected to reach P2.545 trillion, based on the 2025 Budget of Expenditures and Sources of Financing.

Out of the total, P507.408 billion will come from external sources, while P2.038 trillion will be sourced from the domestic market.

As for local borrowings, Ms. Almanza said the government is also open to doing a peso-denominated Sukuk bond issue.

Meanwhile, the NG’s plan to offer government securities via electronic wallet platform GCash dubbed as GBonds could be launched by next quarter as details are still being ironed out, she added.

Finance Secretary Ralph G. Recto last year said the government was set to launch GBonds in December, allowing retail investors to buy and sell government securities through the GCash app. — ARAI with Reuters

Five stars for Volvo EX30 in Euro NCAP safety tests

PHOTO FROM VOLVO PHILIPPINES

THE VOLVO EX30 battery electric vehicle scored a maximum five-star rating in the latest round of safety testing conducted by the European New Car Assessment Program (Euro NCAP), a leading independent car safety assessment program in Europe that helps customers make informed decisions about the safety performance of cars on the market.

“While we always design our cars to be safe in the real world and not only to excel in safety ratings, this result underscores the strong safety credentials of the EX30,” said Volvo Safety Center Head Åsa Haglund. “With the EX30, we have taken our city safety to the next level.”

The EX30’s safety systems are developed through Volvo’s unique safety knowledge gained from research in real-world accidents for over 50 years, and is designed to help protect its driver and passengers in the event of a crash in real life, said the company.

It does so through modern restraint technology, as well as a structural design that fulfills Volvo’s pioneering in-house safety requirements. These requirements often exceed official testing requirements and are designed to prepare cars for various real-world scenarios which can sometimes be far more complicated than standardized testing. The EX30 also comes with an advanced suite of active safety features designed to help the driver avoid and mitigate collisions or risks. For example, an advanced driver alert system comes as standard and helps to assure safety even when the driver is not at his or her best.

In the city, the EX30’s Intersection Auto Brake is engineered to prevent or lessen accidents at intersections by automatically stopping the car if another vehicle unexpectedly crosses the driver’s path. Additionally, the EX30 features a “door opening alert” that uses visual and audio cues to warn the driver if activated. This is particularly vital when opening the door as a cyclist passes by, helping to reduce the “dooring” incidents that lead to many cycling crashes.

The Volvo EX30 is priced here at P2.99 million. For more information, e-mail inquiry@volvocarsph.com or visit https://www.volvocars.com/ph.

Fighting corruption the managerial way

ORIGINAL PHOTO BY JESUS MONROY LAZCANO-UNSPLASH

On Nov. 25, BusinessWorld published an article entitled, “Economic effects of corruption” written by Benjamin R. Punongbayan, a member of the Board of Governors of the Management Association of the Philippines.

He concluded his article thus:

“I purposely confined myself to analyzing the economic effects of corruption in government, except for a few comments in passing that corruption, in my opinion, is not a part of Philippine culture.

“I avoided commenting on the underlying issue of righteousness regarding the practice of corruption. I do not think I have the right to suggest to anyone to be like Mother Teresa.”

Like, Mr. Punongbayan, I would like to approach corruption as a management rather than a moral issue. How would a member of the Management Association of the Philippines go about fighting corruption, not as a crusader but as a manager?

We suggest the following principles guide his actions:

Bypass the corrupt middleman. In January 2013, the government of India, tired of relying on its corrupt agriculture bureaucrats, decided to bypass them and go directly to the farmers.

The Indian government introduced the Direct Benefit Transfer or DBT scheme to streamline the transfer of government-provided subsidies from various Indian welfare schemes directly into the beneficiaries’ bank accounts. This has been one of the most ambitious financial inclusion initiatives ever seen anywhere in the world, bringing over 330 million people into the formal financial sector. By 2020, 318 subsidy schemes from 53 ministries have been directly transferred to the farmer beneficiaries.

In its May 21, 2022 cover story on India, the Economist noted that the Indian government used a direct, real-time, digital welfare system to pay $200 billion over three years to about 950 million people. And the program is so successful that India is now a wheat and rice exporter.

The Philippines has also successfully bypassed its corrupt middlemen.

As reported by the World Bank, the conditional cash transfer (CCT) program, locally known as Pantawid Pamilya Pilipino Program or 4Ps, is a government program that provides conditional cash grants to the poorest of the poor in the Philippines.

The program has one of the most comprehensive poverty targeting databases in the world today, covering 75% of the country’s population. It has been used extensively to identify poor and near-poor beneficiaries for national and local government programs.

In the past, we have advocated that the excise tax collected on the importation of rice be sent directly to the rice farmers as cash instead of spending it on our corrupt bureaucrats. Additional budgets for the bureaucracies could also be converted into cash and deposited directly in the bank accounts of the intended beneficiaries.

Unfortunately, the present Secretary of Agriculture is pursuing a reverse course.

Government may regulate but never operate. The Department of Agriculture (DA) proposes to set up cold storage and warehousing facilities for the use of farmers. From a management point of view, the DA has neither the expertise nor experience to operate businesses, which is what these facilities are. First of all, constructing these facilities will require compliance with government rules on purchasing, rife as they are with corruption. Secondly, if the facilities do get constructed, the management will be very bureaucratic and not business oriented. Thirdly — and most importantly — the intended users of the facilities, the farmers, will not have the money to pay for the services provided.

Far better is to encourage the private sector to build and operate these facilities with the commitment that the funds earlier earmarked for the construction and operation of these facilities by the government will be issued as vouchers to farmers, who can then use the vouchers for availing of the services of the facilities.

The DA will regulate the operation of these facilities to assure that the farmers are getting a fair deal from the use of their vouchers. This does not eliminate the corruption that may arise in the issuance of the vouchers. But in management terms, these are friction costs, still allowing the system to operate albeit less efficiently rather than fatal costs forcing the system to collapse.

Government should regulate broadly not deeply. Let us take the case of two regulatory bodies in transportation, the Civil Aeronautics Board (CAB) in air transportation and the Land   Transportation Franchising and Regulatory Board (LTFRB) in land transportation.

The CAB regulates the routes for both local and foreign airlines merely by setting the number of passenger seats that will be allowed on each route, i.e. 30,000 weekly passenger seats on the Manila-Seoul route. The airlines then determine the aircraft that will be used, the frequencies that they will offer, the services they will provide, i.e. economy or business class, and the fares they will charge. The CAB’s role is to ensure that there is competition on the routes so the consumer will benefit the most.

Meanwhile, the LTFRB regulates the more than 230 jeepney routes in Metro Manila alone (in addition, the LTFRB regulates all the routes in the entire Philippines). Given these routes, which are more numerous than the air routes, the LTFRB still insists on micro-managing the issuance of franchises; determining the number of vehicles in each route, the type of vehicles for the route, and the fares to be charged. The license issued by LTFRB is for a vehicle for a very specific route. Thus, if a route has a surplus of vehicles, vehicles assigned to that route cannot be transferred to another needier route. In sharp contrast, the CAB allows the airplanes of an airline to fly in any route that they are needed.

You may judge which regulatory agency is more corrupt.

Corruption should be made local. The crusader makes no distinction where corruption is concerned while the manager makes a distinction among different types of corruption.

The manager would seek to devolve most government functions to the lowest level of government, knowing that corruption on the local level is better managed.

Corruption on the national level is more comprehensive. National Government officials can steal not only from the taxes collected but also from the loans obtained by the government through domestic borrowing, i.e. treasury bills, international borrowings, i.e. samurai bonds, and international agencies such as JICA, ADB, and the World Bank. In effect they are also stealing from future taxes that will be collected to pay off the loans. The capacity of the local governments to borrow is more restricted.

Accountability on the local level is more demonstrable and so more effective. In the last election of 2022, the President — who cannot run for re-election after his six years — is not held accountable by the voters while the mayors, who serve three years and can be elected for up to three terms, can be held accountable by the voters. In the Metro Manila local elections, the mayors who performed well won by landslide margins while those who performed badly lost to their challengers.

Corruption should also be made local with respect to the Department of Education (DepEd) by devolving grade schools and high schools to the local government units. Let’s take the specific case of textbooks.

According to EdCom II, despite substantial budget allocations, only 27 textbooks have been procured for Grade 1 to Grade 10 for public schools since 2012. DepEd’s budget utilization data show that from 2018 to 2022 alone, a total of P12.6 billion had been allocated to textbooks and other instructional materials, but only P4.5 billion (35.3%) had been obligated and P952 million (7.5%) had been disbursed.

If the purchase of textbooks is devolved to the local governments, specifically to the school boards, corruption may still occur, but the books will be available to the students. If they are not, the outraged parents can confront the mayor as well as the members of the school board who are from the area and known to the parents. Currently, they cannot even identify the faceless bureaucrats in the head office of DepEd in charge of purchasing the textbooks and so are responsible for the lack of books for our public-school students. As with books, so also with computers and other learning materials.

When corruption is on the national level, citizens who despair of the situation can only emigrate to another country. Citizens who despair of corruption in their town or province can always move to another locality. By voting with their feet, they also exert pressure on their local officials to moderate their greed.

In sum, we argue that another approach towards fighting corruption is to consider it, not as a sin to be cleansed but a management problem to be solved.

 

Dr. Victor S. Limlingan is a retired professor of AIM and a fellow of the Foundation for Economic Freedom. He is presently chairman of Cristina Research Foundation, a public policy adviser and Regina Capital Development Corp., a member of the Philippine Stock Exchange.

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