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Gross borrowings up 22% in Feb.

BW FILE PHOTO

By Luisa Maria Jacinta C Jocson, Reporter

THE NATIONAL Government’s (NG) gross borrowings rose by 22% in February as domestic debt surged, the Bureau of the Treasury (BTr) reported.

Data from the BTr showed that total gross borrowings jumped to P419.973 billion in February from P343.625 billion in the same month a year ago.

Month on month, gross borrowings more than doubled (106.7%) from P203.151 billion in January.

Nearly all of February’s gross borrowings (98.9%) came from domestic sources.

Gross domestic debt climbed by 26.7% to P415.232 billion during the month from P327.641 billion a year earlier.

This consisted of P341.412 billion in retail Treasury bonds (T-bonds), P60 billion in fixed-rate T-bonds, and P13.82 billion in Treasury bills (T-bills).

On the other hand, gross external debt fell by 70% to P4.741 billion in February from P15.984 billion in February 2023. External borrowings during the month were composed entirely of new project loans.

Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said that borrowings in February were significantly higher due to the retail Treasury bond (RTB) issuance.

The government raised a record P584.86 billion from its offering of five-year RTBs in February, exceeding the P400-billion target set by the BTr.

Mr. Ricafort also attributed the rise in borrowings to the wider budget deficit amid high borrowing costs.

Separate data from the BTr showed that the NG’s budget deficit widened by 54.81% to P164.7 billion in February from P106.4 billion a year earlier, driven by a 22.14% surge in state spending.

“This increase in borrowings may be attributed to higher financing needs to support various government programs and initiatives, covering budget deficits, managing local government debt profiles, and implementing subsidy measures due to inflation and El Niño,” Security Bank Corp. Chief Economist Robert Dan J. Roces said in a Viber message.

TWO-MONTH PERIOD
Meanwhile, BTr data showed that gross borrowings declined by 12% to P623.124 billion in the January-February period from P710.488 billion last year.

External borrowings in the first two months of the year plunged by 67% to P66.387 billion from P203.547 billion in the year-ago period. This was composed of P56.298 billion in program loans and P10.089 billion in new project loans.

Domestic debt stood at P556.737 billion, up by 9.8% from P506.941 billion in the same period a year ago.

Broken down, this consisted of P341.412 billion in retail T-bonds, P190 billion in fixed-rate T-bonds and P25.325 billion in T-bills.

For the coming months, Mr. Ricafort said the upcoming global bond offering could add to NG’s borrowings.

The BTr is finalizing the details of the government’s first global bond offering this year, Finance Secretary Ralph G. Recto said earlier. No details have been released.

“However, an important positive offsetting factor would be the seasonal increase in tax revenue collections in April that could help narrow the budget deficit and NG debt,” he added.

Taxpayers have until April 15 (Monday) to file their annual income tax returns with the Bureau of Internal Revenue (BIR). The agency is expected to collect P405.9 billion during the month.

“The expectation of further increases in borrowings this year depends on several factors, including the country’s economic growth, government budget and expenditure plans, market conditions, and debt sustainability concerns,” Mr. Roces added.

The government’s borrowing program is set at P2.46 trillion, with P1.85 trillion to be raised from the domestic market and P606.85 billion from foreign sources, according to the latest Budget of Expenditures and Sources of Financing data.

Investors ‘cautiously optimistic’ on Philippines amid headwinds

FOREIGN INVESTORS are “cautiously optimistic” about the Philippine economy, which is expected to grow by 6-7% this year. — PHILIPPINE STAR/ WALTER BOLLOZOS

By Luisa Maria Jacinta C. Jocson, Reporter

INVESTORS are “cautiously optimistic” on the Philippines amid geopolitical and macroeconomic headwinds, Bank of America’s (BofA) top executive in the Philippines said.

“We’ve seen a lot of investors looking at the Philippines in particular, because we know Southeast Asia has been a very interesting market,” Bank of America Country Executive for the Philippines Vincent Valdepeñas told BusinessWorld in an interview.

“When we talk to companies, they’re cautiously optimistic. There are still a lot of geopolitical and macroheadwinds,” he added, citing ongoing conflicts and natural calamities that could stoke inflationary pressures.

Mr. Valdepeñas said many foreign investors still see the Philippines as a “very strong market, given its demographics.” The economy’s resilient growth is one bright spot driving investor sentiment, he added.

In 2023, Philippine gross domestic product (GDP) growth slowed to 5.5% from 7.6% in the previous year. The Philippines was still among the top performers in the region.

“On the economy side, we do have the momentum now. We just don’t want any shocks that will stop this strong, consumer-driven growth,” he added.

Economic managers are targeting 6-7% GDP growth this year.

Mr. Valdepeñas said the Philippines is seeing interest mainly from investors in the US, Europe, Japan and China.

“The key is that the government is open now for investments and we just have to keep on monetizing it,” he said.

He cited the need to ramp up government spending, particularly on infrastructure such as tollways, airports and trains.

“When we execute that, that will really have a multiplier effect on the economy. These are the basics for us to be able to leapfrog and push the economy to the next level.”

Infrastructure is one of the Marcos administration’s priority investment areas. It plans to allocate 5-6% of GDP annually for infrastructure spending. The government’s flagship infrastructure program currently has 185 “high-impact” projects worth P9.14 trillion.

Mr. Valdepeñas said the Philippines should focus on improving investments in manufacturing.

The government can also attract more investors by streamlining processes and improving the ease of doing business, he said.

“We just have to implement it to make it easier for foreigners to invest in the Philippines. It’s really marketing the Philippines and telling them what the opportunities are,” Mr. Valdepeñas said.

MARKET OUTLOOK
Meanwhile, Mr. Valdepeñas said he is optimistic on the further opening of the country’s capital markets.

“We do see that the equity markets will probably be more active in the second half when we see rate cuts and see the valuations better. It’s much more active now compared to the past two years,” he said.

Strong demand is also seen from global investors, Mr. Valdepeñas said, highlighting the recent Metropolitan Bank & Trust Co. (Metrobank) dual-tranche issuance.

In late February, Metrobank raised $1 billion through an offering of five- and 10-year dollar-denominated senior unsecured notes. This was double the initial target of $500 million as the offer was more than 11 times oversubscribed. Orders from global investors reached $5.6 billion.

BofA Securities and UBS were the joint global coordinators and bookrunners for the issuance, with Mitsubishi UFJ Financial Group and First Metro Investment Corp. mandated as joint bookrunners.

“As you can see, there’s a lot of issuers now starting to come in as they can see there’s interest, especially in the Philippines on the investor side,” Mr. Valdepeñas said.

“The (dollar-denominated) debt side is very, very open and investors are really looking to put their money to work, especially on the fixed-income side.”

Mr. Valdepeñas noted the government’s push to broaden the capital markets and increase liquidity.

“Foreign investors want to have really active and liquid capital markets. The problem is if your market is not as liquid, foreign investors will also have a hard time exiting or even buying. If you compare it to our Southeast Asian neighbors, it’s very liquid there,” he said.

“We need more issuers that have a bigger float or issuers that are more public. That will help the foreign investors to come into both the equity and in the local bonds market.”

Both the central bank and Finance department have signaled the need to broaden the country’s capital markets.

The Philippines can look at best practices from Singapore, Mr. Valdepeñas said.

“If we can replicate the liquidity and policies of a market like Singapore, then that’s good… The goal is to fix the liquidity, to get more companies to issue in the Philippines. So, we get more money coming in, cause the problem is the free float is small and you can’t trade. If somebody wants to buy, it’s hard to buy.”

SLOW TOURISM RECOVERY
Meanwhile, BofA Global Research in a separate report said that the Philippines’ tourism recovery has been “hurt” by the slow return of Chinese travelers.

“The pace of international tourism recovery has been uneven across the Asia region with Japan and Vietnam leading the way but China, Hong Kong and the Philippines lagging,” it said in a commentary.

BofA Global Research noted that tourist arrivals are still below pre-COVID levels in the Philippines. Chinese tourists have only resumed overseas travel last year.

“Recovery has been slower for places that depend heavily on Chinese tourists, such as the Philippines and Hong Kong. Specifically, the latest data show Chinese arrivals are only tracking at 20-30% of pre-COVID levels in the Philippines, below trends elsewhere in the region,” it added.

Latest data from the Tourism department showed that the Philippines logged 5.45 million international visitors in 2023, surpassing its 4.8 million target.

South Korea was the top source of foreign arrivals, accounting for 1.44 million tourists or 26.41% of the total. This was followed by the US (16.57%), Japan (5.61%), Australia (4.89%), and China (4.84 %).

“On the other hand, the return of Chinese travelers might be a gradual process. The good news is that according to the Civil Aviation Administration of China, scheduled international flights in China are expected to return to 85% of 2019’s level in the next six months, higher than the current recovery ratio of sub-70%. But the complication is that flight capacity recovery likely won’t be evenly distributed across countries,” BofA added. 

ADB urges Philippine gov’t to broaden online tax take

Figures are seen in front of displayed social media logos in this illustration taken on May 25, 2021. — REUTERS

THE PHILIPPINE government must consider expanding taxes for digital services and enhance revenue collection efforts, an Asian Development Bank (ADB) official said.

“We know with just from the COVID [pandemic,] the proliferation in some of the consumption on online consumption and buying… so I think that’s an area where we could look at, probably broadening the tax take there,” ADB’s Philippines Country Director Pavit Ramachandran told a media briefing on Thursday.

The Department of Finance (DoF) has included the proposed value-added tax on digital service providers (DSPs) in its list of priority measures.

The DoF earlier said it “seeks to level the playing field between local and foreign DSPs by clarifying that services provided by the latter in the country are subject to VAT.” It estimates that the VAT on nonresident DSPs will generate P83.8 billion in revenues from 2024 to 2028.

The House of Representatives approved House Bill No. 4122, which seeks to impose a 12% VAT on digital service providers, on final reading in late 2022.

A counterpart measure is still pending at the Senate plenary for second reading.

The Development Budget Coordination Committee revised its budget deficit ceiling to P1.48 trillion this year from P1.39 trillion set previously. The government aims to collect P4.27 trillion in revenues, and at the same time, spend P5.75 trillion this year.

“What needs to happen, in parallel, is obviously boosting the private sector side. Because that would ensure that you’re getting the return on some of these infrastructure investments,” Mr. Ramachandran said.

“It’s about having adequate fiscal space to continue prioritizing the essential expenditures,” he added.

The government must prioritize spending in agriculture, health, education and infrastructure, Mr. Ramachandran said.

“We are seeing a lot of educational outcomes still impacted by the scarring from COVID and some of the labor market outcomes as well,” he added.

The Philippines still lags behind its regional peers as an investment destination, according to the ADB’s latest Asian Development Outlook. 

Fixed investments in the Philippines was estimated at around 20% of GDP since 2013, lagging behind neighbors such as Vietnam and Indonesia where fixed investments account for 30% of GDP. — BMDC

US private sector ready to invest more in PHL

United States dollar banknotes and an American flag are seen in this multiple exposure illustration photo. — JAKUB PORZYCKI/NURPHOTO VIA REUTERS CONNECT

A MAJOR American business group is vowing to help boost trade between the United States and the Philippines, as President Ferdinand R. Marcos, Jr. called on Washington to quicken the revival of its special incentives program for Manila.

The United States Chamber of Commerce said it is committed to working with the US and Philippine governments and their respective private sectors to keep the momentum of commercial ties between the two allies.

“US-Philippine trade has not seen the growth that many of the Philippines’ neighbors have enjoyed in recent years,” US Chamber of Commerce Senior Vice-President for Asia Charles Freeman said in a recent business forum attended by Mr. Marcos, based on a statement posted on the Chamber’s website.

“The US Chamber of Commerce is committed to working with the Philippine and US governments and private sectors to close this gap and realize the full potential of our bilateral commercial relationship,” he added.

The US is the largest destination of Philippine-made goods, accounting for $11.54 billion or 15.7% of the Philippines’ export value last year. The US is also the fifth-largest source of Philippine imports last year at $8.41 billion.

“The US private sector is ready to invest more in the Philippines, recognizing its potential for growth. We warmly welcome the invitation from the Philippine government for increased investment and partnership,” US-ASEAN Business Council President and Chief Executive Officer Ted Osius was quoted as saying.

“The momentum in US-Philippines relations reflects a steadfast commitment to mutual prosperity and our long-lasting, powerful alliance,” he said.

In addressing the business forum, Mr. Marcos said: “The Philippines is open to US businesses.”

Last month, a high-level delegation of US companies led by US Commerce Secretary Gina Raimondo vowed to invest $1 billion in the Philippines, spanning electric vehicles, digitization, and green energy.

The US has been at the forefront of international condemnation of China’s intrusions into the exclusive economic zone of the Philippines, a much smaller nation that has been seeking more economic and security partnerships.

At the same forum, Mr. Marcos asked the US Congress “to fast-track the reauthorization of the US GSP program,” according to a statement from his office.

He noted that the Philippines has been a major market for US products. Citing data from the US Department of Agriculture, he said the Philippines in 2021 was the eighth-largest market for US agricultural exports and the top market in Southeast Asia.

The Philippine leader also pushed for a free trade agreement with the US, saying it will complement a US-Philippines partnership on critical minerals.

“The benefits for concluding an FTA  (free trade agreement) together with a Critical Minerals Agreement between both our countries will be transformative and will create new jobs, strengthen supply chains, establish new businesses, and upskill our workforce,” he said.

In April last year, US Trade Representative Ambassador Katherine Tai said an FTA with the Philippines was not on the table as the Biden government is focused on the Indo-Pacific Economic Framework (IPEF), of which Manila is a member.

INDO-PACIFIC BUSINESS FORUM
Meanwhile, Mr. Marcos said the government will explore closer ties with its neighbors in the Indo-Pacific region.

“Looking ahead, the upcoming Indo-Pacific Business Forum scheduled for May 21 this year in Manila, promises to be a significant platform for fostering infrastructure development and reinforcing economic ties in the region,” he said on Sunday.

The US Trade and Development Agency is hosting the Indo-Pacific Business Forum for the first time in Manila. It is expected to gather over 500 senior executives and government officials.

“This forum will serve as a catalyst for driving investment and growth in emerging economies,” he said. — Kyle Aristophere T. Atienza with inputs from JVDO

PSE OKs initial listing of OceanaGold IPO shares

THE Philippine Stock Exchange (PSE) has approved OceanaGold Philippines, Inc.’s listing of 2.8 billion shares for its P7.9-billion initial public offering (IPO) under the bourse’s main board.

In a notice posted on its website dated April 12, the PSE said it had approved the initial listing of the stocks with a par value of 10 centavos each.

The local unit of Australian-Canadian miner OceanaGold Corp. delayed its listing date to May 13 from its original May 7 target.

The Philippine unit operates the Didipio gold and copper mine in Nueva Vizcaya in northern Philippines.

The PSE approval is subject to OceanaGold’s compliance with post-approval conditions and requirements of the exchange, the Securities and Exchange Commission and other relevant regulatory bodies, it added.

“The IPO will have a firm offer of 456 million secondary common shares with an offer price of up to P17.28, subject to a book-building process,” the PSE said.

The offer is beyond the minimum requirement of 10% provided in the mining company’s renewed financial or technical assistance agreement.

The offer period will be from April 29 to May 6, based on the latest prospectus dated April 12.

If the listing pushes through, the company will be the first Philippine IPO this year. It will be followed by the public listing of Saavedra-led Citicore Renewable Energy Corp. on May 31.

The proceeds of the maiden share sale will go to OceanaGold Philippines Holdings, Inc. (OGPHI), a wholly owned unit of the Australian-Canadian miner.

The Securities and Exchange Commission approved the IPO on March 12.

OceanaGold tapped BDO Capital & Investment Corp. as the domestic underwriter and bookrunner for the offer, while CLSA Ltd. will be the international underwriter.

Last month, OceanaGold Chief Executive Officer Gerard M. Bond said the company is looking for another mining site in the country.

He added that OceanaGold is looking at spending $5-$7 million this year on drilling and exploration.

OceanaGold expects to produce 120,000 to 135,000 ounces of gold and 12,000 to 14,000 tons of copper at its Didipio mine this year.

PSE President and Chief Executive Officer Ramon S. Monzon said in March that he remains optimistic that the local bourse operator would hit its target of six IPOs this year.

The Senate seeks to start next month plenary debates on a measure that seeks to simplify the tax regime for the mining industry.

The House of Representatives approved the bill in September. Its version proposes margin-based royalties and a windfall profit tax on large-scale miners.

The Finance department wants a simpler mining regime with just four windfall profit tax tiers from 10 tiers under the House bill. — Revin Mikhael D. Ochave

Conti’s, Wendy’s eye 12% growth in sales with new provincial stores

CONTIS.PH

CONTI’S and Wendy’s operator Eight-8-Ate Holdings, Inc. is banking on new stores in the provinces to boost system-wide revenue by 12% this year, according to its chief executive.

“This year, we’re slowing it down,” Joey R. Garcia, president and chief executive officer at Eight-8-Ate, told reporters on Friday. “We’re looking at at least 5% same-store sales growth. Our system-wide sales will grow at around 12% because we’re adding new stores.”

The company will add six Conti’s stores this year, mostly standalones, to 80. The first one was expected to open at SM Bataan at the weekend. Conti’s accounts for 60% of the company’s revenue.

“Our expansion for Conti’s will be mainly in provincial cities or key cities in provinces,” he said in mixed English and Filipino.

“Our strategy for Conti’s for the year is to limit the number of stores that we’re opening but do a lot of the renovation of the old stores,” Mr. Garcia said. “We have about eight stores in the pipeline that we will renovate.”

The company will spend P2 million to P3 million on average per Conti’s store for the facelift, which includes little touch-ups and changes to the furniture.

Eight-8-Ate plans to open 15 Wendy’s stores this year including the two that the company opened earlier this year.

“There’s another 13 in the pipeline. In total, by the end of the year, I think we’ll end up with about 86 to 90 stores,” he said.

He said 90% of Wendy’s stores are company-owned, while the rest are franchises.

Mr. Garcia said there are no plans to go public yet. “That’s not a priority for us. I think we’re still relatively young as a group.”

“We have a lot of opportunities to bring Conti’s to other parts of the Philippines,” he said. “We’re not even in the far north. Our farthest store is in Pangasinan. And we still want to expand as far as the Bicol side and the south.”

He said the company might go to international markets, such as the US, preferably by finding a partner as a master franchisee.

“But we have no plans to go out yet. We are still studying it, so we are trying to understand the US market,” he said.

“It’s too early because there is still a big opportunity for us here (in the Philippines),” Mr. Garcia said. “But if ever there’s an opportunity, at least we already understand the market.” — Justine Irish D. Tabile

Monde Nissin allots P7.2-B capex this year to support growth plans

MONDE Nissin Corp. has allotted P7.2 billion for its capital expenditure (capex) budget this year to support the company’s growth plans, according to its chief financial officer (CFO).

The capex budget will come from the company’s operating cash flow and will be used on facilities and to increase production, Monde Nissin CFO Jesse C. Teo told an online news briefing last week.

The listed Philippine food and beverage maker had a P3.64-billion capex last year.

Mr. Teo said P6.2 billion of the P7.2 billion will be dedicated to the Asia-Pacific branded food and beverage segment, he said. The remaining P1 billion will be used for Monde Nissin’s meat substitute segment.

The capex will be used for the company’s facilities in Pampanga, Laguna and Davao, he added.

Monde Nissin entered into a long-term lease in Pampanga including right of use assets that will cost almost P1 billion, Mr. Teo said.

“In addition, we have the completion of our facilities in Carmelray Industrial Park, Laguna and in Davao. All these projects are ongoing,” he added.

The company is also working on projects to improve its bakery business. “We need to catch up on capacity in order for us to serve the volumes that our consumers are demanding.”

He added that Monde Nissin is diversifying its supply base to support the company’s expansion plans.

“We are taking the opportunity to diversify our supply base in Northern Luzon and Southern Philippines so that we are not reliant on one plant,” Mr. Teo said. “This will also ensure that products get to our ultimate consumers as fresh as possible.”

Monde Nissin cut its net loss to P626 million last year from P13.01 billion a year earlier as consolidated revenue improved by 8.4% to P80.17 billion.

Revenue of the company’s Asia-Pacific branded food and beverage segment rose by 12.6% to P65.94 billion, while sales of its meat alternative business fell by 7.6% to P14.23 billion.

Monde Nissin’s brands include Lucky Me! noodles, SkyFlakes and Fita crackers, Monde baked goods, and Quorn meat alternative products.

Monde Nissin shares were last traded on April 12 at P10.70 each. — Revin Mikhael D. Ochave

AC Health eyes Cebu, Davao for potential M&As

AYALA Healthcare Holdings, Inc. (AC Health) is looking at the cities of Cebu and Davao for possible mergers and acquisitions (M&As) and investments as the company tries to expand its presence, its top official said.

“Our M&A and investment pipeline is still very strong,” AC Health President Paolo Maximo F. Borromeo told reporters on the sidelines of a media event in Taguig City last week. “We’re looking at different assets across the country, primarily in major cities like Cebu and Davao.”

AC Health is also looking at strategic partnerships to boost its network and, he added.

AC Health has six hospitals under its network. The company has inaugurated the Healthway Cancer Care Hospital in Taguig City and partnered with the Far Eastern University – Dr. Nicanor Reyes Medical Foundation for the management of their university hospital.

“We have strong momentum across AC Health,” Mr. Borromeo said. “What’s important is we’re driving utilization.”

In December, AC Health bought a minority stake in North Luzon-based pharmaceutical company St. Joseph Drug or Joleco Resources, Inc.

AC Health is the healthcare unit of Ayala Corp. Its portfolio consists of the pharmacy chain Generika Drugstore, pharmaceutical importer and distributor IE Medica and MedEthix, multispecialty clinics, ambulatory centers and full-service hospital network Healthway, and healthcare aggregator app KonsultaMD. — Revin Mikhael D. Ochave

Shell Pilipinas Corp. to conduct virtual annual stockholders’ meeting on May 14

 

 

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Pag-IBIG Fund: Doing good on mandates

BW FILE PHOTO

Origin, evolution, key milestones

Pag-IBIG has come a long way from its origin on June 11, 1978 via PD 1530 to address two mandates that it continues to uphold: a national savings program and affordable housing finance for workers.

From a fragmented set up of two separate funds — the Social Security System (SSS) handling funds for the private sector and the Government Service Insurance System (GSIS) handling the savings of government workers — it was rationalized when EO 527 (March 1, 1979) transferred the administration of the two separate funds to the NHMFC (the National Home Mortgage Finance Corp., then under the Ministry of Human Settlements), while EO 538 (June 4, 1979) merged the funds into one.

The entity that we now know as Pag-IBIG Fund was spun off from NHMFC — through PD 1752 of 1980 which amended PD 1530 — with its own governing Board of Trustees. PD 1752 (Section 4) made Pag-IBIG membership mandatory for all SSS and GSIS employees.

In the aftermath of EDSA 1, Pag-IBIG contributions were suspended during May-July 1986 pending a review by the Cory Aquino administration but resumed in August of the same year. Contributions became voluntary for eight years from January 1987 until 1994.

The mandatory coverage was restored by RA 7742, signed into law by then President Fidel Ramos on June 17, 1994. Former Senator Joey Lina authored the Senate version of the bill (No. 189) that restored the mandatory coverage.

For those wondering what the acronym Pag-IBIG meant, RA 9679, signed into law by President Gloria Macapagal-Arroyo on July 21, 2009, spelled it out thus — Pagtutulungan sa Kinabukasan: Ikaw, Bangko, Industriya at Gobyerno. RA 9679 expanded the membership beyond SSS and GSIS members to include the military and uniformed personnel (MUP) and overseas workers.

A crucial provision of RA 9679 (Section 19) was the grant of tax exemption on Pag-IBIG earnings from operations and the income distributed to its members as dividends. It also gave the Pag-IBIG board of trustees the flexibility to set the contribution rates, hence allowing for bigger contributions from members.

From a purely member-funded provident fund, Pag-IBIG diversified its funding base by accessing the financial markets in 2001 with a P2 billion issuance of five-year bonds that matured in 2006.

PERFORMING ON THE MANDATES — SCOPE AND REACH
The Pag-IBIG fund’s dual mandate is to generate savings and provide housing finance for its members. Its membership base hit a high of 15.90 million, dipped to 12.769 million in the pandemic year 2020, and recovered to 15.9 million by 2023 — of which 2.25 million are overseas Filipino workers (OFWs). With initiatives for more inclusion, the 2023 membership number already includes 17,885 TNVS riders (i.e., Grab drivers).

The annual reports from 2017 to 2020 stated as a goal to hit 90% of “coverable workers” given the mandatory coverage provision of RA 9679. SSS and GSIS have different definitions of their members “coverable” by Pag-IBIG (active, inactive members). Given this vagueness, the 15.9 million Pag-IBIG members roughly translates to less than 40% of the combined membership of SSS and GSIS.

To serve the substantial customer base that includes OFWs and self-employed workers, the Pag-IBIG branch network has grown from 112 in 2015 to 208 in 2023. Over the last 10 years, its ability to interface with members was greatly enhanced beyond the branch network to include a website, mobile apps, and online platforms able to deliver services 24/7, especially for OFWs.

The performance of the Pag-IBIG Fund maybe best appreciated with a longer view over 11 years from 2013 to 2023 covering the terms of three presidents (Aquino III, Duterte, and Marcos Jr.) and three CEOs (Darlene Berberabe, Acmad Rizaldy Moti, and Marilene Acosta). The current CEO, Marilene Acosta, is a 43-year Pag-IBIG veteran who rose from the ranks.

HOW WELL HAS IT EXECUTED ON ITS MANDATE — HOUSING FINANCE
From 2013 to 2023, its total assets grew 2.7 times, from P344.67 billion to P925.61 billion, very much on track to hit the P1 trillion milestone in 2024. During the same period, housing loan releases grew at a faster clip of 3.7 times, from P33.96 billion to P126.04 billion — hitting the P100 billion milestone for the first time in 2022.

By 2022, the last full year for which audited financial statements are available, the housing loan releases benefited 105,212 borrowers — of which 18,657 members were from the underserved sector.

To provide further impetus to the housing finance mandate, Pag-IBIG launched an upstream program to provide P250 billion financing for the period 2023-2028 under the DDLP or Direct Developmental Loan Program to tap developers, contractors, and LGUs to help address the massive housing backlog estimated at six million units.

HOW WELL HAS IT EXECUTED ON ITS MANDATE — SAVINGS ACCOUNTS
Savings from members accelerated with change allowing for more than the P100 minimum contribution, growing 3.4 times from P26.13 billion in 2013 to P89.26 billion in 2023.

MP2, or the Improved Pag-IBIG Savings, account was at a modest P265.8 million in 2013 or only 1% of the P26.13 billion total savings of members. Due to its superior dividend yield, MP2 balances grew to P46.54 billion by 2023 or 52% of total.

The Regular Savings account is available only to Pag-IBIG members who are currently employed or self-employed while the MP2 Savings account is available to those who have recently retired. The Regular Savings Account is counted under Pag-IBIG members’ equity, while MP2 is classified as a financial liability in the balance sheet due to its five-year term.

The Pag-IBIG savings accounts are superior investments in the following ways:

1. Pag-IBIG savings accounts are guaranteed by the Republic of the Philippines up to the full amount of the investment, better than the PDIC coverage for bank deposits up to P500,000.

2. The earnings of the current year become part of the principal the following year. Most fixed-term instruments credit your interest earnings to a settlement account and do not compound.

3. Because of tax exemption provided by RA 9679, the MP2 dividend yield rate of 7.05% for 2023 translates to an effective net yield of 8.46% (grossed up for the 20% withholding tax). The regular savings account yield of 6.55% means an effective yield of 7.86%.

These yields are superior to the yields on bonds (subject to the 20% withholding tax), the preferred shares of the big corporate names, and the Real Estate Investment Trusts (REITs) listed in the PSE whose dividends are subject to a 10% withholding tax.

SOLID PAG-IBIG FINANCIALS
The business model of Pag-IBIG is closer to that of a cooperative or a credit union where the funding source is composed mostly of contributions from members and its revenues are derived mostly from loans to members. Hence, its leverage and capital ratios are much more solid than a typical financial institution.

Its members’ equity practically doubled, from P317.818 billion in 2014 to P628.923 billion in 2022. This translates to a very solid equity-to-assets ratio of 83.8% in 2013 and 76% in 2022. In short, every peso of its assets is funded by 83.8 centavos of equity in 2013 and 76 centavos in 2022.

Its debt/equity ratio was only 0.193 in 2014 and 0.316 in 2022. In other words, for every peso of equity Pag-IBIG had debt of only 19.3 centavos in 2013 and 31.6 centavos in 2022. In contrast, a typical bank would have a debt/equity ratio of 9-10 times. Industrial companies would have a debt/equity of 1.

In short, the Pag-IBIG Fund has recorded impressive strides in executing its dual mandate. In doing so, its financial footing remained solid, stable, and sound. A very good foundation to do more, serve more “coverable” members and serve them even better.

 

Alexander C. Escucha is the president of the Institute for Development and Econometric Analysis, Inc., and chairman of the UP Visayas Foundation, Inc. He is a fellow of the Foundation for Economic Freedom and a past president of the Philippine Economic Society. He wrote the Handbook on the Overview of the Banking Industry for the Bankers Association of the Philippines’ 60th anniversary in 2014. He is an international resource director of The Asian Banker (Singapore).

alex.escucha@gmail.com

Ninja Van eyes provincial market

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Logistics company Ninja Van Philippines seeks to boost its presence in provincial areas to help address retail challenges, according to its country head.

“Our logistics infrastructure has already expanded to second- and third-tier cities,” Jose Alvin Perez, country head of Ninja Van Philippines, told reporters last week.

Ninja Van, which has as many as 8,000 delivery fleets in the country, wants to boost its business in these areas, he added.

The company sees growth outside Metro Manila, specifically Pampanga and provinces in Mindanao, Mr. Perez said.

“We are surprised that in some regions, for example Mindanao, there’s a lot of e-commerce activity there,” he said, adding that majority of their business would still be in Metro Manila.

Ninja Van Philippines handles almost 500,000 parcel deliveries daily, Mr. Perez said.

Last week, the company launched its new service, Ninja Restock, which streamlines the resupply and delivery process nationwide.

The company also offers other logistic solutions such as its fulfillment service that offers integrated manpower, warehousing, and inventory management solutions.

In 2023, Ninja Van announced the expansion of services beyond last-mile delivery to encompass a comprehensive suite of logistic solutions.

Ninja Van now offers Ninja Direct, Ninja Fulfillment, Ninja Rewards and account management services, the company said on its website.

The company also operates in Singapore, Malaysia, Indonesia, Vietnam, and Thailand. Its network manages two million parcel deliveries daily through its 2,000 hubs in the Southeast Asian region. — Ashley Erika O. Jose

The case for improving drunk driving laws in the Philippines

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In the Philippines, an average of over 10 people die every day due to road crashes. Of these, an estimated three deaths are attributable to alcohol as a risk factor.

The World Health Organization (WHO) states that road traffic crashes as the leading cause of death among people aged 15-29 years globally.

Driving entails a certain level of risk due to factors like poor weather and road conditions, mechanical failures, distracted driving, and human error. But in many cases, the fatalities and injuries are completely preventable. This is certainly true in the case of alcohol-impaired driving.

The side effects from alcohol use, including impaired judgment, coordination, and reaction times, transform potentially safe drivers into serious hazards on the road. Drunk driving incidents, unlike other road crashes that might involve non-controllable factors, can be avoided entirely by ensuring that individuals do not operate vehicles under the influence.

In response to this, the WHO has identified advancing and enforcing drunk driving countermeasures as one of the five most cost-effective interventions to reduce alcohol related harm. Recommended drunk driving countermeasures include:

• establishing and restricting blood-alcohol concentration (BAC) limits (with lower limits for novice and professional drivers);

• sobriety checkpoints and random breath-testing;

• administrative suspension of licenses, graduated driving licenses for novice drivers, and ignition interlocks; and,

• other complementary measures including mandatory driver education, provision of alternative transportation, counseling and, as appropriate, treatment programs for repeat offenders and carefully planned, high-intensity and well-executed mass media campaigns.

Republic Act No. (RA) 10586, also known as the “Anti-Drunk and Drugged Driving Act of 2013,” appears to align in various respects with the WHO recommendations. However, in the Global Status Report on Road Safety 2015, the WHO gave the Philippines a rating of 1 out of a maximum score of 10 in the enforcement and implementation of RA 10586.

In a conversation with Prof. Roberto Valera, a former Professorial Lecturer at the Far Eastern University and a current lecturer at the Metro Manila Development Authority (MMDA) on Land Transportation Office (LTO) rules and regulations, three challenges stood out as regards the enforcement of RA 10586:

1. There is a shortage of law/traffic enforcement officers, including a lack of deputized officers, compounded by insufficient training regarding the proper protocol.

2. There is a deficiency in the appropriate equipment, particularly an inadequate supply of properly calibrated breathalyzers.

3. There are inadequate incentives for enforcement personnel and the public to adhere to the law.

The challenges outlined by Mr. Valera underscore the need for a comprehensive approach that addresses these enforcement gaps to effectively reduce drunk driving incidents.

Stiff penalties for drunk driving such as large fines, long jail times, and strict license suspensions, would seemingly deter offenders, however experience has often proven that these are insufficient, even ineffective, especially when there is a disconnect between the severity of the laws and the actual enforcement of these laws. Heavier penalties are effective only when would-be offenders realize there is a high likelihood of being caught and punished.

Many of the provisions of RA 10586 are simply not enforced.

The shortage of law enforcement officers means that with the high volume of traffic on the road, it is difficult to proactively identify and apprehend drivers on the road who are under the influence of alcohol. While the law allows the deputation of officers from Local Government Units, the law does not require deputation. The lack of officers becomes most apparent during late evenings, when there are less officers on duty and there are likely more drivers who have consumed alcohol, not to mention the decreased visibility.

Even when drivers do get apprehended for probable cause of drunk driving, there remains a high enough probability that they can evade prosecution. For instance, in a 2016 BusinessWorld column, Dinna Louise Dayao recounted an incident where an apparently intoxicated driver was involved in a car collision but managed to escape criminal charges due to the absence of a breathalyzer result*.

Mr. Valera also referenced a case where a drunk driving charge was dismissed in court because the driver in question was too impaired to complete the three field sobriety tests as stipulated in RA 10586. This situation presents quite a paradox: the driver’s extreme intoxication, which should have conclusively demonstrated the danger he posed to others, ironically prevented the completion of the tests, thereby disabling the officers from collecting the evidence needed to secure a conviction.

It seems that outside the LTO, there is a lack of broader governmental commitment to effectively implement RA 10586. Many prosecutors maintain stringent standards on the admissibility of evidence, which, combined with insufficient deputation, inadequate training on protocols, and a shortage of calibrated breathalyzers, can lead to LTO officers feeling discouraged from pursuing cases against drivers who violate the law.

Although the law ostensibly allocates resources for acquiring the necessary equipment and training officers through the Special Road Safety Fund sourced from the Motor Vehicle User’s Charge (Section 7, RA 8794), a review of the General Appropriations Act reveals no specific budgetary line item for the implementation of RA 10586.

On All Saints’ Day in 2023, a tragic accident involving a pickup truck in Calamba, Laguna resulted in the deaths of a family of four and injuries to five other individuals. Senator Raffy Tulfo alleged that the suspected driver “smelled of liquor” at the time of the incident. This prompted him to file Senate Bill No. 2546, imposing stricter penalties for driving under the influence.

It is commendable that our legislators are addressing the issue of drunk driving. We urge them to focus on putting in place proactive or preventive measures for more effective enforcement. Harshly penalizing drunk driving addresses offenses after the fact, whereas proactive enforcement preserves lives before they are jeopardized.

The key is deterrence; prevent crashes from happening. Policymakers must pursue measures to discourage drinking and thus disable driving under the influence.

In this regard, we urge Congress to raise alcohol taxes. This serves as a most effective strategy to reduce overall alcohol consumption. Further, a higher alcohol tax increases government revenues. The additional funds could then be allocated to enhance the under-funded road safety programs, contributing to more consistent enforcement. This approach not only curbs the immediate availability of alcohol but also financially supports the necessary infrastructure to prevent drunk driving incidents.

To summarize, preventive measures and robust enforcement strategies on curbing and ultimately eliminating drink driving will dramatically reduce the number of needless tragedies that occur each year. The impact of alcohol on road safety is not an inevitable risk, but a preventable one.

*“So many drunk drivers, so few breathalyzers,” (July 29, 2016) https://www.bworldonline.com/weekender/focus/2016/07/29/6335/so-many-drunk-drivers-so-few-breathalyzers/

 

AJ Montesa heads the tax policy team of Action for Economic Reforms.

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