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Yields on government debt go down

YIELDS on government securities (GS) continued to decline last week due to a lack of catalysts as the end of the year nears.

GS yields at the secondary market fell by an average of 6.21 basis points (bps) week on week, based on the PHP Bloomberg Valuation (BVAL) Service Reference Rates as of Dec. 22 published on the Philippine Dealing System’s website.

Most tenors saw their yields decline last week, with rates of the 91- and 364-day Treasury bills (T-bill) dropping by 21.69 bps and 15.14 bps to 5.1579% and 5.8218%, respectively. On the other hand, the 182-day T-bill went up by 13.42 bps to yield 5.5233%.

Rates of tenors at the belly likewise dropped. Yields on the two-, three-, four-, five-, and seven-year Treasury bonds (T-bonds) went down by 5.04 bps (5.9323%), 6.96 bps (5.9203%), 7.95 bps (5.9193%), 7.79 bps (5.9291%), and 5.69 bps (5.9592%), respectively.

Yields at the long end were mixed. The 10- and 20-year papers saw their rates decline by 10.51 bps and 1.06 bps to 5.9665% and 6.1201%, respectively, while the 25-year paper inched up by 0.09 bp to yield 6.1281%.

Total GS volume traded reached P22.51 billion on Friday, more than three times the P7.46 billion recorded on Dec. 15.

The continued drop in GS yields last week was due to a lack of catalysts and bond supply, a bond trader said in a Viber message.

“Bond yields dropped as investors scramble to find investment outlets. The move was also supported by a drop in global yields,” the bond trader said.

The lack of catalysts was likely due to risk aversion and the “higher for longer” policy stance of local monetary authorities, Oikonomia Advisory & Research, Inc. President and Chief Economist John Paolo R. Rivera said in a separate Viber message.

However, increased consumption and various economic activities brought by the holiday season can help drive trading in the last week of the year, he said.

“Trading is usually active in the latter parts of the year in anticipation of slower flow of funds as the new year starts. Increased consumption due to holidays is also indicative of an active economy,” Mr. Rivera added.

“Total borrowing remains to be constrained as interest rates will remain elevated given the hawkish stance of BSP (Bangko Sentral ng Pilipinas),” he added.

The BSP is unlikely to start policy easing in the next few months and will only consider cutting rates if inflation settles at the midpoint of the 2-4% target, its chief said last week. 

“We’re unlikely to cut rates in the next few months. We’re in a higher for longer (scenario). When I say hawkish, that basically means high for a while,” BSP Governor Eli M. Remolona, Jr. told reporters.

The Monetary Board this month kept its benchmark rate at a 16-year high of 6.5% for a second straight meeting. Interest rates on the overnight deposit and lending facilities were also left unchanged at 6% and 7%, respectively.

From May 2022 to October this year, the BSP raised borrowing costs by a cumulative 450 bps to tame inflation.

The BTr plans to borrow a total of P435 billion during the first quarter, with the bulk coming from T-bond auctions, based on its borrowing plan released last week.

For the week, Mr. Rivera said trading may pick up as traders may take advantage of the momentum seen in the past weeks.

“As expectations level off and as traders harness the holiday effects, trading may increase albeit at a slower rate. The last [three] days are crucial as it can make or break annual targets,” he said.

“Bond trading will remain to be constrained given a foreseeable elevated policy rates. Higher cost of borrowing inhibits bond issuance,” Mr. Rivera added.

GS yields may move sideways with an upward bias, with investors expected to cash in on their gains, the bond trader said.

“For next year, it will be bumpy as the market’s pricing in of rate cuts and the corresponding reaction in bonds assume that yield curve inversion will remain. This may not be consistent with expectations on inflation,” the trader added. — Bernadette Therese M. Gadon

Freed from COVID restrictions, malls have recovered

PHILIPPINE STAR/MIGUEL DE GUZMAN

By Joseph L. Garcia, Senior Reporter

THE YEAR 2023 was the first year since the lockdowns of 2020 when businesses in the Philippines were free from pandemic-related restrictions. These included limited operating hours, limited occupancy, and, for some businesses deemed nonessential in the very early days of the pandemic, closure.

In that period, malls treaded carefully. Quarantine passes, and later, vaccine cards had to be presented at doors, and only a limited number of shoppers could be accommodated at one time, forming long lines, or else the businesses had to completely turn away potential customers.

BusinessWorld asked for insights of two of the largest mall operators in the country on their first year of restriction-free operations. Ayala Malls — under Ayala Land, Inc., which is itself under the larger Ayala Corp. umbrella (which has interests in banking, telecommunications, energy; among others) — operates more than 30 malls across the country, including several in the National Capital Region, reaching across to the Visayas and Mindanao with several more properties. Robinsons Malls, meanwhile, is the second-largest mall operator, with over 50 malls in the country. It has properties as far up the northern region with Robinsons Place La Union, all the way down to Mindanao’s Iligan. Robinsons Malls is one of the business units of Robinsons Land Corp. (RLC), itself under JG Summit Holdings, Inc.

According to Robinsons Malls website, its establishments generate over 120 million visits annually. Meanwhile, Ayala Land’s annual report for 2022 says that “footfall and tenant sales exceeded pre-COVID levels, reaching 108% and 110%, respectively” in Q4 in 2022. “This significant improvement brought the average footfall and tenant sales to 87% of 2019 levels,” said the report. For this year, Clavel Tongco (Head of Operations, Ayala Malls), Mark Sablan (Head of Leasing, Ayala Malls), Lisa Yang (Marketing Director, Ayala Malls), told BusinessWorld in a joint e-mail, “We are pleased to confirm that we have successfully recovered to pre-pandemic levels in terms of foot traffic and sales.

“Our malls are once again bustling with activity, and we are delighted to witness a resurgence in people returning to the malls for their shopping needs,” they said. “This positive trend indicates a renewed confidence among our patrons, reflecting their eagerness to engage in the vibrant and diverse retail experiences our malls offer.”

Meanwhile, Robinsons Land’s annual report for 2022 says that their footfall and occupancy rates are nearing pre-pandemic levels. For 2023, Joel S. Lumanlan, Robinsons Malls Vice-President for Operations, Marketing, and Business Development told BusinessWorld, “Robinsons Malls’ rental revenues experienced a 32% increase, propelled by strong consumer spending and the normalization of business operations nationwide.” That figure is 6% above pre-pandemic levels.

BIGGER, BETTER?
Because malls had to adjust to less foot traffic during the pandemic, a possible scar would be smaller spaces for fewer people. But because of a post-pandemic surge in business, that may not have to be the case.

According to its 2022 Annual Report, Ayala Malls completed 7,000 sqm of gross leasable area (GLA) in 2022 with the opening of The Shops at Ayala Triangle. As of 2022’s end, their total GLA was 2.1 million sqm. “Bigger is still better when it comes to building mall space,” they told BusinessWorld. “A larger mall space allows us to offer a wider array of retail options, dining experiences, entertainment facilities, and community spaces, thereby enhancing the overall shopping experience for our patrons.

“This strategic focus on creating spacious and comprehensive mall spaces aligns with our commitment to staying at the forefront of evolving consumer preferences and industry trends, ensuring that Ayala Malls remains a preferred destination for both tenants and visitors,” they continued.

As for Robinsons Malls, in 2022, they opened three new malls (including one in Gapan, Nueva Ecija), and expanded two other malls, including their property in Antipolo, Rizal. “Yes, the bigger the better,” said Maria Kristina Real-Lim, Robinsons Malls Vice-President for Leasing. Mr. Lumanlan however, added, “The choice of the size of mall to build depends on a lot of factors including the market, economic, and competitive profile in an area and the property that is available for the developer to build on.”

GOING ONLINE
When malls operations were limited during the pandemic, the mall operators’ online arms reached out for customers. Robinsons retail units like its supermarkets and department stores jumped into online platforms such as Grab, Shopee, and Lazada, as well as maintaining its department store’s website. “Given the acceleration of digitalization in the industry post pandemic, the online platforms became more relevant and more important especially the video sharing, payment systems, and social networking platforms,” said Ms. Real-Lim. Mr. Lumanlan, agreed, saying, “With consumer shopping habits evolving, it’s important to reach, interact with and engage customers across different channels and platforms.”

Ayala Malls, however, reminded BusinessWorld: “We don’t have our own retail store, unlike our competitors,” they said. “Unlike some competitors who operate their own retail stores, Ayala Malls functions as a facilitator for various brands and retailers.”

However, they continued: “Recognizing the evolving retail landscape, we acknowledge the ongoing importance of online platforms. Ayala Malls views online channels as complementary to our mall-based business.”

During the pandemic, they had the Ayala Malls Neighborhood Assistant (nicknamed ANA) as a sort of a personal shopper service. The complementary services of their online arm includes today its Ayala Malls Zing App, which serves as a loyalty program.

Both entities opined on the continued importance of malls in a post-pandemic world. While online shopping may be here to stay, the age-old practice of choosing items by yourself seems to be indelible. However, the mall operators conclude that being in the mall just to buy things is no longer enough, and every visit should have value added to it, perhaps with added and amplified experiential factors.

“Consumer journeys continue to evolve and the malls are adapting well to the changes by introducing more experiential, differentiated, and wider range of options for shoppers,” said Mr. Lumanlan. “The pandemic-evolved Pinoy shopper is more empowered so it’s very important that we focus on customer experience in providing convenience and customer satisfaction,” said Ms. Real-Lim.

For Robinsons Malls, these include the evolution of their spaces beyond retail to be entertainment hubs with “experiential installations,” dining options, art exhibits, and other leisurely activities. While malls had already been used as government-service hubs, the use of mall space for these activities accelerated by the pandemic. “Malls also are now more actively engaging the local communities through government services, community events, etc.; nurturing the relationship between retail and the local area where the mall is located in,” said Mr. Lumanlan.

For Ayala Malls, they discussed their various holiday-related events that keep shoppers captivated, as well as the traditional holiday sales, and even CSR efforts such as community exchange gift activities and opportunities for shoppers to pledge money to children’s charities. “While the convenience of online shopping has become a significant aspect of consumer behavior, Ayala Malls recognizes the evolving landscape and remains committed to providing engaging, community-centric, and immersive experiences that go beyond the transactional nature of e-commerce,” they said.

Malls have become our main cultural and social centers — more than museums, parks, libraries, and other such spaces. There is an enduring importance of the mall, despite shifts in consumer behavior. Malls, apparently, are less a retail space in the Filipino psyche, but are instead an important pillar in building a community.

“Consumer behavior has shown a preference for community-centric spaces. Ayala Malls, with its emphasis on creating vibrant and social environments, taps into the Filipino culture of malls being gathering places. This aligns with the desire for not just shopping but also socializing, dining, and engaging in cultural experiences,” they said. “Our malls continue to be an integral part of the retail ecosystem, offering a dynamic and social shopping environment that complements the convenience of online platforms.”

“Shopping in a mall remains to be an important social activity,” said Robinsons’ Mr. Lumanlan. “One can go shopping with families or friends and enjoy spending time together while going around the stores, try on stuff being sold, dine in exciting food outlets and these cannot be easily replicated online. It’s also great way to bond, meet new people, build new friendships and create more memories.” His colleague Ms. Real-Lim, agrees: “Malls are important in nurturing communities as we bring people together in malls in ways e-commerce cannot.”

Tapping into creativity: A mom’s shift from restaurant-bar to tampipi basket innovation

By Miguel Hanz L. Antivola, Reporter

A SMALL BUSINESS must have all hands on deck, yet it is even better if only a single pair runs a tight ship to effectively manage missteps, according to stay-at-home mom and entrepreneur Bambi Y. Temeña.

Before starting her handmade insulated tampipi basket business, Ms. Temeña was a go-getter who had experienced both business failures and successes.

“I was into events and parties, then I also got into catering and food,” she said in an interview with BusinessWorld. “I had a restaurant, bar, eatery. I think I’ve entered all of them.”

After her graduation, Ms. Temeña began doing gigs such as event planning and catering all by herself for small functions. Eventually, she was invited by four other married couples to start a restaurant-bar.

She used to run the 2000s-famous Tapika Resto Bar along Katipunan Avenue, Quezon City, which nurtured musical talents such as Paolo Santos and MYMP.

However, the business had to close down due to increasing traffic in the area from the underpass construction, causing low demand, as stated by Ms. Temeña.

This was followed by the neighborhood barbecue and packed meals stop, Barbi-q-han, along Xavierville Avenue — a partnership with her mother-in-law, which she had to leave unattended for two years to attend to her sick mother in the United States.

The small eatery’s lease expired without her management, and she had to continue home-based as the pandemic came about.

“All those times I had partners, but with this one — it’s really just me myself,” she said, applying the lessons she learned previously in her current venture.

“What I always advise is to start small, and if you can, start just by yourself,” she added on the difficulty of navigating the dynamics that come with having business partners, whether it stems from personal or corporate endowments.

“Because I’m always very much involved in the business as a managing partner, it’s hard to meet halfway and find your place.”

Ms. Temeña noted always having a hands-on, creative, and entrepreneurial mindset, which she has clung onto amid challenges, given the limits of her resources.

INSULATED TAMPIPI BASKETS
What came about from searching for holiday packaging for Ms. Temeña’s frozen food products in 2020, eventually pivoted into its own online business named “Baskets Just Created for You.”

“Handicraft Christmas packaging was all the rage. There was a market for it,” Ms. Temeña said. “But my business was the food, not the packaging.”

“It’s just that I had to customize the sizes in terms of how many packs I could put in, depending on the client’s need,” she added. “But a lot were asking if they could just buy the basket.”

She saw the opportunity to disrupt the local market by practically lining handwoven tampipi baskets and their lids with insulation material to preserve temperature.

She fully embraced this pivot at the start of 2021 by the end of the holiday season, hiring more weavers to cater to the growing demand.

“It was easy for me to hire more because of the pandemic. Some of them were laid off and concentrated on the supposedly part-time work,” she said, providing alternative income to weavers.

Ms. Temeña also diversified into making custom-designed tampipi bags from clients given their feedback, and receiving orders from celebrities and personalities.

When asked about her expansion plans for the business, she said she is eyeing exports, but only if quality can be maintained.

“I cannot really expand it given my limited resources, finances, and time. Also because I’m very hands-on,” she said.

“Many have offered to distribute, sub-manufacture, and export, but quality control is needed since it’s very handmade,” she added. “I don’t want to let it go to someone.”

“Because I inspect every piece I sell. I always talk to my weavers, especially when there are deformities.”

“With distributors outside Metro Manila, I don’t know how they’re going to store and sell it… After-sale service is very important to me. I don’t know if they can do that.”

She acknowledged how her being hands-on may impede the business from realizing its potential. “This is perhaps one of the things that impedes its full growth.”

However, throughout her three decades of entrepreneurship, Ms. Temeña said she finally gained a sense of content in her current venture.

“At this point in time in my life, I just want to enjoy what I’m doing and at the same time, make money,” she said. “My husband even told me, ‘At last, you’re earning from your creativity.’”

“It’s still important that you know what you’re doing, what kind of business you’re getting into, and your definitive target market,” she added.

Philippines slips in government AI readiness

The Philippines fell 11 places to rank 65th out of 193 countries in the 2023 edition of the Government AI Readiness Index by Oxford Insights. The country scored 51.98 out of possible 100, significantly higher than the global average of 44.94. The index provides valuable insights for effective and responsible AI integration into public services which includes 39 indicators across 10 dimensions. These make up three pillars: government, technology sector, and data and infrastructure.

 

Philippines slips in government AI readiness

How PSEi member stocks performed — December 22, 2023

Here’s a quick glance at how PSEi stocks fared on Friday, December 22, 2023.

PHL shares may rise in last trading days of 2023

PHILIPPINE SHARES may rise this week as investors rebalance their portfolios before the year’s close and look towards 2024, focusing on the outlook for interest rates and the economy.

The Philippine Stock Exchange index (PSEi) climbed by 31.77 points or 0.49% to close at 6,501 on Friday, while the broader all shares index rose by 23.04 points or 0.67% to end at 3,427.30.

Week on week, the PSEi climbed by 22.56 points or 0.35% from its 6,478.44 close on Dec. 15.

Philippine financial markets were closed on Sept. 25-26 due to non-working days for Christmas.

“The final three trading days of the year will see a mix of window dressing and bargain hunting, with the index poised to end 2023 on a positive note,” China Bank Capital Corp. Managing Director Juan Paolo E. Colet said in a Viber message.

“The local rally in stocks is still driven mainly by growing expectations of interest rate cuts next year even after the Bangko Sentral ng Pilipinas (BSP) has signaled that policy may need to remain tight for some time,” Mr. Colet added.

The local bourse may move sideways this week as investors cautiously assess the economic and monetary policy outlook for next year, Philstocks Financial, Inc. Senior Research Analyst Japhet Louis O. Tantiangco said in a Viber message.

“The upside risks to inflation due to supply side issues and the tighter for longer monetary policy of the Bangko Sentral ng Pilipinas, all of which may slow down our economic growth, may weigh on sentiment,” Mr. Tantiangco said.

“In the last week of the year, investors are also expected to still watch out for further catalysts that could give us a clearer picture of how our economy would be in 2024,” he added.

The BSP is unlikely to start policy easing in the next few months and will only consider cutting rates if inflation settles at the midpoint of the 2-4% target, its chief said last week.

“We’re unlikely to cut rates in the next few months. We’re in a higher for longer (scenario). When I say hawkish, that basically means high for a while,” BSP Governor Eli M. Remolona, Jr. said.

The Monetary Board this month kept its benchmark rate at a 16-year high of 6.5% for a second straight meeting. Interest rates on the overnight deposit and lending facilities were also left unchanged at 6% and 7%, respectively.

From May 2022 to October this year, the BSP raised borrowing costs by a cumulative 450 basis points to tame inflation.

Meanwhile, the Development Budget Coordination Committee set next year’s gross domestic product growth goal at 6.5-7.5%.

There may be “more buoyant movement” in the market in the coming sessions as December and January have historically been “the most successful trading months for the benchmark index,” online brokerage 2TradeAsia.com said in a report.

For this week, 2TradeAsia.com put the PSEi’s support at 6,350 and resistance at 6,600, while Mr. Tantiangco sees the benchmark index trading between 6,400 and 6,700. — S.J. Talavera

Peso seen to climb further amid holiday season

BW FILE PHOTO

THE PESO could strengthen further against the dollar when trading resumes this week, mainly driven by the seasonal increase in foreign exchange inflows amid the holidays. 

The local unit closed at P55.40 per dollar on Friday, gaining 17 centavos from its P55.57 close on Thursday, Bankers Association of the Philippines data showed.

Week on week, the peso appreciated by 25.5 centavos from its P55.655 close on Dec. 15.

The peso opened Friday’s session at P55.35 against the dollar. Its intraday best was at P55.33, while its weakest showing was at P55.435 versus the greenback.

Dollars exchanged rose to $1.083 billion on Friday from $841.25 million on Thursday.

Philippine financial markets were closed on Dec. 25-26 due to non-working days for Christmas.

The peso strengthened on Friday amid the seasonal surge in remittances from overseas Filipino workers (OFWs) to help finance holiday-related spending, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.

The peso also appreciated as the dollar weakened on Friday after the slower-than-expected US economic growth print in the third quarter, he added.

US gross domestic product (GDP) grew by 4.9% in the third quarter, revised down from the previously reported 5.2%, Reuters reported. However, this was above the 2.1% print in the second quarter and still marked the fastest pace of expansion since the fourth quarter of 2021.

The US economy has been expanding at a pace higher than what officials from the US Federal Reserve regard as the non-inflationary growth rate of around 1.8%. 

The slower US GDP print in the third quarter could support Fed rate cuts in 2024, as priced in by markets, Mr. Ricafort said.

The Fed held its target interest rate steady at the 5.25-5.5% range during its December meeting. Since March 2022, the US central bank hiked its target policy rate by 525 basis points (bps).

For this week, the peso may continue to strengthen as remittances continue to rise amid the holiday season, Security Bank Corp. Chief Economist Robert Dan J. Roces said in a Viber message.

For the first 10 months of 2023, cash remittances increased by 2.8% year on year to $27.49 billion, central bank data showed.

The Bangko Sentral ng Pilipinas expects remittances to grow by 3% this year.

For this week, Mr. Ricafort expects the peso to move between P55.20 and P55.60 per dollar, while Mr. Roces sees the peso ranging from P55.30 to P55.50. — Keisha B. Ta-asan with Reuters

Palace extends low-tariff regime on rice, other key commodities

REUTERS

PRESIDENT Ferdinand R. Marcos, Jr. has issued an executive order extending the low-tariff regime for imports of rice and key food commodities until the end of next year, citing the need to take action against inflation and any shortages caused by El Niño.

The Palace said on Tuesday that Executive Order 50, signed by Executive Secretary Lucas P. Bersamin on Dec. 22 in the President’s name, kept the tariff for imports of pork at 15% for shipments within the minimum access volume (MAV) quota. The rate is 25% for those over the quota.

The tariff for rice imports will stay at 35% regardless of source or volume. The 35% rate had originally applied only to grain from Southeast Asia.

Rates for corn will be kept at 5% for imports within the MAV quota and 15% for those exceeding the quota.

“The present economic condition warrants the continued application of the reduced tariff rates on rice, corn, and meat of swine (fresh, chilled or frozen) to maintain affordable prices for the purpose of ensuring food security, manage inflationary pressures,” the President said in the order.

He added that the extension will help diversify the source markets for these commodities and stabilize food prices ahead of any droughts and dry spells that may emerge next year and as the hog market continues to recover from the African Swine Fever outbreak.

The order calls for a review of tariff rates on pork, corn and rice would be reviewed every six months.

The Committee on Tariff and Related Matters will also review the tariff rate on coal on an annual basis, instead of every six months.

The National Economic and Development Authority on Dec. 14 endorsed the one-year extension of the lower tariff rates to Mr. Marcos during a Cabinet meeting, citing the need to contain inflation.

Headline inflation in November eased to 4.1%, the 20th straight month that it breached the Bangko Sentral ng Pilipinas (BSP) target band.

Inflation averaged 6.2% in the first 11 months of 2023, still above the BSP’s 6% full year forecast.

In September, rice inflation surged to 17.9%, the highest rate since March 2009, which led to the government’s imposition of a price ceiling for a month.

Calixto V. Chikiamco, president of the Foundation for Economic Freedom, said the government should also lower tariffs on both in-quota and out-quota volumes of products since higher tariffs would still apply on other food items.

“We need a vigorous response to the onset of El Niño by encouraging more imports to address the increasing malnutrition of Filipino children and to arrest food inflation,” he said in a Viber message.

Science and Technology Secretary Renato U. Solidum, Jr. has said that a strong El Niño is expected to set in from the end of December to January, adding that its effects would be felt until May.

The peak of El Niño is expected to hit in April, with about 63 provinces to feel its effects in the form of droughts or dry spells, he said.

The government weather service, known as PAGASA (Philippine Atmospheric, Geophysical and Astronomical Services Administration), defines a drought as three consecutive months of below-normal rainfall or two straight months of significantly below-normal rainfall. A dry spell means two straight months of below-normal rainfall.

“Importing food is a solution when domestic supplies finally falter from bad drought due to El Niño,” Jose Enrique A. Africa, executive director of the think tank Ibon Foundation, said in a Viber message.

“Such imports should only be a last resort especially for our staple foods, and the real issue is what the Marcos administration is doing to improve domestic agricultural productivity.”

He said cheaper imported food might “disincentivize” producers from boosting production and would further “erode self-sufficiency.”

Earlier this month, Mr. Marcos ordered the Department of Agriculture to study the potential effects of El Niño on the prices of agricultural products to allow agencies to prepare countermeasures.

The data would be put in an online interagency database to aid in the government’s efforts to address the effects of El Niño.

The President had also ordered the country’ task force on El Niño to come up with measures to effectively manage energy and food supplies to brace for the impending dry periods. — John Victor D. Ordoñez

Farmers see rice output falling next year due to El Niño impact

By Adrian H. Halili, Reporter

FARMERS are expecting a decline in rice production next year due to the expected dry spells arising from El Niño.

“The biggest factor affecting next year’s output will be El Niño (depending on) severity and timing,” Leonardo Q. Montemayor, chairman of the Federation of Free Farmers, told BusinessWorld.

Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort added that the resulting dry spells could have inflation implications.

“Reduced rainfall could reduce the production of rice and agricultural products, thereby leading to some pick up in prices,” Mr. Ricafort said in a Viber message.

El Niño is projected to enter a stronger phase in January, persisting until May, according to the government weather service, known as PAGASA (Philippine Atmospheric, Geophysical and Astronomical Services Administration).

PAGASA has said that drought or dry spells may be experienced by about 63 provinces during the period.

“The first three out of four months of the crop production cycle for palay needs a lot of water, so a dry episode during this period will affect yields and output,” Mr. Montemayor added.

He said dry season crops would mainly benefit from the dry spells brought about by the weather phenomenon.

“If the drought episode occurs during the 2nd quarter as announced by PAGASA, it will be good for the dry season crop that is harvested in March-April, but bad for the wet (main) crop that normally starts in May and is harvested in October to December,” he added.

He said that unlike dry season crops which are mostly irrigated, “a significant portion of the wet season crop is dependent on rain.”

Production of palay or unmilled rice is expected to come in at 7.32 million metric tons (MT) during the fourth quarter, according to the Philippine Statistics Authority.

The Department of Agriculture has projected palay production in 2023 of 20 million MT.

Mr. Montemayor said that the government should have earlier invested in water impounding and rain harvesting projects to mitigate the effects of the El Niño.

“Right now, some dams are releasing excess water, and this could have been saved for future needs. In areas where water availability is low, farmers will have to be assisted in growing alternative crops,” he added.

The Department of Environment and Natural Resources said last week that water in reservoirs like Angat Dam is expected to be sufficient until May or June of next year, citing a need to conserve water resources.

DoJ reviewing ecozone plan for Palawan penal colony

TOURISM.PUERTOPRINCESA.PH

THE Philippine Economic Zone Authority (PEZA) said that its proposal to construct an economic zone in Puerto Princesa, Palawan is under review by the agency controlling the land, the Department of Justice (DoJ) said.

“We have a draft memorandum of agreement. It is being reviewed by the DoJ… we are excited to go into this,” PEZA Director General Tereso O. Panga told reporters last week.

PEZA had proposed the construction of a major public ecozone within the 26,000-hectare Iwahig Prison and Penal Farm in Puerto Princesa.

“It’s about time we ventured into our fifth public economic zone,” Mr. Panga added.

PEZA currently has public ecozones in Cebu, Baguio, Cavite and Pampanga.

Earlier, Mr. Panga said that the Palawan site will focus on manufacturing, specifically targeting car and electric vehicle companies.

Mr. Panga said PEZA could also contribute to the reform of prisoners within the correctional facility.

“If you make these people productive, it can be part also of their (rehabilitation),” he added.

He said PEZA is also planning to engage subdevelopers for the 26,000-hectare site.

Separately, PEZA said it currently has six pending ecozones waiting the approval of President Ferdinand R. Marcos, Jr.

These include the Suyo Economic Zone in Ilocos Sur and the MetroCas Industrial Estates-Special Economic Zone in Cavite, which will be mainly focus on manufacturing.

Additionally, the Kamanga Agro-Industrial Economic Zone in Sarangani, Sevina Park Commercial in Biñan City, FPN EPIC Center in Cebu, and Tupi IT Park in South Cotabato are also awaiting Presidential approval. — Adrian H. Halili

Sugar industry seeking to resume exports to US

REUTERS

THE Sugar Regulatory Administration (SRA) is considering allowing sugar exports to the US due to requests from the industry.

“Those producers, millers and traders who are volunteering to export are saying that they can deliver about 30,000 or 60,000 metric tons (MT) of (raw sugar to the US),” SRA Administrator Pablo Luis S. Azcona told reporters last week.

The US has a sugar allocation for the Philippines amounting to 145,235 metric tons raw value for the crop year Oct. 1, 2023 to Sept. 30, 2024.

Mr. Azcona added that about six to eight traders, millers, and producers are currently in talks with the regulator to meet the US quota.

“They think that it is really necessary that the US quota not be lost,” he said.

He said farmers have been unwilling to sell their sugar for export to the US, where prices are lower than what they can realize by trading in the domestic market.

“Since it is voluntary, the traders and exporters volunteered. The farmers are not affected here,” he added.

Earlier, Mr. Azcona said that the SRA is studying whether to meet the US quota for raw sugar, with industry policy currently geared towards serving the domestic market.

He added that the US quota has not been used in the past three years.

The Philippines shipped about 112,008 MT of raw sugar to the US during the 2020-2021 crop year, according to the SRA.

The regulator has projected a possible 10-15% decline in raw sugar production due to El Niño. Official estimates place production at 1.85 million MT for the crop year.

The SRA issued Sugar Order No. 1 in September reserving the entire crop for domestic use only.

A strong El Niño is projected to continue until January and is expected to persist until May 2024, according to the government weather service, known as PAGASA (Philippine Atmospheric, Geophysical and Astronomical Services Administration). — Adrian H. Halili

‘Green’ aircraft fuel prices likely to remain elevated

REUTERS

THE price of sustainable aviation fuel (SAF) will remain elevated in the coming years as production remains limited, the Department of Energy (DoE) said.

“SAF output is very tight. The aspiration of IATA (International Air Transport Association) is to increase the production to eventually reach net zero,” Rino E. Abad, director of the Oil Industry Management Bureau at the DoE, told BusinessWorld by phone.

According to a recent IATA report, SAF production next year is expected to triple to 1.88 billion liters or 0.53% of aviation fuel demand. Production was 600 million liters in 2023 and 300 million liters in 2022.

“The doubling of SAF production in 2023 was encouraging as is the expected tripling of production expected in 2024,” William M. Walsh, IATA director general of the IATA, said in a statement.

SAF accounted for 3% of all renewable fuel production, with 97% going to other industries, IATA said, adding that this resulted in limited SAF supply while also pushing prices higher.

IATA said SAF output is weighed down by much renewable fuel production capacity being allocated to other fuels.

It said aviation needs at least 25% of renewable fuel production for SAF, which is the level deemed needed to reach net zero carbon emissions in aviation by 2050.

“Until such levels are reached, we will continue missing huge opportunities to advance aviation’s decarbonization. It is government policy that will make the difference. Governments must prioritize policies to incentivize the scaling-up of SAF production and to diversify feedstocks with those available locally,” Mr. Walsh said. 

“Governments want aviation to be net zero by 2050. Having set an interim target in the CAAF (Conference on Aviation Alternative Fuels) process they now need to deliver policy measures that can achieve the needed exponential increase in SAF production,” he added.

In the Philippines, the DoE is still working on the draft regulations governing SAF to help accelerate the adoption of green fuel.

“The problem here is that in the Asia-Pacific region there is no mandate yet for SAF. There is a policy constraint and there is also a supply constraint,” Mr. Abad said.

SAF can help reduce emissions from air transportation, being made from non-petroleum feedstock like agricultural waste and used vegetable oil.

The IATA has estimated that SAF will contribute around 65% of the reduction in carbon emissions needed by the aviation sector to reach net zero by 2050.

It said that SAF demand is not an issue as all SAF output has been bought and used, with at least 43 airlines having committed to using about 16.25 billion liters of SAF by 2030.

In November, the Board of Investments said it is in talks with aerospace company Airbus for the development of SAF in the Philippines.

Airbus new-engine option aircraft promise significantly improved fuel efficiency and can use SAF. Currently, all Airbus aircraft are certified to operate at an SAF blend of up to 50%.

Budget carrier Cebu Pacific hopes to adopt SAF across its network by 2030, while flag carrier Philippine Airlines said it will continue to work with suppliers and regulators to increase fuel volumes.

“Governments must set a policy framework that incentivizes renewable fuel producers to allocate 25-30% of their output to SAF to meet (the target),” IATA said. — Ashley Erika O. Jose

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