THE NATIONAL Government’s (NG) outstanding debt reached a record P14.48 trillion as of end-October, the Bureau of the Treasury (BTr) said.
Data released by the BTr on Tuesday showed that outstanding debt went up by 1.49% from P14.27 trillion as of end-September.
“The NG’s debt stock increased by P212.13 billion or 1.49% month over month, reflecting the net issuance and availment of domestic and external loans, as well as the revaluation effect of peso depreciation against the US dollar,” the BTr said.
Year on year, the debt stock rose by 6.16% from P13.64 trillion. It also increased by 7.91% from P13.42 trillion at the end of December 2022.
As of end-October, the bulk or 68.38% of the NG’s debt portfolio came from domestic sources.
Domestic debt increased by 1.73% to P9.9 trillion from P9.73 trillion a month earlier due to the net issuance of government securities. Year on year, domestic borrowings also rose by 5.85% from P9.36 trillion in 2022.
Government securities made up almost the entire domestic debt in the 10-month period.
“The effect of local currency depreciation against the US dollar on the debt stock valuation was minimal at only P0.23 billion,” the BTr added.
Data from the Treasury showed that the peso finished at P56.808 as of end-October, depreciating by 0.26% from P56.66 as of end-September.
Meanwhile, external debt inched up by 0.97% to P4.58 trillion from P4.53 trillion in end-September.
Foreign borrowings rose by 6.83% from P4.29 trillion in the same period a year ago.
“For October, the increase in external debt was due to the net availment of foreign loans amounting to P33.52 billion, and the P11.84-billion upward adjustment in valuation caused by peso depreciation against the US dollar. Favorable movement of third currencies tempered the increase by P1.21 billion,” the BTr said.
Broken down, foreign debt was composed of P2.1 trillion in loans and P2.47 trillion in global bonds.
As of the end of October, the NG’s overall guaranteed obligations slipped by 0.34% to P361 billion from P362.22 billion in the previous month.
Year on year, guaranteed debt declined by 6.61% from P386.53 billion in 2022.
“The decline in the level of guaranteed debt was attributed to the net repayment of domestic guarantees amounting to P1.35 billion,” the BTr said.
“In addition, third currency-denominated guarantees declined by P0.31 billion, offsetting the P0.44-billion additional debt valuation caused by peso depreciation against the US dollar,” it added.
China Banking Corp. Chief Economist Domini S. Velasquez said that the increase in debt was “likely driven by the government’s continued spending to finance various projects and programs, as well as by the increase in domestic market interest rates during the month.”
“The new record high in the outstanding National Government debt in recent months may be attributed to continued budget deficits amid higher prices that also bloated government expenditures,” Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said.
Ms. Velasquez said the recent issuance of Sukuk bonds and tokenized Treasury bonds are expected to add to the debt stock.
“But the recent appreciation of the peso and lower market yields may help moderate the growth of outstanding debt,” she added.
Mr. Ricafort said that debt could also continue to balloon amid the government’s planned euro bond sale in the future.
The government recently raised $1 billion from its first-ever offering of Sukuk bonds, which were dollar-denominated and had a tenor of 5.5 years.
The government also raised P15 billion from the first-ever sale of tokenized Treasury bonds, which had a coupon rate of 6.5%.
This year, the government’s borrowing plan is set at P2.207 trillion, consisting of P1.654 trillion from domestic sources and P553.5 billion from foreign sources. — Luisa Maria Jacinta C. Jocson
People flock to Divisoria to shop ahead of the Christmas holidays. — PHILIPPINE STAR/EDD GUMBAN
THE WORLD BANK maintained its Philippine gross domestic product (GDP) growth outlook for this year and 2024.
In its latest Philippine Economic Update, the multilateral lender said it expects GDP to expand by 5.6% this year and by 5.8% next year, unchanged from its projections last October.
The World Bank’s forecasts are below the government’s 6-7% and 6.5-8% growth targets for this year and 2024, respectively.
“We haven’t changed our projections (from) October. The reason is we haven’t seen many shocks or policy surprises, which is by itself, good news,” World Bank Philippines Senior Economist Ralph van Doorn said at a media briefing on Tuesday.
The Philippine economy grew by 5.9% in the third quarter, bringing the nine-month average GDP growth at 5.5%.
The World Bank said an improvement in domestic demand is expected to fuel a “modest increase” in GDP growth to an average of 5.8% in 2024 to 2025.
“Services are expected to drive growth due to the ongoing recovery of the tourism sector and the consistent performance of the IT-BPO industry, which is likely to spur job creation, increase household incomes, and benefit consumption and tourism-adjacent industries,” it added.
On the demand side, the World Bank said that household spending will remain the main growth driver amid a strong labor market, steady remittances, and easing inflation.
Meanwhile, investments are expected to slow this year before picking up next year until 2025 thanks to recent investment reforms and the Philippine government’s “commitment to public investment despite ongoing fiscal consolidation.”
World Bank Country Director for the Philippines Ndiame Diop said that the Philippines continues to outperform many of its peers in the region in terms of growth.
“Despite the challenging global environment that resulted in a slowdown for many countries in the region, the Philippines stands out as among the top performers. This achievement can be attributed to the country’s resilience, resilient domestic demand, which helps mitigate the impact of external headwinds,” he said.
“We anticipate that the Philippine economy will continue to exhibit strong performance in the next few years. This growth will be propelled by a healthy labor market and declining inflation, which will stimulate robust household consumption,” Mr. Diop added.
However, Mr. Van Doorn said that risks are tilted to the downside and could dampen growth, citing external factors such as geopolitical tensions, trade restrictions on agricultural products, and persistent inflation.
On the domestic front, El Niño and other climate risks could also threaten food supply, he added.
To sustain growth in the long term, the World Bank said the Philippines should focus on structural reforms to boost productivity and improve its competitiveness.
“In the medium term, it’s important to implement investment reforms, implement fiscal consolidation, invest in human capital, strengthen water security and sanitation which are key to safeguard growth, reduce poverty, and increase the country’s growth potential,” Mr. Van Doorn said.
Meanwhile, the World Bank kept inflation forecasts unchanged at 5.9% for this year and 3.6% next year.
“While headline inflation is expected to remain elevated in 2023, it is projected to decline to within the target range in 2024,” the bank said.
“Following a year and a half of tight monetary policy, the return of headline inflation to within the target range in the first quarter of 2024 is expected to keep the policy rate steady in the short term,” it added.
Headline inflation eased further to 4.1% in November, slower than 4.9% in October and 8% in the same month in 2022.
November marked the 20th straight month that inflation was above the central bank’s 2-4% target range.
“Concerns over a possible resurgence of high inflation and tight monetary policies in advanced economies will continue to weigh on the Bangko Sentral ng Pilipinas’ (BSP) decision to reduce interest rates,” the World Bank added.
The BSP kept its key policy rate at 6.5% at its latest meeting, the highest in 16 years. Since May 2022, the central bank has raised borrowing costs by a total of 450 basis points.
The BSP’s next policy meeting is on Dec. 14. — Luisa Maria Jacinta C. Jocson
Kids explore the lights installation at a shopping mall in Pasay City, Nov. 15, 2023.— PHILIPPINE STAR/EDD GUMBAN
By Luisa Maria Jacinta C. Jocson, Reporter
THE EXPECTED SURGE in household spending during the holiday season may not be enough to ensure that Philippine annual gross domestic product (GDP) growth will hit the government’s 6-7% target, analysts said.
“We don’t think the holiday spending will provide a meaningful boost to annual growth, as pandemic-related restrictions were already mostly loosened during the same period last year so this will likely not affect annual comparison much,” Makoto Tsuchiya, assistant economist at Oxford Economics, said in an e-mail.
Economic managers have kept the 6-7% full-year target range, even as GDP growth averaged 5.5% as of end-September.
The economy would need to grow by 7.2% in the fourth quarter to meet the lower end of the government’s GDP growth goal.
“I don’t see the government’s target for 2023 as being feasible, at all, despite the stronger-than-expected result for the third quarter… the holiday shouldn’t matter too much in year-on-year growth terms, which by definition strips out the impact of such seasonality,” Pantheon Chief Emerging Asia Economist Miguel Chanco said in an e-mail.
Philippine GDP expanded by 5.9% in the third quarter, ending three consecutive quarters of slowing growth.
Mr. Chanco said the third-quarter growth print was mainly driven by the spike in government spending.
“More importantly, the third-quarter headline growth bounce masked a continued slowdown in private consumption growth, which is the economy’s main engine,” he added.
Household consumption, which typically accounts for about three-fourths of the economy, grew by 5% in the third quarter. This was slower than the 8% growth a year ago and 5.5% in the previous quarter. It was also the weakest rise in household consumption in two years.
Domestic consumption is expected to surge in the fourth quarter as consumers spend more during the holidays. However, elevated inflation may put a damper on holiday spending.
“From third-quarter data, it is obvious that the private sector has been softening, and the growth was led by the public sector. However, given the accumulated debt and limited fiscal space, the government won’t be able to fully offset the weakness in the private sector,” Mr. Tsuchiya said.
Oxford Economics expects Philippine GDP growth to average 5% this year amid muted demand.
“External demand will remain subdued given the slowing global economy, while investment will be hampered by elevated interest rates and low external demand. This will translate to the labor market weakness, when households already need to tighten their purse strings given the need to rebuild savings,” he added.
Mr. Chanco also noted that the Bangko Sentral ng Pilipinas (BSP) could cut rates to support economic growth as inflation eases.
“As fiscal policy is still stretched from the COVID-era expansion of the deficit, the only real macroeconomic policy lever that’s available in the Philippines is a gradual unwinding of the BSP’s aggressive rate hikes, which should be doable in the not-too-distant future, as long as inflation continues to trend downwards in the coming months,” he added.
At last month’s policy meeting, the BSP kept borrowing costs steady at 6.5%, the highest in 16 years. From May 2022 to October, BSP raised policy rates by a total of 450 bps to curb inflation.
BMI Country Risk and Industry Research last month said it projects household spending in the Philippines to grow by 6.3% in 2024.
“Our consumer spending outlook will be more positive, relative to 2023, as economic growth persists, and consumption levels normalize. Easing inflationary pressures and healthy employment will form the base for stable consumer spending,” BMI, a unit of Fitch Solutions, said in a note in November.
However, it said that high levels of household debt remain a risk to the consumer outlook.
“It limits the future availability of debt, but also draws on current disposable income levels, especially as debt servicing costs increase on the back of interest rate increases,” BMI added.
The Philippine business community gathered at the Grand Ballroom of Grand Hyatt Manila for BusinessWorld’s Forecast 2024 last Nov. 22.
BusinessWorld forum tackles economic outlook, opportunities for 2024
By Bjorn Biel M. Beltran, Special Features and Content Assistant Editor
The prominent theme for many global economic outlooks produced for 2023 is that while growth is still projected largely within reach into next year, there are a number of persistent risks that may compromise and slow down growth all over the world. Despite this, however, the Philippines, owing to certain factors, have largely bucked the trend.
Such was the sentiment shared by many of the esteemed guests and speakers at the recently concluded BusinessWorld Forecast 2024 forum, which took place on Nov. 22 at the Grand Hyatt Manila in Bonifacio Global City, Taguig.
ADB Country Director for the Philippines Pavit Ramachandran (center) receives token from BusinessWorld Editor-in-Chief Wilfredo G. Reyes (left) and President and CEO Miguel G. Belmonte (right).
In his keynote address on the “Philippines’ Economic Outlook for 2024,” Asian Development Bank (ADB) Country Director for the Philippines Pavit Ramachandran said the country’s economic growth is currently at the “top of the leaderboard” in Southeast Asia.
“The economy has largely remained resilient, notwithstanding global uncertainties, geopolitical tensions, economic headwinds, interest rates, inflation. We’ve seen a very strong rebound in the Philippines, and we’re actually seeing traction in the growth momentum. A lot of this is underpinned by strong macro-fiscal fundamentals; reforms that have been undertaken and have been continued from the previous administration; and the opening up of several strategic sectors like telecommunications, airlines, shipping, and renewables,” Mr. Ramachandran said.
The Philippines’ 5.9% gross domestic product (GDP) growth in the third quarter overtook the growth rates of Vietnam (5.3%), Indonesia (4.9%), and Malaysia (3.3%). The ADB did, however, lower its forecast for Philippine growth this year from 6% in April to 5.7%.
With a 6.2% growth forecast for 2024, the ADB predicts that the Philippines’ economy would develop the fastest in Southeast Asia.
“There’s a real buzz now about the Philippine prospects. Having said all that, I think we do need competitiveness-enhancing and productivity-enhancing investments particularly to nurture the potential demographic dividends here. That’s going to be crucial, and we need to intensify climate action,” Mr. Ramachandran said.
“You can’t really think of medium- to long-term sustainable, inclusive development without addressing some human deficit challenges. There are still lagging regions in the Philippines. 20 of the poorest provinces are still concentrated in Visayas and Mindanao. 60% of GDP growth still comes from Metro Manila, the Southern Tagalog region, and Central Luzon,” he said.
Mr. Ramachandran pointed out that a lot of the country’s growth is still dependent on domestic demand, household consumption and fixed investment both public and private investment in construction, and in the future, the Philippines would need to improve infrastructure competitiveness and enhance productivity and investments to sustain momentum.
Sharing growth
World Bank Country Director for Brunei, Malaysia, Philippines and Thailand Ndiamé Diop (center) receives token from Wilfredo G. Reyes (left) and Miguel G. Belmonte (right) of BusinessWorld.
From the perspective of the World Bank, Country Director for Brunei, Malaysia, Philippines and Thailand Ndiamé Diop said he is optimistic about the country’s growth prospects despite global headwinds. The Philippines, from the international lender’s own data, still remains as one of the fastest-growing economies in the region.
“The good news is that the Philippines really has climbed out of pandemic-induced recession in 2020, and we are quite optimistic about its growth prospects. One of the key reasons is that the structural drivers that are quite favorable despite the headwinds coming from the global economy, and that’s why the economy is quite resilient.”
The headwinds still take their toll, however. The World Bank had reduced its growth forecast for the Philippines to 5.6% in October from the 6% projection it gave in June. It also trimmed its growth forecast for the Philippines to 5.8% for 2024 from 5.9% previously. These are below the government’s 6-7% target for this year and 6.5-8% in 2024.
“Before the pandemic, the world and the Philippines grappled with three long-term challenges: one, building human capital; second, dealing with climate change and natural disasters; and then ensuring inclusive digital transformation,” Mr. Diop said during his address on the theme, “Development Imperatives in a Post-Pandemic World.”
“In this brave new world, what should government do? Essentially, they should have a two-speed strategy. They should deal with immediate shocks, and they should address longer term development challenges that haven’t disappeared,” he added, identifying the need to support and provide safety nets for households struggling with rising costs, manage inflation, and ensuring food supply and security.
“What we think is a key area to focus on and work more towards is to ensure that that growth and the prosperity generated is shared more widely in the Philippines. That every Filipino, wherever you are in the country, [is] connected to that growth prospect and benefit from it. And this what I see as the key challenge for the Philippines going forward. The best way to do it, to make sure that there is equality of opportunity is to build the foundation right now.”
“It will be really important to further enable private investment and innovation to keep growth,” Mr. Diop recommended. “Second is to double down on investment in human capital. Third is to bridge the digital divide and invest in adapting and integrating climate change.”
Sustaining efforts
IMF Resident Representative to the Philippines Ragnar Gudmundsson (center) receives token from BusinessWorld’s Wilfredo G. Reyes (left) and Miguel G. Belmonte (right).
Meanwhile, International Monetary Fund (IMF) Representative to the Philippines Ragnar Gudmundsson echoed the sentiment.
“When considering the global environment, we are seeing currently a global economy that is limping along rather than sprinting. It is in fact slowing down from 3.5% in 2022 to 3% in 2023, and this compared to a growth rate for the world economy that averaged 3.8% during the last two decades, we are clearly seeing a slowdown in the global economy,” he said, addressing the financial stability risks for the Philippines in 2024.
For the Philippines, he pointed out that the government’s infrastructure program, opening up sectors to foreign investments, and private sector participation should help realize a growth potential of about 6.5% over the medium term.
“Boosting the country’s growth potential requires sustained efforts to raise productivity by reducing infrastructure and education gaps while promoting foreign investment,” Mr. Gudmundsson said.
“Sustaining significant growth gains over the past few decades and reaping the benefits of the demographic dividend will depend on further investments to diversify exports, promote the acquisition of new skills, and enhance connectivity across the archipelago,” he said.
According to the IMF, the country should redouble efforts to exit the Financial Action Task Force’s (FATF) “grey list” to further reassure foreign investors and reduce financial transaction risks.
Since June 2021, the Philippines has been included in the global “dirty money” watchdog’s gray list of countries subjected to increased monitoring to prove its progress against money laundering and terrorist financing.
BusinessWorld President and CEO Miguel G. Belmonte
Ultimately, the Philippines must steel itself against disruption to adapt and innovate when the situation calls for it, Miguel G. Belmonte, BusinessWorld president and CEO, said during his opening remarks.
“As we discuss future risks and help one another devise effective strategies for the incoming year, we need strong relationships with all our stakeholders, including customers, suppliers, employees, and regulatory bodies. Nurturing long-term relationships will ensure that our businesses—and our country—remain resilient even in the face of adversity,” he said.
“While the odds may be stacked against us, keeping the economic momentum of the Philippines going requires more than deft hands; it requires us to remain committed to a future of sustainable and inclusive growth that can be enjoyed by all.”
BusinessWorld Editor-in-Chief Wilfredo G. Reyes
Recalling main takeaways from Forecast 2024 in his closing remarks, BusinessWorld Editor-in-Chief Wilfredo G. Reyes highlighted, among others, the importance of keeping an eye on both short-term and long-terms priorities and of factoring in all possible impacts of solutions to issues.
“Addressing urgent concerns should not make us lose sight of what is important to our companies in the next three to five years,” Mr. Reyes stressed.
“Solutions to problems need to be designed and carried out in a wholistic manner, keeping in mind everything else that can be affected in order to minimize unintended consequences,” he added.
Future trends
In addition to the keynotes on the country’s economic outlook, there were also two panel discussions that looked into the prospects of leading industries, namely real estate and energy. In addition, the first fireside chat walked through the opportunities unfolding in the Philippine stock market.
Two other panel discussions, meanwhile, delved into emerging trends in consumer behavior, as well as the seen shift of corporate leadership and workforces towards younger generations, particularly the millennials and Generation Z. Another trend explored in the forum was generative artificial intelligence, which was tackled in the second fireside chat of the forum.
Top 1000 Premium
The forum also served as the venue for introducing BusinessWorld’s latest offering, the Top 1000 Premium. It is a digital platform (accessed via https://top1000.bworldonline.com) that carries up to ten years of data from the country’s leading corporations, conglomerates, and sectors that were previously published on the annual Top 1000 Corporations in the Philippines magazine.
BusinessWorld Executive Vice-President Lucien C. Dy Tioco
“With Top 1000 Premium, users are not just confined to the print editions of Top 1000 in looking for figures and comparing them. Users can now view such data with less hassle, in an interactive and visually appealing manner,” Lucien C. Dy Tioco, executive vice-president of BusinessWorld, shared during the second half of the forum.
“The platform does not just show a rundown of top corporations, top conglomerates, and top sectors in a given year. Top 1000 Premium makes it easier to view how a corporation, a conglomerate, or sector has performed in, say, the previous year, alongside how it performed in previous years. It also allows a corporation’s performance to be viewed in comparison with its competitors in its particular industry,” Mr. Dy Tioco explained.
A one-month free trial of Top 1000 Premium is currently offered to those who will reserve a copy of the upcoming 2023 edition of the Top 1000 Corporations in the Philippines magazine.
BusinessWorld Forecast 2024 was presented by AboitizPower Corp. and Megaworld, with gold sponsors ACEN, Ayala Corp., First Gen Corp., GCash, Globe, National Grid Corporation of the Philippines, Prime Infra, and SM Investments Corp. Silver sponsors BDO, Federal Land NRE Global, Inc., Global Dominion Financing Incorporated, and SM Supermalls; as well as bronze sponsors AppleOne Properties, Inc., EastWest Bank, Meralco, PAGCOR, Pag-IBIG Fund, Robinsons Land Corp., SGV, Toyota Motor Philippines, and Villar City, have also made contributions to the event.
Additionally, the event is supported by the following partner organizations: the Asia Society of the Philippines; the Bank Marketing Association of the Philippines; the British Chamber of Commerce of the Philippines; the French Chamber of Commerce and Industry of the Philippines; Fiera de Manila, Inc.; J. Legaspi Computer Graphics; the Management Association of the Philippines; the Nordic Chamber of Commerce of the Philippines; the Philippine Chamber of Commerce and Industry; the Philippine Franchise Association; and the Philippine Retailers Association. Media partners, including The Philippine Star and One News, also covered the event.
L-R: BusinessWorld Managing Editor Cathy Rose A. Garcia (moderator), William Thomas F. Mirasol of Federal Land, Inc.; Noli D. Hernandez of Megaworld Corp.; and Jon Canto of McKinsey & Company
By Angela Kiara S. Brillantes, Special Features and Content Writer
2023 has been a progressive year for the Philippine real estate sector, as it started the year on a positive note and has worked its way in sustaining its performance.
As Colliers Philippines Research Director Joey Roi Bondoc previously wrote in a BusinessWorld column, in spite of the challenges in reaching the growth target of more than 6% this year, Philippine real estate is expected to have a “solid finish” towards the end-2023 as opportunities still remain for selected property segment. These include, among others, the expansion of resort or leisure-themed projects in the residential segment; holiday-induced spending in retail; and the potential of the Philippines as a meetings, incentives, conferences & exhibitions (MICE) hub for hotels.
Despite economic headwinds, key drivers such as the return to the office, increased tourism, investment pledges, and steady demand from office and retail spaces, are seen to help in mitigating imminent risks, thus bringing hope for the country’s real estate sector moving forward.
The panel of Forecast 2024’s first panel discussion received tokens from BusinessWorld’s Miguel G. Belmonte (leftmost)
These were discussed in the first panel discussion of BusinessWorld’s Forecast 2024 last Nov. 22 in Grand Hyatt Manila in Bonifacio Global City, Taguig. McKinsey & Company Philippines Managing Partner Jon Canto, Federal Land Inc. President William Thomas F. Mirasol, and Megaworld Corp. Executive Vice-President for Sales and Marketing Noli D. Hernandez shared their outlook for the Philippine real estate market in the upcoming year, including the opportunities and challenges they expect the sector to face.
“The Philippines is optimistic about real estate. It is one of the sectors that will rebound fully next year. It has been resilient in the wake of COVID-19, inflation, and rising construction costs, but sustained demand and investment will take it through next year,” Mr. Canto of McKinsey & Company said during this presentation.
For Mr. Hernandez of Megaworld Corp., while there are risks in inflation, the Philippine real estate sector has been performing exceptionally well. Offices, businesses, and hotels have been increasing significantly, resulting in steady and increasing rental income, occupancy, and room rates.
“For our hotels, office, and businesses, we have also seen a surge of investor confidence and in fact, as far as retention levels of our tenants are concerned, it’s been very steady and increasing. This has contributed substantially to making sure we have a very stable rental income,” Mr. Hernandez said.
“Similarly, for our hotels and resorts business, we are seeing a very huge demand coming from the MICE industry, as well as from foreign tourist arrivals, both foreign and domestic. As a result, we have been seeing not just an increase in occupancy rates but also increase in room rates, especially compared to the previous year,” he added.
Likewise, Mr. Mirasol emphasized how the sector has continuously been creating developments for every Filipino to benefit from. In particular, he spotted residential homes in middle and high-end markets as main drivers of growth for Federal Land.
“We’re doing great. 2019 was our best year ever, and as of end-October, we’ve already exceeded 2019 numbers. We’re very optimistic about the year-end numbers,” Mr. Mirasol said.
“We’re optimistic that this positive side of momentum can carry on to the next year. We see signs of increased consumer confidence and have observed favorable opportunities from the high income and luxury market segments where most of our projects are,” he added.
Returning to office
Among the rising trends highlighted during the discussion was the rise of office spaces. While hybrid work arrangements have changed how people work and live, physical office spaces are found to be more needed among workforces.
Jon Canto, managing partner of McKinsey & Company’s Philippines office
According to Mr. Canto of McKinsey, citing their firm’s recent report, people are spending more time in the office, and this is seen to impact real estate in general.
“Globally, we see that people are in the office three and a half days a week. That affects real estate, how we think about offices, and going back to work,” Mr. Canto said.
“Traditional views of the office are now different. Going back to the office, people now want a different kind of space, a place to collaborate, a place where they feel at home,” he added.
Mr. Canto’s presentation cited Cisco’s Global Hybrid Work Study, which showed a significant proportion of respondents globally preferring the hybrid work model. In the Philippines, it was found the study found that 70% of employees surveyed prefer hybrid work, while 20% prefer working fully online and 11% prefer a fully remote mode.
The McKinsey partner also highlighted that, compared to previous years, office spaces are much more considered now as spaces for collaborations, interactions, increased productivity, and fostering social cohesion.
“For Asia, there’s a stronger preference to return to [working on site]; but it will be different. It’s more purposeful collaboration, where you come to work to do certain things that are much effective in person, to drive social cohesion. Think about ideation sessions [and] working with teams — a different type of engagement than it was in the past,” Mr. Canto said.
“Filipinos are much more social. We want to see each other and to interact face-to-face. We also don’t have, let’s say, the technology services sector like in other places in the US and Europe where collaboration online is much more effective. We will need to come back more than them,” he added.
Given these expectations, Mr. Canto notes the importance of enabling younger generations to adjust to the new and evolving office environment in spite of their apparent hesitancy to fully return to office.
“The reality is that in the Philippines over half of companies have returned. Over time, as we get to a steadier state, we would see that there is a key role of physical office space. It’s good to have a different type of office space than you’re used to in the past. People want different things now when they come to the office. They want to ‘want’ to be there in essence. With that, you’ll get millennials and the younger generations to adapt accordingly,” Mr. Canto said.
“In the data that Jon has mentioned, the 20% of people who wants to go back to the office, these are the owners and executives, and the managers who want their staff to be in office all the time. There’s going to be a push and pull, but undoubtedly things are going to leaning more towards going back to the office,” Federal Land’s Mr. Mirasol added.
Moreover, the data also showed that the number of occupancy rates are going down, but it’s still exceeded to go up in the following year.
Noli D. Hernandez, executive vice-president for sales and marketing of Megaworld Corp.
“Despite the COVID-19 [having] induced the work-from-home arrangements a couple of years back, people would always want to see each other,” Megaworld’s Mr. Hernandez shared.
There’s nothing that can replace the human interaction that makes people a lot more productive and we have been seeing a steady increase of occupancy rates. Our tenant retention levels are at an all-time high and this allowed the necessary rent escalation. So, I’m optimistic that moving forward this is a pattern that we can sustain.”
Risks in inflation, rising costs
Alongside such opportunities, the panel also cited risks that can hinder the sector’s growth. The risks are led by global inflation, driving the rising costs of materials and mortgage rates, which altogether are seen to make access to emerging markets more challenging.
For Mr. Canto, to address such issues, the country still has room for growth, starting with the lack of retail lending, where banks can play an important role.
Regarding mortgage rates, Mr. Mirasol observed that when interest rates are low, investors do not make as much money in investing; which means there is less demand for currency and the exchange rate also decreases.
“Not every consumer has the ability to pay cash. So, the more the flexible the banks are, the easier the mortgage rates will be, the better the industry will go,” he said.
“Higher interest rates tend to naturally bring down the man. But, on the upside, the economy is growing, and the consumer [can have] confidence in the future,” he added.
BusinessWorld Managing Editor Cathy Rose A. Garcia, moderator of the first panel discussion
In spite of the seen risks, the impact of inflation is also seen as an opportunity that will help the sector to survive and thrive.
“While inflation poses a threat, it can also serve as a boon to the industry because we know that real estate investment still remains to be a very good hedge against inflation,” Mr. Hernandez explained. “On one hand, there is the threat posed by inflation as a deterrent to the impulse to invest. On the other hand, it can be an impulse that will generate more interest in the industry.”
Adding to inflation is the rising cost of materials, which has a direct impact on construction and development. Rising costs of materials, from low-income housing to luxury market segments, eventually lead to extra costs and higher prices for consumers who are buying or investing in real estate properties.
“Fortunately, as a big developer in scale, we can offer very inventive and creative payment schemes,” Mr. Hernandez responded. “And as you spread amortization over a period of time, it becomes more attractive and helpful for consumers who would like to aspire to be a part of the improving environment for community building. That is some way we can mitigate interest rate regime.”
Embracing sustainability
Also emphasized during the discussion was the shift to sustainability among property developers. For instance, since the pandemic, there has been an increase in replacing older buildings with sustainable and energy-efficient ones, as well as mixed-use developments that are transit-oriented and environment-friendly.
Yet, support from the public sector is necessary to supplement efforts in decarbonizing buildings and integrating sustainable practices in property development.
William Thomas F. Mirasol, president and chief operations officer of Federal Land, Inc.
“[On sustainability,] the major issue is the cost. When a consumer finds out the costs, sometimes [they] get a little pushed back. Now, what can be done is [giving] incentives to the industry for doing more green development,” Mr. Mirasol said. “Leaning towards green is inevitable; we just have to find a way to make it more less expensive.”
Besides incentives, Mr. Canto added, the government can give their support in terms of policies covering the landscape of building infrastructure, communities, and affordable housing.
“These things will make the overall landscape in sustainability more acceptable to a large part of the population,” Mr. Canto said.
L-R: Moderator Victor V. Saulon of BusinessWorld, John Eric T. Francia of ACEN Corp., Emmanuel V. Rubio of AboitizPower Corp., and Anthony Oundjian of Boston Consulting Group
By Bjorn Biel M. Beltran, Special Features and Content Assistant Editor
Development has many demands, and one of the most pressing is economic growth’s insatiable appetite for energy. While in the past, meeting such demands could be met quite comfortably with fossil fuels like coal and oil, for the modern world the task is not quite as simple.
As the world grapples with the urgent need to combat climate change, for the Philippines in particular as an archipelagic country, transitioning to clean energy sources has emerged as a critical priority. With the increasing global awareness of the environmental impact of fossil fuels, governments, organizations, and individuals are now facing the challenge of shifting towards sustainable alternatives.
BusinessWorld Editor Victor V. Saulon, moderator of the forum’s second panel discussion
But while the benefits of clean energy are undeniable, this path to transition is fraught with hurdles. One of the significant challenges in transitioning to clean energy is the sheer scale of the task.
The existing energy infrastructure built around fossil fuels is deeply entrenched and highly reliant on established technologies, supply chains, and economic models. Replacing this infrastructure with clean energy systems requires substantial investments, technological advancements, and a comprehensive overhaul of the energy sector. Additionally, the intermittency of renewable energy sources, such as solar and wind, poses challenges in terms of reliability and grid integration.
Anthony Oundjian, managing director and senior partner for Manila at Boston Consulting Group
Such points were raised in a panel discussion on the future of Philippine energy at the BusinessWorld Forecast 2024 forum. Anthony Oundjian, managing director and senior partner for Manila at Boston Consulting Group, noted that factors like global inflation, the Ukraine-Russia war, and general supply chain bottlenecks are major factors in the hampered progress towards a cleaner energy grid.
“The crisis, if you want to call it a crisis, is in fact a convergence of a couple of factors that are shaping the energy system. Of course, we aspire to get reliable, clean, and affordable energy. But in each of these dimensions, the last few years have not been quite smooth,” Mr. Oundjian said.
“If we take reliability, we have a dip in production related to COVID (coronavirus disease) like three years ago; and in many dimensions, we are not quite back where we are or quite back to the growth trajectory that we have embraced.”
He mentioned that pressures to enact a clean energy transition are mounting every year, with the materiality of the impact of climate change becoming clearer as time goes on. Some countries went very far from the Philippines in taking measures that are really driving the sector and the adoption on this front.
“Finally, affordability is affected by a set of factors not just by the imbalance between supply and demand that we will expect (but, of course, that is one factor) but also related to inflation in many other sectors. We are at the point where supply is constrained, the climate action has never been so high, and we are facing a pressure on prices. That is our challenge,” he said.
Abotiz Power Corp. (AboitizPower) President and Chief Executive Officer (CEO) Emmanuel V.Rubio said that there is a need to balance “variable” renewable energy (RE) sources to ensure grid preparedness for its buildout.
Emmanuel V. Rubio, president and chief executive officer of Aboitiz Power
“One thing that needs to be discussed in this transition — and there has to be a transition towards green energy — is the variability of renewables. People are talking about the low costs of generation from wind and solar. Sure, of course, the resource is free once you’ve invested on the capacity; but what is not being discussed is the energy needed to balance the variability of solar and wind, to the point that I believe that variable renewable energy has a cap in terms of grid penetration. When it gets to a certain level of capacity in the grid, the grid may not be able to manage it,” he said.
Previously, AboitizPower set its own target net attributable capacity of 9,200 megawatts and a 50:50 balance between its RE and thermal portfolios by the end of the decade.
As of end-2022, renewables accounted for about 22% of the Philippines’ power generation mix. The government wants to increase the share to 35% by 2030 and 50% by 2040.
Mr. Rubio added that the country’s energy transition needs to consider a lot of things.
“It’s easy to actually discuss and simplify things, but it’s not simple. The transition has to be well-managed and well-planned; and every time there’s a discussion on transition to cleaner energy, I think what has to be put into the table is also about climate justice and energy equity,” he said.
John Eric T. Francia, president and CEO of ACEN Corp.
John Eric T. Francia, president and CEO of ACEN Corp., pointed out that the country’s current strong growth makes it much more difficult to meet the requisite energy demands from renewables alone. That fact has contributed to a decreased share of renewable energy in the country’s energy grid.
“In 2010, the share of renewables out of the total output was close to 30%. Today, it’s down to 22%. This is ironic because it was in 2008 when the RE Law was passed. But, because of the strong growth of the country over the last decade or so, a lot of the new capacity we have built was from coal plants; and only about 3,000 megawatts was from renewable energy. That’s how the renewable energy mix declined, how we got to where we are today,” Mr. Francia said.
The Philippines would need an additional 18,000 MW of renewables to adjust to the low capacity factor of solar and wind resources, he pointed out.
“We don’t think that geothermal potential in the Philippines would close that gap of 5,000 megawatts of renewables. We believe that a lot of that will be driven by solar and wind, which have low output or low capacity factor,” Mr. Francia added.
“When we now look forward, by 2030 and beyond, the country is growing at 5%-6% per year; and that translates to about 1,000 megawatts of new capacities that we need to build every year,” he said, noting that for the next seven years and beyond the country will need to build around almost 6,000 MW of “clean” capacity, which is to be driven by solar and wind sources.
Currently, ACEN has approximately 4,430 MW of attributable capacity spanning the Philippines, Vietnam, Indonesia, India, and Australia.
ACEN is building solar and wind power projects with a total capacity of 1,100 MW, of which 700 MW is expected to be operational in the next three to six months, Mr. Francia said.
The panel of Forecast 2024’s second panel discussion received tokens from BusinessWorld’s Miguel G. Belmonte (leftmost) and Lucien C. Dy Tioco (rightmost).
“I think we’re at a pivotal moment. We’ve reached a point where we need to do things differently, and we need to ensure and keep a cycle of investments. For the next five to ten years, we should probably invest more than we’ve invested in the previous decade,” Mr. Oundjian said.
ACEN Corp. has cleared another partnership with a US-based company to develop renewable energy projects in the Philippines.
In a disclosure to the stock exchange on Tuesday, the listed energy company said its executive committee had approved a proposed tie-up with BrightNight APAC B.V. to establish a local renewable energy (RE) platform.
According to ACEN, the partners aim to “develop, construct, and operate utility-scale renewable energy projects in the Philippines, subject to, among others, execution of final definitive documents.”
The company did not disclose details of the RE platform that it seeks to establish.
BrightNight APAC is wholly owned by BrightNight LLC, which is designed to provide utility and commercial and industrial customers with “clean, dispatchable renewable power solutions.”
BrightNight has developed a renewable power portfolio of 2.7 gigawatts of alternating current (GWac) across the Philippines, India, Australia, and Bangladesh.
Of the total, 1 GWac is under development in the Philippines.
“This partnership in the Philippines, once completed, will be the second GW-scale renewable energy platform investment partnership between ACEN and BrightNight in APAC (Asia-Pacific),” ACEN said.
In March, ACEN signed a partnership with BrightNight to develop, construct, and operate large-scale hybrid wind-solar and “round-the-clock” renewable power projects in India.
Currently, ACEN has approximately 4,430 megawatts of attributable capacity spanning the Philippines, Vietnam, Indonesia, India, and Australia.
At the local bourse on Tuesday, shares in ACEN declined by seven centavos or 1.47% to close at P4.69 apiece.
Meanwhile, ENEX Energy Corp. said in a separate stock market disclosure that the Department of Energy had granted the request of the listed company’s subsidiary to extend the deadline to drill a well under Service Contract 55 (SC 55) by 18 months.
The subsidiary — Palawan55 Exploration and Production Corp. — has a contract with the government to explore an area in offshore west Palawan within a set timeline.
In a letter dated Dec. 1, the Energy department said “(given that SC 55 is currently still on force majeure, Palawan55 shall have a total of twenty-three (23) months (the five [5] months remaining plus the 18-month extension) from the lifting of force majeure to drill the committed well.”
The department earlier found a basis to place SC 55 under force majeure from Dec. 6, 2022 until such time that a clearance to proceed with exploration activities in the West Philippine Sea has been issued by the government. — Sheldeen Joy Talavera
From L-R: Santiago J. Arnaiz of Multiverse.PH (moderator), Stella Christine D. Dizon of Globe Telecom, Patricia Poco-Palacios of Global Dominion Financing, Inc., and Yukiko Tsukamoto of Bain & Company
By Angela Kiara S. Brillantes, Special Features and Content Writer
A big part of changes taking place in the economy involves changes in consumer behavior, which organizations and brands adapt to in order to remain relevant and responsive to their markets. One of these recent changes that businesses should not miss is that consumers are now being more empowered by information, tools, technology, and support they need for making their own decisions on what to purchase and consume.
In the third panel discussion of BusinessWorld Forecast 2024 last Nov. 22, themed “Points of Convergence: Meeting Consumers Where They Currently Are,” industry experts and executives from Bain & Company, Global Dominion Financing, Inc., and Globe Telecom discuss how consumer empowerment is driving and can further drive the way companies are reaching their customers.
Yukiko Tsukamoto, partner at Bain & Company
As one of the fastest-growing economies in the world, Southeast Asia is experiencing fundamental economic and consumer shifts. More particularly, in the Philippines, the shift to higher levels of lifestyle resulted in an increase in consumer spending as well. According to Yukiko Tsukamoto, partner at Bain & Company, citing recent reports from the firm’s end, consumer spending is projected to double by 2030 as 75% of the population shifts to mid-high-income lifestyles.
“As the GDP per capita grows, there will be a rocket effect on the consumption and on things they will spend money on. Even today, we observe this. [Consumer] fitness is close to three times high, consumer electronics are two times high, and you’ll understand that when you become richer. Your base of lifestyle becomes better and you start to look for your health, you start to look for better iPhones. This is why consumers are starting to spend more, and we expect this spend to further increase as the Filipino consumers redefine what is the basic need is. Their basic need is now expanding into more and more categories,” Ms. Tsukamoto explained.
Engaging with Filipino consumers comes in two phases — purchasing and discovery. According to Bain & Company, research revealed that the Philippines is among the highest digital users in the world, and using the digital platform is essential for engaging with Filipino consumers.
“The purchase will happen more and more on e-commerce, they really want to buy online because it’s easier and more convenient, and you can do it anytime you want. The survey also suggests that a lot of people prefer to do it in a marketplace (Lazada, Shoppee, etc.),” Ms. Tsukamoto explained.
Ms. Tsukamoto also noted that the digital space serves as consumers’ channel for discovery. The digital space gives consumers closer access to product and brand information, as well as consumer preference reviews, which not only help consumers in decision making but also has the potential in improving the image of brands.
Bain & Company’s report showed a majority of Filipino consumers are tech-savvy, and they use their phones at least 10 hours a day for emails, phone calls, web browsing, social media, etc. The digital shift, as revealed by these findings, presents an advantage for businesses to enhance consumer interactions and relationships.
Patricia Poco-Palacios, president and CEO of Global Dominion Financing, Inc.
Patricia Poco-Palacios, Global Dominion Financing Inc., president & COO, said the need for building online presence while maintaining offline channels has now become a key to sustaining customer relationships in order to address their changing needs and expectations.
Known financial institutions like GDFI have served families and businesses by helping them reach their financial goals. For GDFI, utilizing the digital platform streamlined their operations. For instance, 30% of payments are made through digital banking and mobile wallets, up from previously 7%.
Similarly, Stella Christine D. Dizon, vice-president for the business-to-business segment at Globe Telecom, stated that the digital shift helped businesses provide a seamless experience and improve consumer relationships.
She shared that GCash, Globe’s payment service and mobile wallet, has proven the upside of going digital as it helped individuals and businesses adapt to new ways of doing financial transactions.
“As we shift online, we also shift how we engage with our customers; and we’ve taken great lengths to bring all of these experiences online. It is our responsibility as well to meet them in the digital world and bring all those experiences within that space,” Ms. Dizon said.
“It is our mantra to help businesses in the Philippines to grow and reach their customers better. What we’ve done and continue to try to do is help our customers in the business realm come closer to their customers as well through their own digital transformation journey,” she added.
Switching choices
While the country’s consumer spending rate is high, Ms. Tsukamoto described Filipino consumers as “not loyal” as they are more likely to switch to consumer goods that they think are more suited to their changing lifestyles.
“If you look at the things they look for, it’s the value of money, price, and quality; and they’re looking for better products. When we looked up [how consumers switch brands], they were switching to an insurgent ground. They were looking for something for me [themselves], something that has an edge; and they’re waiting to change,” Ms. Tsukamoto explained.
“But, it doesn’t mean large consumer products are doomed because a lot of these insurgents are part of their portfolio. It’s more of how you market or position yourself to be able to communicate the value of a specific customer segment.”
The panel noted that as consumer spending and expectations are expected to accelerate, businesses should use data and technology to their advantage.
“Being in the digital space has leveled the playing field for businesses and consumers. They have access to the global market already, and the power is in their hands because they can look at reviews, and compare prices in real-time, and they expect so much more from the businesses they will deal with or the brands they patronize,” Ms. Dizon of Globe said.
Becoming sustainable brands
Aside from digitalization, sustainability has been moving its way towards consumer spending and lifestyles. For consumers, making sustainable choices is crucial in achieving net zero transition.
Stella Christine D. Dizon, vice-president for the business-to-business segment of Globe Telecom
In the Philippines, many consumers are found to be more than willing to pay for sustainable products but there is still a gap in the market. According to Ms. Dizon, while 80% of consumers are interested in buying sustainable products, only a few actually do so. The success of integrating sustainability into brands depends on their accessibility, availability, and affordability.
“It is on us (companies), to be able to give them those alternatives and options because it needs to be a part or integral part of the business of what we do.” Ms. Dizon said. “At Globe, we’re a very big advocate for sustainability, it’s a very important part of our business.”
“We have to be the ones to deliver on that and we have to become that brand and commit to it as an organization,” she added. “Sustainability should be good for the organization and for the brand image.”
Sustainability is not only about environmental protection but also about consumer protection, GDFI’s Ms. Palacios added. She noted that sustainability frameworks consist of consumer protection, which is a big concern for the country’s financial sector. Moreover, the need to address financial illiteracy within the Filipino population is seen one of the sustainability goals that the financial sector should endeavor to achieve.
“It is imperative that we have a sustainability framework, and this is the direction we’re going to go and see how sustainability will be embedded in our operations. More than anything, we also feel our products and services are addressing one of the UN Development Goals which is anti-poverty,” she said.
The panel of Forecast 2024’s third panel discussion received tokens from BusinessWorld’s Wilfredo G. Reyes (leftmost) and Lucien C. Dy Tioco (rightmost).
“Aside from board support, internally, our regulators, through the Financial Consumer Protection Act, have been pushing to disclose all the interest rates and for everyone to be treated fairly and equitably,” she added.
AYALA-LED ACEN Corp. has called for a responsible way of replacing traditional power plants with renewable energy sources to avoid supply disruptions.
“Basically, to replace up in a responsible manner the coal, we need renewables — solar and wind — we estimate that this will require a thousand megawatts,” ACEN President and Chief Executive Officer Eric T. Francia said during a side event of the United Nation’s Conference of the Parties in Dubai.
“But we also need to incorporate energy storage at least four to six hours so as to not negatively impact the grid,” he added.
Mr. Francia was referring to ACEN’s energy transition program and roadmap for the early retirement of its subsidiary’s 246-megawatt (MW) coal-fired power plant in a bid to accelerate energy transition.
“As part of this commitment to 100% renewables, we have to do a responsible divestment of power plants because that was the major asset that was in our portfolio mix,” he said.
ACEN’s “just energy transition” initiative was developed to outline the early retirement of South Luzon Thermal Energy Corp.’s (SLTEC) coal power plant via technical assistance support from Coal Asset Transition Accelerator in partnership with Climate Smart Ventures.
The 246-MW coal plant in Batangas was the only coal plant in ACEN’s portfolio.
Through its program, SLTEC’s coal power plant will be decommissioned as early as 2030, which is a decade ahead of its current retirement date.
According to ACEN, the initiative could reduce 15 to 25 years’ worth of emissions given that coal plants typically operate for 40 to 50 years.
In July last year, ACEN approved the divestment of all its shares in SLTEC through an energy transition financing, which was expected to secure P3.7 billion in fresh funds.
“I recognize the vast impact of this not only for ACEN, not only for the Philippines but the global landscape,” Mr. Francia said.
He said that the energy replacement needs to be done responsibly, especially if it is to accelerate the timeline.
SLTEC’s power plant typically generates 1,800 gigawatt-hours of output, Mr. Francia said, which is around 2% of the country’s needs.
The energy transition initiative is in line with ACEN’s aspiration to reach 20 gigawatts of renewables by 2030, 100% renewable generation by 2025, and net zero greenhouse gas emissions by 2050 or earlier. — Sheldeen Joy Talavera
ALFREDO S. Panlilio is stepping down as president and chief executive officer of PLDT Inc. effective Jan. 1, 2024 as he retires for health reasons, the telecommunications company said on Tuesday.
After Mr. Panlilio’s retirement, PLDT Chairman Manuel V. Pangilinan will concurrently hold the vacated posts until such time as a new president and chief executive officer is appointed, the company said.
“I would like to thank Al profusely for his service and his loyalty and wish him the very best. I also enjoin everyone to support a smooth transition within the PLDT Group at this critical juncture of its corporate life,” Mr. Pangilinan told the stock exchange.
PLDT said its board had also accepted Mr. Panlilio’s resignation as president and chief executive of its wireless subsidiary Smart Communications, Inc.
PLDT credited Mr. Panlilio for being instrumental in steering the group “during the challenging times of the Covid 19 pandemic and enabling PLDT to sustain profitability and industry leadership in that difficult period.”
“With Mr. Panlilio at the helm, PLDT received various citations from both local and international organizations for pioneering brand, corporate social responsibility, cybersecurity, network, and sustainability initiatives,” it said.
Meanwhile, Mr. Panlilio will remain as director of PLDT, Smart, and MediaQuest Holdings, Inc., the company said, adding that he will also retain his role as chairman of Maya Bank, Inc. and Bonifacio Communications Corp.
He will also remain the director of Multisys Technologies Corp.; and MultiPay; and president of MVP Sports Foundation, trustee of Asian Carriers Conference, and member of the Management Association of the Philippines.
Pangilinan-led PLDT reported P9.43 billion in attributable net income for the third quarter, down 12% from P10.71 billion a year earlier, citing a challenging economic environment.
In the third quarter, the company’s combined revenues rose by 1.9% to P52.32 billion from P51.35 billion in the same period last year.
At the local bourse on Tuesday, shares in the company closed P6 or 0.47% higher to end at P1,276 apiece.
Hastings Holdings, Inc., a unit of PLDT Beneficial Trust Fund subsidiary MediaQuest Holdings, Inc., has a majority stake in BusinessWorld through the Philippine Star Group, which it controls. — Ashley Erika O. Jose
One News Anchor and Forecast 2024 Host Danie Laurel (left) and Philippine Stock Exchange President & CEO Ramon S. Monzon (right) during the first fireside chat of the forum
By Mhicole A. Moral
The Philippines has become an attractive market for both local and foreign investors, demonstrating resilience in the face of economic obstacles. In 2024, the Philippine stock market is expected to offer a dynamic landscape of opportunities and challenges, which investors and market enthusiasts are eagerly anticipating.
In a fireside chat themed “Dissecting the Stock and Bonds Market Outlook for 2024” during the BusinessWorld Forecast 2024 last Nov. 23, Ramon S. Monzon, president and chief executive officer of the Philippine Stock Exchange (PSE) shared about the performance of the stock market this year and his insights into what lies ahead for 2024.
Mr. Monzon acknowledged that 2023 brought disappointments in terms of the stock market’s performance, particularly in trading volume and the number of companies going public. Several companies that planned to go public in 2023 deferred their initial public offerings (IPOs) due to volatile market conditions.
However, he emphasized that this trend is not unique to the Philippine market but is observed across the Southeast Asian region.
Despite this, Mr. Monzon remains optimistic about the future of the Philippine stock market and highlighted several initiatives to enhance the market’s attractiveness and resilience.
“We at the PSE, we’re always optimists,” he shared. “Our job is to provide products, provide an efficient platform for people to trade and exchange, and harmonize the needs of companies that need to raise capital versus the equally important advocacy of PSE to protect small investors.”
He also acknowledged that while the IPO prices of real estate investment trusts (REITs) have experienced fluctuations, the appeal lies in their attractive yields. Therefore, the declining prices have resulted in higher yields, attracting investors who value steady income.
“In the PSE index, we have nine of these 30 giving dividend yields of more than 10%. I mean, you can’t get that up anywhere. And that’s for the third quarter. We expect the fourth earnings to be even higher,” Mr. Monzon explained.
Making the Philippine market more attractive
The Philippines has been seen as a promising market for local and international investors for quite some time. However, the market has become less attractive due to the recent economic challenges and the impact of the pandemic. As a result, the national government and financial authorities, especially the PSE, are working together to implement measures to make the Philippine market more appealing to local and foreign investors.
Ramon S. Monzon, president & CEO of Philippine Stock Exchange
According to Mr. Monzon, current retail investors comprise around 19% to 20% of the average trading volume. The PSE president acknowledged the impact of high interest rates on the market. In addition, friction costs, including stock transaction taxes and fixed commission rates, have been a major challenge that puts the Philippines at a disadvantage compared to other markets in the ASEAN.
“In Jan. 2021, at the height of the pandemic, we were hitting about 12 billion in trading volume. The retail investors comprise [52%] of the trading volume,” he said. “So, in short, we know that the retail investors are there. What’s really hurting the market right now, I would say, is the high interest rates.”
“Only in the Philippines do you have a stock transaction tax of 60 basis points, 0.6 of 1%. We have a minimum broker’s commission rate of 0.25. So, if you do a round-trip transaction in the market, you buy, you sell, and you’re down 1.1% right away, 110 basis points. So, if you’re a foreign investor, you’re talking about earning 2%, 3%, or 4% in the market, 1.1 friction cost is very discouraging,” the PSE president added.
In turn, legislative efforts are underway to reduce the stock transaction tax and dividend tax for foreign investors, potentially acting as a significant game-changer.
“[There is] a bill that would reduce a stock transaction tax from 60 basis points to 10 basis points, and reducing the dividend tax for foreign investors from 25% to 10% again, to entice the foreign investors to come back and put our market at a level playing field,” Mr. Monzon noted.
“We’re hoping the Senate can do something about this before they do the recess. If not, it’s going to be in the first quarter, but that’s a very big [deal]. I think that could be a big game changer, the reduction of the friction cost,” he added.
In addition, the resistance level in the market, currently hovering between 62 and 65, was identified as a hurdle. Mr. Monzon emphasized the importance of interest rates in stimulating market activity. For instance, if interest rates go down or the expectation of such a decrease arises, the excess liquidity in savings and time could flow into the market. Conversely, rising interest rates could deter market participation.
Moreover, the PSE president announced their intention to introduce short selling in the Philippine market to attract institutional investors and boost market liquidity.
“We are pushing for the short selling product to entice foreign investors to return to the market because, without the short selling, the Philippine market is just a long market. If there is some bad news in the Philippine economy or even the Asian economy, and investors feel the need to get out of the market, in the Philippine market, they have no choice but to sell,” said Mr. Monzon.
“But with the short selling, they will now have the ability to hedge their portfolio and investments,” he continued. “So, they will not be selling, but they will just be doing some hedging.”
Addressing the issue of listings, Mr. Monzon shared the PSE’s commitment to fostering an environment conducive to the growth of small and medium enterprises (SMEs). Acknowledging the urgency for SMEs to secure funding for expansion, he highlighted the liberalization of listing rules.
According to the PSE president, they have reduced barriers to entry, allowing companies with a two-year operating history and a sales growth of at least 20% to qualify for listing, even without a profit track record.
To further facilitate SME listings, the PSE introduced the Listing Engagement and Assistance Program (LEAP). This initiative provides guidance to companies, particularly those facing challenges in preparing for an IPO.
Furthermore, Mr. Monzon affirmed that these changes were now the new listing rules. The adjustments, initially implemented to mitigate pandemic-induced economic challenges, have proven effective in encouraging more companies, especially SMEs, to consider going public.
In response to the trend of local companies listing abroad, particularly in Singapore, the PSE president emphasized the mutually beneficial nature of dual listings. Notably, companies listed in both the Philippine and foreign markets enhance market liquidity.
“If the DRs (depository receipts) of the local companies trade very well in the foreign markets, they will have to buy the corresponding shares here. So that will increase the liquidity here,” he explained.
On the topic of corporate earnings, Mr. Monzon expressed optimism, citing positive reports from major banks such as BDO, BPI, Metro Bank, China Bank, and PNB. These institutions have reported significant increases in earnings, with some boasting a remarkable 35% increase over the nine-month period.
“When you go to the 12-month, year-end, the earnings are really going to, I guess, go through the roof. If inflation goes down, then, obviously, these companies will have a lower cost of capital and a lower cost of borrowing — they can expand. So, you should expect the earnings to go even higher,” he added.
The PSE president also touched upon the time and effort involved in introducing innovative market mechanisms. For instance, obtaining regulatory approval for short selling took four years. Acknowledging the potential delays in crafting new rules, Mr. Monzon suggested collaborating with regulators by providing existing rules from other exchanges to expedite the approval process.
The conversation also touched on sectors that could drive capital market activity in the coming year. Mr. Monzon hinted at a potential listing of a mining company — an area the Philippine stock market has not explored for a considerable period. He emphasized the need for a new income stream for the Philippines, suggesting that responsible mining should be a valuable contributor.
“Mining does not equal to, I guess, environmental deterioration. There’s such a thing as responsible mining… I think the biggest obstacle for mining companies to operate is not so much the environmental impact but the LGU approval. So, if the national government can help these mining companies overcome the LGU challenges, I think we should be okay there,” said the PSE president.
Digitalization and inclusivity
PSE’s Ramon S. Monzon received a token from Wilfredo G. Reyes (first from left) and Miguel G. Belmonte (third from left) of BusinessWorld.
Mr. Monzon shedding light on the positive impact of digitalizing trading for financial inclusivity.
For instance, fintech app GCash introduced GStock to make online trading services accessible to the public. The PSE has adjusted its board lot to allow retail investors to participate with a minimum investment of 100 pesos. The PSE president has stated that this move reflects a concerted effort to make the stock market more financially inclusive.
“Foreign investors know that institutional investors comprise a bigger share of any market. But when they see that a market has big retail participation, they get encouraged. So, we’re hopeful that we’ll take off.”
Meanwhile, the PSE has indicated a cautious approach to digital currencies, citing recent controversies, including the issue of money laundering by the founder of a crypto exchange giant. Instead, the PSE focuses on expanding the market’s product offerings, such as introducing DRs by next year and aiming for derivative trading by 2025, aligning the PSE with regional counterparts.
In closing, Mr. Monzon encourages investors to consider the historical outperformance of the stock market compared to bank deposits, particularly during times of high-interest rates.
“While the market is at this level, it would be very prudent for investors to start putting some of their funds in the market, and I think next year will be a much better year,” Mr. Monzon said.
DIGITAL Fine Arts 1st Place: Beyond Illumination by Mary Dawn Jane Monterde
PHOTOGRAPHY 1st Place: Rahuyo ng Mapag-asang Tala by Marniel Daguio
WATERCOLOR 1st Place: Inaaning Tagumpay by Glenn Gonzales
SCULPTURE 1st Place: Resilience Unearthed by John Patrick Gante
THE WINNING works in this year’s Shell National Students Art Competition were images of unsung heroes of Philippine society, from hardworking farmers and steadfast artisans to everyday Filipinos upholding cultural traditions.
Following the post-pandemic return to in-person activities, the Shell Pilipinas Corporation’s 56th National Students Art Competition (NSAC) received a record-breaking 2,900 entries across all categories.
“The ingenuity displayed by our participants, their choice of subjects and the stories woven into their art pieces all resonate the profound truth, that the Philippines is a nation that is always moving forward through their creativity and vision,” Serge Bernal, Shell Pilipinas’ Vice-President for Corporate Relations, said in his opening speech on Nov. 28.
He told BusinessWorld after the program that during the pandemic, the number of entries went up since the online format gave wider access. The worry this year was that going back to the physical might mean fewer participants.
“We were surprised to find the numbers actually went even higher,” he said. “This year, we also visited more schools in the regions. If we could bring this to all 7,000-plus islands, we would.”
There were five categories in NSAC this year: Digital Fine Arts, Sculpture, Watercolor, Oil and Acrylic, and the newest category Photography, which was reintroduced for the first time since 1972.
The top winners in each category had recurring messages of the value of Filipino strength and spirit, in keeping with this year’s theme “Galíng Pinoy, Galing Pinoy.”
In the Digital Fine Arts Category, Mary Dawn Jane Monterde of Holy Trinity University in Palawan won first place for her work, Beyond Illumination, which depicts a kerosene lamp’s fire lighting up various facets of the Filipino spirit. Speaking about her work, Ms. Monterde said that her fellow countrymen served as her main inspiration.
Weaving the Narrative by Judhea Java of University of the Philippines Cebu won the Oil and Acrylic Category. The subjects of the piece are women artisans who take on the noble task of continuing the local weaving tradition even in contemporary society. “Indigenous weavers are often marginalized, so I wanted to champion them and show how important they are in weaving the different narratives of Filipino people today,” said Ms. Java.
In the Watercolor category, Glenn Gonzales of the University of the Philippines Diliman won for his painting titled Inaaning Tagumpay. The piece presents a farmer holding up his produce amid the fields. Mr. Gonzales said that it is inspired by his hometown, Nueva Ecija, which is rich in agricultural produce provided by farmers who tirelessly work, day after day, to look after their crops.
The winning work in the Sculpture category is also inspired by farmers. John Patrick Gante of the Bulacan State University won for his sculpture Resilience Unearthed, which depicts a farmer hard at work. For him, the piece is a tribute to “the unsung heroes of our society.”
Finally, Tarlac State University’s Marniel Daguio won first place in the Photography category for his work titled Rahuyo ng Mapag-asang Tala. He said that capturing the act of a cultural tradition being upheld by members of the local community, in the form of hanging a simple parol (star-shaped Christmas lantern), was very important to him.
The 2nd and 3rd place winners are: Mayamang Pamayanan by Mary Ashley Sophia Chikiamco, and Hanapbuhay: Hanap Sining by Jahn Aldrin Carilimdiliman in the Digital Fine Arts category; Prinsipyo by John Lester Garcia, and Faceted Identities by Markus Gabrielle Gallegos in the Oil/Acrylic category; Nak,Uuwi na si Mama by Edward Russel Romero, and Pagsibol by Shereen Yancy Millet in the Watercolor category; Hiraya by Ace Brian De Leon, and Kakanyahan ng Bayanihan by Gerald Ed Chua in the Sculpture category; and Buhay by Jennielyn Liezel Sala, and Pahiyas ng Kamay by Connie Grace Carlos in the Photography category.
This year’s judges were: Ross Capili, Lex Kabigting, and Pablo Biglang-Awa, Jr. for the Digital Fine Arts category; Marina Cruz, Rodel Tapaya, and Ronald Ventura for the Oil/Acrylic category; Kenneth Esguerra, Nemi Miranda, and Renato Habulan for the Watercolor category; Michael Cacnio, Toym Leon Imao, and Ram Mallari for the Sculpture category; and Jorell Legaspi, Ardie Lopez, and Edwin Tuyay for the Photography Category.
Launched by Shell Pilipinas in 1951 as a search for art to feature in its calendar, NSAC grew to become the longest-running Philippine student art competition. Among NSAC’s winners were Jose Joya, Ang Kiukok, and Benedicto “BenCab” Cabrera — all National Artists today.
For updates on the virtual gallery of winners, visit Shell Pilipinas’ social media accounts. — Brontë H. Lacsamana
