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UN aviation meeting agrees to interim goal of 5% lower emissions by 2030

STOCK PHOTO | Image from Pixabay

A MEETING of more than 100 countries on Friday agreed to an interim goal for emissions reductions from global aviation by 2030 by using less-polluting fuels, but China, Russia and some others aired concerns about the impact on their economies.

The goal, which came after five days of United Nations (UN)-led talks in Dubai, called for 5% lower carbon emissions through the use of cleaner energies like sustainable aviation fuel (SAF) by 2030, the International Civil Aviation Organization (ICAO) said. An earlier draft had a target of 5-8%.

The United States told the closing session of the meeting, which was held ahead of next week’s Conference of the Parties (COP28) climate summit, that the goal sent a “clear and positive signal” to the financial community, which must invest in new clean energy projects.

Aviation accounts for an estimated 2-3% of global carbon emissions. SAF is key toward reducing those emissions, but it is costly and amounts to less than 1% of total global jet fuel.

Mauricio Ramirez Koppel, ICAO representative from Colombia, which is looking to produce SAF from materials like palm oil, said the 5% target “will kick-start and speed up SAF projects” by providing investors a clear objective.

“Now it is up to the finance community and energy sector to support the necessary infrastructure and start delivering SAF in ever increasing quantities,” said Haldane Dodd, executive director of the Air Transport Action Group, which represents airframe and engine makers, among others.

Aviation is not directly covered by the Paris Agreement on combating climate change, but the air transport sector has previously pledged to align itself with global goals by setting an “aspirational” target of net zero emissions by 2050.

By bringing together broadly the same countries that are involved in COP28, analysts have said that this week’s aviation talks offered an early glimpse of the scope for further cooperation.

The deal followed wrangling over wording, particularly the transfer of technology that African and other emerging economies want to allow them to ramp up SAF production capacity.

RESERVATIONS
Some countries made clear their reservations.

China, which has agreed to aim for carbon neutrality by 2060 rather than 2050, said the goal would “enormously increase” airline operating costs and discriminate against developing countries by posing a threat to energy and food security.

Saudi Arabia and Iraq, two major Middle East oil producers and the Organization of the Petroleum Exporting Countries members, objected to both the target and the date. 

Environmentalists said agreement lacks teeth as it is not binding and would allow airlines to use lower-carbon fossil fuel.

“ICAO has no mandate to enforce this target so it will likely end up in smoke,” said Jo Dardenne, aviation director at the Brussels-based group Transport & Environment. “It is unclear how much and what type of fuels will need to be produced to reach this 5% target globally.”

The aviation industry estimates it will take between $1.45 trillion and $3.2 trillion for SAF capital development to achieve the sector’s net zero emissions goal.

Making access to financing more readily available to developing countries, another conference goal, is needed to bolster SAF output outside regions like the U.S. and Europe. — Reuters

AboitizPower allots P50-B capex next year largely for renewables

ABOITIZPOWER is set to build a second solar power venture on a site in Brgy. Laoag in Aguilar, Pangasinan located 14 kilometers from the Cayanga-Bugallon solar power project. — ABOITIZPOWER.COM

ABOITIZ Power Corp. (AboitizPower) is setting aside P50 billion as capital expenditure (capex) budget next year mostly for the expansion and construction of its renewable energy (RE) projects.

“Ballpark of about P50 billion for all our capex. A lot of that is for the growth,” AboitizPower Senior Vice-President for Commercial Operations Juan Alejandro A. Aboitiz told reporters last week.

“A big part of our capex is for new projects primarily for renewables. Fundraising is always a critical component of growth so we’re looking at all of our options to raise more debt to fund our new projects,” he said.

The company has yet to disclose the number of projects next year, but Mr. Aboitiz noted that most of the expansion and new projects are in renewables such as solar and wind energy.

AboitizPower has allotted P32 billion for capex this year, primarily for “the development and construction of various solar, geothermal, hydro, and wind power projects.”

This year’s capex also covers the continuous improvement of the reliability of baseload plants and various land acquisitions, new substations, and new meters for its power distribution business.

The company is currently completing the 159-megawatt peak (MWp) Laoag solar project in Pangasinan which is expected to be fully energized by the second quarter of 2024.

It is also targeting to energize a 17-megawatt (MW) binary geothermal power project in Tiwi, Albay by the first quarter of next year.

In the third quarter, AboitizPower reported an attributable net income of P8.92 billion, 6.4% lower than the P9.53 billion posted in the same quarter last year.

Gross revenues went down by 9% to P48.37 billion from P53.17 billion a year ago.

The company aims to expand its power generation capacity to 9.2 gigawatts (GW), of which half or 4,600 MW will come from various RE sources.

To date, the company has RE projects with a combined capacity of about 1,000  MW that are in the pipeline through its development of wind, solar, and geothermal projects. — Sheldeen Joy Talavera

Meralco says rate setting is regulated, stringent

Electric utility denies overcharging allegations

POWER RATES for consumers served by Manila Electric Co. (Meralco) undergo a review and confirmation process, the listed electricity seller said on Sunday, as it denied overcharging allegations.

In a media release, the distribution utility (DU) said that “it has no power to unilaterally set its own rates” as these are approved by a regulator — the Energy Regulatory Commission (ERC) — after “a very stringent” and “transparent process” of public hearings.

“I would like to reiterate that as a highly regulated entity, Meralco strictly adheres to the rules governing its operations and franchise and the rates we implement always have prior approval from the regulator. A testament to the strict review, these rates are still subject to periodic confirmation process by the ERC,” Meralco First Vice President and Regulatory Management Head Jose Ronald V. Valles said.

“The proper venue for discussing the refund claims is the ERC, which has the rate-setting power and the regulator has already decided on a refund totaling P48 billion, which Meralco implemented in a timely manner,” he added.

Meralco made the statement in response to claims by Santa Rosa Rep. Dan S. Fernandez during Wednesday’s hearing of the House committee on legislative franchises on the alleged monopolistic and monopsonic practices of Meralco, among others.

“Higit na P160 billion ang sob-ra-sobrang nasingil ng Meralco simula 2012… kung kasama ang interest P200 billion pala dahil sa overcharging at napakataas na weighted average cost of capital (WACC) na hindi nila binago mula noon hanggang ngayon — 14.97%,” Mr. Fernandez said.

(Meralco has overcharged more than P160 billion starting 2012… including the interest, it’s P200 billion due to overcharging and extremely high weighted average cost of capital (WACC) that they have not changed since then until now — 14.97%.)

Meralco said that the setting of WACC is under the function of the regulator and was determined based on a set of rules that underwent public consultations and thorough review by ERC.

The company said its last approved WACC is the lowest given by the regulator under the performance-based Regulation, whether for the National Grid Corp. of the Philippines or a private distribution utility.

“This WACC is an industry WACC that applies to all private DUs in the same category and is not company specific. In addition, Meralco does not have a determined WACC since July 2015 because there was no completed rate reset during that regulatory period up until now,” it added.

Meralco is awaiting the decision of the ERC after it filed for withdrawal and refiling of its application for its fifth regulatory period.

Meanwhile, the DU said that it secures approval from the Department of Energy (DoE) for its power supply procurement plan and the terms of reference (TOR) before conducting a competitive selection process (CSP) to make sure that these are aligned with the requirements and standards set by the government.

“This is contrary to the baseless and malicious claims that Meralco’s TOR is tailor-fitted to favor select generation companies,” Mr. Valles said.

“Our past CSPs conducted are proof that no such tailor-fitting is happening, precisely because the TOR and other bidding documents are required to comply with existing policies of DoE and regulations of ERC, and the resulting Power Supply Agreement needs to be approved by regulator,” he added.

Currently, Meralco is conducting the rebidding for the procurement of its 1,800-megawatt power supply requirement. Six companies expressed interest to participate, which the DU said proves that “there is competition” and it could get the least cost supply for its customers through the process.

“The CSP is a very transparent process, and the resulting PSAs from this bidding will still be subject to the review and approval of the ERC,” Mr. Valles said.

Meralco’s controlling stakeholder, Beacon Electric Asset Holdings, Inc., is partly owned by PLDT Inc.

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

DMCI Mining set to operate two new mines by 2024 new mining sites early next year

DMCI Mining Corp. is set to begin operating two mining sites by next year, its top official said over the weekend.

Tulsi Das C. Reyes, DMCI Mining president, told reporters that one of its mine sites in Zambales is expected to begin operations during the first quarter of 2024.

“[By the first quarter], it is 100% operational that I am sure, backhoe on the ground,” Mr. Reyes added.

DMCI Mining said earlier that it would spend about P250 million to develop a nickel mine in Zambales.

The site, to be operated by subsidiary Zambales Chromite Metals Corp., is estimated to produce about 20 million metric tons (MT) of ore.

Mr. Reyes added that the company might begin operations of the other mine site during the second quarter of next year. The new mine site has an estimated 70 million MT of ore.

“The area is much bigger,” he said, without disclosing the location of the mine.

“In Zambales, we just need site development like roads and equipment purchases. [For] the [other mine site] we’d need new ports, site development and equipment. It’s bigger than Zambales,” he said.

For the third quarter, the company reported a net loss of P171 million mainly due to lower selling prices and higher costs.

Its revenues for the period fell by 34% to P158 million, from P240 million in the same period last year, due to lower selling prices that muted the impact of higher shipments.

Operating expenses rose by 53% to P197 million from P129 million due to costs incurred by Berong Nickel Corp. and Zambales Diversified Metals Corp.

In an earlier stock market disclosure, the company said it was seeking permits to secure at least 200 million MT of nickel resources. The move would allow the company to invest in a processing plant.

DMCI Mining is a subsidiary of the listed holding firm DMCI Holdings, Inc. — Adrian H. Halili

The Orient Express inspires Natori’s latest collection

JOSIE NATORI, founder and chief executive officer of The Natori Company.

THE LUXURY train that once shuttled the rich and famous from West to East, the Orient Express, became a fixture of pop culture thanks to its appearance in film and literature. On Nov. 14, internationally renowned Filipino fashion designer Josie Natori showed that the train’s history can show up in fashion too.

Presenting her Fall 2023 line at the Ayala Museum, the designer showed muted but rich colors of burnt amber, bordeaux, olive, and especially black. There were bone-white dragons and flowers embroidered on rich black coats, jackets, wraps, and dresses. These showed a view towards 1920s chinoiserie, but of particular interest was a loose jacket with wide sleeves, trimmed with faux fur (the press release calls it “environmentally sound vegan sheared minks”).

For this collection, she listed materials and techniques she used to include silk, tapestry, and embroidery. “It’s just the richness and the patterns. The Orient Express to me is exotic,” she said, adding that hopping on the revived Orient Express train is on her bucket list. Meanwhile, socialites buzzed around the display of her clothes, with some trying them on straight from the mannequins.

Born Josephina Almeda Cruz, Ms. Natori was set for a career in music, but studied economics in New York. This led to a logical career in banking, becoming a Vice-President at Merrill Lynch. In the 1970s, Ms. Natori ventured into fashion, becoming a (wealthy) household name thanks to her comfortable and luxurious lingerie sets.

While the collection has already launched in New York, Ms. Natori found it important to launch it in the Philippines a second time. “I love the Philippines. I’m from the Philippines, and Natori would not be around without the Philippines. I want to be able to share what we do with the Filipino people,” she said. “It makes me pleased to have Filipinos wear Natori.”

During the launch, she also showed off a new line for her jewelry collection (her first was in 2019). This showcased bold designs with big, big diamonds — which were lab-grown. “This allowed me to be able to do bigger stones,” she said. This marks another turn in her career (if you’ve been following: pianist, banker, fashion designer, and now jeweler). “I love accessories. I’m a jewelry maniac,” she told BusinessWorld.

Tracking the trajectory of her career, we asked the designer what’s next: “I keep going. You never can sit still. You have to keep on going.

“As long as I like what I’m doing, I’ll keep doing it. It’s a wonderful thing to make women happy.”

Since she started designing in the ’70s, Ms. Natori counts that the brand is approaching its 47th anniversary. More than what she has learned at work, we ask her what she’ learned about herself.

“I’m crazy,” she answered.

“To be in this business this long — I feel very fortunate that I’ve been able to build a brand that’s made in the Philippines. I’m very proud of that.”

In the Philippines, Natori is available at Rustan’s. — Joseph L. Garcia

MPT South allocates nearly P12B to fund projects’ construction

MPTC.COM.PH

EXPRESSWAY operator MPT South Corp. is setting aside P11.95 billion for its capital expenditure (capex) budget for the next two years.

The unit of Metro Pacific Tollways Corp. said the majority of the capex will fund the ongoing construction of existing projects such as the C5 Southlink and the 45.4-kilometer Cavite-Laguna Expressway (Calax).

Most of the capex for 2024 to 2025 will be allocated for Calax at P8.17 billion. About P1.09 billion is set aside for the Cavitex-CC Link; while P2.56 billion is allocated for the Cavitex-C-5 Link, which is a 7.7-kilometer project that will connect Cavitex R1 to C5 road in Taguig. 

About P134 million is for the Cavitex R-1 and R1 extension, which stretches from Manila and connects Roxas Blvd. to Cavite.

For 2023, the company allocated about P8 billion for MPT Calax and around P5 billion for its C5 project, Elnora D. Rumawak, vice-president for finance of MPT South, said in a briefing last week.

MPTC is the tollways unit of Metro Pacific Investments Corp., which is one of three key Philippine units of Hong Kong-based First Pacific Co. Ltd., the others being Philex Mining Corp. and PLDT Inc.

Hastings Holdings, Inc., a unit of PLDT Beneficial Trust Fund subsidiary MediaQuest Holdings, Inc., has a majority stake in BusinessWorld through the Philippine Star Group, which it controls. — Ashley Erika O. Jose

Sparkle through the holidays

WHAT’S CHRISTMAS without a little sparkle? BusinessWorld is giving sparkly gift suggestions for your holiday lists, from delicate pieces from Swarovski to a tough-guy watch from Seiko.

SWAROVSKI
Swarovski presents an inspiring new range of jewelry for Fall/Winter 2023. An ode to the moon in crystal can be seen in the Luna collection, using pavé and various stone cuts for crescent shapes. The Dextera collection presents something more avant-garde with angular cuts, mixing these together with soft and organic shapes. Idyllia is all about flora and fauna to touch one’s own whimsical side, showing butterflies, birds, and cute ladybugs.

Millenia presents bolder, younger designs in light green, denim blue, and industrial-style chains. Gema makes statements in blue, and Matrix’s line shows dark green crystals and eternity pieces made with round stones.

Finally, what’s Swarovski without a line of swans? This season’s new designs come alive in their own radiant blue color, crafted with dazzling pavé, hanging stones, and graceful silhouettes.

TESSERA
Tessera Jewelry releases pieces with certification from the Belgium-based International Gemological Institute (IGI).  IGI was founded with the goal of providing independent and unbiased certification for diamonds, gemstones, and jewelry. At the time, there were few other gemological laboratories in the world, and most of them were affiliated with specific trade organizations. IGI was one of the first laboratories to be truly independent, and it quickly became known for its high standards and commitment to accuracy and transparency.

“With an IGI certification, clients are assured and have confidence in the diamond pieces they choose, knowing that each stone has undergone rigorous examination and has passed the highest industry standards,” explains Papat Fider, Sales Director and Co-founder of Tessera Jewelry.

For this season, we suggest Tessera’s strand of diamonds joined together as if looped, or else an elegant emerald-cut ring. Visit their showrooms at 38 Rockwell, 1 Proscenium, Arton Strip in Katipunan, Quezon City and Ayala Abreeza, Davao.

COACH
You may already have a Coach bag, but why don’t you match it with a watch?

Coach at SM North EDSA is showing off the Elliott watch. The watch features a sunray dial detailed with a mix of numerical and stick markers, as well as a Coach signature marker at the 3 o’clock mark. With various case sizes of 28mm, 36mm, and 41mm, the Movado-manufactured watch features stainless steel and plating, as well as genuine Coach leather straps.

Visit Coach SM North EDSA Store at the second level of the City Center.

SEIKO
Seiko’s new limited-edition Prospex watch explores the elements with a timepiece inspired by the Ifugao Rice Terraces. This is the third in the series, beginning in 2020 with a watch designed for the Tubbataha Reefs (and has since included watches about the Philippine Eagle and the Philippine sunrise).

The watch runs on a caliber 4R35, is automatic with manual winding, and has a power reserve of approximately 41 hours. The case is made of case stainless steel and has a bezel with a ceramic display, a sapphire crystal with magnifier, an anti-reflective coating on its inner surface, and LumiBrite illumination on its hands, indices, and its bezel.

It has a water resistance of 200m/660 ft, as well as ridging etched on the face reminiscent of the Ifugao Rice Terraces.

There are only 1,500 pieces in the world — which should make opening this as a gift on Christmas a real treat.

Furthermore, a portion of the proceeds from the sales of the new watch will be donated to the Save The Ifugao Terraces Movement (SITMo), the non-stock, non-profit, non-government organization (NGO) formed by the Philippine Rural Reconstruction Movement. The NGO helps with the preservation and conservation of the Ifugao Rice Terraces — ensuring that the landmark will be around for many holidays to come. — JLG

From Lululemon to Birkenstock, duplicate styles lure holiday shoppers

THE BLOG Passionate Penny Pincher does suggest a number of dupes for branded items including this Walmart take on a Lululemon jacket.

NEW YORK — Lauren Maginness is a fan of Lululemon. But the 31-year-old product marketer in New York City is increasingly supplementing her activewear with less-pricey brand duplicates she picks up through e-commerce site Amazon.com.

One of her favorites: CRZ Yoga’s $32 high-waisted yoga pants, resembling Lululemon’s popular $98 Align leggings. Ms. Maginness learned about CRZ from an influencer on short-video platform TikTok who describes herself as a former Lululemon employee.

As the holiday shopping season gets under way, top-sellers from Lululemon, Abercrombie & Fitch, Birkenstock, and Estee Lauder’s Tom Ford perfume are competing for shoppers like Ms. Maginness and their growing love affair with TikTok-popularized “dupes” — sufficiently similar replicas of higher-priced products.

CRZ Yoga is doing brisk business, selling an average 88,633 pairs of the leggings a month and earning around $2.84 million in average monthly revenue, according to data from e-commerce analytics firm Jungle Scout. CRZ, which according to its website is owned by a Hong Kong trading company, did not respond to a request for comment.

Growing demand for lookalike products, coupled with a pullback in spending due to inflation, is cutting into sales of some trendy, big-name products. “Dupes” have become so widely accepted, particularly among younger consumers, that Ms. Maginness said she would consider gifting a faux-Lululemon activewear set to a friend. “After all, you do have more room in the budget with the dupe,” she said.

Hashtag searches for dupes of major brands — including Skims underwear and Deckers’ Ugg boots — have been viewed millions of times on TikTok. Influencers accepting commissions regularly tout similar, alternate products from value retailers such as Walmart, Target, and fragrance e-tailer Dossier.

Last week, Passionate Penny Pincher, a discount blog that accepts commissions for sales, touted $29.99 Dearfoam shearling “Ugg dupe slippers” as holiday gifts in an e-mail to followers. Department store chain Nordstrom pitched original “Ugg slippers on everyone’s gift list” for $115.

Dupes have become so widely available from such a broad range of sellers that experts say it is difficult to quantify how much market share they may steal from the original products this holiday season. Most at risk are brand-name perfumes, cosmetics, and mid-tier clothing and footwear, particularly those “commodity” products that are easy to replicate, said Leslie Ghize, executive vice-president of retail consulting firm Doneger Tobe.

Twenty-eight percent of US consumers said they plan to give a beauty product such as perfume as a holiday gift and 55% plan to give clothing, shoes, or accessories, according to a survey of 3,429 people by Circana, Inc.

Lululemon, whose revenue rose 18% in the second quarter compared with a year earlier, launched a two-day “dupe swap” promotion in Los Angeles in May where shoppers could trade lookalikes for Align leggings. Lululemon declined to comment. Chief Executive Officer Calvin McDonald told investors in June that roughly half of shoppers who attended the dupe swap were under 30 and new to Lululemon.

FROM FAST FASHION TO E-COMMERCE
Experts say the current excitement over dupes traces back to the start of fast fashion. Inditex-owned Zara, which opened its first store in 1975, made a business of replicating luxury designs. Its shorter production cycles allowed more styles to enter the market quickly, sparking “the habit of shopping more frequently,” said Ian Taplin, a professor at Wake Forest University.

E-commerce platforms Amazon, eBay, Shopify, and Etsy helped dupe sales accelerate, by making it easy to compare prices on similar goods. Newer technologies like the Google Lens app allow people to take photos of items they like and find similar products for sale.

For prospective dupe-makers, the Chinese marketplace Alibaba makes it simple to find and hire manufacturers. Some manufacturers use the same materials and fabrics as big-name brands, said Juozas Kaziukenas, founder of e-commerce analytics firm Marketplace Pulse.

In other cases, dupe sellers opt to replicate the look of higher-priced originals with cheaper materials to maximize profit.

Either way, sellers on shopping platforms like Amazon typically do not have the same overhead costs as retailers with brick-and-mortar locations, allowing them to bring goods to shoppers more cheaply. “They might not be exactly the same, but they’re much cheaper,” Kaziukenas said.

Thirty to 49% of shoppers have been disappointed with “dupes” purchased online, according to a survey of 3,000 millennial and Gen-Z consumers conducted by consumer review platform Trustpilot across the US, UK, and Italy.

Amazon spokesperson Maria Boschetti said the company does not allow its sellers to use the words “dupe,” “fake,” or “faux” connected to a brand name when describing their products on the site. However, it cannot always keep up with sellers who violate the rule, according to Mike Scheschuk, president of small and medium business at Jungle Scout.

As of last Wednesday, multiple products available on Amazon appeared to violate the policy, including a pair of clogs listed as “dupes” of a popular style by Birkenstock and priced more than $100 below the original.

A spokesperson for Birkenstock said it “takes the issue of brand and product piracy very seriously” and takes a “rigorous approach” to defending its intellectual property. However, experts say dupe sellers have grown increasingly skilled at avoiding brand logos and other design features that could infringe existing patents or copyrights. — Reuters

Set policies for cleaner aviation fuel, gov’t urged

THE government needs to fast-track the crafting of policies and a framework that will help advance the development of sustainable aviation fuel (SAF), as the aviation sector targets to cut carbon emissions by utilizing green fuel, an airline executive said.

“The integration of sustainable aviation fuel is crucial in meeting the aviation industry’s commitment to reducing its carbon footprint,” Alex B. Reyes, chief strategy officer of Cebu Pacific said in a Viber message to BusinessWorld.

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

Airbus’ all-new engine (NEO) aircraft is said to have better fuel efficiency as it is the latest generation of Airbus planes considered the most compatible to use SAF.  Currently, all Airbus aircraft are certified to operate by up to 50% SAF blend.

In September, the Department of Energy said it was working on crafting draft regulations on SAF to accelerate its adoption in the country.

“The Philippine government’s support to enhance the production and availability of sustainable aviation fuel is a welcome development and aligns with Cebu Pacific’s goal of driving sustainable aviation in the country,” Mr. Reyes said.

The International Air Transport Association has projected that SAF will contribute 65% of carbon emissions reduction.

“We encourage more producers and stakeholders to join in these efforts to achieve net zero emissions by 2050,” Mr. Reyes said.

In an earlier interview, Mr. Reyes suggested that the government must also offer incentives to encourage airlines to use more SAF.

In October, budget carrier Cebu Pacific said it was working to establish a long-term supply agreement with SAF suppliers as it is targeting to operate more flights powered by green fuel.

For its part, flag carrier Philippine Airlines said it would continue to work with relevant stakeholders to help increase the fuel supply.

“PAL continues to explore with various stakeholders different means to produce more SAF to make it more available and cheaper for airlines,” Stanley K. Ng, PAL president and chief operating officer, said in a Viber message. — Ashley Erika O. Jose

The Maharlika strategic investment fund — How to prioritize projects

ALVARO REYES-UNSPLASH

(Part 3)

“Begin with the end in mind.” — Stephen Covey, Seven Habits of Highly Effective People

The cacophony of voices surrounding the Maharlika Investment Fund (MIF) range from one extreme of unrealistic expectations (“the MIF can get involved in all 197 projects”) to the contemptuously dismissive (“it’s all a waste of time”).

WHICH PROJECTS, AND HOW TO CHOOSE?
The priority areas are clearly referred to at least two times in RA 11954:

A. Article IV Investments, Section 14 Allowable Investments, (h.) — “real estate and infra projects… directed towards the fulfillment of national priorities… such as the national infrastructure program of DPWH [Department of Public Worlds and Highways] … inclusive innovation industry strategy of DTI [Department of Trade and Industry], and public investment programs of NEDA [National Economic and Development Authority].”

B. Section 17 Investment Policy, paragraph after (k.) — “priority must be given to investing in government infrastructure and other developmental projects which would yield the highest return on investment coupled with developmental impact” (a clear reference to double bottom line objective of strategic investment funds or SIFs).

The obvious starting point is the list of 197 Infrastructure Flagship Projects (IFPs) as approved by the NEDA (effectively the entire cabinet) and posted on the NEDA website.

The list of 197 projects as of July 2023 added three public-private partnership (PPP) projects to the list of 194 as of March 2023:

1. Ninoy Aquino International Airport Project (No. 97)

2. Laguindingan (Cagayan de Oro) International Airport Project — Upgrade, O&M (No. 99)

3. Tarlac-Pangasinan-La Union Expressway (TPLEX) Extension from Rosario, La Union to San Juan, La Union (No. 100)

The list already includes the New Bulacan International Airport being undertaken by the San Miguel group (project no. 7).

The original list of 194 infrastructure projects costs P8.3 trillion over five years from 2023-2028, equivalent to 5-6% of gross domestic product for each fiscal year. The revised list of 197 projects cost P8.67 trillion.

The 197 projects are classified according to status — Ongoing, Approved for Implementation, For Government Approval, Under Project Preparation, and Pre-Project Preparation.

The projects are classified by funding source — annual budget or General Appropriations Act (GAA), concessional loans (Official Development Assistance/ODA), and PPP. Several projects have mixed funding such as GAA/ODA, ODA/PPP, GAA/PPP while funding for some projects in the pre-project preparation stage are still to be determined (TBD).

Following best practices of successful case studies in other countries, the following framework is useful in determining which projects to prioritize:

Level 1 projects. These have economic and social returns ONLY, with no clear commercial returns so these are clearly not attractive to private investors. Funded only via GAA or ODA or both. Level 1 covers 143 or 73% of the 197 projects (63 GAA and 80 ODA).

Level 2 projects. These have economic and social returns, AND with commercial yields or cash flows. This category has 47 PPP projects, subject to further screening using the economic principle of additionality.

The UP School of Economics Discussion Paper (“Maharlika Fund: Still Beyond Repair,” June 2023) correctly pointed out a couple of issues:

1. The participation of the Maharlika Investment Fund in projects should not distort the government budget process. Projects with economic and social returns but without clear commercial returns and no potential cash flows or dividends to private investors, can only be funded by GAA or ODA.

2. The economic concept of “additionality” — If a project generates commercial returns attractive enough for private investors to come in anyway, SIF participation is unnecessary or redundant. In short, an SIF should not compete with the private sector for PPP projects.

Conversely, additionality means the SIF should focus on projects that would not otherwise happen without its involvement. “Demonstration effect” projects are meant to attract the private sector upon showing signs of viability (Crowd In effect).

Level 3 projects. These come with economic/social returns, along WITH commercial yields, and clear ADDITIONALITY. These are clear candidates for participation by an SIF. This highlights the importance of the board-level Investment Committee overseeing a screening process that operationalizes a disciplined approach to project evaluation. This should be conducted by qualified, experienced, and technically capable project finance staff.

The India Infrastructure Investment Authority’s screening process is so rigorous that projects are taken up at the Investment Screening Committee several times (concept, pre-feasibility, feasibility stages) prior to Board consideration.

WHICH PROJECTS ARE REALLY ‘SHOVEL READY’?
From the universe of 197 projects, 19 projects can be considered “shovel ready” — those listed under the PPP column and categorized as Ongoing (13), Approved for Implementation (four) and for Government Approval (two). This is not a bad number, and some in the project preparation stage may be included depending on how advanced the staff work already done is. This list of 19 should be still subjected to the additionality test.

Can projects outside of the 197 list still be included? The short answer is “yes.”

Fellow Introspective columnist Calixto Chikiamco has suggested that the additionality principle applies to agro-forestry projects where government participation can make the returns on projects more predictable by reducing the uncertainty of property rights arising from log bans and the 25-year constitutional limit on leases as well as facilitate issuance of licenses/permits. Such a project may need to be included first in the list of IFPs following NEDA protocol, but the MIC board can formulate policy and procedures to evaluate the projects on its own initiative aligned with NEDA parameters.

BUT FIRST THINGS FIRST
You must learn how to stand before you can walk and learn to walk before you can run. The first priority is to complete the board of directors, which will form the governance structures, create board committees (especially the independent committees) and formulate the critical investment policies and screening processes.

It is neither fair nor proper to expect the MIC President to articulate policies and identify project priorities without the benefit of the collective wisdom of the Board of Directors.

The second priority is the hiring of key management personnel to perform key functions and operationalize the mandate of MIF as defined by RA 11954 and articulated by the Board. Potential partners will be keen to look at the track record of the board and the management team (individually and as a team).

Credibility does not consist only in having the money at hand (which only highlights the opportunity cost of idle funds in the meantime), or in announcing a list of projects which still needs to be validated anyway by the MIC board.

Credibility is established by putting the key pieces in place, in the right sequence, and in the right combination that checks the boxes for best practices in governance and execution. This will be the topic of my next column.

(Parts 1 and 2 of this series can be found here: “The Maharlika Strategic Investment Fund governance issues: Aligning with best practice” (https://tinyurl.com/ylhpyvu4) and “The Maharlika strategic investment fund — the ‘pause,’ the fix” (https://tinyurl.com/yuetlvaq).).

 

Alexander C. Escucha is the president of the Institute for Development and Econometric Analysis and the chairman of the UP Visayas Foundation. He is a Fellow of the Foundation for Economic Freedom and a past president of the Philippine Economic Society. He wrote the Handbook on Overview of the Banking Industry for the BAP.

alex.escucha@gmail.com

SEC warns vs investing in 2 more unauthorized firms 

THE Securities and Exchange Commission (SEC) cautioned the public against investing in two entities, which it found to be soliciting investments without the necessary registration.

In two separate advisories posted on its website, the corporate regulator said that Trade City-Mall and Valero Energy Corp. Philippines are not authorized to solicit investments from the public.

According to the SEC, Trade City-Mall is enticing the public to invest in exchange for profit under a tasking and recharging scheme. The entity allegedly asks the public to perform various tasks and to grab orders from its e-commerce platform with the promise of commissions. 

The entity also allegedly invites the public to apply for a part-time job by completing a daily task for a promise receiving a guaranteed monetary reward amounting to P1,000 to 3,000 or more with a P500 reward for completing three basic-level tasks daily.

“A tasking and recharging scheme has the characteristics of a Ponzi Scheme where money from new investors are used in paying fake profits to prior investors and is designed mainly to favor its top recruiters and prior risk takers and is detrimental to subsequent members in case of scarcity of new investors,” the SEC said.

Meanwhile, the SEC said that Valero Energy Corp. Philippines appears to impersonate American Fortune 500 petroleum and energy firm Valero Energy Corp.

According to the corporate regulator, the entity claims to be engaged in the petroleum business that offers a co-partnership program to the public. 

“After the interested investor has signed up in its website, he/she is then presented an investment contract in the guise of co-partnership under the name of Valero Energy Corp., a legitimate petroleum and energy company headquartered in San Antonio, Texas, US,” the SEC said. 

The entity allegedly offers three packages consisting of the “econofill” collective, “fuelshare” elite, and “petroplatinum” partners programs that promise weekly income ranging from P616 to P126,000 depending on the chosen package and investment. 

“Based on verification conducted, the fake/bogus Valero Energy Corp. Philippines is not in any way related to or affiliated with Valero Energy Corp. of Texas, US or any of its subsidiaries or affiliates,” the SEC said. — Revin Mikhael D. Ochave

Rio police investigate Taylor Swift concert organizers after fan’s death

RIO DE JANEIRO — Rio de Janeiro’s police said on Friday they have opened an investigation into the organizers of the Brazilian leg of Taylor Swift’s The Eras Tour for the death of a 23-year-old fan who fell ill at the show last week. The police will investigate whether entertainment firm Time for Fun (T4F) committed the crime of endangering human life or health.

Fans and concertgoers said they had been banned from entering the venue with bottles of water despite the extreme heat in the city which hit 59.3 degrees Celsius on the day of the event.

Ana Clara Benevides fell ill on the first night of Swift’s Rio tour in Rio, and later died in hospital. The extreme weather led the US pop star to postpone her concert the following day, just two hours before she was to go on stage.

“The organizers of the event will be called to give evidence and further investigations are underway to ascertain the facts,” Rio’s civil police said in a statement.

Police have also launched a separate investigation into the cause of Ms. Benevides’ death, which has not yet been concluded.

T4F said the company and its representatives were cooperating with the authorities and available for any clarifications.

The firm’s CEO Serafim Abreu acknowledged on Thursday that the concert organizers could have taken “alternative actions” to help fans cope with the extreme heat.

Swift will conclude the Brazilian leg of her tour with three sold-out shows in Sao Paulo from Nov. 24 to 26, which are also organized by T4F.

Weather forecasters say those days are set to be cloudy, rainy, and have milder temperatures. — Reuters

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