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Shares may move sideways before inflation data

PHILIPPINE SHARES may move sideways this week as the market awaits the release of the latest inflation and labor data, as well as more corporate results.

On Friday, the Philippine Stock Exchange index (PSEi) breached the 6,700 level as it gained 84.24 points or 1.27% to close at 6,707.25, while the broader all shares index rose by 30.79 points or 0.88% to finish at 3,516.82.

Week on week, the PSEi went up by 21.16 points or 0.32% from its 6,686.09 finish on Jan. 26.

“After a slow start due to a gross domestic product (GDP) miss, local equities rallied in the latter half of the week on a renewed bullish outlook on rates,” online brokerage firm 2TradeAsia.com said in a market report.

Philippine GDP expanded by 5.6% in 2023, below the government’s 6-7% target and slower than the 7.6% increase in 2022, the Philippine Statistics Authority (PSA) reported last week.

For this week, investors will wait for the release of January inflation data for leads, Philstocks Financial, Inc. Senior Research Analyst Japhet Louis O. Tantiangco said in a Viber message.

“An inflation print lower than December 2023’s 3.9%, especially one which is near or at the Bangko Sentral ng Pilipinas’ 2.8%-3.6% [forecast], may spur optimism, which in turn may drive the market higher,” Mr. Tantiangco said.

“Aside from this, investors may also watch out for our upcoming labor force survey for clues on the health of the local economy.”

The PSA will release January consumer price index data on Tuesday and results of the December 2023 labor force survey on Wednesday.

A BusinessWorld poll of 16 analysts yielded a median estimate of 3.1% for January headline inflation.

If realized, this would be the second consecutive month that inflation was within the BSP’s 2-4% target band. It will also be below the 3.9% seen in December.

“[This] week, the market may test the validity of its breach of the 6,700 level. If the market succeeds in sustaining ground at 6,700, this will be its new support while a minor resistance is seen at 6,800. If the market fails however, the market may retest its 10-day exponential moving average,” Mr. Tantiangco added.

For its part, 2TradeAsia.com put the PSEi’s immediate support at 6,600 and resistance at 6,900-7,000.

“The PSEi managed a trek in the psychological support zone of 6,700. Positive corporate results will be critical in directing investor energy towards 7,000,” it said.

“Note that Federal Reserve comments in the Jan. 31 meeting only solidified expectations of a May-June rate cut, which further support bullish calls in the short-to-medium term,” the online brokerage added.

The Federal Open Market Committee last week held its target rate steady at the 5.25-5.5% range for a fourth straight meeting.

Fed Chair Jerome H. Powell said after the review that they are unlikely to ease their policy stance in their March 19-20 meeting due to lingering inflation risks. — R.M.D. Ochave

Strong bookings point to further growth in int’l outbound travel

NINOY AQUINO INTERNATIONAL AIRPORT (NAIA) Terminal 3 — PHILIPPINE STAR/MIGUEL DE GUZMAN

OUTBOUND international travel is expected to grow further this year, based on initial bookings data, which point to the likelihood that such trips will surpass pre-pandemic levels, the chairman of an upcoming travel trade show said.

Cris Aquino, president of Travel Proponents, Inc. (Travelpros) and chairman of the 31st Travel Tour Expo (TTE) program committee, said that travel agencies are now handling more bookings than they were before the pandemic.

“The bookings have already gone back. Actually, there are even more Filipinos going outbound compared to pre-pandemic,” Mr. Aquino said on the sidelines of the Philippine Travel Agencies Association’s (PTAA) TTE 2024.

“I think it is because most of them felt deprived during the pandemic or are scared that another pandemic will happen again and they will not be able to travel, or maybe some of them were able to save money during the pandemic, which they are now using to travel,” he said.

He said top international destinations are Japan and South Korea. However, he said that there is also increased demand for destinations such as Vietnam, Israel and the surrounding countries, and Turkey.

The PTAA at a pre-event briefing projected travel bookings, domestic and international, to grow 20-25% this year due to pent-up demand that had built up during the pandemic.

According to Mr. Aquino, the domestic destinations receiving strong interest are Siargao, Boracay, El Nido, and Coron. He said that there might be an increase in demand for Batanes if the weather proves favorable.

Tourism Secretary Maria Esperanza Christina G. Frasco said that PTAA’s role of putting together travel and tour packages “has benefited travel agencies, tour operators, partner airlines, small and medium enterprises and hotels and resorts.”

“I am grateful because by inbound travel we contribute to our economy and by outbound travel our travelers contribute through our travel taxes from which we derive all the tourism infrastructure projects that we’ve managed to do in the short span of a year,” she said.

Meanwhile, Ms. Frasco said that the most prevalent request among travelers is clean and decent restrooms in tourist destinations.

“That is why we plan to build tourist rest areas (TRAs) all over the Philippines. We have managed to inaugurate seven and three more will be inaugurated. And then we’re building 20 more TRAs,” she said.

The TRAs have restrooms, information centers, and pasalubong gift centers featuring small- and medium-sized enterprises selling Philippine goods.

“By investing in infrastructure to increase the enhanced overall tourism experience, we can assure that our tourists will stay longer and come back again and again,” she added. — Justine Irish D. Tabile

Iloilo airport original-proponent bid review set for completion by Feb. 21

ILOILO AIRPORT FB

THE Department of Transportation (DoTr) said it is currently reviewing unsolicited proposals for the upgrade and expansion of Iloilo International Airport, with a Feb. 21 deadline set for completing the evaluation of some proposals. 

“As far as the unsolicited proposals are concerned, since the PPP (public-private partnership) code became effective, the unsolicited proposals that have an OPS (original proponent status) will be evaluated under the old rules. Deadlines will have to be met by Feb. 21,” Roberto C.O. Lim, Transportation undersecretary for aviation and airports, told reporters. 

Last year, President Ferdinand R. Marcos, Jr. signed a measure that aims to streamline the framework for PPPs.

The PPP Code, or Republic Act No. 11966, amended the Build-Operate-Transfer (BOT) Law to create a unified legal framework for all PPPs at both national and local levels.

In 2023, Aboitiz InfraCapital submitted a proposal to develop and improve the Iloilo International Airport.

“Yes, we did (submit a proposal), but we’re second in line. Another firm has OPS which DoTr and the government issued to,” Cosette V. Canilao, Aboitiz InfraCapital, Inc. president and chief executive officer, said in a Viber message.

In 2019, the unsolicited bid of Prime Asset Ventures Inc. (PAVI) was granted the OPS for its proposal to operate, maintain, and expand the Iloilo International Airport.

The grant of an OPS gives the original bidder the option to match other bidders who may trigger a Swiss challenge.

The Iloilo provincial government website indicates that PAVI was instructed to submit documents in compliance with the revised guidelines of the BOT law. 

“They need to provide updated submissions to comply with the PPP code so that the department can evaluate it and make modifications and proceed to other parts of the negotiations,” Mr. Lim said. — Ashley Erika O. Jose

German, Italian chambers expect rising goods prices due to Red Sea ship attacks

REUTERS

By Justine Irish D. Tabile, Reporter

THE GERMAN-PHILIPPINE Chamber of Commerce and Industry (GPCCI) and the Italian Chamber of Commerce in the Philippines said the rerouting of shipping away from the Red Sea will exert upward pressure on goods prices.

GPCCI President Stefan Schmitz told BusinessWorld that logistics prices are already rising as shipping lines increase their rates to avoid the Red Sea, a key shortcut for Suez Canal traffic, because of attacks on cargo ships by Yemeni rebels.

“We are looking at about anything, depending on shipping line, 10 to 14 days additional. So we’re talking about millions of dollars per journey and the carriers will not carry the burden, so that means that will go to the (price consumers pay),” Mr. Schmitz said in a chance interview. He added that price increases will vary by product.

“I think (the price impact) will be noticeable to say the least,” he added.

He said that most of the carriers have indicated plans to collect added charges due to the need to take a longer route rounding the Cape of Good Hope in southern Africa.

Mr. Schmitz said the chamber still waiting on how businesses will react to European plans to send in naval vessels to protect shipping.

“We are yet to see whether vessel owners are going to take that offer and change routing. It is still hanging, and with the amount of vessels that we’re seeing going each way, if it’s over tomorrow, then the effect may not be noticeable, but if it prolongs then surely it will be noticed,” he added.

Germany was the 12th largest trading partner of the Philippines in 2022, with total trade amounting to $4.71 billion in 2022, according to the Department of Trade and Industry.

Of the total, $2.78 billion are Philippine exports to Germany, while $1.93 billion are imports from Germany.

Electronics are the top Philippine export to Germany.

The Suez Canal, on the northern end of the Red Sea, accounts for around 12% of global trade or 30% of overall global container traffic.

Italian Chamber of Commerce in the Philippines Executive Director Lorens Ziller said the chamber expects transport costs to double due to the crisis.

“The logistics cost is going to increase to transport goods from Asia to Europe because (shipping companies) said they will not use the canal because of the issues in the Red Sea,” Mr. Ziller said.

“Therefore, we will see an increase in transport costs. I think a container will cost up to $5,000 and that definitely will make things more expensive, those that go from east to west and the other way around,” he said.

He said that this will be an almost double increase from $3,000 per container pricing prior to the crisis.

Mr. Ziller said that among the products that the Philippines exports to Europe are raw materials like coconut oil and microchips.

“We have seen that the number one export product (of the Philippines) is microchips, and this makes up the majority of the export and even that is going to be affected right now,” he added.

Total trade between Italy and the Philippines amounted to $1.24 billion in 2022, $832 million of which are Philippine imports.

Indian market for PHL goods seen at $566.92M

REUTERS

THE Department of Trade and Industry’s (DTI) Export Marketing Bureau (EMB) urged exporters to expand their presence in India, a potential market for Philippine goods which the EMB estimates at $566.92 million.

In a statement, the Philippine Exporters Confederation, Inc. (Philexport) said the EMB Assistant Director Jhino Ilano pitched India to exporters, citing that market as an opportunity to be pursued.

Philexport, quoting Mr. Ilano, who was speaking at a briefing organized by the EMB, said: “There is an opportunity for us to really make our exports higher than what we are importing.”

Mr. Ilano estimated an unrealized market of $436.96 million for machinery and electronic equipment exports to India, and an unrealized market of $3.94 million for processed food.

“The best thing to sell to them would be food. Because the major observation is this: people in India are not actually fond of cooking food for themselves because they are very busy (with work to) maintain a certain lifestyle,” he said.

Meanwhile, Mr. Ilano said that Philippine exporters could also unlock a potential of $1.4-million Indian export market for personal care and beauty products.

“Indian consumers actually believe that coconut oil has a more moisturizing effect than a usual lotion. So this would tell you that coconut is a very good product that can be sold in the Indian market. Coconut is considered the tree of life here in the Philippines because nothing is wasted,” he said.

“For Indian color cosmetics, the market is expected to grow stronger than other beauty products. So coloring in terms of the hair, for the skin, they are very fond of it,” he added.

“We have lots of products that would have great potential but sometimes our farming is just focused primarily on specific products so we really need to look at what products can actually sell,” he said. — Justine Irish D. Tabile

Italian investment interest seen in manufacturing, mineral processing

REUTERS

AT LEAST three Italian companies involved in manufacturing and mineral processing are expected to invest in the Philippines, according to the Department of Trade and Industry (DTI) and the Italian Chamber of Commerce in the Philippines (ICCP).

“Two of these are in high-technology sectors and there is also another one that is interested in processing copper,” Trade Secretary Alfredo E. Pascual told reporters last week.

ICCP Executive Director Lorens Ziller said that many Italian companies currently maintain headquarters in the region and could look at expanding to the Philippines.

“Where we bring in the majority of the investments is actually not from Italy, but it is from Italian companies who are already operating in the region,” Mr. Ziller said.

“They may have their headquarters in Singapore, Hong Kong and Thailand, and of course they will try to expand their markets and the Philippines will be another market,” he added.

Asked for more details on the potential investors, he said that the manufacturing companies are in the metalworking and electronics sectors.

“One is in the metalworking sector in general. They finish certain products with raw materials from abroad. So, the products will be finished here in the Philippines and re-exported,” Mr. Ziller said.

“Another one is in the electronics sector… There is way more expansion now especially because of this disruption in China… many companies that move here will make their facilities bigger,” he added.

He estimated the potential investments at up to 1 billion euro if the Philippines is actively promoted as an investment hub.

“A company that we met a few months ago wants to set up a factory here and their investment is around 150 million euros,” he said.

With other companies interested in the Philippines, “we will definitely go towards a billion euro if we push hard,” he added.

He cited the need to address high power costs and ease of doing business if the Philippines is to attract more investment.

“The ease of doing business is the key here to bring more investment and that’s why we keep on working with government agencies and with our stakeholders to make it easier to do business in general,” he said.

“We should open the doors and be a little bit laxer on the restrictions and we will absolutely be flooded with investment because nowadays this (the Philippines) is one of the few places in the world where we can actually invest because the Middle East is in trouble,” he added.

The Philippine cost of power is “double compared to Vietnam, compared to other neighboring countries so we need to do something,” he said.

Mr. Ziller added, “definitely they must locate in Luzon. I mean, we try to look at Mindanao but then there are so many brownouts in Mindanao, so it doesn’t make it feasible for them to stay there.” — Justine Irish D. Tabile

Solar installers for gov’t agencies to be limited to those with 3-year track record

Solar panels are being installed on the roof of a mall. — GREEN HEAT HANDOUT PHOTO

THE Department of Energy (DoE) said it is drafting the guidelines for accrediting solar photovoltaic (PV) installers who will work with government agencies under the government energy management program (GEMP).

“Solar PV installers must have… at least three years of continuous hands-on experience in the installation, operation, maintenance, and commissioning of Solar PV System,” the Energy department said in a draft circular.

The Inter-Agency Energy Efficiency and Conservation Committee (IAEECC) will oversee all government entities (GEs) seeking to install solar PV systems in compliance with GEMP.

GEMP hopes to reduce the government’s electricity and fuel consumption by at least 10% through energy efficiency and conservation measures.

The IAEECC has directed the DoE’s Energy Utilization Management Bureau (EUMB) to provide the official list of solar PV installers for the reference and guidance of GEs.

Applicants for GEMP accreditation are required to submit application forms, documents attesting to their eligibility, a list of projects undertaken in the last three years, and the application fee of P2,000.

The validity of the accreditation is three years from the date of issuance, unless suspended. — Sheldeen Joy Talavera

NEDA seeks accelerated rollout for UHC to head off future crises

REUTERS

THE GOVERNMENT must accelerate the universal healthcare (UHC) system rollout to guard against future crises like the coronavirus pandemic, the National Economic and Development Authority (NEDA) said.

“Efforts should be sustained in addressing lessons learned from the COVID-19 pandemic, such as the critical role of developed primary healthcare, adequate health facilities, and strengthened health system resilience in large-scale health emergencies,” it said in the Philippine Development Report.

It called for “adequate and equitable human resources for health to carry out services at the different levels of healthcare.”

“The government must strengthen inter-agency collaboration to address the social determinants of health. These include sustained efforts in education, nutrition, and water, sanitation, and hygiene,” it said.

It said the Health and Education departments must partner up to address youth pregnancy and the increasing incidence of HIV/AIDs in those age groups.

“The Department of Health (DoH) must also continue engaging with local government units (LGUs) to create healthy settings in communities, schools, and workplaces,” it said.

“Recognizing that non-medical factors play a significant role in affecting health outcomes, healthy communities may activate local committees in the LGUs to track their performance in improving social determinants of health, such as access to safe water, basic sanitation, and nutrition,” it added.

The report also recommended enhancing the supply and deployment of human resources for health. It cited the example of working with the Commission on Higher Education to promote scholarships for doctors, nurses, pharmacists, technologists, midwives, and other healthcare professionals.

NEDA also said stressed the need for an “integrated package of healthcare delivery system across life stages.”

“Accessibility of gender- and culture-sensitive healthcare services across the life stages and different levels of care, providing integrated packages of health, nutrition, immunization, family planning, tuberculosis, HIV/AIDS, and adolescent health services, will continuously be pursued,” it said. — Luisa Maria Jacinta C. Jocson

ADB seeks harmonized data in remittance studies

A man accepts Philippine peso bills at a money remittance center in Makati City, Metro Manila, Philippines, Sept. 19, 2018. — REUTERS/ELOISA LOPEZ

RESEARCH on remittances must be harmonized to address conflicting definitions in the interest of improving policy making, the Asian Development Bank (ADB) said.

It cited “large differences in the size of international remittances reported by households and the central bank, which is an important factor to consider for remittance data analysis at the micro, macro, or both levels,” the bank said in a working paper.

“Future research is needed to close the gap between micro and macro remittance studies and overcome definitional differences,” it added.

The ADB cited the discrepancies in the definitions of remittances in various research.

“In general, microeconomic and macroeconomic literature complement each other to provide a comprehensive assessment of the impact of remittances on migrants’ households and communities, as well as on the overall economy of countries of origin,” it said.

“However, caution should be exercised when comparing the two sets of literature, as the definition and data source for international remittances differ significantly,” it added.

The report said that most micro-level studies identify remittances as the amount of income households report receiving from overseas in both cash or kind.

“At the macro level, by contrast, remittances are the aggregated total of personal remittances reported by financial institutions and intermediaries, which necessarily include the amount that migrants send to their families and to elsewhere such as their own personal bank accounts,” it said. — Luisa Maria Jacinta C. Jocson

Transforming bold vision into a successful IPO journey

(First of two parts)

As the economy continues to recover, many entrepreneurs are contemplating how to raise funds through an initial public offering (IPO) and level up their game. Chief executive officers (CEOs) envision growth and set new goals such as investing for innovation, increasing brand awareness, and improving their companies’ credit worthiness.

In the face of current economic and geopolitical headwinds, rather than asking whether the markets are ready for IPO aspirants, the key question for CEOs pursuing their bold vision is, “What can we do to achieve a successful IPO journey?”

The IPO journey is more than just a financing event — it should be approached as a transformational process. Because this has to be a structured and managed transformation of the people, processes, systems, and culture of an organization, it is crucial for CEOs to perform an IPO readiness assessment and consider the following critical success factors to transform their bold vision into a successful IPO journey.

EVALUATING STRATEGIC OPTIONS
Even if a company assesses that the current environment is not ideal for fundraising, it can serve as an opportunity to plan and prepare for an IPO or any other strategic transaction. While waiting for significant markets and geopolitical uncertainties to settle, executives can embark upon their IPO journey.

Planning for an IPO involves a holistic discussion about the strategic options offered by the capital market. An IPO aspirant needs to design a multi-track approach that covers the options for listing (either direct or dual and secondary listing) as well as other financing methods such as private capital, debt, or a trade sale. Considering an array of exit and funding alternatives in an IPO readiness assessment is critical to achieve flexibility in the timing and pricing of alternatives and to exploit narrow IPO windows.

EARLY PREPARATION IS KEY
IPO aspirants should begin the IPO readiness process early to allow the pre-listing company to act and operate like a public company at least a year before the IPO. The preparation can start with a comprehensive IPO readiness assessment as a first step, ideally over a 12- to 24-month timeline. The IPO readiness assessment will serve as a diagnostic phase so that CEOs can identify opportunities for the transformation of certain key focus areas.

The IPO readiness process also includes building a strong IPO team with members from management, the board, and external advisors, among others. External advisors can be composed of bankers, lawyers, auditors, and investor relations advisors.

Assembling a powerful team begins from top management. Institutional investors will look to the CEO, who is mainly responsible for articulating and executing the company’s vision and business strategy, while the chief financial officer (CFO) will likely be focused on investor relations in a public company. A quality management team should also ideally include executives who have experience in IPOs and managing public companies.

TAKING ON AN INVESTOR’S PERSPECTIVE
A successful IPO can be characterized by a compelling equity story that captures the appetite of institutional investors. Hence, it is vital for CEOs to approach their IPO journey from an institutional investor’s perspective. Institutional investors mainly influence the movement in stock prices and include mutual funds, hedge funds, banks, insurance companies, pension funds, larger corporate issuers and other corporate finance intermediaries.

IPO aspirants need to recognize the need for enhanced corporate governance, recruiting qualified non-executive board members, improving internal controls, and forming a qualified audit committee. This also includes the need to fine-tune internal business operations through working capital management, proactively addressing regulatory risks and rationalizing the business structure.

Given the increased stakeholder demand for sustainability, IPO candidates must also be able to clearly articulate and demonstrate an embedded environmental, social and governance (ESG) strategy and culture, from climate change mitigation initiatives to promoting board and management diversity.

STRONG PERFORMANCE TRACK RECORD
Investors usually base their IPO investment decisions on financial factors, especially debt to equity ratios, revenues, return on equity (RoE), profitability and earnings before interest, taxes, depreciation, and amortization (EBITDA). This also includes the capability of IPO candidates to comply with new financial and sustainability reporting standards and securities regulations.

IPO investment decisions may also be based on non-financial factors, including the quality of management, corporate strategy and execution, brand strength and operational efficiency, and corporate governance.

IPO candidates should also focus on profitability and cash flows or articulate a clear path to profitability. They must craft a compelling equity story backed by a strong track record of growth that sets their company apart from their peers while maximizing value for their stakeholders.

TRANSFORMATIONAL IPO JOURNEY
Although an IPO is a key turning point in the life of a company, market leaders should not treat an IPO as a one-time financial transaction — they must approach it as one defining step in a complex transformational journey from a private to a public company.

While IPO aspirants need to be cautious given the challenging capital market environment, CEOs must focus on preparing an equity story that addresses the concerns of institutional investors. This transformational process begins with IPO readiness and ample internal preparation, aiming towards a successful IPO journey even with the fleeting market window of opportunity.

The second part of this article will discuss additional elements that can contribute to the success of an IPO journey.

This article is for general information only and is not a substitute for professional advice where the facts and circumstances warrant. The views and opinions expressed above are those of the authors and do not necessarily represent the views of SGV & Co.

 

Aris C. Malantic is a partner and the Financial Accounting Advisory Services (FAAS) leader, and Jerwin C. Esquibel is a senior director under FAAS of SGV & Co.

Philippines told to accept Indonesia pitch for military aircraft agreement

PRESIDENT BONGBONG MARCOS FACEBOOK PAGE

By Beatriz Marie D. Cruz, Reporter

THE PHILIPPINES should take Indonesia’s offer to sell anti-submarine aircraft as a deterrent amid worsening tensions with China, a congressman said at the weekend.

“Offhand, the Philippine Navy could use the aircraft to defend against possible submarine attacks,” Surigao del Sur Rep. Johnny T. Pimentel said in a statement.

“We have to build up the capability of our armed forces to conduct naval warfare using a combination of surface ships, submarines and aircraft, to fully secure the integrity of the national territory,” he added.

The lawmaker noted that as an archipelagic state, the Philippines is most vulnerable to potential foreign incursions by sea.

“In the future, we are counting on submarine patrol operations to effectively deter such external threats,” he added.

Mr. Pimentel has filed a bill that seeks to put up naval forward-operating bases to protect gas and oil reserves within the country’s exclusive economic zone in the South China Sea that “are absolutely needed to assure the country’s long-term energy security.”

He also filed another measure that seeks to develop the 37.2-hectare Pag-asa Island — the largest Philippine-occupied landmass at the northeastern section of the disputed Spratly Islands — into a recreational fishing tourist destination.

Indonesian President Joko Widodo during a visit to Manila last month asked Philippine President Ferdinand R. Marcos, Jr. to buy anti-submarine warfare aircraft from his country.

The two leaders met amid heightened tensions between the Philippines and China. The Chinese Coast Guard on several occasions last year fired water cannons at Philippine ships trying to deliver food and other supplies to an outpost at Second Thomas Shoal.

“Indonesia’s offer of anti-submarine warfare aircraft to the Philippines will push the extra mile in the realization of naval diplomacy from friends in the Association of Southeast Asian Nations (ASEAN),” Chester B. Cabalza, founding president of Manila-based International Development and Security Cooperation, said in a Facebook Messenger chat.

Hansley A. Juliano, who teaches political science at the Ateneo De Manila University, said it is high time for the Philippines to invest in naval and aerial equipment amid increasing tensions with China.

“Any technical, educational, strategic and doctrinal support should be considered by the Philippine government especially when it comes from allies who share our maritime security concerns,” he said via Messenger chat.

The government should study the deal with Indonesia to ensure the Philippines could handle the costs, he said. “The practical question here would be the nature of support.”

“Is Indonesia making it for us? Is it offloading current equipment to us so they can instead upgrade (essentially hand me downs)? Is Indonesia instead brokering it to us via another partner (say the UK or the EU)?” he asked.

The Philippine military last year said it would deploy anti-submarine aircraft in the South China Sea, including two choppers from the United Kingdom, as it faced increasing threats from Chinese ships.

Military chief Romeo S. Brawner, Jr. in October said the British AgustaWestland 159 Wildcat chopper has a torpedo that can hit any submarine illegally entering Philippine territorial waters.

The Philippines is expected to procure four more anti-submarine aircraft.

The Armed Forces of the Philippines (AFP) modernization program has about P50 billion in programmed and unprogrammed funds under this year’s P5.768-trillion national budget, Mr. Pimentel said.

Mindanao separation talk destabilizing however farfetched, analysts say

REUTERS

By Kyle Aristophere T. Atienza, Reporter

EX-PRESIDENT Rodrigo R. Duterte’s call for the separation of Mindanao from the Philippines is destabilizing and could pull the Philippine economy down, however farfetched the idea is, according to a former presidential political adviser.

“He’s thinking that a failed secession attempt will be devastating for the economy,” Ronald M. Llamas, who used to be the political adviser of the late President Benigno S.C. Aquino III, said by telephone on Sunday. “Even if the attempt fails, it will be devastating for the Marcos administration.”

“A failed mutiny, coup or uprising will be devastating for the economy,” he said, adding that this could cancel any investment pledges that President Ferdinand R. Marcos, Jr. secured in his past foreign trips.

Harry L. Roque, who was Mr. Duterte’s spokesman, did not immediately reply to a Viber message seeking comment.

The National Security Council vowed to quell any secession attempts.

In a statement, the agency said it would “not hesitate to use its authority and forces to quell any attempts to dismember the republic.”

“Any attempt to secede any part of the Philippines will be met by the government with resolute force, as it remains steadfast in securing the sovereignty and integrity of the national territory.”

Mr. Duterte last week said local political forces would be regrouping in the southern Philippine region of Davao to start a signature campaign for the separation of Mindanao from the Philippines.

He made the remark days after accusing Mr. Marcos of being a drug addict at a political rally in Davao City that opposed the push to amend the 1987 Constitution.

Mr. Duterte also accused Mr. Marcos of wanting to stay in power beyond his term and slammed the International Criminal Court for its investigation of his deadly war on drugs that had killed thousands.

Mr. Marcos, 66, has veered away from his predecessor’s pivot to China, standing up to its neighbor and boosting security ties with the US and other Western allies.

“Imagine an ex-President threatening a sitting President with an uprising, destabilization, secession, mutiny and even a hint of assassination — publicly,” Mr. Llamas said. He noted Mr. Duterte had said during the rally that his successor would have been a target of the anti-illegal drug campaign if he was still the President.

Mr. Marcos fired back by saying the firebrand leader might be reeling from the effects of fentanyl use. On Sunday, he vowed to avoid political mudslinging.

“In the New Philippines, there is no space for name-calling and pulling down,” he said in a video in Filipino posted on his YouTube channel. “Let us prioritize our nation. Let us change because there won’t be a new Philippines without a new Filipino.”

Mr. Duterte and his daughter Vice-President Sara Duterte-Carpio would benefit from an economy rigged by instabilities, Mr. Llamas said. “They are the next opposition in the midterm elections. The Vice-President, even if she’s still with the Cabinet, is clearly against the administration.”

He noted that Ms. Duterte-Carpio, who is also Education secretary, has opposed the Charter change push and a government decision to restart peace talks with the Maoist movement. “You cannot do that if you are a Cabinet secretary because you are supposed to follow your boss.”

The Office of the Vice President did not immediately reply to a Viber message seeking comment.

Ms. Duterte-Carpio would likely resign as Education chief months before the 2025 midterm elections as she criticizes the Marcos government “more sharply.”

“There is nothing concrete about the [Mindanao] proposal, there’s not even a study on how Mindanao will become should it secede. For all we know, this is part of his strategy to be in the national spotlight after his presidency,” said Jan Robert R. Go, a political science professor at the University of the Philippines.

“Remember, the 2025 midterm election is close, and this might be a preparation for either him or his candidates,” he said in a Facebook Messenger chat. “This is another ploy to attract people’s interest and he might succeed.”

Antonio P. Contreras, a political expert based in the University of the Philippines Los Baños, said Mr. Duterte’s idea does not have a constitutional basis, adding that any secessionist move might be considered seditious. “You can only have that if you rebel.”

A number of lawmakers and former Muslim separatists have rejected the secessionist idea, which they said would erode the gains from past peace negotiations.

Talks of secession would probably die out “as soon as another confrontational event occurs to sustain his image as an opposition leader,” Anthony Borja, who teaches political science at De La Salle University, said via Messenger chat.

He said the call for Mindanao separation is “another manifestation of Duterte’s tribalistic brand that marries personality politics with ethno-linguistic and regional boundaries.”

“We can consider his statements on secession as either mere political snarling — a means of saying that he is still top dog — or a way to deliberately test his remaining clout,” he added.

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