Home Blog Page 3046

The Maharlika strategic investment fund — the ‘pause,’ the fix

JOSH APPEL-UNSPLASH

Alea iacta est. The die is cast.

Republic Act (RA) 11954 was signed into law on July 18, 2023, establishing the Maharlika Investment Fund (MIF) and creating the Maharlika Investment Corp. (MIC) to manage the fund, following its passage in the House (HB 6608) on Dec. 14, 2022 and in the Senate (SB 2020) on May 31, 2023. The house adopted in full the Senate version of the bill, without going through the usual bicameral conference committee.

The Implementing Rules and Regulations (IRR) was signed by the Treasurer of the Philippines on Aug. 22, 2023, as provided for by Section 54 of the law calling for the promulgation of the IRR within 90 days from enactment, in consultation with the founding government financial institutions (GFIs) Land Bank of the Philippines (LANDBANK) and Development Bank of the Philippines (DBP).

However, “upon the directive of the president” the implementation of the IRR was suspended by a memorandum dated Oct. 12, 2023 from Executive Secretary Lucas Bersamin, “pending further study of the IRR.”

President Ferdinand R. Marcos, Jr. said, “the organization of the Maharlika proceeds apace” and that “we are committed to having it operational before the end of the year.” He insisted that the suspension of the IRR must not be seen as a “judgement of the rightness or wrongness of the Maharlika Fund” but that “we are just finding ways to make it as close to perfect and ideal as possible.”

“HOUSTON, WE HAVE A PROBLEM”
LANDBANK and DBP had to request for “regulatory relief” from the Bangko Sentral ng Pilipinas/Monetary Board (BSP/MB) when they remitted their capital contributions.

TIMING. RA 11954 provided for the capital contributions of LANDBANK’s P50 billion and DBP’s P25 billion to be fully paid (Section 6.1) without specifying a timetable. The IRR, however, required the combined P75-billion contributions to be deposited to the account of the Treasurer of the Philippines for the benefit of the MIC “within five (5) days from the effectivity of the IRR” (Rule III, Section 6).

IMPACT ON CAPITAL RATIOS. At the forum on the Maharlika Fund held by the UPSE Alumni Association on June 21, 2023, this writer was one of the few who pointed out that the contributions from the LANDBANK and DBP to the initial capital of MIC are not in the same category of funds that the GFIs can allocate out of their investible or loanable funds. Instead, they are equity investments that will be deducted from their equity, following Basel 3 rules.

Based on calculations using the audited figures from 2022 annual reports of LANDBANK (pages 49-53) and DBP (page 155) — which show detailed computations of qualifying capital and the risk-weighted assets or RWA:

1. DBP ex-MIF capital ratios will fall below the regulatory minimum of 10% (CET 1 from 11.68% to 7.44% and total CAR from 12.61% to 8.36%). Unless it gets a fresh capital infusion, DBP would even have to shrink its loan book or collect on outstanding loans to meet the regulatory capital ratios.

2. LANDBANK’s ex-MIF capital ratios will drop (CET 1 from 13.9% to 10.2% and total CAR from 14.46% to 10.73%), barely meeting the regulatory minimum and cannot support any expansion in its loan portfolio.

3. Merging the LANDBANK and DBP will not help, as their composite CET 1 ratio will drop from 13.34% to 9.35% (below the 10% minimum) and total CAR from 13.90% to 10.01%.

4. In addition to falling below the minimum capital ratios, the immediate contribution of the LANDBANK’s P50 billion and DBP’s P25 billion may have led to violation (particularly in the case of DBP) of:

1. The very same law RA 1954 — Article III Section 12, and IRR Rule IV Section 12. “The investments from LANDBANK, DBP … shall not exceed 25% of their net worth.”

2. RA 8791 or General Banking Act of 2000, Article 1, Section 24.2. “The equity investment in any one enterprise … shall not exceed 25% of the net worth of the bank.”

ADVERSE IMPACT ON THE ECONOMY, CREDIT RATINGS
Based on a leverage ratio of 6.5 to 8x, the P75 billion taken out from the capital base of LANDBANK and DBP and transferred to the MIC corresponds to siphoning off P500-600 billion of lending from the economy or 4-5% of the total loans of the banking industry. By some estimates, this represents an output loss equivalent to over 2% of GDP.

Fitch Ratings has warned that “… LANDBANK and DBP’s underlying loss absorption buffers are poised to weaken on the back of their contribution to the MIF, irrespective of regulatory forbearance that maybe provided to the banks.”

While not explicitly warning of a credit downgrade of their current BBB rating (which carries an implicit sovereign guarantee) Fitch said their capital contribution to the MIF “may pressure their standalone credit strengths, in the absence of other mitigating factors.”

Fitch also noted that the government stands ready to help the banks should they need it. LANDBANK’s 2021 annual report notes that it received a P27.5-billion capital infusion from the National Government to support its loan expansion and to help absorb the costs of the UCPB merger.

WHERE TO GO FROM HERE?
The immediate solution is to revise the IRR to make the contributions of LANDBANK and DBP staggered over a number of years “until fully paid.” Alternatively, capital calls can be made only once the projects are identified and their viability established. The experience of strategic investment funds elsewhere, especially for infrastructure projects, shows that it takes time for projects to take shape and be funded. It is called “patient capital” for a reason. A disciplined approach to “viability first, funding to follow” will obviate the pressure to deploy the funds to less-than-ideal or wasteful projects.

In the case of DBP, a P5 billion per year contribution (roughly 7% of its unimpaired capital as of end 2022) can be a realistic number over five years that will allow it to meet the requirements of RA 1954, while allowing it to comply with regulatory capital ratios. Instead of having to cut back on lending to industries and MSMEs, it will have the breathing room to expand its loan book, generate income, and build up its internally generated capital to further sustain its lending growth. Similarly, the LANDBANK contribution can be downscaled to P10 billion a year over five years.

Should additional funding for MIC be needed from both GFIs, they can do so without impacting their capital ratios by subscribing to debt instruments that are convertible to equity at a later time. However, this option requires amending the law itself since it provides only for preferred shares that are non-voting, non-participating, and non-convertible (Article II, Section 6.2).

Such a revision in a key provision of the IRR will spare the two GFIs from having to avail of “regulatory relief” from the BSP/MB and avoid a possible credit rating downgrade.

The General Banking Act provides that any equity investment is subject to the “prior approval of the Monetary Board” (RA 8791, Section 24.2, last paragraph). The proposed revision in the IRR will spare the Monetary Board from the unpleasant task of exercising its lawful duty to withhold its approval of the equity investment of DBP for exceeding 25% of its net worth. An alternative scenario to outright disapproval would be for the MB to give its approval for the equity investment but reduced to an amount below 25% of its net worth.

 

Alexander C. Escucha is president of the Institute for Development and Econometric Analysis, Inc., and chairman of the UP Visayas Foundation, Inc. He is a fellow of the Foundation for Economic Freedom and a past president of the Philippine Economic Society. He is an advocate of best practice in corporate governance with over 40 years’ experience in banking and finance, particularly in strategy, communications, technology and stakeholder/ investor relations.

Azure way to well-being

PHOTO BY KAP MACEDA AGUILA

Bentley turned to science to make this Bentayga Extended Wheelbase variant even more comfortable

WE ALREADY KNOW that we spend an inordinate amount of time on the road, ensconced in our vehicles and suffering through gridlock, potholes, noise, and a wealth of stressors that drain us of our energy — sometimes even before a workday begins.

The uber-luxe marque is aware of this, stressed Bentley Manila, and added that the “relaxing and reenergizing environment of the Azure cabin reduces fatigue through multisensory and scientific design, and further helps to enhance the safety of the car.” The company points to studies showing that “tiredness” is a factor in up to 20% of all road crashes.

That’s exactly why a vehicle needs to be comfortable and promote the well-being of its occupants — beyond the bells and whistles of entertainment and tech accoutrements, and the undeniable value of a safety suite.

The Bentley Bentayga SUV, already in a rarified realm of its own and worthy of its storied badge, now comes out with an Azure variant of the EWB (extended wheelbase) prioritizing well-being “that enhances the comfort of its driver and passengers.” Bentley Manila made a further claim that “the Bentayga EWB Azure keeps its driver alert, but comfortable and rested in the cabin.”

The model has been “developed with the help of well-being experts and neuroscientists, (and is equipped with the) Touring Specification option of advanced driver assistance technologies for safer, more relaxing journeys. The stress-free interior ambience is enhanced by reduced levels of noise, vibration, and harshness.”

“It’s an entire derivative strategy that was launched by the brand — in areas that match different customer profiles,” said Bentley Motors Asia Pacific Head of Sales and Network Development Sam Bontoft, in an interview with this writer. There are two general directions: the other is the S, with features that bear the so-called Black Line specification. “That makes it look aggressive,” he maintained, and added that the focus is on driving enjoyment.

What’s the target customer profile of the Azure then?

“It’s a difficult question,” insists the Singapore-based executive, in town for the recent Philippine launch of the Bentayga EWB Azure. “We obviously look at the customers that we have on hand and, of course, we want to appeal to other customers as well — that’s why you get this diversified portfolio of derivatives. With the Azure range, we’re targeting people who are looking for well-being. They want to drive a car that suits their lifestyle. In the EWB, they’re looking for comfort. They want to benchmark features, whether it’s the cabin temperature, seat dynamics or what have you. We don’t target a specific age group or gender. It’s just a vibe that the customer has.”

Is the Bentayga EWB Azure meant for the driver or the chauffeured?

Mr. Bontoft remarked, “It’s interesting. Naturally, you’d think that it’s for the chauffeur-driven because it’s a bit longer with a bit more space at the back. And with the airline seats — you’d want to be in the back, right?

“But look at different markets, for example in the Philippines. I’d assume that the person who buys this car is probably going to be chauffeur-driven, right? But if you go to Australia, we still sell these cars to people who drive — and it’s their family at the back. It’s a mixed bag.”

The Bentayga EWB Azure gets 22-inch, 10-spoke directional wheels, a bright lower bumper grille, unique quilted seats, mood lighting, a heated steering wheel, and even more driver’s assistance aids. As with all Bentley Azure models, the Bentayga EWB receives the Front Seat Specification that includes 22-way adjustable seats for passengers, and heating and ventilation that are keenly tuned to give occupants “optimum temperature for comfort and alertness.”

Insisted Mr. Bontoft, “They’re the most advanced seats in a car thus far.” Further elevating the experience and comfort for passengers, sensors measure the body’s temperature and make micro adjustments in aide of blood flow.”

The Azure range itself introduces a concept to the automotive world,” reported Mr. Bontoft. “It prioritizes the comfort of everybody on board; Azure stands for more than just the specification of the car.”

As for the Bentley Bentayga Azure EWB, he stressed, “What we have is the best rear cabin experience that you can get in a Bentley since the Mulsanne. It’s actually quite impressive. More than 2,500 new parts went into the development of this car, with more than 2,000 hours of testing to achieve the final product.”

Among the new elements are vertical vanes in the front grille, new illumination, power-closing doors that can shut with the press of button from the inside, and all-wheel steering that reduces the turning circle by seven percent, compared to the regular Bentayga.

And since it’s a Bentley, the model lends itself to customization. “Customers have the opportunity to choose from 24 billion different trim combinations, with finer sewing threads creating Bentley’s softest quilt to date,” reported Bentley Manila.

The Bentayga continues to be the top-performing model for the Crewe, England-headquartered luxury automaker, accounting for 40% of sales.

Striking Hollywood actors pass counteroffer ahead of further talks with studios

STOCK PHOTO | Image by Peter Thomas from Pixabay

STRIKING Hollywood actors have made a comprehensive counteroffer to the major studios, the SAG-AFTRA performers’ union said in a post on social media platform X.

Negotiators for the union and the Alliance of Motion Picture and Television Producers, the group representing Walt Disney, Netflix, and other major media companies, meet again on Friday, the actors union said.

Ahead of Friday’s talks, a group of SAG-AFTRA members published an open letter to the union leadership, urging the negotiating committee to continue fighting for improved compensation, royalties, and workplace protections.

“We have not come all this way to cave now,” wrote the group calling itself Members In Solidarity. “We have not gone without work, without pay, and walked picket lines for months just to give up on everything we’ve been fighting for.”

The latest counteroffer submitted by the actors union on Thursday comes after media companies and the union representing striking US actors returned to the bargaining table on Tuesday last week.

Earlier this month, negotiations between Hollywood studios and SAG-AFTRA were suspended as the two sides clashed over streaming revenue, the use of artificial intelligence, and other issues at the core of a three-month work stoppage.

Members of SAG-AFTRA, which represents 160,000 actors and other media professionals, have been on strike since July. The work stoppage has scrambled next year’s film slate and delayed the return of primetime television comedies and dramas. It also has created hardships for crew members, who have been out of work for months. — Reuters

Wellex Industries turns profitable

LISTED Wellex Industries, Inc. reported a turnaround as posted earnings during the July-to-September period, reversing its net loss a year earlier, on the back of higher revenues from leasing its warehouse facilities.

In a stock exchange disclosure, the company said its net income reached P359,641 during in the third quarter, a reversal of the P1.13 million net loss last year.

Wellex said its total revenue for the third quarter rose 38.8% to P6.84 million from P4.87 million previously.

For the nine-month period, the company said it trimmed its net loss to P4.21 million from P7.1 million in the same period last year.

Wellex’s total revenues climbed 19% to P17.58 million compared with P14.81 million a year ago.

According to the company, 28 companies are leasing spaces inside the Plastic City Industrial Corp. in Valenzuela City.

Wellex said that as of the quarter ending Sept. 30, it leased out more areas in its warehouse facilities compared with a year earlier.

Wellex’s website said that the compound houses 44 industrial warehouses across 84 hectares of land. It has facilities such as roads, water, electricity, and security. The company is owned by the Gatchalian family.

As of Oct. 27, shares of Wellex at the local bourse closed unchanged at 25 centavos apiece. — Revin Mikhael D. Ochave

‘Climate-smart’ rice irrigation project planned for Nueva Ecija

THE National Irrigation Administration (NIA) said it is planning to roll out a climate-smart irrigation project in Nueva Ecija, a major rice-producing province in Central Luzon.

Projects can be made climate-smart “by increasing water productivity in national irrigation systems while reducing carbon emissions in irrigated rice cultivation,” the NIA said in a statement.

It added that the “climate smart” project is aimed at promoting broad adoption of alternative wetting and drying technologies in irrigated areas.

The projects will offer financial incentives and capacity-building activities to partner farmers.

The NIA said the initiative will be carried out via a memorandum of understanding (MoU) with Ostrom Climate Solutions, Inc.

It added that the Climate-Smart Rice Project in Upper Pampanga River Integrated Irrigation Systems will be active in the area until 2028.

The project’s goal is to contribute to the achievement of rice security and resiliency, it said.

The company will also manage all project fund releases in accordance with government accounting and auditing rules.

“Ostrom Climate shall provide funds for the implementation of the project, thus incurring no cost to NIA,” it added.

“With the signing of the MoU between NIA and Ostrom Climate, NIA looks forward to the realization of its vision of making the Philippines a climate-smart and climate change-resilient nation,” it said.

Ostrom Climate is a Vancouver-based company providing carbon management solutions. — Adrian H. Halili

No beer in heaven

FREEPIK

“In heaven there is no beer” was one of our favorite ditties during our rough and unrestrained days in high school. The lyrics go:

In heaven there is no beer/That’s why we drink it here/And when we’re all gone from here/Our friends will be drinking all the beer

In heaven there is no wine/So we drink till we feel fine/And when we leave this all behind/Our friends will be drinking all the wine

A half century has passed, and we have matured and have become wiser. Being senior citizens, we have become health-aware. Binge drinking is no longer the norm; moderate drinking is the practice.

Despite the caution in our later years, we simply have reaffirmed our love for beer, wine, and spirits. And we continue to sing “In heaven there is no beer.”

We can likewise intellectualize the worldly significance of liquor. In this regard, I came across a New York Times (NYT) opinion piece titled “How Beer Gave Us Civilization,” written by Jeffrey P. Kahn, a clinical associate professor of psychiatry. The piece, published 10 years ago (March 15, 2013), is a paean to beer.

I wonder whether the author would have written a sober or less celebratory piece if he had known then the evidence that liquor of any type has no safe level of drinking. But I’m getting ahead of my story.

The NYT opinion piece is an advertisement for beer in the disguise of an academic discourse. It nevertheless amuses. Kahn’s ode to beer is anchored on his belief that the drink was the antidote to social constraints. While acknowledging that social constraints “gave structure and strength to our primeval herds,” and hence made “our ancient forebears cooperate, prosper, multiply,” the author recklessly concludes that “these same lifesaving social instincts didn’t readily lend themselves to exploration, artistic expression, romance, inventiveness, and experimentation — the other human drives that make for a vibrant civilization.”

Further: “To free up those, we needed something that would suppress the rigid social codes that kept our clans safe and alive. We needed something that, on occasion, would let us break free from our biological herd imperative….”

And here, Kahn gets more reckless: “We needed beer.”

Whoa! That’s how the psychiatrist, and an academic at that, strays from the scientific method. Worse, says he, this is “how beer gave us civilization.”

Kahn’s thinking is an example of reductionism, of bad logic. A smart-aleck could have engaged Kahn in a mischievous, comical debate. Couldn’t it have been another psychoactive substance like mushrooms, poppy, or cannabis, other than beer, that lent our forebears to “exploration, artistic expression, romance, inventiveness and experimentation?”

Emily Bell, who writes about food and beverages and their connection to culture and politics, will disagree. She has an essay humorously titled: “Early Man Smoked Weed Before Discovering Alcohol. No Wonder It’s Called The Stone Age.” (vinepair.com; updated on Aug. 8, 2016). Bell wrote about a systematic review authored by Tengwen Long et al. titled “Cannabis in Eurasia: origin of human use and Bronze Age trans-continental connections” (published in Vegetarian History and Archaeology on June 27, 2016).

Kahn’s argument crumbles in the face of proof that humankind was already engaged in exploration, artistic expression, romance, inventiveness, and experimentation, before the advent of beer. Prehistoric man, for example, had manifested artistic expression through cave engravings and paintings.

On beer and romance: The story of Adam and Eve is an example of romance to a tee. It was not just about love; it was about sex and nudity, temptation and betrayal, and banishment. But beer was not present when the story of Adam and Eve happened.

Beer itself was the product of such exploration, inventiveness, and experimentation. So, we have to correct Kahn: It is not beer that gave us civilization; it was civilization that gave us beer.

So let’s move away from faulty reasoning, including causal fallacy, as exhibited by Kahn’s NYT opinion. Let’s conform to the scientific method when talking about alcohol.

The latest scientific evidence refutes the hitherto dominant belief that moderate drinking can be good for one’s health. The claim that moderate drinking is good for the health is illustrated by a graph known as the J curve. The graph’s horizontal axis measures drinks per day and the vertical axis measures the relative risk of mortality from all causes.

The lowest point of the J curve, which is somewhere in the middle, represents the moderate drinkers. The J curve shows that the moderate drinkers have the lowest risk of mortality. Said differently, the moderate drinkers (defined as limiting intake to two drinks or less per day for men and one drink or less per day for women) have lower risks of all-cause mortality than those who abstain from drinking (represented by the J’s hook).

The heavier drinkers face much higher risks of mortality. They are represented by the high point in the J curve.

Two studies stand out for disproving the long-held J curve observations.

The first study, authored by Robyn Burton and Nick Sharon, is titled “No level of alcohol consumption improves health,” published in The Lancet, Aug. 23, 2018. Here is a lengthy quote from said journal article:

“The study considers the extent to which moderate levels of consumption are protective for some health conditions. A paucity of estimates from meta analyses identifying appropriate reference categories, adequately accounting for survival bias and other confounders, has meant previous assessments of the harm of alcohol have been potentially inaccurate. However, the emerging literature can account for some of these issues, enabling more reliable estimates of the disease burden attributable to alcohol. By implementing a novel method to establish a counterfactual level of exposure across varied relative risks that does not need to assume zero exposure, the authors present tangible evidence for low-risk drinking recommendations. The level of consumption that minimizes an individual’s risk is 0 g of ethanol per week, largely driven by the fact that the estimated protective effects for ischaemic heart disease and diabetes in women are offset by monotonic associations with cancer.”

The second study is authored by Jinhui Zhao, Tim Stockwell, Tim Naimi, et al. and titled “Association Between Daily Alcohol Intake and Risk of All-Cause Mortality” (published by JAMA Network on March 31, 2023). This study is summarized as follows: The systematic review and meta-analysis consisting of 107 cohort studies and involving more than 4.8 million participants showed that “daily low or moderate alcohol intake was not significantly associated with all-cause mortality risk, while increased rate was evident at higher consumption levels, starting at lower levels for women than men.”

The main problem with the J-curve observations was it could not prove causation. Confounding factors were ignored. For example, the moderate drinkers in the observational studies also had attributes indicating healthy lifestyle and habits which lower their total mortality risks and make them live longer.

Hence, the presence of another variable influences the relationship between moderate drinking and relative risk of all-cause mortality. This phenomenon is called interaction effects. Analysts have to be careful in explaining variables that have interaction effects.

Further, the abstainers chosen for the J-curve observations included those who were former heavy drinkers or those who had chronic health problems. This sample selection of abstainers resulted in a biased outcome.

Now that the evidence points to no safe level of drinking, public policy toward alcohol has to unequivocally discourage consumption.

Society has a consensus that the harm caused by alcohol drinking is not just to individual health, and that it extends to the public sphere. Providing care and treatment to those afflicted with alcohol-related diseases is a cost to public health. The productivity losses arising from alcohol-related diseases likewise affect the whole economy.

Drunkenness results in accidents or collisions that harm others. And excessive drinking foments violence, especially against women and children.

The examples above constitute what economists call the negative externalities of alcohol drinking. A tax on negative externalities is thus appropriate to discourage consumption and to compensate for the harm to others that such individual consumption causes.

In the Philippines, alcohol taxes are moderate, and one reason behind that is the view that light drinking is acceptable. This has to change, now that the evidence refutes moderate drinking and establishes that no safe level of alcohol drinking exists.

This does not translate into prohibition. Taxation remains the most effective policy to deter consumption of harmful goods. But it is high time we had much heavier alcohol taxation.

Probably, my generation will continue to drink alcohol despite taxing it heavily. Anyhow, we are that generation that will soon be knocking on heaven’s door. And in heaven there is no beer.

But let there be no doubt that any ounce of alcohol is unsafe for everyone.

 

Filomeno S. Sta. Ana III coordinates the Action for Economic Reforms.

www.aer.ph

The last of Urus

PHOTO BY KAP MACEDA AGUILA

ICE-powered Lamborghinis are going to get scarce soon. Consider this the final call for this SUV with this powertrain.

RECENTLY, Lamborghini Philippines General Sales Manager Enrique “Erick” Jarlego II pointed to a framed image of the LM0002 right next to the present-day Urus (an S variant) on display at the Rockwell Power Plant Mall in Makati City. The LM0002 is the spiritual predecessor of the Lamborghini’s strong-selling (certainly by supercar standards) Urus. “This Urus is one of the last few units that are exclusively internal-combustion-engine-powered,” he shared, not without a hint of sadness. The Italian auto brand is expected to roll out a hybrid model by next year, effectively ending the ICE age for the SUV.

Year 1986 was an unlikely period for a brand such as Lamborghini to release a, gasp, utility vehicle, but the LM0002 proved to be precursor for the crossover/SUV craze that was to follow. Today, with its luxe car price point and accoutrements, the Urus can now look at a distinguished history. Some 20,000 units have been made since the model’s introduction in 2017.

Mr. Jarlego shared that the S variant of the Urus slots just beneath the Performante, which remains the most beastly of the lot. The S is your daily drivable Urus, he maintained, which now boasts an improved infotainment system — with Apple CarPlay, to boot. It has adaptive air suspension, soft-close doors, double-glazed glass, and more horses (now at 650hp) versus the garden-variety Urus. A new front bumper nixes the traditional honeycomb design for horizontal slats. Matte-black, stainless-steel skid plates are standard, along with a black front grille. The Urus S loses kilograms through a carbon fiber hood with vents that can come in gloss black, body, color, or carbon fiber. A carbon fiber roof can be optioned as well.

The rear bumper has also been recast, with the lower portion painted in matte black. The new twin-tailpipe exhaust is finished in brushed steel, but can be had in matte or gloss black — or even bright chrome.

Powering the Urus S is the same 4.0-liter, twin-turbocharged V8, mated with an eight-speed automatic transmission for a brisk zero-to-100kph time of 3.5 ticks — on the way to a top speed of 305kph. Even the blat of the exhaust system has been tweaked, said Mr. Jarlego. Keeping the heightened performance in check are huge 10-cylinder monobloc calipers in front and floating calipers in the rear. The carbon ceramic brake discs are bigger than the ones on the Porsche GT2 RS. Aside from the standard 21-inch wheels, buyers can opt for 22-inch Nath wheels in matte titanium and diamond polish finish, or huge 23-inch Taigete rollers in bronze or diamond polish. The wheels are shod in Lamborghini-specific Pirellis.

The display unit was swathed in Arancio Borealis paint, a color shared with the Huracan. The Urus embarrassment of riches continues with six drive modes, plus an Ego mode, to “deliver the most versatile, comfortable, and sporty super SUV experience in every environment.”

With the clock ticking loudly for vehicle browsers with an ICE-powered super SUV on their wish list, the Lamborghini Urus S certainly ticks all the boxes to make that purchase more memorable and worth it. — Kap Maceda Aguila

How can sustainable agriculture make the fashion industry greener?

REUTERS

IZMIR, Turkey — In between rows of sprouting cotton crops, the dried-out stems of wheat and sugar beet carpet a stretch of farmland near Turkey’s Aegean coast, helping to lock in soil nutrients and moisture — even in the scorching heat.

In nearby fields, where cotton is being grown without the protective blanket, the plants wilt and wither under the sun.

“Healthier soil means healthier cotton,” said Basak Erdem, the farm manager of cotton fields owned and run by cotton manufacturer SOKTAS, which is based in Soke municipality, Aydin province.

Four years since SOKTAS first converted one hectare (2.47 acres) of land for regenerative farming — using nature-based methods to restore the land and improve its carbon storage capacity — the soil absorbs more than 18 tons of carbon per hectare a year.

That is equivalent to the annual greenhouse gas emissions of about 15 gasoline-powered cars, according to a calculator from the US Environmental Protection Agency.

“Every year, we see the results improve,” Erdem told the Thomson Reuters Foundation during a tour of the company’s fields.

SOKTAS was first introduced to regenerative agriculture in 2018 by the Stella McCartney label, which buys from the company, and now has 90 hectares (222 acres) of regenerative land.

Notorious for its intense use of natural resources and high waste output, the fashion industry has stepped up efforts in recent years to reduce its environmental impact and carbon footprint, with the UN’s Fashion Industry Charter for Climate Action setting an industry-wide target to decarbonize by 2050.

While efforts have focused on reducing waste, brands and designers are increasingly endorsing projects in regenerative agriculture to help reduce the emissions produced in the manufacture of classic textiles, such as cotton and wool.

A pilot regenerative cotton project in Turkey, set up by international conservation group WWF, found that up to 15 times more carbon was stored in the soil compared to carbon sequestration in general.

“The soil becomes more spongy and lively,” said Gokce Okulu, cotton manager at Textile Exchange, a nonprofit working with the fashion and textile industries to help reduce the environmental impact of materials.

Carbon-absorbing organic matter is killed in conventional farming by over-plowing the earth, she added.

Regenerative farming uses little to no tilling of the soil to help maintain its biological make-up, in addition to growing a cover crop to shield the ground, said Ms. Okulu.

Thanks to the cover crop of wheat, beans and sugar beet at SOKTAS fields, the soil’s organic matter content has doubled in four years, and each year the cotton needs less fertilizer and water, said Erdem.

According to the Confederation of British Industry, demand for cotton produced sustainably, which accounted for nearly 20% of the global cotton supply in 2020, is increasing.

The largest sustainable cotton initiatives are Better Cotton, Fairtrade, and Organic, but Jules Lennon, fashion lead at the Ellen MacArthur Foundation, said interest in regenerative cotton is growing, with leading denim producers Bossa and DNM among brands initiating partnerships.

“We’ve seen an absolute hub of activity that we’ve never seen before,” Lennon said. “But first, we really need to prioritize keeping existing products in use,” said Lennon, explaining that to transition to a circular economy, the industry needs to reduce the need for virgin materials by prioritizing recycling and reuse.

“Whatever (needs) remain, we want to come from regenerative sources,” said Lennon.

The European Commission wants all planned regulations requiring fashion companies to produce clothes in a more sustainable way to be in place by 2028.

There are currently 16 pieces of legislation in the works, which could set minimum standards of durability and recyclability for any product entering the EU and require fashion companies to collect textile waste.

“Given the significance of the EU as a market, this could mean a big push to change overall sourcing practices,” said Anita Chester, head of fashion at the Laudes Foundation, a philanthropic organization that helps fund the Thomson Reuters Foundation’s coverage of the green transition.

Little action has been taken to legislate on regenerative farming as it is still in the early stages of adoption, but some existing policies, such as the EU’s proposed Soil Health Law would help to support the transition, added Ms. Chester.

Standards and certifications are starting to emerge, such as from the Regenerative Organic Alliance or regenagri, but brands and designers must invest in farmers to help them transition to regenerative agriculture, said Ms. Chester.

“Nothing can be regenerative if it’s not just. You have to build community resilience by rewarding the farmers for their stewardship of nature and the services they provide in helping us combat climate change,” said Ms. Chester.

Zeynep Kayhan, a board member at SOKTAS, said it is hard to convince some brands to switch to regenerative cotton because it is more expensive.

In addition to the extra costs of soil tests, certification and investing in no-till machinery, regenerative farms initially lose profit on lower yields — before the soil has improved — and swapping a secondary farmable crop in the winter for a cover crop that is not harvested, said Kayhan.

“It’s more expensive to do the transition, but in time because you need less inputs, there will come a point when it will level off,” said Kayhan.

Improving soil health also helps to stave off the impacts of climate change that are hitting the cotton sector.

Research by WTW insurers shows that half of all cotton-growing regions will be at increased threat from climate risks, such as water stress and extreme weather, by 2040.

“Water retention becomes even more important going forward because you need less water if you know the soil can keep its water and nutrients,” said Kayhan.

In the spring, heavy rains damaged cotton seeds at SOKTAS, but the healthier soil in the regenerative plots helped the farmers to replant the seeds quickly, said Erdem.

“If all farmers did regenerative farming, then the climate could change,” said Erdem. — Thomson Reuters Foundation

Banks keep strict lending standards in Q3

BW FILE PHOTO

PHILIPPINE BANKS continued to impose tighter credit standards in the third quarter and expect to keep these for businesses and ease those for consumers in the coming months, a Bangko Sentral ng Pilipinas (BSP) survey showed.

The BSP’s latest Senior Bank Loan Officers’ Survey (SLOS) published late on Friday showed most respondent banks maintained their lending standards for both enterprises and households based on the modal approach.

However, based on the diffusion index, the study showed there was a net tightening of credit standards imposed for businesses, but lending standards were unchanged for households in the July-to-September period.

“The net tightening of credit standards for business loans in the third quarter of 2023 is reflected in the reduced size of credit lines, stricter collateral requirements and loan covenants, and more use of interest rate floors,” the central bank said.

The net tightening of lending standards for firms was also driven by lower risk tolerance, deterioration in the profitability of banks’ portfolios, and decline in the quality of borrowers’ profiles, the BSP said.

Meanwhile, lending standards for households were unchanged in the third quarter amid banks’ steady economic outlook, sustained profitability of portfolios, unchanged risk tolerance, and steady profile of borrowers.

The SLOS is a quarterly survey conducted by the BSP to gather qualitative information on lending conditions and demand from businesses and consumers. It aims to boost the central bank’s understanding of lending behavior, which is an important indicator of credit activity in the country.

By using the modal approach, the results of the survey are analyzed by looking at the option with the highest share of responses. The three options for the modal approach are either tightening, easing, or unchanged credit standards for loans to enterprises and for loans to households.

On the other hand, in the diffusion index (DI) approach, a positive DI for credit standards indicates that the number of banks that have tightened their credit standards exceeds those that eased (net tightening). 

A negative DI indicates that more banks have eased their lending standards compared with those that tightened (net easing). Meanwhile, an unchanged credit standard indicates that the number of banks that have tightened is equal to those that eased their credit standards.

For the last three months of the year, the DI approach showed lenders are likely to implement stricter loan standards for businesses amid expectations of a deterioration in borrowers’ profiles and decline in the profitability of banks’ portfolios along with banks’ reduced tolerance for risk.

Meanwhile, bank respondents expect to relax lending standards for households on the back of better borrowers’ profiles and improvement in profitability. 

Loan demand is also seen to grow in the fourth quarter, based on the DI approach, the survey showed.

Increased borrowings from businesses is likely amid the improved economic outlook of clients, and higher inventory and accounts receivable financing needs, the survey showed.

Meanwhile, an increase in loan demand from retail borrowers is expected to be driven by higher consumption, limited sources of funds, and more attractive financing terms offered by banks.

For the third-quarter round of the SLOS, the BSP sent questions to 62 banks, but only 48 lenders were able to respond to the survey. This is equivalent to a response rate of 77.4%. Information was gathered from Sept. 4 to Oct. 13. — Keisha B. Ta-asan

Now and Then: The Beatles to release new song with Lennon’s voice

IMDB

LONDON — Fans of the Beatles might just twist and shout in joy.

A new Beatles song will be released this week, featuring the voice of late member John Lennon and developed using artificial intelligence (AI), record company Universal Music Group said on Thursday.

Called “Now and Then,” the song — billed as the last Beatles song — also features parts recorded by surviving members Paul McCartney and Ringo Starr as well as the late George Harrison.

“There it was, John’s voice, crystal clear,” Mr. McCartney said in a statement. “It’s quite emotional. And we all play on it, it’s a genuine Beatles recording.

“In 2023 to still be working on Beatles music, and about to release a new song the public haven’t heard, I think it’s an exciting thing.”

“Now and Then” dates back to the late 1970s when Lennon recorded a home demo in New York City, where he was murdered in 1980. The Beatles broke up in 1970. Mr. Harrison died of cancer in 2001.

Years after his death, Mr. Lennon’s widow Yoko Ono handed a set of recordings including “Now and Then” to the other Beatles, who added their own parts to it. But technological limitations meant Mr. Lennon’s vocals and piano could not be separated to produce the clear mix required to finish the song.

The idea to revive the tune followed Peter Jackson’s 2021 documentary series The Beatles: Get Back, which had managed to isolate instruments and vocals using AI.

The same technology was applied to “Now and Then,” which was then completed by Mr. McCartney and Mr. Starr, Universal said. It will release worldwide at 1400 GMT on Nov. 2.

“It was the closest we’ll ever come to having him back in the room, so it was very emotional for all of us,” Starr said, referring to Lennon. “It was like John was there, you know. It’s far out.” — Reuters

Globe cited as most consistent broadband operator in 35 areas

GLOBE Telecom, Inc. said it had been recognized by global network testing firm Ookla as the most consistent broadband operator in 35 locations for the third quarter.

In a report, Globe said it posted top scores in terms of broadband consistency in 33 towns and cities as well as two provinces, which is higher compared with the previous quarter where it only earned the top spot in 31 locations.

The listed telecommunications company said consistency is defined as the percentage of a provider’s data samples that meet the minimum threshold for download and upload speeds, which indicates stable internet quality.

Globe had earned the highest consistency score in Dangcagan, Bukidnon at 90.76 points; San Luis, Pampanga at 90.55 points; and Mandaluyong City, Metro Manila at  89.21 points.

Globe said that Pampanga and Catanduanes recorded overall speed improvement in the country.

In a statement, Raymond Policarpio, vice-president of Globe At Home brand management, said the company will continue to provide its commitment to deliver uninterrupted connectivity.

“Globe, acknowledging the increasing reliance of its customers on stable connectivity, has tirelessly worked towards strengthening and expanding its fixed wired solutions,” Globe said.

As of last year, the company deployed  3.7 million fiber-to-the-home lines, with 1.4 million rolled out solely in 2022, the company said. — Ashley Erika O. Jose

Have sex, please or work until you’re 90

FREEPIK

IN HER NOVEL, Scattered All Over the Earth, Yoko Tawada imagines a world in which Japan has physically vanished and Japanese-ness survives only with a handful of natives and Japanophiles. While the archipelago isn’t likely to disappear (if it did, a lot of us would, too, in the seismological cataclysm), the demographic equivalent isn’t too farfetched — not only for Japan but other countries in East Asia. The population of the Land of the Rising Sun is sinking rapidly and, by the turn of the next century, will shrink to about 75 million people from the current 121 million. China has already lost the title of most populous nation to India and will decline from 1.46 billion now to 780 million by 2100. South Korea? It’s now a little over 50 million people; in 77 years, the projections have the country at under 20 million. (In contrast, its bellicose rival North Korea will roughly maintain its population and have 2 million more people than the South by 2100).

In a column this week, Shuli Ren says Hong Kong has come to the conclusion that to populate three artificial islands plus an enormous housing project it is spending as much as $128 billion on, it needs, well, population. Indeed, its demographics will decline precipitously from more than 8 million to 1.3 million in 2100. “For the next three years, the government will hand out HK$20,000 ($2,556) — the price for a dim sum banquet on the classy side — in cash for each baby born to a parent who is a permanent resident,” she writes. “Those who want to seek assisted reproductive services, such as in-vitro fertilization treatments, can receive a tax allowance of up to HK$100,000.” As Shuli says, it is a desperate attempt by the government to justify expensive infrastructure projects that no longer make economic sense.

Japan, in the meantime, has run out of workers. “Over half of the country’s businesses say they can’t find enough full-time staff,” says Gearoid Reidy. One in 10 people in Japan is now over 80 and octogenarians may soon be filling jobs like taxi driving if a rule change takes place. There’s very little slack in the labor market, “Nearly 87% of the working-age populace is employed, well above the 79% average of countries in the Organization for Economic Cooperation & Development,” says Gearoid. Next year could bring another crunch: That’s when new regulations will kick in limiting overtime in the trucking industry. “Estimates say it could result in a 14% drop in transportable cargo by 2025, ballooning to 34% by 2030.”

Automation can probably help Japan and Hong Kong (and China and South Korea) in terms of productivity and manufacturing efficiencies. But robots aren’t consumers — and economies focused on perpetual growth will cease to expand if there are dramatically fewer people around to buy things. Perhaps it’s time to retarget economic efforts on sustainable, more equitable prosperity rather than ever-greater largesse.

Relaxing barriers to immigration could help keep the old growth models going, but that will require cultural adjustments from reflexively xenophobic countries. If these nations come around to it, there are rescuers at hand. The population of the Philippines is projected to practically double by 2100. We Filipinos aren’t robots — and we like to travel.

IT’S NOT JUST ASIA …
Rishi Sunak’s days as UK prime minister appear to be numbered, whether or not he survives the plots his fellow Tories are fomenting against him. As Adrian Wooldridge wrote this week: “The disintegration of the Conservative Party is happening faster than the Conservatives feared and Labor dared hope.” Labor Party leader Keir Starmer has already started to issue promises about what his prospective government will do to build Britain better — including build more housing. The trouble with that, says Matthew Brooker, is: With what workers? He writes: “Construction is in the midst of a yearslong labor crisis. The industry’s workforce is smaller than it was in 2007, while the shortfall of housing has accumulated since then.” What remains of the industry’s supply of workers is also aging fast.

Matthew says: “The proportion of work done by over-50s has risen, from about a quarter of total hours worked in 2007 to 33% as of 2021, government data show. The amount performed by the youngest, from 16 to 29 years old, dropped over the same period. If you were designing a workforce to take on a future of significantly scaled-up housing construction, you wouldn’t start from here.”

While the UK’s population isn’t shrinking, it also isn’t growing particularly fast. A contributing factor to the laborer deficit is, of course, Brexit and its concomitant curtailment of workers from the EU. There’s no way Starmer can say “never mind” about the divorce.  That ship has sailed.

TELLTALE CHARTS
“The Big Four of Indian offshoring giants — Tata Consultancy Services Ltd., Infosys Ltd., Wipro Ltd. and HCL Technologies Ltd. — have hired half a million engineering graduates in the past three years. Two of the companies have indicated they won’t be going to campuses this year, according to an article in the Mint. This is a big blow. It seems, the industry is mimicking its clients by employing generative artificial intelligence tools like ChatGPT to boost productivity. If AI is going to permanently reduce the number of entry-level programming jobs in an average year, then youngsters need to pick up other skills to improve their chances. It’s better to let them know when they’re yet to hit the job market.” — Andy Mukherjee in “India’s Sell-Side Researchers Should Say What They Mean.

“The increasing presence of international investors in the UK stock market looks at first glance like a success story for London. But it’s really a tale of declining domestic ownership and a resulting leadership vacuum among shareholders. In theory, the nationality of owners shouldn’t matter. In practice, the withdrawal of the home crowd puts UK companies at the mercy of opportunistic hedge funds when they need to raise cash.” — Chris Hughes in “There’s a Reason Why UK Stocks Need UK Owners.

BLOOMBERG OPINION