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The expanding Philippine REITs space

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Real estate investment trusts (REITs) are generally seen to be advantageous for some reasons: a way to diversify one’s portfolio apart from stocks as well as being able to invest in real estate without having to manage one’s properties. But just like property investments, returns could be expected by investors from rental income through the assets. And in the Philippines, at least 90% of distributable income must be paid as dividends to shareholders, as per the REIT Act of 2009.

Even as the legal framework for such companies has already been established way back more than a decade, REITs just recently rose in the country. The first REIT listing on the Philippine Stock Exchange (PSE) was only made in 2020.  Nonetheless, more companies are seen to be part of the country’s REIT space, while the existing ones are seeking to diversify their assets and tenants.

Among 14 initial public offerings (IPO) targeted by the PSE this 2023, 11 are companies and REITs that will list on the main board.

Currently, the Philippines has eight REITs, with the AREIT, Inc. being the first to debut on the PSE in August 2020. Also among the country’s REITs are Citicore Energy REIT Corp., DDMP REIT, Inc., Filinvest Reit Corp., MREIT, Inc., Premier Island Power REIT Corp., RL Commercial REIT, Inc., and VistaREIT, Inc.

AREIT is looking at P22.5 billion worth of asset infusion this year, which include “prime flagship developments” of its sponsor Ayala Land, Inc., namely One Ayala Avenue and Glorietta 1 and 2 mall and office buildings in Makati; as well as Ayala Malls MarQuee in Angeles, Pampanga, according to AREIT President and CEO Carol T. Mills.

Ms. Mills also considered that the addition of these developments would benefit AREIT in terms of portfolio expansion, diversification of its assets, and shareholder return.

Such an infusion will bring AREIT’s total properties to 23. It would also expand its total assets to P87 billion, according to AREIT, which makes it “well ahead” of its three-year investment plan to have P90 billion worth of Asset Under Management (AUM).

“Our goal is to ensure that AREIT is not only large enough in size today but also has a healthy pipeline for future growth,” Ms. Mills said.

Meanwhile, RL Commercial REIT, Inc. (RCR) also expanded its portfolio last year with the addition of Robinsons Cyberscape Gamma and Robinsons Cybergate Bacolod in 2022. Such infusion generated growth in its net income in the first quarter of this year to P1.09 billion.

Last month, RCR also became the first office REIT company to have the EDGE (Excellence in Design for Greater Efficiencies) Champion status, as 213,158 square meters (sq.m.) of its portfolio are EDGE-certified building space.

More offices are also set to expand the portfolio of MREIT, Inc. from its sponsor Megaworld Corp., which has leasable area totaled at 150,500 sq.m.

According to MREIT, these acquisitions include seven grade A office buildings that include Two West Campus, Ten West Campus, Science Hub Tower 3, and Science Hub Tower 4 in Metro Manila; as well as the One Fintech Place and Two Fintech Place in Iloilo Business Park; and the Davao Finance Center in Davao Park District.

With these additional properties, MREIT’s portfolio will expand to 475,500 sq.m., making it near to its targeted 500,000 sq.m. of AUM by the end of 2024.

MREIT President and CEO Kevin Andrew L. Tan said that they are looking forward to finalizing the company’s succeeding set of acquisitions soon.

Filinvest REIT Corp. (FILRT) aims to expand its portfolio as well with an addition extending 12,400 sq.m. The company’s portfolio expansion covers new leases and co-working spaces. It also seeks diversification in terms of adding on the share of coworking and traditional tenants and lessening the focus on large names in business process outsourcing (BPO).

FILRT also looks into expanding its portfolio by encompassing other asset classes such as properties in the retail, residential, and leisure, and industrial segments.

Meanwhile, the DDMP REIT, Inc. earlier this year has shared its aim of diversifying its tenant mix, particularly tenants from financial services, banking, insurance, technology, media, service industries and government agencies.

The Philippine REIT space also expanded with Citicore Energy REIT Corp. (CREIT), the first energy-focused REIT listing in the country.

In August last year, CREIT President and CEO Oliver Y. Tan shared that the company aims to augment its portfolio to 950 megawatts by 2025.

Meanwhile, the Citicore Renewable Energy Corp. has plans to have its IPO this year to invest $4 billion for its new solar projects.

The PSE also approved the IPO application of Premiere Island Power REIT Corp. (PREIT), Prime Asset Ventures’s power and infrastructure REIT platform, in the previous year. PREIT is likewise aiming for growth and diversification of its portfolio on power generation.

Another REIT making its debut last year was VistaREIT, Inc., which has by far 10 retail malls and two PEZA-registered office buildings in its portfolio, with gross leasable area spanning over 250,000 sq.m.

Other companies such as SM Prime Holdings, Inc. have plans to make its REIT offering. However, the saif company might push back its filing from the initial third-quarter schedule as low demand is seen.

OUTLOOK ON REITs

The country’s REITs are seen to be supported by the economy reopening further from the pandemic. China Bank Securities Corp. Research Director Rastine Mackie D. Mercado told BusinessWorld in a report last January that further economic activity could support occupancy and rental rates of office and retail REITs.

“Apart from this, revenue growth could also be supported by annual rental escalation, and incremental revenues from asset infusions,” he added.

However, the continued remote or hybrid work arrangements for some BPOs as well as the decrease and stricter regulations on Philippine offshore gaming operators (POGO) could offset the benefit from the economic reopening, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in the same report.

AP Securities, Inc. Equity Research Analyst Carlos Angelo O. Temporal expected further pursuit of REIT listings among property companies, according to a BusinessWorld report from February. REITs, along with companies in growth sectors, are seen to tower over IPOs this 2023.

“In general, the IPOs will depend on market conditions. If we see the market to continue to gain strength, then we can expect more IPOs,” COL Financial Group, Inc. First Vice-President April Lynn C. Lee-Tan added. — Chelsey Keith P. Ignacio

Boosting the Philippine property market

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Moving into 2023, there was much optimism surrounding the Philippine real estate market, as strong macroeconomic fundamentals was expected to buoy the country’s economy from the downward pressures skyrocketing inflation rates across the globe and the lingering effects of the COVID-19 pandemic.

And although economic headwinds are still present in the background, the cautious optimism seemed to survive to the second half of the year.

Property consultant JLL Philippines, in a recent report, has said that there is cause for hope in the real estate market this 2023, a sentiment that is echoed by many other experts.

“Occupiers have gained their footing and settled post-pandemic, and now have a clearer view on their short- to medium-term strategy in terms of office space requirements,” Janlo de los Reyes, JLL Philippines’ head of research and strategic consulting, said.

Similarly, real estate experts Colliers Philippines said that they project office net take-up in 2023 to reach 116,400 square meters (sq.m.), a marginal increase from the 110,500 sq.m. recorded in 2022.

Colliers data noted office vacancy marginally improved to 18.7% in first quarter (Q1) 2023 from 18.8% in fourth quarter (Q4) of 2022.

“The Metro Manila office market posted positive net take-up for the fifth consecutive quarter. By end-2023, Colliers expects net take-up to reach 116,400 square meters, a marginal increase from the 110,500 square meters in 2022,” the property consultancy firm said in their Q1 Property Market Report – Office.

“However, office vacancy, which marginally improved to 18.7% in Q1 2023 from 18.8% in Q4 2022, remains elevated due primarily to continued completion of new office buildings and the implementation of hybrid work arrangements.”

The company pointed out that rents throughout the country are still dropping, and anticipates them to bottom out by end-2023.

“We saw a marginal rise in Metro Manila transactions but deals outside the capital region plummeted by more than a third,” the report said.

Opportunities over new horizons

Landlords and tenants, according to Colliers, should keep searching for opportunities to invest both in and around Metro Manila. Considering the current market trending toward tenants, the firm also suggested landlords continue providing discounts to businesses to ensure optimum occupancy rates are reached in spite of increased vacancies.

Meanwhile, tenants should continue using flight-to-value techniques and take advantage of rental price reductions in certain commercial districts.

In a column published in BusinessWorld, Joey Roi Bondoc, director at Colliers, said, “The Philippine property sector is highly cyclical and is susceptible to periods of expansion, overbuilding and a subsequent crash and price correction. The period from 2017 to 2019 highlighted the sector’s strengths, with substantial office space take up complemented by an aggressive demand for condominium units across Metro Manila.”

“The property sector is one of the key segments of the Philippine economy. It has tremendous multiplier effects which bode well for the country. Sub-segments such as office, residential, hotel, retail, and industrial are the sector’s major planks. Attracting more foreign investments into these sub-sectors is crucial to raising the Philippines’ stature as a major property investment in the Asia-Pacific region and ensuring that the country remains on the radar of foreign property investors.”

Mr. Bondoc explained that prior to the pandemic, the Philippines was priming itself to become a key property investment destination in Southeast Asia. More foreign property firms partnering with local developers in building several office, residential, retail, even township projects in anticipation of this eventuality.

However, because of the pandemic, such investments were paused.

”It is interesting to note that the country is finally recovering after major economic disruptions in 2020 and 2021. Colliers Philippines believes that there are several factors that will help the Philippines become an attractive investment destination in Asia-Pacific over the near to medium term,” he said.

Such factors include the massive infrastructure program being pushed by the government as the ramped-up spending on public projects will support the continued development of satellite communities outside of Metro Manila.

“These integrated communities offer a better value proposition than standalone projects since they offer mixed-use developments. We believe that this feature makes integrated townships a more attractive option for investors,” he said, adding that these will attract more foreign players to invest in master planned communities around the country.

“More business process outsourcing (BPO) tenants will also gravitate toward integrated communities as they offer a better living and working environment. We project more joint venture deals between major foreign developers and Philippine property firms moving forward.”

Regarding the growing investment opportunities outside Metro Manila, Cyndy Tan Jarabata, president of TAJARA Leisure & Hospitality Group Inc. and the chairperson of the PropertyGuru Philippines Property Awards judging panel, expressed the same sentiments in an article published on their website.

“There is a positive outlook for the Philippine property market this year, with new developments outside Mega Manila, Cebu, and Davao,” she said.

For developers in particular, the decentralization effort pushed by the government and the development of key city centers all over the country have presented new opportunities to master plan communities that promote new ways of living. Such communities would be more open to new living environments such as those where “walkable communities” or “live-work-play” environments truly thrive.

Ms. Jarabata cited a report by real estate experts Santos Knight Frank, pointing out that the country’s economic growth and favorable demographics will remain key drivers for growth for the market.

The growing demand for office spaces driven by the country’s booming outsourcing industry, according to the report, is projected to fuel growth in the office segment, while the industrial sector is expected to benefit from the growing e-commerce and logistics industries.

In the same vein, the residential market is expected to maintain its strength, with demand for moderately priced homes coming primarily from those in the medium income range. There is also an increase in demand from both domestic and international customers, including the luxury residential market.

“In hospitality and tourism, luxury resorts are in the pipeline including new master-planned developments in destinations like Palawan and Bohol, including Batangas and Laguna. There’s a strong interest in developing luxury and branded residences, especially from boutique developers. Residential developments remain strong outside of the city and there is a huge backlog to address demand on affordable and socialised housing,” Ms. Jarabata added.

Even with the current headwinds, research from JLL noted the Philippine real estate market will continue to advance thanks to the government’s ongoing infrastructure program and the continued expansion of the outsourcing industry, both of which have been significant economic contributors for the country.

“Occupiers have gained their footing and settled post-pandemic, and now have a clearer view on their short- to medium-term strategy in terms of office space requirements,” JLL Philippines’ Mr. de los Reyes said.

“We have moved past the pandemic, but it must be noted that there are varying degrees to recovery. Some sectors are performing better than others.”

Some segments of the Philippine property market, such as the residential market, is moving sideways, while hospitality is finding its own way to return to pre-pandemic levels of activity.

JLL expects supply pressure to be one of the key challenges that will have notable impact on the performance of the market for the remaining quarters of 2023.

“We are anticipating a notable volume of supply to enter the market, potentially weighing down on the recovery of demand indicators across sectors,” Mr. de los Reyes concluded. — Bjorn Biel M. Beltran

Emerging ‘smart’ shifts in the automotive space

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Cars are not just starting to become sustainable; they are also beginning to become “smart.”

Aside from the observation that automobiles are beginning their transition towards electric and low-carbon, as shown by hybrid models and the uptrend in electric vehicles (EVs), other growing developments in the automotive industry have to do with smart cars and smart manufacturing.

As market research company Market.US defined in its report on the global smart car market published last June, smart cars include those “equipped with advanced technologies like artificial intelligence (AI), connectivity, and autonomous driving.”

“Smart cars boast advanced features like sensors, cameras, navigation systems, and computing power that enable them to interact with their environment while making decisions based on real-time data. These capabilities allow smart cars to increase safety by decreasing accident chances,” the research firm further described.

Smart cars, the report added, feature advanced safety features. These include collision avoidance systems, lane departure warnings, adaptive cruise control, and emergency braking — all of which are designed to keep both driver and pedestrian safer on the road, and so reduce accidents and injuries.

Smart cars are also considered to be energy-efficient, improving fuel economy while cutting operating costs.

Market.US’ report highlighted that the global smart car market is growing rapidly. The report noted that in 2022, the global smart car market was valued at US$57.5 billion and will reach US$ 265.7 billion by 2032. An estimated compound annual growth rate of 17% is projected to be registered by the market between the two aforementioned years.

“The global smart car market is being driven by factors such as rising electric car adoption, safety features, and the growing trend toward connected vehicles. Furthermore, government initiatives and smart city infrastructure will further fuel this market growth,” the report added in an overview published on its website.

In particular, automotive technologies such as connectivity technologies, AI, sensors, and data analytics are credited to have played a substantial role in shaping the smart car market.

“Such advancements enable features like advanced driver assistance systems (ADAS), infotainment systems, autonomous driving capabilities, and vehicle-to-vehicle communication that have proven invaluable for consumers who own smart cars,” Market.US added.

The firm also noted that governments across the globe have introduced policies and regulations — such as include tax credits, subsidies, rebates for purchasing EVs, and stricter emission standards — to promote smart car adoption.

Another seen driver in smart car demand is the increasing consumer enthusiasm for advanced technologies and connected experiences.

“Features like infotainment systems, smartphone integration, voice control capabilities, and enhanced safety features have proven particularly popular with buyers who now favor these cars over traditional ones,” Market.US explained.

Despite these drivers, however, there may be restrains to growth, such as high cost; limited infrastructure; regulatory challenges, especially in controlling autonomous vehicles and in safety concerns; and limited consumer awareness, which can lead to hesitancy in investing in smart cars.

“Due to the advanced technology and benefits they give, smart cars are usually more costly than traditional vehicles. Many customers may find this price to be a major barrier to access, particularly in emerging nations where disposable incomes are smaller,” Market.US explained.

Moreover, infrastructure needed to support smart cars include electric vehicle refuel facilities, high-speed internet access, and dependable GPS systems. Without such infrastructure, the firm added, adoption of smart card might be limited, especially in in rural regions and emerging nations.

Here in the Philippines, cars are set to be made “smart” as PLDT and Toyota Motor Philippines (TMP) announced last April their partnership for intelligent car solutions.

Through its business-to-business solutions arm PLDT Enterprise, PLDT is powering TMP’s newest suite of connected services under mobile platform myTOYOTA Connect with Smart Internet of Things (IoT) eSIM solutions — the first of its kind to be rolled out in the country.

myTOYOTA Connect enables Toyota car owners and drivers to monitor their location, car condition and driver speed, among other features, through myTOYOTA app. myTOYOTA Connect service is ready for activation in the expanding lineup of select variants of Hilux, RAV4, Hiace and Fortuner models. Activation can be done through the myTOYOTA app.

TMP President Atsuhiro Okamoto said that this partnership brings them to their goal of making a “Connected, Automated, Shared, and Electrified mobility a reality to more and more Filipinos.”

Smart manufacturing

The “smart” trend is not just becoming evident in the industry’s products. It is also beginning to be encouraged in the production itself.

According to an article published in the website of business consulting firm Frost & Sullivan, the shift of automotive sales toward EVs, which drive as well demand for batteries for this kind of vehicle, is bringing the need for shifting to smart automotive manufacturing.

According to a Frost & Sullivan research paper titled “Global Electric Vehicle Battery Manufacturer Profiles and Growth Opportunities,” published last year, EV sales increased by more than 100% y-o-y, with nearly 6.7 million units sold, achieving 8.9% market penetration in the passenger car segment.

“70% of the 6.7 million EVs sold in 2021 were battery electric vehicles (BEVs). BEV sales increased from 2.1 million in 2020 to 4.5 million in 2021, reflecting an increase in battery demand and alerting established and new battery manufacturers to incoming demand,” the article read.

“As a result, everyone from mature automakers to startup EV companies, tire manufacturers, and battery manufacturers needs a new approach and must shift processes and technology to accelerate production, scale operations, and drive faster launches with less risk,” Frost & Sullivan wrote.

Furthermore, the firm highlighted that this kind of scenario should drive leaders to pay attention to “the potentially transformative role of smart automotive manufacturing to serve the changing market needs.”

“Such digitalization helps manage the constant technological changes and disruptions in the automotive space. It helps accelerate sustainable production and to get to market first and faster; make better, faster business decisions; reduce downtime; and improve quality and [overall equipment effectiveness] with integrated automation solutions,” the firm further explained.

An example of a smart manufacturing platform that can be used for automotive, as Frost & Sullivan presented, are cloud-based information technology/operational technology (IT/OT) platforms, which “break down silos, allow system consolidation, and unlock data across the enterprise.”

“With real-time data on manufacturing operations, organizations can identify inconsistencies and make corrections as needed. The end-to-end, wider, and deeper organizational visibility helps them to better understand day-to-day operations affecting the bottom line and allows more accurate, data-driven decisions,” Frost & Sullivan explained.

“A smart manufacturing platform with cloud connectivity allows users to connect from anywhere globally and such remote and secure access to production systems speeds up response time and enables timely decisions without requiring users to be on the plant floor. Customers can make decisions rapidly and more accurately using information and insights directly connected to the plant floor,” the article added.

Leading REITs worth considering in your portfolio

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For investors and retail experts, REITs is a powerful tool for investments, especially in building and diversifying balanced portfolios, as well as strengthening your financial future. Currently, REITs is becoming the center of attraction as more companies are looking into it as a funding option for growing businesses and enterprises.

Real estate investment trusts (REITs) are companies that invest and manage real estate in various sectors. According to the leading wealth management firm Charles Stanley Group, REITs is where investors can buy and sell their shares, and makes property investments more convenient and more accessible.

“Commercial property investments can provide a high and potentially rising rental income and some capital growth over the long term. REITs often have long-term lease agreements with tenants, which can help to make rental income and dividends paid relatively reliable,” Charles Stanley Group says on the role REITs plays in an investor’s portfolio.

According to Grit Philippines, a Philippine-based online platform on personal finance and entrepreneurship, investing in real estate is worth it but many Filipinos are having second thoughts the moment they think about investments but REITs are here to help them as an alternative funding option.

The following are some the leading REITs in the Philippines that investors can look into.

Ayala Land Inc. (AREIT)

The country’s first REIT, Ayala Land REIT (AREIT) is a subsidiary of the country’s leading property developer Ayala Land Inc., which has three commercial buildings covering 152,756 meters in Manila. At the core of its services, AREIT is helping investors and the Philippine market in diversifying their investment portfolios by giving investors the opportunity in obtaining their own real estate, generate incomes via dividends, and help foster economic growth.

“With the Ayala Land REIT, we hope to provide investors with a solid investment instrument. It is aligned with the best REIT practices in the region. As a company, AREIT will embody Ayala Land’s time-honored principle of corporate governance. This is a commitment to our shareholders in ALI (Ayala Land, Inc.) and now to our shareholders in AREIT,” ALI Chairman Fernando Zobel de Ayala said in his speech at AREIT’s landmark listing ceremony in 2020.

Robinsons Land REIT (RCR)

Robinsons Land Corp., another leading real estate developer in the Philippines, has established its own real estate investment trust called Robinsons Land REIT (RCR) which focuses on strengthening the office building business, especially with physical offices being back in business as we step into the new normal brought by the pandemic.

Another aspect of RCR’s success is the location of its REIT properties, which is why they are big in the business process outsourcing (BPO) sector which occupy the majority of their commercial properties located through business districts. With this, RCR is focusing more on establishing BPO-focused projects, as they become the core of their business.

According to Grit PH, Robinsons Land has already established a name in the REIT Philippine market, being known for having the largest REIT in asset size, covering a large portion of territory, having the longest land leases, and having a forecasted dividend yield of above 5.96%.

Filinvest REIT Corp. (FILRT)

Another leading REIT in the Philippines is the real estate investment trust of Filinvest Land Inc., also known as Filinvest REIT Corp. (FILRT). As one of the biggest property developers in the country, Filinvest Land is known for its well-established portfolio in areas of residential, industrial, and retail developments. On top of that, FILRT puts sustainability as a core of its services.

Additionally, as a strategic approach, FILRT plans to expand central business districts in the metro and in major regional hubs in the Philippines, which the company describes as the perfect locations that will have high and stable occupancy rates of real estate properties that generate incomes.

Megaworld Corp. (MREIT)

A subsidiary of one of the most prominent property developers, Megaworld Corp., MREIT owns offices and buildings that are used in various sectors.

The business has established itself as a reliable sponsor by putting high-quality assets that are substantial and are managed by experts in the industry. In addition, it identifies upscale buildings in prime locations that generate income that is consistent with tenant revenues and occupancy rates. For instance, MREIT covers hotels, offices, and retails.

Citicore Energy REIT (CREIT)

The first and only REIT focusing on renewable energy, Citicore Energy REIT (CREIT) is a company that operates a portfolio that generates income from renewable energy and real estate properties, including solar plants in various regions in the Philippines. CREIT has earned its reputation by building sustainable prime land and solar assets in its renewable energy projects portfolio.

CREIT is considered a smart investment, especially for companies who are looking into expand their green revenues as it contains an extensive group of synergies, is pioneering in sustainable investing, obtains a superior operational track, and can harness the increasing demand for renewable energy. — Angela Kiara S. Brillantes

Excellent vehicles in an expanding SUV market

Toyota Veloz — toyota.com.ph

Sport utility vehicles (SUVs) continue to make their way into popularity. With their capacities that suit on-road and off-road drives for traversing amidst challenging road and weather conditions; coupled with better visibility through higher seating and generous cargo and cabin spaces; and finished with sophisticated design, SUVs are turning heads in the automotive market today and likely in the years to come as well with more developments to take place in the segment.

Globally, the SUV market was valued at US$34.69 billion in 2021, according to Data Bridge Market Research. This is projected to reach US$105.25 billion by 2029, with a compound annual growth rate of 14.88% from 2022 to 2029.

The major factors seen to drive the growth of the SUV market are the rising need for premium vehicles in the advanced nations and the acceptance for SUVs. The increase in the demand for heavy and luxury vehicles and the emergence of technological advancements like the integration of Internet of Things and real-time information solutions are also perceived as drivers that could accelerate market growth.

SUVs have also maintained their popularity in the Philippines. More models have arrived in the country’s SUV market last year, boasting new improvements and electrification.

A new sub-compact SUV was released by Toyota Motor Philippines (TMP) in April last year. Toyota’s new Veloz comes in two variants: 1.5 G CVT and 1.5 V CVT. On the inside, it provides more comfortable and spacious seating, offering a long sofa mode as an additional option. It also features a seven-inch TFT Multi-Information Display as well as a nine-inch multimedia display (eight-inch for G CVT), which includes Apple Carplay and Android Auto. It also includes wireless smartphone charging capability.

Complementing its “comfort and function” is the new stylish design of the new Veloz, which boasts a modern-looking front grille and split-type LED headlamps. And to give an accent to its SUV design, the vehicle sports an overfender, which is exclusive to the Philippine build of the new Toyota Veloz.

Honda BR-V — hondaphil.com

Honda, meanwhile, announced the introduction of its all-new BR-V last November. In a statement, Honda shared that the new model elevates its already spacious and comfortable cabin that provides better legroom and head clearance with its 7-seater SUV seating capacity that contains larger body dimensions and cargo space. It is powered by a 1.5L DOHC i-VTEC engine, mated with a Continuously Variable Transmission (CVT) to deliver a “smooth, refined, and engaging driving experience.”

“With the All-New BR-V, HCPI is bringing these to the next level because Filipino families deserve better,” Honda’s statement added.

With the return of Hyundai to the Philippine market in June last year, new SUV models were presented to the market, among which are Creta, Tucson, and Santa Fe.

Posed as a “premium B-segment SUV,” Hyundai’s second-generation Creta stretches at 4.3 meters. The vehicle is powered by a 1.5-liter (L) Smartstream gasoline engine with an Intelligent Variable Transmission system, promising to carry out “tough, responsive, and efficient performance.”

Hyundai Creta — www.hyundai.com

Hyundai also equipped Creta with several safety features, among which is the Forward Collision-avoidance Assist (FCA), which warns the driver when a risk of impact from the front direction is detected by the system. The system will automatically carry out an emergency braking when the risk of impact persisted to rise even after the warning.

Meanwhile, the fourth generation of Hyundai’s Tucson now sports a 3D parametric-style grille and jewel-like surfaces. Inside, the SUV shows its versatility with its rear seat folding feature that makes 1,903 L of flat storage space available. Tucson offers two variants, Smartstream Gasoline 2.0 and Smartstream Diesel 2.0.

Hyundai’s new Santa Fe offers spacious interiors, with more luggage space and legroom in the second and third rows. On the outside, Santa Fe is styled with a wide cascading chrome grill and 19-inch alloy wheels to give the SUV a “new unique, and bold design.”

“The reason we launched the SUVs first is because these are globally loved models by our customers. So, we launched the Santa Fe, Tucson, and Creta. The Creta is a well-received model produced in Indonesia. [The plant] started production in January this year. So, new factory, new cars. I think Filipinos will enjoy our new products, with very nice features,” Hyundai Motor Philippines President Lee Dong Wook told BusinessWorld last August.

Some new SUV models in the Philippine market are also electrified, such as Kia Philippines’ EV6 and Maserati’s Levante GT Hybrid.

Kia EV6 — www.kia.com/ph

An all-electric crossover SUV, the new EV6 is made with a 77.4-kWh battery pack with a 168-kW electric motor. When fully charged, the vehicle has a driving range of up to 528 km. It offers 800V ultra high-speed charger, which enables it to charge up to 80% in less than 18 minutes.

The new EV6 is also created with comfort and safety in mind with its relaxation comfort seats and temperature-controllable seats as well as features including Blind View Monitor, Rear Cross-Traffic Collision-Avoidance Assist, and Smart Cruise Control.

Launched in the country last September 2022, Kia’s new EV6 will be available by first quarter next year.

Levante GT Hybrid — www.maserati.com

Meanwhile, Modena Motorsports, the official distributor of Maserati in the country, has brought in the Levante GT Hybrid. The SUV sources its power from its four-cylinder, two-liter engine with a 48-volt hybrid system, which delivers a horsepower of 330ps and a torque of 450Nm.

Among the notable features incorporated in the Levante GT Hybrid is the Maserati Connect, which lets the driver know about the vehicle’s health and alerts them when a service is due. It also provides real-time traffic information and continually updated maps. Via the dedicated Smartphone or Smartwatch app or a virtual personal assistant like Amazon Alexa or Google Assist, car owners can stay connected with their vehicle through the Maserati Connect.

Maserati’s Levante GT Hybrid was launched in the country last June 2022. — Chelsey Keith P. Ignacio

Understanding REITs, a tool for easier investments

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Real estate investment trusts (REITs) were created, offering an alternative option to liquid real estate investments. Real estate is regarded as a liquid asset class, but publicly traded property stocks, such as REITs and real estate operating companies (REOCs) allow investors an opportunity to access real estate without sacrificing the benefits of liquid equities.

REITs is a company that owns real estate-related that produces income from assets such as lands, buildings, and real estate securities. To provide a structure comparable to what mutual funds offer for stock investments, REITs were created.

“The continued global expansion of property stocks and REITs has led to the development of a more robust and sophisticated asset class. Moreover, potentially high dividend yields, inflation-hedging attributes, and modest correlations with traditional asset classes may serve to reinforce the potential benefits of including property stocks and REITs within a portfolio context,” financial intelligence company S&P Global Inc. (SPGI) said.

“[T]hey have also offered higher yields than other equities historically, may serve as an effective inflation hedge, and could help diversify a portfolio made up of other asset classes.  In addition, index-based products, such as REIT benchmarks and [exchange-traded funds] that track property, may provide a cost-effective means of accessing a diversified portfolio of REITs and property stocks,” it added.

An asset class is a group of financial products, which comes in different classes or investment assets. Asset classes are often categorized on their similar financial structure, and subjected to the same law and policies.

According to Corporate Finance Institute (CFI), a leading global provider in banking and financing, asset classes can be categorized into five categories: stocks or equities; bonds or other fixed-income investments; cash or cash equivalents; real estate; and forex, futures, and other future derivatives.

Moreover, location is an important factor when categorizing asset classes. There are investments in domestic securities, foreign investments, and other emerging markets. According to CFI, other assets like collectibles, investments in private equities, and digital currencies are other types of assets. These asset classes are grouped as “alternative investments,” and these types of investments are more into the illiquid part of investments.

Notably, aside from understanding REITs and asset classes, it is also important to keep in mind the role of real estate diversification. With this strategic approach, investing in various asset classes can lower the risk exposure of investors.

“You can hedge your investments in one asset class, reducing your risk exposure, by simultaneously holding investments in other asset classes. The practice of reducing investment portfolio risk by diversifying your investments across different asset classes is referred to as asset allocation,” CFI explained.

“The extent to which you choose to employ asset allocation as a means of diversification is going to be an individual decision that is guided by your personal investment goals and your risk tolerance. If you’re very risk-averse, then you may want to invest only in relatively safe asset classes. You may aim to diversify within an asset class. Stock investors commonly diversify by holding a selection of large-cap, mid-cap, and small-cap stocks. Alternately, they may seek diversification through investing in unrelated market sectors,” it added.

Sustainability-oriented tool

While REITs become an important investment tool, many investors are taking this opportunity to promote their sustainability agenda.

“REITs already control one of the keys to unlocking the energy transition, rooftops, moving us to a cleaner, greener, and more stable grid. That key also unlocks potential profits for REITs all while creating a mechanism to contribute to the communities in which their assets operate, in the form of greater energy security and utility cost savings,” according to non-profit energy organization Rocky Mountain Institute (RMI).

In the Philippines, the energy demand continues to rise. However, power outages remain a challenge, especially in the energy sector. Therefore, solar farms should be greatly increased in number to continuously meet and address the energy demand that the country needs.

Solar farming restores dry soil by using the soil as the surface for solar panel installation. With solar panels working, the soil regeneration creates new dirt and once the soil has been restored, it can be used to grow a variety of crops that communities can use.

While solar farms can be a great alternative to the country’s energy source, it also takes a lot of work as it requires a commitment to promoting biodiversity, soil regeneration, and improving livelihood opportunities and agriculture production. However, using solar energy or supporting companies that promote the use of renewable energy as an alternative source is more convenient as it can be used in homes and businesses, as well as help in improving financial planning, investing in energy-focused REITs can help in diversifying holdings and profiles. — Angela Kiara S. Brillantes

 

Advancing towards the future of money

Photo By NAIPO.DE/ UNSPLASH

Digital has set itself up to become the future of money. That is not to say that physical currencies are on their way to be replaced by numbers on a screen anytime soon, but with the explosive growth of electronic wallets and the benefits they provide in the way of convenience, efficiency, and accessibility, it will be difficult indeed to imagine a world without digital money.

As it celebrates its 33rd anniversary, BancNet, as the first and largest Automated Teller Machine (ATM) consortium in the Philippines, continues to prove its commitment to advancing the financial services system in the country by also becoming the first multi-bank, multi-channel electronic payment network in the Philippines.

Under the leadership of the Bangko Sentral ng Pilipinas (BSP), BancNet played a key role in expanding digital payments in 2022, even as the threat of coronavirus disease 2019 (COVID-19) waned. Throughout the year, BancNet welcomed more financial institutions on board with its established InstaPay use cases, particularly those involving payments to merchants using QR Ph codes.

A new payment use case called Bills Pay Ph was introduced on the InstaPay rail before the end of the year, making digital payments more accessible than ever.

The Bangko Sentral ng Pilipinas and Philippine Payments Management, Inc. launched Bills Pay Ph to be a bills payment facility that enables customers of a participating bank or e-wallet to pay partner billers of other banks and e-wallets, using their mobile banking or e-wallet apps.

Bills Pay Ph aims to provide shared access to more than 700 billers even if the billers’ service providers are different from the customer’s bank or e-wallet. These include local as well as national companies such as basic utilities, telcos, cable providers, schools, and insurance and financing companies.

Bills Pay Ph was designed as a new interoperable facility that would allow customers to pay their bills for utility, rent, subscription, credit cards, loan amortizations and other periodic or recurring financial obligations even with different accounts on different payment service providers.

In the Bills Pay Ph facility, transactions can be performed either by scanning or uploading the QR Ph1 Person-to-Biller (P2B) code, or by manually inputting the payment details for the non-QR mode of payment.

As the clearing switch operator of InstaPay and thus responsible for maintaining its safe, efficient, and reliable operations, BancNet was authorized by the BSP as an Operator of a Designated Payment System in June.

BancNet President Fabian S. Dee told the stockholders that 2022 was a record year for the consortium, playing a pivotal role in expanding digital payments as the country returned to near normalcy and the economy gradually recovered with the waning of the COVID-19 pandemic.

“Our two main businesses — InstaPay and ATM reached new heights in 2022, setting new records in both volume and value. As a result, we closed the year with a net income of P99.14 million and an ROE (return on equity) of 9.82%,” Mr. Dee said.

CEO Elmarie S. Reyes pointed out that BancNet processed a record 1.27 billion interbank transactions in 2022, 19% more than the total in 2021, indicating the consortium’s continuing growth.

Notably, this growth includes 538 million InstaPay transactions which grew by 25% from the previous comparable period. ATM withdrawal transactions, in comparison, were at 389 million which grew by 16% and 124 million point of sale (POS) transactions, up by 25% from 2021.

“We expect the upward trend in transactions to continue in 2023 and beyond. For InstaPay, the interoperable Bills Pay Ph, a service we launched in 2022; our various efforts to expand the adoption of payments to merchants using a QR Ph code; and a new use case we will introduce this year will contribute to this trend,” Mr. Dee added.

Bills Pay Ph is part of the digital payments road map towards achieving the BSP’s goal of converting 50% of retail payments to cashless by 2023. By end 2022, the service was available from 14 participating banks, e-wallets, and a payment center, and 1,362 billers.

Essentially, BancNet has become the core consolidator of the digital payments platforms in the country, integrating all the payments into one ecosystem, so Filipino consumers do not have to have separate ecosystem for their debit cards, another ecosystem for Instapay, and yet another for ATM and other acquiring devices.

“This levels the playing field among financial institutions, whether big or small. They all get access to all products through one link. This coordination brings into the fold as many financial institutions into BancNet — with each one being an enabler itself — and makes it easy for them to be part of the ecosystem,” BancNet wrote.

Adopting to challenges of a new era

Photo By albert hu/ UNSPLASH

Even as total transactions handled reached record highs, BancNet’s robust systems maintained high average switch availability rates during the year, both for InstaPay (99.97%), and ATM transactions (99.98%).

Obsolescence, resiliency, availability and vulnerability are only some of the risks involved in making the transition into a partly digital economy. BancNet, through improving operational efficiency, becoming digital, bolstering cyber security and data privacy processes, and managing business continuity, aims to get ahead of such issues.

Resolution No. 911, issued by the BSP’s Monetary Board in June, designated InstaPay as a Prominently Important Payment System (PIPS) under the National Payment Systems Act.

This means that the BSP places InstaPay under closer supervision and monitoring to protect the public from digital risks.

“In 2023 and beyond, BancNet will continue to be an enabler. Our key role is to allow financial institutions and money or electronic wallets to have interconnectivity with one another. BancNet is the link that opens up a new entrance into the whole ecosystem,” the consortium wrote in its 2022 annual report.

“This is why, now and in the future, stability of operations is crucial. We can sum it up in two words: No Surprises. We have to keep on top of capacity, keep on top of resiliency, keep on top of the battle against cyberattacks, keep on top of technology. A lot of work is involved in making sure that we stay on top of developments. We cannot be left behind because we have the whole industry relying on us. If BancNet falls behind, it will have an impact on the whole economy.”

The Philippines Payments Management, Inc. (PPMI) has given BancNet a contract extension as InstaPay’s clearing switch operator through the year 2024.

In 2022, there were 3.82 million digital payments made to government organizations, up significantly from the 2.68 million made in 2021. Pag-IBIG Fund accounted for 30.21%, Philippine Health Insurance Corp. (PhilHealth) for 31.81%, and the Social Security System (SSS) and the Bureau of Internal Revenue (BIR) for the remaining 0.79%. There was a 19.84% rise, or P64.50 billion more, in the value of these payouts from 2021 to 2022, bringing the grand total to P389.53 billion.

By the end of 2021, just 4,758 person-to-merchant (P2M) transactions had been completed using QR Ph, despite its recent introduction. The limited number of providers was noted as a challenge to expansion.

BancNet sped up the process of adding new users in 2022 by working closely with PPMI and the InstaPay Automated Clearing House. Aware of its place in the evolution of the market, BancNet also implemented tiered pricing for the acquirer institutions so that they could provide free transactions for a subset of merchants.

From just nine at launch in 2021, there were a total of 28 distinct banks and e-wallets by the end of 2022 delivering P2M via QR Ph and/or acquiring merchants. In 2022, P2M deals reached a record high of 2.08 million.

With the introduction of non-QR bill payment in their pilot program in February 2022, BancNet took a giant leap ahead in the world of digital payments. Previously, a QR code could be used to pay one’s expenses.

As the BSP pursues its set goal of moving 50% of retail payments to cashless by 2023, Bills Pay Ph and, in essence, InstaPay will be a key component towards getting there.

“BancNet celebrates its success in expanding digital payments in the new normal. At the same time, we remain grounded in the fact that digital payments are dependent on financial inclusion, not the other way around. The pace of digital payments will pick up with financial inclusion. In all likelihood — over the near future — the world may not go to be fully digital yet, but rather in combination with the physical. This is what we all have to prepare for,” BancNet wrote. — Bjorn Biel M. Beltran

‘Hot money’ flows turn positive in June

MORE FOREIGN CAPITAL entered than left the Philippines in June, the central bank said. — REUTERS

By Keisha B. Ta-asan, Reporter

FOREIGN PORTFOLIO INVESTMENTS registered a net inflow in June, ending four straight months of outflows, the Bangko Sentral ng Pilipinas (BSP) said.

Transactions on short-term foreign investments registered with the BSP through authorized agent banks (AABs) posted a net inflow of $1.23 million in June, a turnaround from the $124.49-million net outflow seen in May and the $342.19-million net outflow in the same month of 2022.

These foreign investments are also known as “hot money” — called as such due to the ease by which these funds enter and exit an economy.

BSP data showed gross inflows of hot money fell by 14.3% to $889.44 million in June, from $1.04 billion a year earlier.

The top five investor economies were the United Kingdom, the United States, Luxembourg, Singapore, and Switzerland, accounting for 84.2% of total foreign portfolio investment inflows.

Most of the investments went into Philippine Stock Exchange-listed securities of companies involved in property, banks, holding firms, food, beverage and tobacco, as well as telecommunications. The rest were invested in peso government securities.

Gross outflows also declined by 35.6% to $888.21 million in June from $1.38 billion a year ago. The BSP said the United States received $589 million or 66.3% of total outward remittances.

Security Bank Corp. Chief Economist Robert Dan J. Roces said the steady interest rate differential between the Philippines and the United States boosted investor sentiment.

“As the Fed and BSP both paused, the interest rate differential between the Philippines and the US remained above 1%. This made Philippine assets more attractive to investors, who then bought pesos and invested in the Philippines,” Mr. Roces said in a Viber message.

At its June meeting, the Monetary Board decided to extend the pause for a second time, keeping the  key interest rate at 6.25%. This was after it hiked borrowing costs by a total of 425 basis points (bps) from May 2022 to March 2023.

The Federal Open Market Committee likewise kept policy rates on hold at its meeting in June, following the cumulative 500-bp rate hike since March 2022.

Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said hot money inflows in June may have been driven by the easing inflation trend in the Philippines and in the US.

In the Philippines, headline inflation slowed to 5.4% in June from 6.1% a month earlier. This was the slowest print in 14 months. Year-to-date inflation settled at 7.2%, still higher than the 5.4% forecast of the BSP.

Meanwhile, US inflation slowed to 3% year on year from 4% in May. This was the smallest annual increase since March 2021.

A bipartisan deal to raise the debt ceiling in the United States also supported investor sentiment, Mr. Ricafort said.

US President Joseph R. Biden, Jr. signed a deal that narrowly averted a crisis that would have sent the US into a debt default.

NET OUTFLOW
For the first half of the year, BSP-registered foreign investments yielded a net outflow of $803 million, a reversal of the $778.28-million net inflow in the same period last year.

According to Mr. Roces, the improving economic outlook for the Philippines also helped boost investor sentiment.

However, in the near term, the Philippines may see more outflows given that the US Federal Reserve may continue policy tightening in the coming months and that the US may not go into recession this year, he said.   

The US Federal Reserve on Wednesday raised interest rates by a quarter of a percentage point — its 11th rate increase in the last 12 meetings.

Mr. Ricafort said easing inflation may prompt central banks to extend their policy pause, leading to further gains in financial markets and more investments.

The BSP expects hot money to yield a net inflow of $2.5 billion this year.

BSP has room to extend pause despite Fed’s latest rate hike — economists

Bangko Sentral ng Pilipinas main office in Manila. — BW FILE PHOTO

THE BANGKO SENTRAL ng Pilipinas (BSP) has room to extend its monetary policy tightening pause at its meeting next month, despite the narrowing interest rate differential with the US Federal Reserve, economists said.

The Fed raised the federal funds rate target range by 25 basis points (bps) to 5.25-5.5% on Wednesday, the highest level in 22 years.

“Should pressure on the peso not build to proportions seen in 2022, we believe the BSP can look past this recent rate hike by the Fed and continue to adopt a wait-and-see, data-driven approach to policy,” ING Bank N.V. Manila Senior Economist Nicholas Antonio T. Mapa said in an e-mail.

“Against the backdrop of inflation headed back towards target and an economy headed for a slowdown, we believe that there is room for the BSP to pause at the next meeting,” he added.

The Monetary Board in June paused its tightening cycle for a second meeting, keeping the key rate to a near 16-year high of 6.25%. From May 2022 to March 2023, the BSP has hiked borrowing costs by a total of 425 bps to curb inflation.

Headline inflation eased to 5.4% in June, marking a 14-month low. For the first six months of 2023, inflation averaged 7.2%. The central bank expects full-year inflation to hit 5.4% this year, still above its 2-4% target band.

Jonathan L. Ravelas, senior adviser at Reyes Tacandong & Co., said the narrower interest rate differential between the Philippines and the US could still cause some volatility in the foreign exchange market.

“As long as inflation trends lower, we could keep the pause,” Mr. Ravelas said. “But despite the falling inflation trend, risks arising from El Niño and the ongoing war keep prices of commodities elevated. These could reaccelerate inflation thus BSP could resume its hikes.”

Mr. Mapa noted the US central bank’s latest rate hike was widely anticipated and priced in by market players.

“As such, markets had a relatively muted reaction to the decision with short-end US Treasury yields actually edging lower in anticipation that this could be the last rate increase for the Fed, at least for this cycle,” he said.

Following the Fed’s rate hike decision, US Treasury yields slipped as the yield on 10-year Treasury note was down at 3.865%, while the two-year yield fell to 4.8433%.

Mr. Mapa noted the narrowing of interest rate differentials between the Philippines and the US does not always result in intense pressure on the local currency, unlike what happened last year.

“BSP Governor Eli M. Remolona indicated that last year’s peso slide could be traced to outsized concerns and anxiety about currency depreciation that did not move in line with fundamentals,” he said.

In October last year, the peso reached its record low of P59 against the dollar. It has since rebounded back to the P54 level, closing at P54.56 against the greenback on Thursday.

“Given the improved external position of the Philippines relative to last year, we believe that the peso need not suffer the same fate it did last year, even if interest rate differentials narrow further,” Mr. Mapa said.

He noted that former BSP Governor Felipe M. Medalla was able to deploy forward guidance last year by pre-announcing his decision to hike rates before the Monetary Board’s meeting in November.

“Meanwhile, Governor Remolona has said he would likely employ a similar strategy, if need be, as he appears to be a firm believer in forward guidance, having authored several papers on the topic,” he said.

“Of course, should the peso come under intense pressure in the coming weeks, the data-driven BSP will consider further tightening, as needed.”

Mr. Remolona earlier said it would be premature to talk about rate cuts this year as inflation is still elevated, emphasizing that the BSP remains data-driven in deciding which policy settings would be appropriate during this time.

China Banking Corp. Chief Economist Domini S. Velasquez said she does not expect the BSP to raise rates this year and in 2024, given slowing inflation and stable currency.

“It seems that the market will be more tolerant of a narrower interest rate differential given that central banks are at the end of the monetary tightening cycle,” Ms. Velasquez said in a Viber message.

She also noted that Fed Chair Jerome H. Powell was less hawkish compared with his statement in June. Coupled with the lower-than-expected inflation in the US last month, she said this may signal that the Fed may be done with its rate hikes.

Analysts said risks to the country’s inflation outlook include the ongoing conflict in Ukraine, and the El Niño weather event as these could lead to supply chain issues. — Keisha B. Ta-asan

BIR may start imposing withholding tax on online sellers by Q4

PHILIPPINE STAR/RUSSELL PALMA

THE BUREAU of Internal Revenue (BIR) is looking to start imposing a creditable withholding tax on partner-merchants of online platforms as early as the fourth quarter this year.

“We are aiming for (its) full implementation by next year. It may even start by the fourth quarter. Hopefully, the private sector will be on board,” BIR Commissioner Romeo D. Lumagui, Jr. told reporters on Tuesday.

The BIR is amending Revenue Regulations No. 2-98, which currently does not cover income payments by online platform providers.

Under the draft rules, the BIR proposed a creditable withholding tax of 1% on one-half of the gross remittances of online platform providers to their partner sellers or merchants.

It defined an online platform provider as any entity that serves as an intermediary, where sellers and buyers of goods and services transact their business through the use of information technology and other electronic means, and act as the withholding agent of the government.

These would include marketplaces, food delivery, lodging accommodation, travel or transportation, and payment platforms, among others.

Mr. Lumagui said that the agency is working with online platforms to address their concerns on the implementation of the creditable withholding tax.

“There really is a need to level the playing field. It’s also unfair for brick-and-mortar stores. There are so many sales now online,” he added.

Under the draft rules, online platforms that do not require business registration from sellers will only collect withholding tax on single transactions of goods or services worth P10,000 and if the same buyer and seller have engaged in at least six transactions, regardless of amount per transaction, in the previous or current year.

The BIR has been seeking ways to tax the digital sector, as e-commerce surged during the pandemic as people were forced to stay at home.

The Marcos administration included the proposed value-added tax (VAT) on digital services as one of the priority legislation that Congress aims to approve by end-2023.

Last year, the digital economy contributed P2.08 trillion, equivalent to 9.4% of GDP. Of this, e-commerce had the highest growth at 26.5%, with its share to the economy reaching 20% or P416.12 billion.

REVENUE GOAL
Meanwhile, the BIR raised its 2023 revenue collection goal by 1% after better-than-expected collections in the first half.

In a revenue memorandum order posted on its website on Thursday, the BIR said it now aims to collect P2.64 trillion in revenues this year, slightly higher than its previous target of P2.599 trillion.

The new target is 13% higher than the agency’s actual collection of P2.34 trillion in 2022. The BIR collects about 70% of government revenues.

According to the memorandum order, the BIR targets to collect P2.54 trillion from its operations and P99.7 billion from non-BIR operations.

Under the BIR’s operations, taxes on net income and profits are expected to reach P1.32 trillion. It aims to collect P538.13 billion from VAT, P336.1 billion from excise taxes, P124.65 billion from percentage taxes and P224.15 billion from other taxes.

In June, Finance Secretary Benjamin E. Diokno said that the government would be revising its revenue target amid improved collections.

Data from the Department of Finance showed that state revenues rose by 7.7% to P1.9 trillion in the January-to-June period. Of this, tax collections during the period grew by 7.5%, while nontax revenues increased by 9.1%. — Luisa Maria Jacinta C. Jocson

DoE planning to include LGUs in one-stop shop for energy projects

THE WIND FARM in Pagudpud, Ilocos Norte. — PHILIPPINE STAR/KRIZ JOHN ROSALES

THE PHILIPPINES’ Energy Virtual One-Stop Shop (EVOSS) will eventually include local government units (LGUs) in order to address delays in project approvals, the Energy secretary said on Wednesday.

“Under a whole-of-government approach and fully implemented the energy required one-stop shop system to cover all relevant agencies and entities. At the moment, the Department of Energy (DoE) is in the process of integrating the remaining relevant agencies and entities into the evaluation platform,” Energy Secretary Raphael P.M. Lotilla said during the BusinessWorld Insights forum at the Shangri-La The Fort Manila in Bonifacio Global City.

EVOSS is an online platform under the DoE that streamlines and expedites the processing of applications for energy projects.

Power generation companies have said the biggest hurdle in their projects is the delay in approvals by LGUs.

“The EVOSS is being expanded to make sure that local governments are also in the system and in the loop. We will continue to work with you in the private sector, in accordance with a clear goal set by the President to develop each of the sources of energy, particularly renewables,” Mr. Lotilla said.

A recent report conducted by the World Wide Fund for Nature identified red tape and inadequate incentives are obstacles to the growth of the Philippines’ renewable energy sector.

Felino M. Bernardo, Aboitiz Power Corp. chief operating officer for the company’s thermal power generation group, said the country’s transmission system is also a challenge to achieving the government’s energy security target. 

“We are an archipelago; we are not well-connected. We can have solar and wind plants, but transmission is still a challenge. We need to do this responsibly and reliably. Energy has to be on 24/7,” Mr. Bernardo said.

Oliver Y. Tan, president and chief executive officer of Citicore Renewable Energy Corp. (CREC) said that the problems in shifting to renewable energy such as wind and solar are not limited to the Philippines.

“Anywhere in the world has the problem of transitioning to variable renewable energy. This is not limited to the Philippines. It is on all stakeholders to come up (with a solution),” Mr. Tan said.

For a country like the Philippines with an abundance of resources like solar, wind and hydro, Mr. Tan said the ideal energy mix would be 70-30 with 70% coming from renewable sources.   

Under the Philippine Energy Plan, the government is targeting to increase the share of renewable energy to 35% by 2030 and 50% by 2040.

As of end-2022, the share of renewable energy in the country’s power mix is at 22%.

The DoE aims to issue a revised Philippine Energy Plan, expanding its coverage from 2040 to 2050. In the new Philippine Energy Plan, the DoE proposes a higher share of renewable energy of more than 50%.

Miguel G. de Jesus, chief operating officer of ACEN Corp., said that the ideal energy mix is full renewable energy.

“The Philippines is in a very privileged position. The role of the private sector is to seize this opportunity,” Mr. De Jesus said.

Also, the Energy chief reiterated the importance of the transmission system to accommodate the country’s energy needs.   

“Transmission is key. We need to improve on the system impact studies because these have to be addressed upfront rather than later. The SIS (system impact study) unfortunately is rather delayed,” Mr. Lotilla said.

The SIS is being conducted by the system operator, the National Grid Corp. of the Philippines (NGCP), to assess how adding new energy sources can impact the grid.

Earlier, the Energy Regulatory Commission (ERC) ordered the NGCP to complete the SIS within 60 days.

“The sector has been complaining of delays from one and half years to two years in the SIS alone. These are the things that we want to be able to address so that RE developers will be able to focus on the rollout of their projects,” Mr. Lotilla said.

Mr. Lotilla said that the DoE is also set to conduct a “comprehensive review” of the NGCP’s performance to help advance and identify the hurdles in the country’s energy sector. — Ashley Erika O. Jose

Internet cost worries persist despite SONA’s digitalization push

GLENN CARSTENS PETERS-UNSPLASH

By Miguel Hanz L. Antivola

PRESIDENT Ferdinand R. Marcos, Jr. highlighted digitalization advancements in his second State of the Nation Address (SONA) on Monday, but analysts said that internet affordability remains a major concern.

“Majority of Filipinos can only afford to ‘buy’ mobile internet subscriptions,” David Michael M. San Juan, professor at De La Salle University (DLSU), said in an e-mail interview on Thursday.

“Granted for the sake of argument that speed is no longer a problem, price still is,” he added.

The country ranked 55th out of 117 countries in the Digital Quality of Life Index 2022, conducted by virtual private network service provider Surfshark, dropping from its position at 48th in 2021.

The Philippines performed the worst in internet affordability, ranking 98th globally, down 26 places from 72nd a year prior, according to the report.

“Internet in the Philippines is not affordable compared to global standards,” Surfshark said.

It said a 1 gigabyte (GB) mobile internet package costs four minutes and 51 seconds of work per month in the Philippines, 59 times more than the five seconds of work needed to buy a 1 GB package in Israel, which has the most affordable mobile Internet in the world, based on the index.

“From what we see, the issues of internet access, cost, and reliability are the top most concerns to date,” Ronald Gustilo, national campaigner of Digital Pinoys, said in a Viber message.

“[Around] 65% of Filipinos still do not have internet access for various reasons — mostly because they reside in geographically isolated and disadvantaged areas (GIDAs),” he said, citing data from the Department of Information and Communications Technology (DICT).

“However, they can have internet access through Starlink’s low orbit satellite tech, but it is too expensive.”

SpaceX launched its satellite internet service Starlink in the country in February, enabling access to GIDAs at a one-time hardware fee of P29,320 and monthly service fee of P2,700.

In his second SONA, Mr. Marcos underscored the role of digital transformation in improving the ease of doing business and combating corruption.

He said that mobile and broadband internet speeds have improved and will undergo further upgrades, with a priority on GIDAs.

The Philippines ranked 83rd out of 140 countries in June for mobile internet performance, with a download speed of 26.98 megabits per second (Mbps), according to the global network testing firm Ookla. This speed is below the global average of 42.92 Mbps.

“There is a clear need to prioritize the provision of telecommunication and internet services in GIDAs,” Mr. Gustilo said.

“We see Executive Order (EO) 32 as a welcome development to this matter,” he added.

EO 32 was issued this month to streamline the permitting process for the construction of telecommunications infrastructure in the country.

“No other national or local permit or clearance shall be required in the construction, installation, repair, operation, and maintenance of telecommunications and Internet infrastructure,” the EO said.

The President also touted the National Fiber Backbone and Broadband ng Masa projects, aiming to deliver high-speed connectivity.

The National Fiber Backbone, which consists of five phases, is still awaiting completion of its first phase, which involves activating 28 fiber nodes in 12 provinces between the cities of Laoag and Quezon, as of November of last year, according to the DICT.

As of February, the Broadband ng Masa has established 4,385 operational live sites in 73 provinces, including Basilan, Sulu, Tawi-Tawi (BaSuLTa), and Pag-asa Island in the province of Palawan.

DLSU’s Mr. San Juan also said that any talk of digital transformation will be incomplete without proactive plans for achieving total national electrification.

According to Mr. Marcos, complete electrification of the country is now within reach. But there are still 68 connections for the unified national grid delayed, according to the Energy Regulatory Commission’s count.

“High electricity prices coupled with expensive, and still relatively slow, internet, any Filipino’s dream for digital transformation will remain dreams,” Mr. Marcos said. “Or they will just come true for certain segments of Philippine society, such as those who have money for premium services.”

E-GOVERNANCE
Mr. Marcos also highlighted the eGov PH app as the single and centralized mobile app for public convenience but did not elaborate on reliability concerns such as data privacy, crashes, and maintenance.

“The government should ensure that the information passing through e-governance platforms are protected at all times,” Mr. Gustilo said.

“Proper training for personnel involved in the maintenance and operation of government platforms should also be provided to avoid data compromise.”

Areas that the government should focus on digitalizing are those typically beset with red tape and corruption, said Terry L. Ridon, convenor of Infrawatch Philippines, in a Viber message.

Mr. Ridon cited the Bureau of Customs as an institution that continues to fail in fully digitalizing its services despite Republic Act 10863 or the Customs Modernization and Tariff Act.

“Full digitalization processes should be able to deter smuggling activities, including technical smuggling, as human intervention into transactions is severely minimized,” he said.

“Funding in Customs digitalization should translate into better revenues to government and better prices to consumers.”

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