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PEZA-approved outlays hit P14.9 billion in May, poised for 10% growth

THE PHILIPPINE Economic Zone Authority (PEZA) on Monday said it is on track to hit its 10% growth target for approved investments this year, after greenlighting P14.93 billion worth of 20 new and expansion projects in May.

This brought PEZA’s approved investments for January to May to P48.03 billion, which is 2.5 times higher than a year earlier, PEZA Director-General Tereso O. Panga said in an e-mailed statement.

Among the 20 projects approved by the PEZA board on May 26, 11 are into export manufacturing, seven are in the information technology sector, and one each in facility and economic zone development.

The projects will be located in the cities of Makati, Pasig, Taguig and Baguio, and the provinces of Pampanga, Cavite, Batangas, Laguna, Cebu, Iloilo and South Cotabato, PEZA said.

The biggest project pre-qualified by the PEZA board for approval by the Fiscal Incentives Review Board is owned by the maker of solar wafer cells with Maxeon 7 technology, it said. The project will be in Sto. Tomas, Batangas province with investments worth P11.63 billion.

“These projects are expected to generate about $293.55-million (P16.5-billion) exports and create 4,480 direct jobs,” the agency said in the statement.

“We are continuously seeing an uptrend with our investment approvals as we enter the first half of the year,” Mr. Panga said. “We are more aggressive in our initiatives to help our investors make the Philippines their smart investment choice, taking the cue from President Ferdinand R. Marcos, Jr., who has been most active in promoting the Philippines in his outbound missions.”

PEZA approved 80 projects for January to May that are expected to generate $1.31 billion in exports and 11,949 jobs, up from 70 projects a year earlier.

The agency said it is partnering with government agencies and industry associations to address the “pain points” that hinder investors to unlock the untapped potentials of the Philippines.

These agencies include the Department of Finance, Commission on Election, National Economic and Development Authority, with which PEZA discussed the concerns of investors.

PEZA has also discussed with Senator Lorna Regina “Loren” B. Legarda the creation of more economic zones in Antique and other provinces to spur development in the countryside.

It had also signed a deal with the Information and Communications Technology department to boost digitalization in the government to ensure the fast delivery of public services and bolster the country’s competitiveness, Mr. Panga said.

The agency aims to continue the government’s export-led growth strategy by having 98% of 3,431 registered business enterprises export-oriented.

PEZA locators account for 82% of the country’s total annual commodity exports and 60% of service exports.

“We vow to continuously perform our mandate to the best of our ability and help the administration in achieving its bid for the country to graduate to upper middle-income status within the term of President Marcos,” Mr. Panga said. — Justine Irish D. Tabile

Philippine credit card delinquency rate falls

FREEPIK

THE COUNTRY’S credit card delinquency rate dropped to 3.26% in the first quarter, even as credit card billings surged, the Credit Card Association of the Philippines (CCAP) said on Monday.

The rate, which refers to the percentage of borrowers who fail to pay the minimum amount due, has been falling since peaking at 8.37% in 2020 at the height of a coronavirus pandemic, CCAP data showed. It was 3.32% in 2022 and 4.03% in 2021.

Card delinquency also refers to the payment of less than the minimum amount of credit card debt for at least three billing cycles.

Card delinquency has been falling even as credit card billings climbed by 47% to P410 billion in the first quarter from a year earlier, CCAP said in a statement.

This was the highest growth since the pandemic, as Filipinos spent more on shopping, traveling and buying goods after two years of lockdowns.

Consumers should be reminded that using a credit card does not give them free money, CCAP Executive Director Alex Ilagan said in the statement. “While Filipinos’ spending spree keeps the economic engine chugging along, we must bear in mind that a credit card is not free money.”

CCAP, which is made up of 17 credit card issuers, has been conducting credit awareness programs for colleges, universities and companies since 2017 as part of efforts to teach more Filipinos to become responsible borrowers.

“Our aim is to educate them as early as possible so they know what credit is and how they can manage their credit cards well when they get theirs,” Mr. Ilagan said. “Any organization, not just schools, can reach us for these enlightening seminars.”

CCAP has been reminding consumers to use credit cards wisely. This includes not using a credit card beyond one’s capability, which could lead one to become mired in debt.

Credit card users should also monitor their total monthly spending to avoid exceeding their credit limit.

“A maxed-out credit card can also cause financial strain, especially for people who can only manage to make minimum payments each month,” CCAP said. “The minimum monthly payments will likely grow past the cardholder’s paying capability, causing them to miss their dues.”

Consumers should also settle their bills on time to avoid late fees and other penalties. — Keisha B. Ta-asan

AREIT to acquire five properties in swap deal

AYALA-LED real estate investment trust company AREIT, Inc. has signed the deed of exchange for a P22.48-billion property-for-share swap with Ayala Land, Inc., Ayalaland Malls, Inc., and Northbeacon Commercial Corp.

In a regulatory filing on Monday, AREIT said 607.56-million primary common shares will be issued to the companies at P37 apiece in exchange for flagship offices and malls.

It said the price per share represents a 3% premium over the 30-day volume-weighted average price of AREIT. The shares will be issued out of the increase in its authorized capital stock, which will amount to P40.5 billion.

“Ayala Land, Ayalaland Malls, and Northbeacon will transfer, cede, and assign the properties to AREIT, while the latter grants the corresponding shares to the parties upon the [Securities and Exchange Commission’s] approval of the property-for-share swap,” the company said.

It added that AREIT had submitted an application to the commission for the increase in its authorized capital stock, a request for confirmation of exemption from the registration of securities, and the confirmation of valuation of the involved properties.

“Once approved, the parties shall apply for the certificate authorizing registration with the Bureau of Internal Revenue and the listing of the additional shares with the Philippine Stock Exchange within the first quarter of 2024,” it added.

Three office buildings will be added to AREIT’s portfolio, which are Glorietta 1 and 2 business process outsourcing (BPO) buildings, which have a gross leasable area (GLA) of 60,632.84 square meters (sq.m.), One Ayala West and East Tower, which has a GLA of 117,365.2 sq.m.

Additionally, two regional malls will be infused, which are Glorietta 1 and 2 Mall at Ayala Center, Makati City with a GLA of 68,763.84 sq.m., and Marquee Mall in Pampanga with a GLA of 66,041.04 sq.m.

AREIT said that since its initial public offering, it has exceeded its growth plans, resulting in a 52% total shareholder return based on the closing price of P35.85 on March 6, 2023. It started with assets under management (AUM) of 153,000 sq.m. equivalent to P30 billion.

To date, AREIT has recorded 673,000 sq.m. equivalent to P64 billion in AUM.

The new infusion of properties will nearly triple its AUM to P87 billion and boost its GLA more than five times to 863,000 sq.m., “making AREIT one of the largest and the most diversified commercial REIT in the Philippines.”

On Monday, its shares rose by 1.64% or P0.55 to P34.05 apiece. — Adrian H. Halili

Filipino culture as soft power

L-R Top row: Len Cabili, Gino Gonzales, Leigh Reyes; Bottom row: Bayang Barrios, Ito Kish, Jenny Yrasuegui

SOFT POWER is referred to as a nation’s ability to attract and influence various actors in the global arena — and the Philippines has the potential to wield this power more effectively, according to Filipino artists, creatives, and craftspeople.

Dama Ko Lahi Ko, a volunteer-driven initiative established by the Filipino Culture Collective in 2021, marked its third year of spreading awareness about Filipino products, services, and experiences.

“This campaign is what we hope to contribute to improve our culture’s global standing,” said Leigh Reyes, one of the movement’s co-founders, at a May 31 event in Makati City.

The Philippines, known for its warm and welcoming people, ranks 61st out of 121 countries when it comes to soft power, according to the 2023 Global Soft Power Index by brand valuation consultancy Brand Finance.

Though the country’s performance could be better, its high score in the “people” metric “speaks volumes in terms of who we are as Filipinos,” according to Ms. Reyes.

“We’re nurturing, and we’ve reached other countries through different professions by always being rooted in malasakit (concern),” she said.

Whether it’s giving a visual platform to icons such as tribal tattooist Apo Whang-od, like Vogue photographer Artu Nepomuceno did, or showing the beauty of the terno in local TV, film, and theater, as scenographer Gino Gonzales does, Filipinos must be proud of their own.

For restaurateur Jenny Yrasuegui, who showcases local cuisine at her food joint Lunes Everyday Dining, it’s not that Filipino culture must be “elevated” — it’s that it must be championed and creatively presented.

CULTURE AS ECONOMIC STIMULUS
Award-winning furniture designer Margarito “Ito” Kish drew tactile inspirations for his work from his upbringing in San Pablo, Laguna, largely influenced by his mother and grandmothers.

“Filipino will always be my design language,” he said, recalling solihiya chairs at the family’s ancestral home and wooden balusters that beckoned cool air. “My memories are woven into my creativity. “

This is why his Gregoria two-seater chair, named after his own mother, was able to win awards for best design at various events and continuously sell over the years. It is representative of looking back.

Meanwhile, ethnic music diva Bayang Barrios maintained that it’s possible to find one’s way back to local culture, even after resenting it.

“When I was younger, I didn’t want anything to do with being Manobo,” she said. Her college years weren’t defined at all by any sort of care for indigenous culture — but destiny would have her music and dance groups at school take it up anyway. “It really seemed like destiny.”

Now, her lilting voice captivates audiences, and she is a proud pioneer of Manobo music.

“Kung hindi natin mamahalin ang kulturang atin, tayo po ay magkakawatak-watak, at ang mismong bansa ay hihina at walang mapa-tutunguhan (If we don’t love our culture, we will fall apart and the country itself will weaken and lose direction),” said Ms. Barrios.

Dama Ko Lahi Ko co-founder Lenora “Len” Cabili gave Hallyu, or the Korean cultural wave, as an example of how a country can invest in soft power.

“The economic implication is that the same way people eat food, people also consume media and culture,” she said, likening it to how Filipinos may reach for another suman or another empanada or another lumpia.

“It must be very intentional on the part of the country and its government and its people to spread that throughout the world.” — Brontë H. Lacsamana

ACEN secures regulatory nod to acquire Texas wind assets 

AYALE-LED ACEN Corp. said that the acquisition by its joint-venture company UPC Power Solutions LLC of eight operating wind projects in Texas is nearing completion after it secured regulatory approval for the purchase of the assets.

In a stock exchange disclosure on Monday, ACEN said the US Federal Energy Regulatory Commission (FERC) had given its go signal for the planned acquisition.

In March, ACEN said UPC Power had signed a purchase and sale agreement with US-based GlidePath Power Solutions LLC for the acquisition of 136 megawatts (MW) of wind assets.

With the recent development, ACEN said UPC Power and GlidePath could now complete the acquisition under their agreement.

The FERC serves as an independent agency and regulator of interstate transmission of electricity, natural gas, and oil.

ACEN said the wind operating assets could generate about 360 gigawatt-hours (GWh) of wind energy per year, which can power around 24,000 households.

In 2022, ACEN, through its subsidiary ACEN USA LLC, partnered with Pivot Power Management, or PivotGen, and UPC Solar & Wind Investments LLC to explore opportunities to acquire operating wind projects in the US.

The energy company of the Ayala group has committed to shifting its power generation portfolio to fully renewable energy by 2025, while also aiming to reduce its greenhouse gas emissions to as close as zero by 2050.

ACEN has around 4,200 MW of attributable capacity spread across the Philippines, Vietnam, Indonesia, India, and Australia. The energy company is targeting to expand its renewable energy portfolio to 20 gigawatts by 2030.

The update in the US comes after ACEN said that it had secured approval from the government of New South Wales to increase the capacity of its battery energy storage system in Australia.

It said the facility’s capacity will be increased to 2,800 MW or 1,400 MW per two hours from the initial 200 MW per two hours.

At the local bourse on Monday, shares in the company gained four centavos or 0.67% to end at P6.03 apiece. — Ashley Erika O. Jose

DMCI Power plans  to build wind farm  on Semirara Island

DMCI Power Corp. is planning to build a wind power plant on Semirara Island, its listed parent firm DMCI Holdings, Inc. told the stock exchange on Monday.

“We are also looking at solar energy to augment the supply in the island, but we are prioritizing wind resource development because it has shown the most promise,” DMCI Power President Antonino E. Gatdula, Jr. said in a media release.

The power generation company said it has yet to finalize its intended capacity for the wind power project but is looking at between 8 megawatts (MW) and 12 MW.

The project will be funded and undertaken independently by DMCI Power, which expects it to be operational within a year to 15 months.

“Current studies suggest that wind power could potentially deliver a 33% plant utilization rate, compared to just 17% for solar. Capital expenditure per megawatt for both wind and solar projects are also roughly the same,” Mr. Gatdula said.

DMCI Power is validating wind resource estimates for Semirara Island to determine the final location and capacity of its wind power project.

It said the wind corridors between Luzon and Panay, which include the Semirara and Cuyo islands, were found to have abundant wind power density and speed for a utility-scale wind project.

In 2022, DMCI Power said it was targeting to include solar energy in its energy mix this year, with at least a 4-MW solar plant set to operate in Masbate by the fourth quarter of 2023.

Established in 2006, the company is primarily engaged in energizing off-grid small and remote islands. Its portfolio includes diesel, bunker, and thermal energy plant. — Ashley Erika O. Jose

AirAsia awaits delivery  of A321, A330 aircraft

LOW-COST carrier AirAsia Philippines expects the delivery next year of five A321s and five A330s Airbus aircraft apart from 20 leased planes to support its growth projection.

“We are lucky that we have an order book of over 400 planes. The order book starts next year with the delivery of five A321s,” said Anthony Francis Fernandes, chief executive officer of Capital A Berhad, the holding firm for the travel and lifestyle group.

“In between, we are taking from the leasing market both new planes and old planes. We just signed about 20 more aircraft. It’ll be a mixture of taking what are the available Airbuses,” he said.

AirAsia Communications and Public Affairs Country Head Steve F. Dailisan said the airline is also looking at the delivery next year of bigger planes, which will be five A330s.

In February, the airline announced its commitment to bring its fleet back to the pre-pandemic level, which is 24 aircraft. It is currently operating 18 aircraft, just four away from this year’s target, Mr. Dailisan said.

“I’m invigorated and energized to put in more investment in the Philippines, not just in the airline but now we have our Superapp and aircraft service business. We are very committed to the Philippines,” Mr. Fernandes said.

“It is our smallest market but I think it really should be one of our biggest markets as it sits on the doorsteps of North Asia,” he added.

Aside from fleet expansion, Mr. Fernandes is focusing on processing the airline’s refund to customers. “We are hoping to sort that out by October or November,” he said.

This year, the airline aims to refund the remaining 21% or P9.07 million of its refunds. Data from AirAsia show that it has completed 79% or P34.76 million of its total P43.83 million refunds.

The airline is also looking at improving its products and adding more destinations.

“We want to bring in Face ID here, we’re gonna have WiFi on the plane and we will add new destinations on top of what we are doing with our Superapp,” Mr. Fernandes said.

Through Superapp, AirAsia customers can fly via other airlines, avail of ride-hailing services, and book travel packages.

Meanwhile, Mr. Fernandes said a quicker way to decongest the Ninoy Aquino International Airport (NAIA) is to build better road infrastructure for other airports.

“I call the government to look at building a train and better bus services to Clark [International Airport],” he said.

He also said airport operations and management should be under a mix of government and private entities.

On Friday, the Department of Transportation and the Manila International Airport Authority submitted a joint proposal to upgrade NAIA under a solicited public-private partnership. Under the proposal, the private concessionaire will have 15 years to operate the airport and recover its investment. — Justine Irish D. Tabile

Digital doubles, fake trailers: AI worries Hollywood actors before labor talks

ARTIFICIAL intelligence erased 40 years from Harrison Ford’s face for certain scenes in the newest Indiana Jones film, Indiana Jones and the Dial of Destiny.

LOS ANGELES — A search for Wes Anderson on YouTube turns up trailers that the famed director with a distinctive style appears to have made for adaptations of Star Wars, Harry Potter, and The Lord of the Rings featuring Bill Murray, Scarlett Johansson and other stars.

Artificial intelligence (AI) allowed people with no real actors and far smaller resources than major Hollywood studios to generate the fake movie trailers, feeding debate on the issue that will be on the bargaining table when the SAG-AFTRA actors union begins labor talks with studios on June 7.

AI already has divided studios and striking film and television writers, who want assurances that the emerging technology will not be used to generate scripts.

SAG-AFTRA wants to ensure its members can control use of their “digital doubles” and ensure studios pay the actual actors appropriately, said Duncan Crabtree-Ireland, the union’s chief negotiator.

“The performer’s name, likeness, voice, persona — those are the performer’s stock and trade,” Mr. Crabtree-Ireland said. “It’s really not fair for companies to attempt to take advantage of that and not fairly compensate performers when they’re using their persona in that way.”

Tom Cruise and Keanu Reeves already have been the subject of widely viewed unauthorized deepfakes — realistic yet fabricated videos created by AI algorithms. Mr. Reeves called the technology “scary,” in part because it can be deployed without actors’ input.

Interest in generative AI exploded globally after the November launch of ChatGPT, the fastest growing app of all time, by Microsoft Corp-backed OpenAI. US and European regulators have demanded guardrails to prevent misinformation, bias, violation of copyrights, and invasion of privacy.

Actors and writers envision various scenarios in which studios could try to cut costs and boost revenue using generative AI, which can be fed existing material and pump out new content. The technology already is used to erase age marks or alter mouth movements to sync with words when programming is dubbed in various languages.

Actor Leland Morrill said he has worked on sets where he was surrounded by cameras taking pictures from all angles.

“With that type of content, they could use you for part of it, and then create the rest of the character, and then we’re not on set anymore and nobody gets paid,” Mr. Morrill said at a multi-union rally in Los Angeles.

Producer, writer, and former Family Ties actress Justine Bateman, holds a degree in computer science and has been sounding the alarm about AI. She said companies could allow fans to make their own Star Wars movie, and add themselves for an extra fee.

Or, a studio could take footage from a popular 1980s TV show such as Family Ties and make a new season with AI.

YOUNGER YOU
Some actors have signed off on specific uses of AI.

The upcoming Indiana Jones movie features scenes where 80-year-old star Harrison Ford appears 40 years younger. He said Walt Disney Co.’s Lucasfilm used images of his face that were shot during Indiana Jones films in the 1980s.

“It’s fantastic,” Mr. Ford raved about his youthful on-screen appearance in an interview with late-night host Stephen Colbert.

James Earl Jones, now 92, agreed to allow AI to replicate the menacing voice he gave to Darth Vader, according to Vanity Fair, so the character could live on. AI helped Disney put the late Carrie Fisher in 2019 film The Rise of Skywalker, with the blessing of her daughter.

SAG-AFTRA’s Mr. Crabtree-Ireland said actors have varying comfort levels with how AI is used, which is why the union will advocate for informed consent in talks with the Alliance of Motion Picture and Television Producers (AMPTP), the group that represents Disney, Netflix Inc., and other studios. — Reuters

A representative for the AMPTP had no comment on its position on use of AI with actors.

In negotiations with the Writers Guild of America (WGA), the AMPTP proposed discussing the topic once a year, which the Guild viewed as an attempt to avoid the issue. The WGA has been on strike over AI and compensation since May 2.

If SAG-AFTRA cannot reach a deal on AI and other issues, actors also could go on strike, which would pile more pressure on the studios. Ahead of negotiations, SAG-AFTRA leaders have asked members to provide authorization to call a strike if needed. Voting on a strike authorization ends Monday.

Both unions want safeguards in place before AI becomes widely used.

Ms. Bateman, a former SAG board member, derides AI as “automatic imitation” that could lead to a future filled with rehashed entertainment from the past.

“I don’t want to live in that world,” Ms. Bateman said. “What’s the next genre in film? What’s the next genre in music? You’re never going to see anything like that if we’re all using AI.” — Reuters

Entertainment News (06/06/23)

The Flash holds previews

THERE will be previews of The Flash before it opens in cinemas this week. Fans can catch a sneak preview in select cinemas nationwide on the evening of June 13, one day before the film opens wide across the Philippines. The ticketing site for The Flash is already live at https://www.theflashmovie.com.ph/ and includes the list of preview cinemas. The Flash is distributed worldwide by Warner Bros. Pictures and is set to open in theaters across the Philippines beginning June 14.

Gucci launches video series

A NEW video series directed by two-time Academy Award-winning filmmaker Sharmeen Obaid Chinoy brings Annie Lennox, Halle Bailey, Julia Roberts, Idris Elba, Alia Bhatt, Serena Williams, John Legend and Gucci CHIME co-founder Salma Hayek Pinault together to speak out about what equality means to them, as the campaign ushers in a new decade of support for gender equality. On June 1 ten years ago, Gucci, together with co-founders Beyoncé Knowles-Carter and Salma Hayek Pinault, founded the Gucci CHIME campaign, dedicated to advancing gender equality around the world. Ten years after Gucci hosted The Sound Of Change: Live, a global concert that raised $3.9 million to support girls and women around the world, Gucci CHIME has raised $21.5 million, which has helped 635,000 girls and women globally through more than 500 projects in 92 countries through 185 non-profit partners. To honor a decade of impact, Gucci enlisted longtime Gucci CHIME Advisory Board member and collaborator Sharmeen Obaid Chinoy to lens a 35-video series that documents a wide range of artists, activists, organizers, and advocates chiming in on what equality means to them. The films will be available to stream on Gucci’s social channels and official YouTube account. Beyoncé’s song “Freedom,” from her pioneering visual album Lemonade, scores the videos.

Netflix stars in fan event this month

HENRY Cavill, Jamie Dornan, Gal Gadot, Chris Hemsworth, Arnold Schwarzenegger and more Netflix stars will debut news, exclusives, and more to fans all over the world from a live event in São Paulo called Tudum: A Global Fan Event – LIVE from Brazil. After two years as a virtual event, the 2023 Tudum livestream will be broadcast live in front of thousands of fans in São Paulo, Brazil to audiences around the world on June 18 at 4:30 a.m. Philippine Standard Time. Tune in on Netflix’s YouTube (YouTube.com/Netflix) to watch global stars reveal exclusive news and debut never-before-seen footage, trailers and first looks at favorite shows, movies, and games. Learn more at: Tudum.com/event.

Music fest marks Oh Flamingo! anniv

CO-PRODUCED by GNN Entertainment Productions, the Filipino alt-rock band Oh, Flamingo! will mark their 10th year in the music scene with a festival, a concert, an anniversary tribute, and a fan’s day all rolled into one. Dubbed Oh, Flamingo!: 10th Birthday, the event will feature performances by Ourselves The Elves, Ang Bandang Shirley, DJ Love, The Itchyworms, Ena Mori, DJ Love, SPIT, The One Pesos, and T33G33. Oh, Flamingo!: 10th Birthday is set to take place at 123 Block in Mandala Park, Mandaluyong City on July 15 from 4 p.m. onwards. There will be a dedicated space for lifestyle, art, and brand merchants. Limited-edition merch will be available at the venue. Tickets to the show are now available via bit.ly/HBDOHFLAM10.

F&S sells stake in AirAsia PHL

ROMERO-LED F&S Holdings, Inc. has sold its shares in AirAsia Philippines as it concentrates on its power and ports businesses, the company said on Monday.

In a press release, it said shares in the budget carrier owned by lawmaker Michael Odylon L. Romero and his wife Sheila B. Romero are to be bought by AA Com Travel Philippines, Inc.

“The sale makes it the sole local owner and majority shareholder of the country’s third-largest airline,” it said.

The remaining 40% is owned by Capital A Berhad founders Anthony Francis Fernandes and Datuk Karmarudin Menarum.

“We are excited at the opportunity to consolidate our business enterprises and realign them to focus more on our core businesses in power and ports,” said Ms. Romero, chairman of F&S Holdings.

“Needless to say, we did not want to undertake this while the pandemic was ongoing, and nearly every business — particularly air travel — was severely hampered. That would not embody the kind of relationship we had with our partners,” she added.

Meanwhile, CapitalOne Energy Corp. is set to be integrated into the Romero group’s power generation companies, which include investments in the renewable energy sector, which include Fort Pilar Energy, Inc. and Belgrove Power Corp.

CapitalOne is currently expanding its solar power portfolio with the development of new sites in Cagayan, Nueva Ecija, Batangas, Marinduque and Palawan, which will have a combined capacity of 180-megawatt-peak.

“We wish nothing but the best to our former partner in AirAsia Philippines, as well as to AA Com. May they continue to fly high and reach new heights,” said Ms. Romero.

She said the Romero group would continue to “invest aggressively” in the family’s core businesses in Globalport 900, Inc. terminals, which she said now operates 10 local ports.

When Mr. Fernandes was asked in a media roundtable on Monday regarding the ownership of the airline, he said: “Come back to me in one-and-a-half month. Ownership will be solved. It is important for the airline but we’ll make the proper announcement at the proper time.” — Justine Irish D. Tabile

Metro Manila retail reaps post-pandemic gains

People walk around a mall in Quezon City, June 22, 2022. — PHILIPPINE STAR/MIGUEL DE GUZMAN

By Joey Roi Bondoc

THE Philippine retail sector has been growing steadily after the government lifted most of mobility restrictions across the country.

Mall operators and retailers are reporting a rebound in consumer traffic and some even note that revenues are even stronger compared to pre-pandemic levels.

Colliers believes that the retail sector is one of the most dynamic segments of the property sector and we see it continuously outperforming other segments as malls serve as Filipinos’ de facto public spaces.

The entry of more foreign retailers should make the mall scene more dynamic, exciting, and competitive. This should result in a further evolution of the Philippine mall culture, benefitting consumers.

Holiday spending stoked the country’s retail segment in the fourth quarter of 2022. An upside for the sector is that Filipinos continue to spend even after the festive season and despite elevated prices, although inflation is starting to cool down at least for the first four months of 2023.

Given a sanguine macroeconomic as well as business and consumer confidence outlook, Colliers believes that the retail sector will continue to grow for the remainder of the year, resulting in greater absorption of mall space and marginal rise in lease rates. However, the delivery of substantial new supply starting the second half of 2023 will be a major concern, as this will likely raise vacancy rates across Metro Manila and as more operators compete for retailers willing to take up brick and mortar mall spaces.

Now is an opportune time for landlords planning to take advantage of retail sector’s recovery to launch retail real estate investment trust (REIT). Lease rates are starting to rise, that’s why retailers should be quick in locking in prime spaces in major business districts.

Meanwhile, given the growing interest from foreign retailers, Colliers recommends that mall operators seize the demand from these firms by taking into account their sizes and fit out requirements. Online and offline shopping will continue to complement each other, which should compel mall operators and retailers to ramp up their omnichannel strategies.

AN OPPORTUNE TIME TO LAUNCH RETAIL REITS
Colliers believes property developers with retail footprint should consider divesting malls into their REIT portfolio especially now that the retail segment is recovering. Malls generate recurring income and are now a viable REIT asset class as vacancies are declining and lease rates are starting to increase.

In our view, developers should carefully assess which retail outlets to add to their REIT portfolio and should consider projected mall space absorption as well as profiles of retailers willing to take up brick-and-mortar spaces. Developers should take advantage of renewed interest from foreign and homegrown retailers as well as continued expansion of Philippine economy that is mainly driven by personal consumption expenditure.

LOCK IN SPACE IN PRIME LOCATIONS
Colliers believes that retailers should be quick in securing mall spaces in key business districts across Metro Manila now that vacancy rates are declining while rents are gradually increasing. In our view, this trend is likely to persist in the market as footfall is rebounding across the capital region.

We still see substantial vacancies in selected malls in Quezon City, Bay Area, and Alabang and retailers should further explore the viability of opening physical space in these locations.

Looking forward, we see heightened competition for prime retail space, especially in key business districts that will house new and expansive office and residential towers.

SEIZE DEMAND FROM FOREIGN RETAILERS
Colliers sees an improving demand for physical space from foreign retailers. We attribute this to improving consumer demand on the back of sustained macroeconomic expansion and the enactment of measures that further relax the country’s retail regulatory environment.

Mall operators should capture demand from foreign retailers planning to enter the country by taking into account their size and fit-out requirements.

MALL SPACE TAKE-UP RISES
In the first quarter of 2023, vacancy rates across malls in the capital region dropped to 14% from 15.4% in the fourth quarter of 2022. Major developers have reported that consumer traffic has now reverted to 90-100% of pre-COVID levels. Some mall operators even noted that footfall especially in the fourth quarter of 2022 was even greater than pre-pandemic levels.

With rising purchasing power due to improving consumer confidence (according to the latest central bank survey) and personal income tax cuts implemented by the government, retailers have been active in taking up physical mall space.

While online shopping will remain relevant among Filipino consumers (especially among young shoppers), Colliers expects in-store shopping will continue to rebound, as shown by relentless absorption of physical mall space within Metro Manila.

In our view, mall operators should not consider online presence as competition but as a necessary complement to retailers’ omnichannel strategies. Both retailers and mall operators unable to update their omnichannel presence will be left behind.

Colliers is optimistic that sound macroeconomic fundamentals are likely to support the retail sector’s growth over the next 12 months. The reactivation of high-density retail, staging of various events at malls’ activity centers, and renewed interest in experiential retail should entice more Filipinos to visit physical malls and further stoke spending.

 

Joey Roi Bondoc is the research director at Colliers Philippines.

Gov’t fully awards Treasury bill offer at slightly higher yields

STOCK PHOTO | Image by RJ Joquico from Unsplash

THE GOVERNMENT made a full award of the Treasury bills (T-bills) it offered on Monday as yields only rose marginally on expectations that inflation slowed further in May.

The Bureau of the Treasury (BTr) raised P15 billion as planned from the T-bills it auctioned off on Monday with total bids reaching P27.653 billion or almost twice the amount on offer.

Broken down, the Treasury borrowed P5 billion as planned via the 91-day T-bills, with tenders for the tenor reaching P6.589 billion. The average rate of the three-month papers went up by 4.4 basis points (bps) to 5.827% from the 5.783% quoted for the tenor last week, with accepted rates ranging from 5.67% to 5.9%.

The government likewise made a full P5-billion award of the 182-day securities as bids for the tenor reached P11.07 billion. The six-month T-bill was quoted at an average rate of 5.891%, up by 1.2 bps from 5.879% the previous week, with accepted rates from 5.74% to 5.95%.

Lastly, the BTr raised the programmed P5 billion from the 364-day debt papers as demand reached P9.994 billion. The average rate of the one-year T-bill rose by 3.2 bps to 5.98% from the 5.948% fetched for the tenor last week. Accepted yields were from 5.81% to 6%.

At the secondary market before Monday’s auction, the 91-, 182- and 364-day T-bills were quoted at 5.7657%, 5.9630%, and 5.9314%, respectively, based on PHP Bloomberg Valuation Reference Rates data provided by the Treasury.

T-bill yields inched higher ahead of the release of May consumer price index (CPI) data, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.

Headline inflation likely slowed for a fourth straight month in May amid favorable base effects and a decline in prices of energy and some food items, analysts said.

A BusinessWorld poll of 15 analysts last week yielded a median estimate of 6.1% for May inflation, near the lower end of the 5.8-6.6% forecast of the Bangko Sentral ng Pilipinas (BSP) for the month.

If realized, this would be slower than 6.6% in April but quicker than the 5.4% print in the same month a year earlier.

The May CPI could also exceed the BSP’s 2-4% target for 2023 for the 14th consecutive month.

In the first four months, headline inflation averaged at 7.9%, well above the BSP’s forecast of 5.5% for this year.

The Philippine Statistics Authority will release inflation data on June 6.

Mr. Ricafort added that the higher global crude oil prices recently also contributed to the slight increase in T-bill rates.

Oil prices were up $1 a barrel on Monday after top global exporter Saudi Arabia pledged to cut production by another 1 million barrels per day from July, counteracting the macroeconomic headwinds that have depressed markets, Reuters reported.

Brent crude futures were at $77.21 a barrel, up $1.08 or 1.4%, at 0515 GMT after earlier hitting a session-high of $78.73 a barrel.

US West Texas Intermediate crude climbed by $1.07 or 1.5% to $72.81 a barrel after touching an intraday high of $75.06 a barrel.

Rates also rose amid decreased demand from the previous auction, which was likely due to expectations that the US Federal Reserve would pause its rate hike cycle at its June 13-14 review, which could be matched by the BSP in its own meeting on June 22, Mr. Ricafort said.

The US central bank raised borrowing costs by 25 bps at its May 2-3 meeting, bringing the Fed funds rate to 5% to 5.25%.

The Fed has hiked borrowing costs by 500 bps since March 2022.

Meanwhile, the BSP on May 18 paused its tightening cycle, keeping its policy rate unchanged at 6.25% for the first time after nine meetings.

Since it began its aggressive monetary tightening cycle in May 2022, the central bank had raised borrowing costs by 425 bps.

T-bill yields rose “after the release of stronger than expected US nonfarm payrolls report last Friday,” a trader said in an e-mail.

Data released on Friday showed payrolls in the public and private sector increased by 339,000 in May, Reuters reported.

On Tuesday, the BTr will auction off P25 billion in reissued 10-year Treasury bonds (T-bonds) with a remaining life of four years and nine months.

The Treasury wants to raise P185 billion from the domestic market this month, or P60 billion via T-bills and P125 billion via T-bonds.

The government borrows from local and foreign sources to help fund its budget deficit, which is capped at 6.1% of gross domestic product this year. — A.M.C. Sy with Reuters

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