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MSpectrum installs solar panels at Cavite water utility

MSPECTRUM.COM.PH

MSPECTRUM, Inc., a wholly owned solar subsidiary of Manila Electric Co. (Meralco), has energized a 33-kilowatt-peak (kWp) solar rooftop facility to power the water pumps of General Trias Water Corp. (GTWC).

The project is designed to generate around 45,350 kilowatt-hours of clean energy per year, the company said in a statement on Wednesday.

GTWC is the first in the area to power its water pumps with solar panels in line with its sustainability goals.

“We proudly celebrate the ceremonial turnover of the 33-kWp solar power generating system that will help GTWC achieve their sustainability goals and realize the savings from their electricity bill,” said MSpectrum Chief Operating Officer Patrick T. Panlilio.

The facility is expected to help reduce its carbon footprint by an estimated 32.3 metric tons and will allow GTWC to generate energy savings through the operation of the solar project.

GTWC, a water utility in Cavite since 1995, serves General Trias City and the municipalities of Naic and Alfonso. It also serves some areas in Laguna, Batangas, and Bulacan.

Meanwhile, MSpectrum offers tailor-fit solar solutions for industrial, commercial, and residential customers “through an in-depth understanding of energy consumption behaviors and strategic partnerships with world-class technology partners.”

With its eight years in the industry, MSpectrum has already installed more than 80 megawatts of solar rooftop projects, estimated to power around 40,000 households.

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

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

A taste of home

LIMBAGA 77 Cafe Restaurant in the Morato section of Quezon City (its address is in its name) celebrated its 10th anniversary on Dec. 18, offering guests a gut-stretching Filipino buffet.

It all started in 2014 when a group of diners were at Sct. Limbaga, eating at a restaurant across the street from No. 77. “Birthday ng son ko (it was my son’s birthday),” recalled Juris Fortuna, managing director, and one of the partner-owners of Pino 77 Foods Corp. (after opening Limbaga 77, the group went on to acquire the Pino restaurants in Maginhawa). “Suddenly, nakita namin itong (we saw this) place,” she said. Two of the partners thought about buying the mid-century home, and “seven” just happened to be one of the partners’ lucky numbers. “It was destined to be a restaurant,” said Ms. Fortuna. The house’s interiors were preserved, the better to highlight the Filipino comfort food menu.

Dinner that December evening had appetizers like Stuffed Bulaklak ng Kalabasa (squash blossoms), Mini Lechon Tacos (tacos filled with roast pork), and their signature salad. The Crispy Pata (deep-fried pig’s trotters), Kare-Kare (beef stewed in peanut sauce), Chicken Morcon (a roasted chicken roll-up), and their version of paella would have been Sunday fare for a nice Filipino family.

We do reserve special praise for their comforting Sinigang na Salmon (a soup soured by tamarind fruit) and Seafood Pancit Buko (stir-fried noodles, but the noodles replaced by strands of young coconut). We normally pick anything coconut off of our plate, but the Pancit Buko was so good, we didn’t realize what we were eating. When we did, we came back for more.

Since the pandemic led to the closure of their Trinoma branch, Ms. Fortuna said that now they’re looking at expanding to other areas, targeting opening one or two branches this year.

She discussed how they lasted 10 years: “Number one, iyong food. Hindi nagbago iyong quality ng food namin (the quality of our food has not changed), from the start, up to now. Number two, iyong service. Very important iyon sa customer.”

While people have Filipino food at home, diners still keep coming back to their home-like restaurant anyway. “Tayong mga Pilipino, preferred natin iyong nakasanayan na (we Filipinos prefer what we’ve been used to). Most of the time, kapag nagcecelebrate tayo, ang gusto natin iyong mga Filipino food na nakasanayan ng family natin (when we celebrate, what we want is the food that our families have been used to).” — Joseph L. Garcia

Limbaga 77 Cafe Restaurant is at 77 Sct. Limbaga Street, Tomas Morato Ave., Brgy. Laging Handa, Quezon City. For inquiries, contact: 8374-3509 and 0926-715-8134.

Term deposit yields drop on BSP rate cut hopes

YIELDS on the Bangko Sentral ng Pilipinas’ (BSP) term deposits declined on Wednesday as Philippine inflation settled within target in December and in full-year 2024, which could open the door to further rate cuts this year.

Demand for the central bank’s term deposit facility (TDF) amounted to P339.78 billion on Wednesday, well above the P180-billion offering. This was also higher than the P155.222 billion in bids for a P240-billion offer the prior week.

Broken down, tenders for the seven-day papers reached P213.661 billion on Wednesday, above the P100 billion on the auction block. This was also higher than the P89.001 billion in bids for the P150-billion offering of six-day term deposits the previous week.

Banks asked for yields ranging from 5.715% to 5.8745%, a narrower band compared to the 5.7% to 6% seen a week ago. With this, the average rate of the one-week deposits dropped by 9.27 basis points (bps) to 5.8193% from 5.912% previously.

Meanwhile, the 14-day papers fetched bids amounting to P126.119 billion, higher than the P80-billion offer and the P66.221 billion in tenders for the P90 billion in 13-day deposits auctioned off last week.

Accepted rates for the tenor were from 5.84% to 5.97%, also narrower than the 5.825% to 6.1% range seen last week. This caused the average rate of the two-week papers to decline by 2.22 bps to 5.9319% from 5.9541% in the prior auction.

Last week’s TDF tenors were shorter than the usual maturities due to a holiday.

The central bank has not auctioned off 28-day term deposits for more than four years to give way to its weekly offerings of securities with the same tenor.

The term deposits and the BSP bills are used by the central bank to mop up excess liquidity in the financial system and to better guide market rates.

TDF yields were lower week on week following the release of Philippine inflation data, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.

December headline inflation remained within the BSP’s 2-4% target despite accelerating from the November print, which would support future policy rate cuts, Mr. Ricafort said.

Philippine headline inflation picked up to 2.9% in December from 2.5% in November due to higher utility and transport costs, the government reported on Tuesday.

This marked the third consecutive month of faster inflation and was higher than the 2.7% median estimate in a BusinessWorld poll of 13 analysts.

Still, this was slower than the 3.9% print in the same month a year prior and was within the BSP’s 2.3%-3.1% forecast for the month.

The December print brought the full-year 2024 inflation average to 3.2%, slower than 6% in 2023 and marking the first time since 2021 that the consumer price index settled within the BSP’s 2-4% annual target. This was also the slowest since the 2.4% average in 2020 and matched the central bank’s baseline forecast for 2024.

The central bank said the within-target inflation outlook and well-anchored inflation expectations “continue to support the BSP’s shift toward a less restrictive monetary policy.”

The Monetary Board has slashed benchmark borrowing costs by a total of 75 bps since it began its easing cycle in August, bringing its policy rate to 5.75%.

BSP Governor Eli M. Remolona, Jr. last month said that while the BSP remains in an easing cycle, 100 bps worth of cuts this year may be “too much” amid inflation concerns. He added that they will continue to bring down benchmark interest rates in “baby steps.”

Mr. Remolona said the central bank is “neither more dovish nor less dovish” and is open to delivering another cut in their first policy meeting for this year, which is scheduled for Feb. 20. — Luisa Maria Jacinta C. Jocson

Philippine Labor Force Situation

THE UNEMPLOYMENT RATE in November dropped to its lowest in five months as businesses ramped up hiring ahead of the holiday season, the statistics agency said on Wednesday. Read the full story.

Philippine Labor Force Situation

Improving the pension system

PHILIPPINE STAR/MIGUEL DE GUZMAN

By raising its members’ contribution rate to 15% starting this January, the Social Security System (SSS) expects to extend its fund life by 28 years. In essence, the SSS claims it will have sufficient resources to provide benefits — such as pensions, loans, and maternity leave benefits — until 2053 without requiring members to pay additional monthly premiums.

SSS President and Chief Executive Officer Robert Joseph M. de Claro stated that the latest increase in the contribution rate will add approximately P51.5 billion to the SSS fund by 2025. Of this, 35% — or P18.3 billion — will be allocated to the Mandatory Provident Fund accounts of SSS members. He also noted that the 1% hike this year would mark the final increase in a series of adjustments implemented since 2019.

While the initiative extends the fund life to 2053 from the previous projection of 2032, Mr. De Claro acknowledged that the ideal fund life is 68 years. However, he conceded that achieving this target would be unrealistic without government subsidies. He further explained that aiming for a 68-year fund life might not be practical due to its potential cost to members.

“[It] doesn’t make sense to ask members to pay more than 15% of their salary, especially considering they also have to pay income tax of around 25% to 30%. The take-home pay would shrink significantly,” Mr. De Claro said during a press briefing at Malacañang. This observation underscores the burden on individuals, where 40%-45% of income goes toward mandatory obligations.

The government faces a significant challenge: how to achieve an ideal fund life of 68 years while minimizing the financial burden on members already contributing 15% of their salary. While Mr. De Claro mentioned subsidies as a potential solution, any additional government support for the pension fund could necessitate new fees or taxes.

The funds must come from somewhere. Supporting the pension system may divert resources from other critical areas, such as education and social services. Additional borrowing to sustain the SSS could also lead to higher debt payments, further straining government finances. But there are alternative pension options.

Globally, the average mandatory pension contribution rate in wealthier countries is approximately 15%, placing the SSS contribution rate on par with these systems. For example, Iceland has a mandatory contribution rate of 15.5%, split between an 11.5% employer contribution and a 4% employee contribution.

Iceland, along with the Netherlands and Denmark, is frequently cited as having one of the most effective pension systems globally. In these countries, pensions are funded through a combination of state pensions and mandatory occupational pension funds, with contributions from both employers and employees.

In contrast, the Philippines has a state pension system but lacks a mandatory occupational pension scheme. This is where the private sector could step in to complement the government’s efforts. Occupational or industry pension funds could augment the benefits retirees receive. With an aging population, this need becomes even more pressing.

In the Netherlands, the state pension is funded through payroll taxes, while occupational pensions are supported by contributions from both employers and employees. Denmark employs a similar approach, with public and mandatory occupational pensions funded primarily through employer contributions. In addition, both countries have private pension funds, akin to those in the Philippines.

The combined contribution rate for state and occupational pensions in wealthier countries is substantial, reflecting the goal of ensuring adequate retirement income. In Denmark, for example, mandatory contribution rates, determined through collective agreements, range between 12% and 18% of salary. Starting this month, the SSS contribution rate stands at 15%.

Expanding beyond state pension funds is essential to securing adequate retirement benefits for seniors. This is likely why the SSS is exploring other models, including what Mr. De Claro described as a shift to a “variable or hybrid model” from the current “defined benefit” system. Under a variable-benefit model, the 68-year fund life goal may become less critical.

Transitioning to a variable-benefit model, however, poses challenges. This approach would provide members with a variable income stream after retirement, as opposed to the fixed income currently offered. Personally, I believe the SSS should retain the fixed-income model, while the government incentivizes the creation of occupational pension funds offering variable income streams.

Countries like Iceland, the Netherlands, and Denmark maintain fixed income streams for state pensions, providing retirees with a stable financial foundation. Variable income streams, such as dividends, are typically associated with occupational or private pensions.

A fixed state pension, like the SSS provides, ensures a universal basic benefit for all members and is relatively straightforward to audit. The SSS can continue to offer supplemental benefits, while occupational pension funds can provide variable payouts depending on fund performance and contribution levels.

The Netherlands offers an interesting model: workers contribute to pensions through payroll taxes, which are part of their income tax. The contribution rate is about 17%, with no direct employer contribution to the state pension fund. However, when payroll tax revenue is insufficient, the government uses general tax revenues to cover the shortfall.

Occupational pensions are mandatory in many sectors in the Netherlands. Employers and employees both contribute, with employers typically shouldering 60%-70% of the total premium. Contribution rates for occupational pensions range from 15% to 25% of gross salary. Additionally, all residents, including non-working individuals, accrue pension rights based on years of residence (up to 50 years). This universal system ensures a flat-rate pension upon retirement, with the retirement age tied to life expectancy, currently at 67 years.

Iceland’s pension system has its own unique features. Public pension benefits are adjusted based on the retiree’s income and assets. While everyone meeting the residency requirement (at least 40 years) is entitled to a basic state pension, supplementary benefits are reduced proportionally based on other income sources, such as occupational pensions, private savings, or employment income. If a retiree’s assets exceed certain limits, state pensions may be reduced or denied. Pensions are also periodically adjusted for inflation, income levels, and government policies.

Given these examples, a comprehensive review of the Philippine pension system is urgently needed. While the SSS has extended its fund life to 2053, it should not remain the sole option for retirement benefits. Private pension funds and occupational pension schemes should be encouraged to provide retirees with additional options and ensure a more secure retirement for future generations.

 

Marvin Tort is a former managing editor of BusinessWorld, and a former chairman of the Philippine Press Council

matort@yahoo.com

Can the Philippines keep its title as contact center capital of the world?

INDUSTRY.GOV.PH

By Christopher Connolly

THE PHILIPPINES continues to be the global leader in the contact center industry, and if the country wants to retain this position for the next 10 years, urgently modernizing processes with the use of generative artificial intelligence (AI) and data is key.

According to IDC, generative AI spending in the Asia-Pacific (APAC) region alone is projected to reach $26 billion by 2027. This includes AI investments in customer engagement as businesses seek to remodel their operations around creating delightful customer experiences at every touchpoint. In the Philippines, a 2024 IT & Business Process Association of the Philippines (IBPAP) survey reported that 67% of IT and business process management (IT-BPM) firms, the sector that includes contact center companies, are already leveraging AI in their operations, focusing on customer service, data entry, and quality assurance.

However, while AI use cases in customer experience are increasing, traditional contact centers still struggle to meet the evolving expectations for personalized, omnichannel interactions. Amid shifting customer demands, contact centers need to transcend inefficient legacy systems and overcome integration challenges to gain a competitive edge in the age of AI. By embracing advanced technologies and improving system interoperability, they can better cater to modern customers and enhance overall service quality.

THE STRATEGIC BENEFITS OF MODERNIZING
Utilizing real-time customer data and advanced language models can address operational inefficiencies in contact centers and improve agent experiences. Modernizing contact centers through cloud-native architecture can facilitate the delivery of better customer service at a lower cost and help businesses transition from outdated systems to more advanced ones.

With 43% of APAC consumers expecting a response within an hour, according to Twilio’s 2024 Consumer Preferences Report, streamlined processes and unified customer data can lead to faster responses and solutions. Customers do not have to go through the hassle of repeating their problems or waiting on operators to locate their information. Insights drawn from unified data, including customer history, conversational insights, preferences, and AI-derived traits such as sentiment, predicted lifetime value (LTV), and churn propensity, can also create highly contextualized and personalized interactions, which can keep customers happier and translate to greater loyalty and customer LTV for the business.

Businesses and agents also stand to gain. Reduced instances of app switching, better access to recommended responses, and automated wrap-up reports can enhance overall productivity. This approach addresses issues such as long waiting times, repeat calls, and high transfer rates, ultimately leading to service and operational performance improvements. Businesses can streamline operations further using predictive analytics, which reduces workload and search time for agents.

THE NEXT RACE: EMBEDDING CDP DATA INTO THE CONTACT CENTER TO EMPOWER AGENTS
Harnessing the potential of first-party data, which is customer data directly collected and owned by the organization doing business with them, and empowering agents is essential for modernizing contact centers. Collecting first-party data from various sources and integrating it into real-time service interactions can provide agents with more comprehensive information than traditional customer relationship management (CRM) systems. Using a customer data platform (CDP) alongside CRM can help contact centers better understand customer behaviors.

Leaders in customer experience can rely on CDP data because it offers real-time insights and supports the shift towards omnichannel. The real-time nature of CDP data allows leaders to respond swiftly to customer needs and preferences as they arise. CDPs’ ability to consolidate data from billing systems, data warehouses, and marketing automation platforms also makes it easier to transition across channels without losing context or information.

With the emergence of newer large language models and the memory capabilities of CDPs, agents now have access to personalized assistance during customer conversations. This development changes the traditional approach to agent training. Lengthy training sessions confined to a classroom setting, which also incur additional costs, are less necessary. Instead, agents can engage with customers more proactively, knowing that their AI assistant can help with complex scenarios that may arise occasionally.

NAVIGATING TRANSFORMATION AMIDST FILIPINO CONSUMERS’ PRIVACY EXPECTATIONS
As with every new technology, businesses need to be mindful of using AI safely to harness customer data and build transparent and trustworthy systems. According to Twilio’s recent State of Customer Engagement Report, 41% of businesses in the Philippines consider protecting customer data their most pressing challenge. Shortage of labor and navigating the complexity of regulations were also identified as top challenges.

Incorporating privacy and security features and principles into the development lifecycle of new technologies can support the compliant and responsible use of customer data. The report also found that the majority (77%) would trust a brand more if it disclosed how customer data is used in AI-driven interactions. Additionally, three in four Filipino consumers ranked transparent communications such as clear terms and conditions, return policies, ease of reaching customer support, and responsive customer service, as the most effective ways to maintain trust.

As customer expectations and business needs evolve, traditional contact centers must also keep up with the times. Improving customer experience requires adopting modern technologies that ensure data protection, improved response times, and transparency. This shift involves moving away from outdated models and implementing scalable solutions that can meet business needs. Modern contact centers should be capable of rapidly adapting to changes and providing excellent customer service.

 

Christopher Connolly, Solution Engineering Lead, APJ, Communications, Twilio

Megawide secures SEC nod for capital increase

MEGAWIDE.COM.PH

SAAVEDRA-led Megawide Construction Corp. secured the approval of the Securities and Exchange Commission (SEC) for its planned capital increase.

The SEC approved Megawide’s increase in total authorized capital stock to P5.180 billion from P5.116 billion on Jan. 7, the company said in a regulatory filing on Wednesday.

Megawide also secured the corporate regulator’s approval for the increase in its authorized capital stock of preferred shares to 250 million from 186 million.

The increase in capital will allow Megawide to issue an additional 64 million cumulative, non-voting, non-participating, non-convertible, perpetual preferred shares with a par value of P1 per share.

Megawide also said that its parent company, Citicore Holdings Investment Inc., subscribed to at least 25% of the additional capital.

For the first nine months, Megawide’s net income increased by 69% to P562 million as revenue grew by 7.2% to P16.3 billion.

The construction segment took up P15.5 billion, or 96%, of consolidated revenues due to increased economic activities and the government’s infrastructure buildup.

Megawide shares fell by 2.44%, or six centavos, to P2.40 per share on Wednesday. — Revin Mikhael D. Ochave

Folk singer Peter Yarrow of Peter, Paul and Mary, 86

AMERICAN SINGER and songwriter Peter Yarrow, who found fame with the 1960s folk music trio Peter, Paul and Mary, died on Tuesday at the age of 86, his publicist said.

Mr. Yarrow died in the morning at his New York home surrounded by family following a four-year battle with bladder cancer, publicist Ken Sunshine said in a statement.

“Our fearless dragon is tired and has entered the last chapter of his magnificent life,” Mr. Yarrow’s daughter Bethany said in a statement provided by Mr. Sunshine. “The world knows Peter Yarrow the iconic folk activist, but the human being behind the legend is every bit as generous, creative, passionate, playful, and wise as his lyrics suggest.”

Mr. Yarrow formed Peter, Paul and Mary with Noel Paul Stookey and Mary Travers. The group helped popularize the early work of Bob Dylan and sang hits such as “Puff, The Magic Dragon,” which Mr. Yarrow co-wrote.

The group’s version of Dylan’s “Blowin’ in the Wind” helped transform the song into a civil rights anthem and introduced his music to a wider audience. The group also scored big hits with “If I Had a Hammer” and “Where Have All the Flowers Gone?,” co-written by folk artist Pete Seeger. The group’s other hits included covers of Will Holt’s “Lemon Tree,” and John Denver’s “Leaving on a Jet Plane.”

The trio’s members were noted for their political activism. They performed at the 1963 Civil Rights March on Washington and at demonstrations protesting the Vietnam War.

Throughout his life, Mr. Yarrow campaigned for social change and various causes, including equal rights, peace, the environment, gender equality, homelessness, hospice care, public broadcasting, and education.

Mr. Stookey, the only living member of the trio, praised Mr. Yarrow’s creative influence and said he would deeply miss his former bandmate.

“Being an only child, growing up without siblings may have afforded me the full attention of my parents, but with the formation of Peter, Paul and Mary, I suddenly had a brother named Peter Yarrow,” Mr. Stookey said.

“And while his comfort in the city and my love of the country tended to keep us apart geographically, our different perspectives were celebrated often in our friendship and our music,” he added.

Mr. Yarrow is survived by his wife, Marybeth, son Christopher, daughter Bethany, and granddaughter Valentina. — Reuters

Robust economy to spur PHL insurance industry’s growth

PHILIPPINE STAR/MIGUEL DE GUZMAN

By Aaron Michael C. Sy, Reporter

THE INSURANCE industry is expected to perform better this year driven by the life sector, but the health maintenance organization (HMO) and pre-need industries could continue to face challenges.

Finance Secretary Ralph G. Recto said the sector’s 2025 performance “will be better” than 2024 as rising incomes could boost demand for protection products to hopefully push up the country’s insurance penetration rate.

“For as long as productivity and incomes increase, there will be more demand for insurance products,” Mr. Recto said.

As of end-September 2024, the Philippine insurance sector’s combined premium income grew by 13.45% year on year to P328.55 billion, driven mainly by the life segment, data from the Insurance Commission (IC) showed.

However, insurance penetration, or premium volume as a share of gross domestic product (GDP) or the contribution of the insurance sector to the national economy, remained low at 1.74% in the period.

Enrico P. Villanueva, a senior lecturer at the University of the Philippines Los Baños Economics Department, noted that this is lower than the global average of roughly 7%.

He said the life insurance sector could continue to drive the industry’s growth this year amid high sales of variable unit-linked or universal life (VUL) products. VULs are policies that combine life insurance and investment components.

“Variable universal life insurance continues to dominate the life insurance market, accounting for 65% share of premia in 2024. This trend is likely to continue with the way many insurance agents are positioning VUL as an investment product, rather than a life insurance product with investment components and tax advantages,” Mr. Villanueva said.

“Insurance penetration can therefore be overstated by customers getting several VULs for investment,” he said.

Variable life premiums earned by the sector increased by 12.63% to P171.06 billion in the nine months through September from the same period a year prior.

“The challenge for the industry and the Insurance Commission is to avoid and maybe sanction mis-selling and misrepresentation particularly for VUL, where overinsurance can happen in pursuit of investment and where customers are sometimes made to believe that certain returns are guaranteed,” Mr. Villanueva added.

Market risks associated with VUL products are sometimes not explained properly to customers, he said.

The Philippine Life Insurance Association (PLIA) said expectations of strong economic growth and VUL products will drive the sector this year.

“The industry looks to 2025 with optimism, banking on a recently adjusted 5.9% GDP growth forecast by the World Bank. With the bulk of the industry’s total premium coming from variable unit-linked products, a favorable economic environment provides inherent growth opportunities for continuing uptake of VUL products with their unique combined protection and investment features,” PLIA said in an e-mail interview.

However, domestic and external developments involving geopolitics could cause market volatility, which may affect the financial services sector, investments, and overall economic stability, it said.

The industry’s shift to new reporting rules will also pose a challenge as companies are struggling to adopt the International Financial Reporting Standard 17 (IFRS 17), it added.

“One of the other key challenges confronting the industry is the fact that about two-thirds of the life insurance market players would likely not be able to switch over to the mandatory IFRS 17 reporting by Jan. 1, 2025,” PLIA said.

“Final prescriptions from the IC are expected to be issued soon enough.”

The International Accounting Standards Board in 2017 prescribed IFRS 17 for insurance contracts. The standards provide updated principles for the recognition, measurement, presentation and disclosure of insurance contracts in firms’ financial statements.

NONLIFE SECTOR
Meanwhile, the nonlife industry expects strong economic growth, better awareness about insurance products, and technology to drive its expansion in 2025, the Philippine Insurers and Reinsurers Association (PIRA) said.

“By 2025, the Philippine nonlife insurance industry is poised for growth, complemented by an expanding economy, increasing consumer awareness, technological innovation, and a focus on sustainability. Insurers that adapt to these trends and leverage technology while maintaining strong regulatory compliance can expect to thrive in this evolving landscape,” PIRA Executive Director Michael L. Rellosa said.

The nonlife industry’s net premiums written increased by 10.19% year on year to P53.13 billion at end-September 2024.

Philippine economic growth, which is expected to be driven by recovery in key sectors such as services, manufacturing, and infrastructure, will lead to more disposable income for consumers, which would translate to higher demand for nonlife insurance products, Mr. Rellosa added.

Growing awareness about the need for insurance protection amid increased natural disasters and health concerns could also boost demand.

“This push for financial literacy could result in a broader customer base for nonlife insurance products, especially among younger demographics,” he said.

The growth in insurance technology will also boost sales amid improved underwriting processes, claims handling, and customer service.

Other opportunity areas for nonlife insurers include risk management and mitigation for climate-related risks, products offering protection related to e-commerce, health services, and cyber insurance, and microinsurance, Mr. Rellosa said.

“Partnerships between traditional insurers and technological firms could likewise create new offerings that cater to niche markets.”

Mr. Recto likewise said that microinsurance could be a growth driver for the Philippine insurance industry.

“The Philippines is a sachet economy, so your insurance also has to be in a sachet form. So, they’ll have to innovate. They’ll have to adapt to the market. I think there’s a lot of opportunities for insurance. Our penetration rate is so low, but you have to offer the right products,” he said.

Takaful or Islamic insurance is also a growth area for the Philippine insurance sector, industry officials said, amid the country’s large Muslim population and regulatory support for these products.

Takaful is a type of Islamic insurance where members contribute a certain sum of money to a common pool. Takaful insurance needs to be compliant with Shari’ah law, which prohibits riba (interest), al-maisir (gambling), and al-gharar (uncertainty) principles.

In 2024, Pru Life Insurance Corp. of UK Philippines (Pru Life UK) was granted the first takaful license in the country, followed by Etiqa Life & General Assurance Philippines, Inc.

Pru Life UK has said it aims to launch its first Islamic Insurance product in the first quarter of 2025.

However, Mr. Rellosa said knowledge gaps on takaful insurance still need to be addressed.

“While there are promising signs for the growth of takaful in the Philippines, successful implementation will require concerted efforts from stakeholders, including regulatory bodies, financial institutions, and the community. If these efforts are made, Takaful could indeed take off and play a significant role in the financial landscape of the Philippines,” he said.

HMO, PRE-NEED SECTORS
However, the insurance industry’s outlook could be weighed down by troubled HMO and pre-need companies as some of these firms have experienced challenges in meeting capital and actuarial reserve requirements and have been closed down or stopped from doing new business as a result, Mr. Villanueva said.

“The higher capital requirements set by IC for HMOs can help weed out and prevent entry of companies with insufficient resources to provide the service. More than the increase in absolute capital requirements, the IC should regularly review companies who fail to set aside adequate reserves for insurance contract liabilities. Deficit in reserve is a major cause and indicator for Philippine insurance companies that went bankrupt,” Mr. Villanueva said.

The pre-need industry saw its premium income decline by 2.5% year on year to P16.287 billion as of September 2024 as players sold fewer plans.

Meanwhile, the HMO industry posted a net income of P800.86 million at end-September, rebounding from the P2.15-billion net loss a year prior amid higher revenues.

Insurance Commissioner Reynaldo A. Regalado has said the IC will likely delay the implementation of the proposed hike in HMOs’ minimum capital requirements.

The IC in July 2024 issued a draft circular that proposed to raise the minimum paid-up capital of HMOs to P50 million by end-2024 from the current P10 million. Meanwhile, new HMOs must put up at least P100 million in capital.

By end-2025, all HMOs should have at least P100 million in paid-up capital under the proposal. This would be increased to P200 million by end-2028, to P350 million by end-2031 and to P500 million by end-2034, based on the proposal.

Job Gains by Industry

THE UNEMPLOYMENT RATE in November dropped to its lowest in five months as businesses ramped up hiring ahead of the holiday season, the statistics agency said on Wednesday. Read the full story.

Job Gains by Industry

Tech group urges US to halt rule that would limit global access to AI chips

REUTERS

A TECHNOLOGY industry group on Tuesday urged President Joseph R. Biden’s administration to refrain from issuing a last-minute rule that would control global access to AI chips, warning the restrictions would jeopardize US leadership in artificial intelligence (AI).

The Information Technology Industry Council (ITI), representing companies like Amazon, Microsoft, and Meta, said the rule, which could come out as soon as Friday, would place arbitrary constraints on US companies’ ability to sell computing systems overseas and cede the global market to competitors.

Reuters reported exclusive details last month on the Commerce department’s plan for approving global AI chip exports while also preventing bad actors from accessing them. A key aim of the restrictions is to keep AI from supercharging China’s military capabilities.

In a letter to US Commerce Secretary Gina Raimondo, ITI CEO Jason Oxman criticized the administration’s “insistence” on publishing the rule in the final days of Mr. Biden’s presidency. Donald J. Trump will be inaugurated Jan. 20.

“Rushing a consequential and complex rule to completion could have significant adverse consequences,” Oxman said in the Jan. 7 letter, a copy of which was obtained by Reuters.

While ITI appreciates the commitment to national security, the letter said, “the potential risks to US global leadership in AI are real and should be taken seriously.”

The group asked that any such controls be issued as proposed rulemaking, rather than a rule, given the significant geopolitical and economic implications.

Neither the Commerce department nor the White House immediately responded to requests for comment.

Industry opposition to the expected rule has become increasingly blunt and public.

The Semiconductor Industry Association issued a statement on Monday night. And on Sunday, Ken Glueck, executive vice president at Oracle, said in a blog post that rather than target activities of concern, the rule “drops the Mother of All Regulations on the commercial cloud industry, regulating… nearly all commercial cloud computing globally for the first time in history.”

He said the “Export Control Framework for Artificial Intelligence Diffusion,” as the draft rule is titled, “will go down as one of the most destructive to ever hit the US technology industry.” — Reuters

More coal, more growth, cheaper electricity

Two Asian countries have released their fourth quarter (Q4) 2024 GDP performance data: Vietnam’s GDP grew 7.55% and Singapore’s 4.3%. Vietnam’s full year 2024 growth was 7% and Singapore’s was 3.9%. All other major economies have not reported their Q4 data yet.

This cements Vietnam as the fastest growing major economy (those in the list of the top 50 countries with the largest GDP size) in 2024. Trailing Vietnam as the fastest growing major economies in the world according to their average growth in Q1-Q3 were: India, 6.6%; the Philippines, 5.8%; Taiwan, 5.2%; Malaysia, 5.1%; Indonesia, 5%; and, China, 4.9%.

What is noticeable about these seven Asian economies is that all of them are consumers of a great deal of coal. For instance, the coal/total (electricity) generation ratio of these countries in 2023 were as follows: India, 75%; Indonesia and the Philippines, 62%; China, 61%; Vietnam, 47%; Malaysia, 43%; and, Taiwan, 42%.

The average GDP growth from 2015 to 2023 of these seven Asian nations was also high: Vietnam, 6%; India and China, 5.8%; the Philippines, 4.7%; Indonesia, 4.1%; Malaysia, 3.9%; and, Taiwan, 3%.

In contrast, countries which have had a progressive reduction in their coal capacity from 2007 to 2023 — the US, Germany, Spain, the UK, Poland, Australia — have had low growth, except Poland with growth of 3.7%. Turkey is more like Asia, with rising coal use and high growth of 5% (see Table 1).

In Q1-Q3 2024, Australia’s growth was at 1%, the UK’s 0.6%, and Germany shrank by 0.2%. They have experienced crawling growth or degrowth as they continue to decarbonize.

Another trend that I noticed is that countries that shifted away from coal experienced higher or flat inflation rates — Australia, Canada, Germany, the UK, the US — while countries that increased their coal use experienced lower inflation rates — Taiwan, China, South Korea, Japan, India, Indonesia, Malaysia, the Philippines, Vietnam, Russia, and Turkey (see Table 2).

GNPD COAL PLANT
The GN Power Dinginin (GNPD) plant was the first coal plant I ever saw. Located in Brgy. Dinginin, Mariveles, Bataan, I was able to visit it on Nov. 6, 2024. It is a super-critical coal plant, with an installed capacity of 1,450 megawatts (MW) and a dependable capacity of 1,336 MW (668 MW x 2 units). It was commissioned for commercial operation in 2022, so it is just two years old. It is the largest, the newest, the most efficient, high efficiency low emission (HELE) coal plant in the Philippines. It is owned by the Aboitiz Power Corp. (AP).

Its sister power plant in the same barangay, the GN Mariveles Energy Center (GMEC), is a sub-critical pulverized coal plant with a dependable capacity of 632 MW (316 MW x 2 units). It was commissioned in 2013, so it is 11 years old.

Because GNPD is new, with few unscheduled shutdowns and a high-capacity factor, it can produce electricity at low prices. It has been winning in Meralco’s recently held competitive selection process (CSP) or bidding for power supply agreements (PSA).

On Aug. 27, 2024, Meralco opened bidding for 600 MW of baseload capacity. The winners with levelized cost of electricity (LCOE) were SMC’s Masinloc Power for 500 MW and GNPD for 100 MW with all-in rates of P5.60/kilowatt-hour (kWh) and P5.74/kWh, respectively. These were way below Meralco’s reserved price of P7.26/kWh. And last September, when Meralco held another CSP for 400 MW of baseload, GNPD led with P7.6816/kWh.

Among the things I saw at GNPD were the following.

1. There was no dark or black smoke coming out of tall chimneys that we often see in images on social media or search engines. Those are coal plant models from the 1940s to 1970s.

2. There were huge conveyor belts that transport coal from cargo ships, and huge cranes that can unload about 32 tons of coal per hour so that a bulk carrier can leave the shore after two days.

3. There are huge domes for coal storage with open entrances for big loader machines to come and go. Coal storage is not fully enclosed, unlike diesel or LNG storage, and this translates to lower cost.

4. The very hot water that is condensed from the steam produced during the power generation process is treated and cooled in a big deep pool before being released back to the sea.

5. There is a modern control room operated and monitored by engineers.

We need more big, modern, high-capacity factor and low-cost coal plants, at least among those approved by the Department of Energy prior to the moratorium laid out in 2020 on greenfield projects. The Atimonan HELE coal plant by MGen in Quezon province is a good candidate.

 

Bienvenido S. Oplas, Jr. is the president of Bienvenido S. Oplas, Jr. Research Consultancy Services, and Minimal Government Thinkers. He is an international fellow of the Tholos Foundation.

minimalgovernment@gmail.com

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