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How China became ground zero for the auto chip shortage

TAIPEI/SHANGHAI/SINGAPORE – From his small office in Singapore, Kelvin Pang is ready to wager a $23 million payday that the worst of the chip shortage is not over for automakers – at least in China.

Pang has bought 62,000 microcontrollers, chips that help control a range of functions from car engines and transmissions to electric vehicle power systems and charging, which cost the original buyer $23.80 each in Germany.

He’s now looking to sell them to auto suppliers in the Chinese tech hub of Shenzhen for $375 apiece. He says he has turned down offers for $100 each, or $6.2 million for the whole bundle, which is small enough to fit in the back seat of a car and is packed for now in a warehouse in Hong Kong.

“The automakers have to eat,” Pang told Reuters. “We can afford to wait.”

The 58-year-old, who declined to say what he himself had paid for the microcontrollers (MCUs), makes a living trading excess electronics inventory that would otherwise be scrapped, connecting buyers in China with sellers abroad.

The global chip shortage over the past two years – caused by pandemic supply chaos combined with booming demand – has transformed what had been a high-volume, low-margin trade into one with the potential for wealth-spinning deals, he says.

Automotive chip order times remain long around the world, but brokers like Pang and thousands like him are focusing on China, which has become ground zero for a crunch that the rest of the industry is gradually moving beyond.

Globally, new orders are backed up by an average of about a year, according to a Reuters survey of 100 automotive chips produced by the five leading manufacturers.

To counter the supply squeeze, global automakers like General Motors Co GM.N, Ford Motor Co F.N and Nissan Motor Co 7201.T have moved to secure better access through a playbook that has included negotiating directly with chipmakers, paying more per part and accepting more inventory.

For China though, the outlook is bleaker, according to interviews with more than 20 people involved in the trade from automakers, suppliers and brokers to experts at China‘s government-affiliated auto research institute CATARC.

Despite being the world’s largest producer of cars, and leader in electric vehicles (EVs), China relies almost entirely on chips imported from Europe, the United States and Taiwan. Supply strains have been compounded by a zero-COVID lockdown in auto hub Shanghai that ended last month.

As a result, the shortage is more acute than elsewhere and threatens to curb the nation’s EV momentum, according to CATARC, the China Automotive Technology and Research Center. A fledgling domestic chipmaking industry is unlikely to be in a position to cope with demand within the next two to three years, it says.

Pang, for his part, sees China‘s shortage continuing through 2023 and deems it dangerous to hold inventory after that. The one risk to that view, he says: a sharper economic slowdown that could depress demand earlier.

 

FORECASTS ‘HARDLY POSSIBLE’

Computer chips, or semiconductors, are used in the thousands in every conventional and electric vehicle. They help control everything from deploying airbags and automating emergency braking to entertainment systems and navigation.

The Reuters survey conducted in June took a sample of chips, produced by Infineon, Texas Instruments, NXP, STMicroelectronics and Renesas, which perform a diverse range of functions in cars.

New orders via distributors are on hold for an average lead time of 49 weeks – deep into 2023, according to the analysis, which provides a snapshot of the global shortage though not a regional breakdown. Lead times range from 6 to 198 weeks, with an average of 52 weeks.

German chipmaker Infineon IFXGn.DE told Reuters it is “rigorously investing and expanding manufacturing capacities worldwide” but said shortages may last until 2023 for chips outsourced to foundries.

“Since the geopolitical and macroeconomic situation has deteriorated in recent months, reliable assessments regarding the end of the present shortages are hardly possible right now,” Infineon said in a statement.

Taiwan chipmaker United Microelectronics Corp 2303.TW told Reuters it has been able to reallocate some capacity to auto chips due to weaker demand in other segments. “On the whole, it is still challenging for us to meet the aggregate demand from customers,” the company said.

TrendForce analyst Galen Tseng told Reuters that if auto suppliers needed 100 PMIC chips – which regulate voltage from the battery to more than 100 applications in an average car – they were currently only getting around 80.

 

URGENTLY SEEKING CHIPS

The tight supply conditions in China contrast with the improved supply outlook for global automakers. Volkswagen, for example, said in late June it expected chip shortages to ease in the second half of the year. Read full story

The chairman of Chinese EV maker Nio, William Li, said last month it was hard to predict which chips would be in short supply. Nio regularly updates its “risky chip list” to avoid shortages of any of the more than 1,000 chips needed to run production.

In late May, Chinese EV maker Xpeng Motors 9868.HK pleaded for chips with an online video featuring a Pokemon toy that had also sold out in China. The bobbing duck-like character waves two signs: “urgently seeking” and “chips.”

“As the car supply chain gradually recovers, this video captures our supply-chain team’s current condition,” Xpeng CEO He Xiaopeng posted on Weibo, saying his company was struggling to secure “cheap chips” needed to build cars.

 

ALL ROADS LEAD TO SHENZHEN

The scramble for workarounds has led automakers and suppliers to China‘s main chip trading hub of Shenzhen and the “gray market”, brokered supplies legally sold but not authorized by the original manufacturer, according to two people familiar with the trade at a Chinese EV maker and an auto supplier.

The gray market carries risks because chips are sometimes recycled, improperly labeled, or stored in conditions that leave them damaged.

“Brokers are very dangerous,” said Masatsune Yamaji, research director at Gartner, adding that their prices were 10 to 20 times higher. “But in the current situation, many chip buyers need to depend on the brokers because the authorized supply chain cannot support the customers, especially the small customers in automotive or industrial electronics.”

Pang said many Shenzhen brokers were newcomers drawn by the spike in prices but unfamiliar with the technology they were buying and selling. “They only know the part number. I ask them: Do you know what this does in the car? They have no idea.”

While the volume held by brokers is hard to quantify, analysts say it is far from enough to meet demand.

“It’s not like all the chips are somewhere hidden and you just need to bring them to the market,” said Ondrej Burkacky, senior partner at McKinsey.

When supply normalizes, there may be an asset bubble in the inventories of unsold chips sitting in Shenzhen, analysts and brokers cautioned.

“We can’t hold on for too long, but the automakers can’t hold on either,” Pang said.

 

CHINESE SELF-SUFFICIENCY

China, where advanced chip design and manufacturing still lag overseas rivals, is investing to decrease its reliance on foreign chips. But that will not be easy, especially given the stringent requirements for auto-grade chips.

MCUs make up about 30% of the total chip costs in a car, but they are also the hardest category for China to achieve self-sufficiency in, said Li Xudong, senior manager at CATARC, adding that domestic players had only entered the lower end of the market with chips used in air conditioning and seating controls.

“I don’t think the problem can be solved in two to three years,” CATARC chief engineer Huang Yonghe said in May. “We are relying on other countries, with 95% of the wafers imported.”

Chinese EV maker BYD, which has started to design and manufacture IGBT transistor chips, is emerging as a domestic alternative, CATARC’s Li said.

“For a long time, China has seen its inability to be totally independent on chip production as a major security weakness,” said Victor Shih, professor of political science at the University of California, San Diego.

With time, China could build a strong domestic industry as it did when it identified battery production as a national priority, Shih added.

“It led to a lot of waste, a lot of failures, but then it also led to two or three giants that now dominate the global market.” – Reuters

Russia strikes cities across Ukraine, gas supplies in focus

Army soldier figurines are displayed in front of the Ukrainian and Russian flag colors background in this illustration taken, Feb. 13, 2022. — REUTERS/DADO RUVIC/ILLUSTRATION

KYIV – Russian forces kept up their bombardment of cities across Ukraine, with intense shelling of Sumy in the north, cluster bombs targeting Mykolaiv and a missile strike in Odesa in the south, authorities said on Tuesday.

After failing to capture the capital Kyiv at the outset of the invasion on Feb 24, Russia has shifted to a campaign of devastating bombardments to cement and extend its control of Ukraine‘s south and east.

Ukraine says Russian forces have intensified long-distance strikes on targets far from the front, killing large numbers of civilians. Moscow says it is hitting military targets.

Ukrainian President Volodymyr Zelenskiy says Russia had fired more than 3,000 cruise missiles and uncountable artillery shells during the five-month conflict.

Over the weekend, Zelenskiy suspended the country’s security chief and top prosecutor, saying they failed to purge Russian spies from their organizations. Read full story

Despite his disclosure of Russian penetration of the SBU, U.S. officials on Monday said Washington would continue sharing intelligence that U.S. officials have said Kyiv uses to respond to Moscow’s attacks. Read full story

This week could be pivotal for European countries concerned about the impact of war and sanctions on gas supplies.

Russia is due to reopen its main natural gas pipeline to Germany, Nord Stream 1, in coming days after regular maintenance, but Europeans are worried Moscow could keep it closed.

Russia‘s Gazprom, which operates the pipeline, has told customers in Europe it cannot guarantee gas supplies because of “extraordinary” circumstances, according to a letter seen by Reuters, upping the ante in an economic tit-for-tat with the West. Read full story

 

HEAVY BOMBARDMENT

In Odesa, a Russian missile strike injured at least four people, burned houses to the ground and set other homes on fire, Oleksii Matsulevych, a spokesman for the regional administration, said on his Telegram channel.

Russian forces targeted Mykolaiv with cluster shells Monday, injuring at least two people and damaging windows and roofs of private houses, the Ukrainian city’s mayor Oleksandr Senkevich said in a social media post.

More than 150 mines and shells had been fired on the Sumy region, Dmytro Zhyvytskyi, the head of the Sumy regional military administration, said on Telegram.

“They fired mortars, barrel and rocket artillery. The Russians also opened fire using machine guns and grenade launchers,” he said.

Kyiv hopes the war is at a turning point, with Moscow having exhausted its offensive capabilities in seizing a few small cities in the east, while Ukraine now fields long-range Western weapons that can strike behind Russian lines.

Kyiv cites a string of successful strikes on 30 Russian logistics and ammunition hubs, which it says are crippling Russia‘s artillery-dominated forces that need to transport thousands of shells to the front each day.

In a Facebook post on Monday, Ukraine‘s top military commander, General Valery Zaluzhny, credited U.S.-supplied advanced long-range rocket systems known as HIMARS with helping to “stabilize the situation” through “major strikes at enemy command points, ammunition and fuel storage warehouses.”

Russia said on Monday that Defense Minister Sergei Shoigu had ordered the military to concentrate on destroying Ukraine‘s Western-supplied rockets and artillery.

European Union foreign ministers on Monday agreed to provide Ukraine with another 500 million euros ($504 million) in EU funds for arms, raising the bloc’s support to 2.5 billion euros since Moscow invaded on Feb. 24. Read full story

In the south, Ukraine is preparing a counterattack to recapture the biggest swath of territory taken since the invasion. Ukraine reported destroying Russian missile systems, communications, radar, ammunition depots and armoured vehicles in strikes in the southern Kherson region.

In the east, Ukrainian forces withdrew at the start of July from Luhansk, one of two provinces Russia claims on behalf of its separatist proxies.

Kyiv says Moscow is planning another assault to capture the last Ukrainian-held pocket of neighboring Donetsk province.

President Vladimir Putin says his assault on Ukraine is a “special military operation” to demilitarize Russia‘s neighbor and root out dangerous nationalists. Kyiv and the West call it an attempt to reconquer a country that broke free of Moscow’s rule in 1991. – Reuters

US advisers say no need for Disinformation Governance Board

STOCK PHOTO | Image by Ally Thomas from Pixabay

WASHINGTON – Advisers to the US Homeland Security Department said there was no need for the Disinformation Governance Board created by President Joe Biden’s administration earlier this year.

The recommendation from a Homeland Security Advisory Council subcommittee comes two months after Nina Jankowicz, the head of Biden’s disinformation-fighting advisory group, resigned. Read full story

The board‘s creation provoked criticism from right-wing critics of Biden and skepticism from some experts, who felt a government agency should not be responsible for tackling disinformation since the government itself is often accused of wrongdoing.

The White House did not immediately respond to a request for comment late on Monday.

The Department of Homeland Security (DHS) said at the time that the board was being “grossly and intentionally mischaracterized” and that it was not about censorship or policing speech.

DHS said the board was intended to advise the government on how to fight lies spread by, for example, foreign countries such as Russia or China, or human traffickers.

DHS said in May it was pausing the board‘s activity pending a “thorough review.” – Reuters

Russia’s Gazprom tells European buyers gas supply halt beyond its control

LONDON – Russia’s Gazprom has told customers in Europe it cannot guarantee gas supplies because of “extraordinary” circumstances, according to a letter seen by Reuters, upping the ante in an economic tit-for-tat with the West over Moscow’s invasion of Ukraine.

The Russian state gas monopoly said in a letter dated July 14 that it was retroactively declaring force majeure on supplies from June 14. The news comes as Nord Stream 1, the key pipeline delivering Russian gas to Germany and beyond, is undergoing 10 days of annual maintenance scheduled to conclude on Thursday. Read full story

The letter added to fears in Europe that Moscow may not restart the pipeline at the end of the maintenance period in retaliation for sanctions imposed on Russia over the war in Ukraine, heightening an energy crisis that risks tipping the region into recession.

Known as an “act of God” clause, force majeure is standard in business contracts and defines extreme circumstances that release a party from their legal obligations. The declaration does not necessarily mean that Gazprom will stop deliveries, rather that it should not be held responsible if it fails to meet contract terms.

Gazprom did not respond to a request for comment.

Russian gas supplies have been declining via major routes for some months, including via Ukraine and Belarus as well as through the Nord Stream 1 pipeline under the Baltic Sea.

A trading source, asking not to be identified because of the sensitivity of the issue, said the force majeure concerned supplies through Nord Stream 1.

“This sounds like a first hint that the gas supplies via NS1 will possibly not resume after the 10-day maintenance has ended,” said Hans van Cleef, senior energy economist at ABN Amro.

“Depending on what ‘extraordinary’ circumstances have in mind in order to declare the force majeure, and whether these issues are technical or more political, it could mean the next step in escalation between Russia and Europe/Germany,” he added.

Uniper, Germany’s biggest importer of Russian gas, was among the customers that said it had received a letter, and that it had formally rejected the claim as unjustified. Read full story

RWE, Germany’s largest power producer and another importer of Russian gas, also said it has received a force majeure notice.

“Please understand that we cannot comment on its details or our legal opinion,” the company said.

 

TURBINE DELAY

Gazprom cut Nord Stream 1 capacity to 40% on June 14, the date that Gazprom said in the letter to buyers would be the start of the force majeure.

Gazprom blamed sanctions for that reduction, citing the delay in the return of a gas turbine from maintenance in Canada by equipment supplier Siemens Energy ENR1n.DE.

Canada sent the turbine for the pipeline to Germany by plane on July 17 after repair work had been completed, Kommersant newspaper reported on Monday, citing people familiar with the situation.

It will take another five to seven days for the turbine to reach Russia, the report said, provided there are no problems with logistics and customs. Germany’s economy ministry said on Monday it could not provide details of the turbine’s whereabouts.

But a spokesperson for the ministry said it was a replacement part that was meant to be used only from September, meaning its absence could not be the real reason for the fall-off in gas flows prior to the maintenance.

Austrian oil and gas group OMV, however, said on Monday it expected gas deliveries from Russia through the Nord Stream 1 pipeline to resume as planned after the outage. Read full story

“Gazprom‘s motivations are uncertain, but the declaration will not have a material impact on the current landscape,” said Zongqiang Luo, gas analyst at consultancy Rystad Energy.

The European Union, which has imposed sanctions on Moscow, aims to stop using Russian fossil fuels by 2027 but wants supplies to continue for now as it develops alternative sources.

“Russia continues to use natural gas as a political and economic weapon,” said White House spokesperson Karine Jean-Pierre, adding that the Biden administration continues to work to reduce Europe’s dependence on Russian fossil fuels. “Russia’s energy coercion has put pressure on energy markets, raised prices for consumers and threatened global energy security.”

For Moscow and for Gazprom, the energy flows are a vital revenue stream as Western sanctions over Russia’s invasion of Ukraine, which the Kremlin terms a “special military operation,” have strained Russian finances.

According to the Russian Finance Ministry, the federal budget received 6.4 trillion roubles ($114.29 billion) from oil and gas sales in the first half of the year. This compares with a planned 9.5 trillion roubles for the whole of 2022.

The grace period for payments on two of Gazprom‘s international bonds expires on July 19, and if foreign creditors are not paid by then the company will be technically in default. – Reuters

US Senate Democrats urge Biden to declare climate emergency

WASHINGTON – Two US Senate Democrats urged President Joe Biden on Monday to declare a climate emergency and use the Defense Production Act to ramp up production of a wide range of renewable energy products and systems including solar panels.

Senators Sheldon Whitehouse and Jeff Merkley, speaking days after an effort to advance climate legislation failed in the Senate, also called on Mr. Biden to use the White House “bully pulpit” to draw attention to climate-related crises in the United States. Read full story

“It is time for the Biden administration to pivot to a very aggressive climate strategy,” Mr. Merkley said.

Mr. Biden said last week that he would take unspecified steps to reduce climate emissions after Democratic Senator Joe Manchin withdrew support for climate legislation that Democrats had hoped to pass before Congress leaves Washington for its August recess. In the evenly divided Senate, Mr. Manchin’s support was critical for passage of the legislation, which lacked any Republican backing.

Mr. Manchin and Senate Democratic Leader Chuck Schumer had been in talks about $300 billion in tax credits for industries including solar and wind power, carbon capture from power plants, and nuclear power, which generates virtually emissions-free electricity.

Mr. Whitehouse said he spoke to the White House about the need to move forward with aggressive executive action, but shared no details. “I’ve talked to the White House about going on offense and being aggressive and doing all the things that it is within the executive powers to do that have not so far been done,” he said.

Mr. Whitehouse said the conversation tracked his public call for initiatives ranging from tighter carbon regulations for vehicles and power plants to carbon border tariffs and potential federal litigation against the fossil fuel industry.

It was not clear, however, how far the White House could go, after the Supreme Court last month effectively restricted the Environmental Protection Agency from issuing emissions rules involving matters of major “economic and political significance.” – Reuters

Mall of Asia (MOA) Complex: A sterling landmark of disaster resilience

We all know that the SM Mall of Asia (MOA) is a popular destination for unforgettable gastronomic and recreational experiences, but did you know that the 67-hectare Mall of Asia Complex where MOA stands is engineered to withstand disasters caused by natural hazards?

The foundation of the Mall of Asia Complex was built to be safe and secure because SM Prime Holdings, Inc., one of Southeast Asia’s largest integrated property developers incorporates disaster resiliency measures in every project, with the MOA Complex as one of its biggest investments.

SM Prime collaborated with a team of local and international experts to ensure the feasibility of both water and land before the MOA complex was built and once finalized, Belgium’s renowned coastal development construction company, Jan de Nul, developed it from the ground up.

The reputable Jan de Nul made sure the terrain was stable and the complex’s roads were made resistant to earthquakes and erosion, in accordance with the National Structural Code of the Philippines and approved by both the Philippine Reclamation Authority and the National Government.

Three important disaster resiliency features were used in protecting the Complex and the coastal community of Pasay from tides and waves: One, a three-kilometer seawall built to stand against liquefaction; two, a meter-high inverted wave return to serve as defense against high waves; and three, a drainage channel to prevent floods during storm surges. This was put to test when Typhoon Pedring hit in 2011, and the Mall of Asia Complex was spared from destructive waves and flooding that submerged many other surrounding establishments.

As an added feature, both the Complex’s main road and all its structures are elevated 4 meters above the parameters set by the National Building Code. Pilings strengthened its foundation and greatly improved its soil bearing capacity.

Family fun, leisure and entertainment are the objectives behind the awe-inspiring grandeur of SM Mall of Asia, but this vision is founded on a commitment to safety and a secure foundation throughout the Complex. This is a firm philosophy of SM Prime Chairman of the Executive Committee Mr. Hans T. Sy, a champion for disaster resilience, who continuously invests in DRR and in allocating 10% of the company’s expenditure for DRR in all of SM’s infrastructures throughout the country.

“Today, disasters have become more frequent and severe. The government and the private sector must work together to find solutions for greater resiliency.  SM prime as a responsible property developer places Disaster Risk Reduction as one of its core strategies. It simply makes good business sense,” emphasizes Mr Hans Sy. He believes that not only is DRR an effective way to grow the business but it protects the communities where SM is located amid the increasing risks of climate change.

Today, the MOA Complex is a bustling realization of Mr. Henry Sy Sr.’s grand vision for it to become both a premiere integrated leisure destination with a complimentary business and lifestyle district – one of the country’s truly revolutionary mixed-use developments, and a thriving example of disaster risk reduction at work.

The next time you visit the MOA Complex – whether it is to visit the world’s largest IKEA, or to view the sunset from the top of the MOA Eye, or to simply shop and dine with your loved ones – it will be good to know that SM Prime has ensured your safety and security from the time the development was conceptualized and opened in 2006.. to today and tomorrow.

 

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Study: Is the ‘Great Resignation’ affecting SMEs, too?

As the world economy recovers from the pandemic, businesses now face another challenge — the ‘Great Resignation,’ a phrase coined in 2021 to describe the trend of millions of employees worldwide leaving their jobs.

In the Philippines, for instance, resignation was the top reason for unemployment in 2021. In its Mission: Rebooting Economic Activities through Community Engagement (RACE) program survey, the Department of Labor and Employment (DoLE) said that 85,045 of the over 2.39 million unemployed workers resigned from their work last year.

Meanwhile, in Metro Manila, the country’s capital, the labor turnover rate, which refers to the difference between hiring (accession) and the rate of job termination or resignation (separation), has implied negative growth in employment in the first half of 2021.

The Labor Turnover Survey released by the Philippine Statistics Authority (PSA) reported a labor turnover rate of -3.1% in the first quarter of last year. It continued to weaken during the second quarter at -1.2%. These numbers translate to reductions of 31 workers in the first quarter while 12 workers in the second quarter for every 1,000 persons employed in establishments.

How is this trend affecting SMEs?

According to a study released by SAP SE, the Great Resignation is real and impacting small and medium-sized enterprises (SMEs) in the Asia Pacific and Japan (APJ) region today.

The study, “Transformational Talent: The impact of the Great Resignation on Digital Transformation in APJ’s SMEs,” surveyed 1,363 SME owners and decision-makers across eight countries in the region, including Australia, India, Indonesia, Japan, Korea, New Zealand, Singapore, Thailand.

Nine in 10 (91%) SME respondents in APJ say workforce volatility, including the Great Resignation, has directly impacted their digital transformation plans. These plans are critical since 69% of SME respondents say that digital transformation is significant to their organization’s survival over the next year.

Meanwhile, four in 10 (40%) respondents agreed that more employees are resigning now than just 12 months ago, while almost two-thirds (64%) of SME respondents said they are not finding it easy to cope with the impact of the Great Resignation.

The talent crunch is impacting organizations’ ability to transform their businesses digitally. According to the study, the lack of skilled talents also ranks as the top challenge to achieving successful transformation for SMEs across APJ. It topped traditional obstacles, such as cyber security, lack of budget, and lack of understanding of available digital solutions.

“This study shows how the ‘Great Resignation’ can be an existential challenge to organizations. At SAP, we believe that having the right people is important to ensuring digital transformation success. As part of retention efforts, SMEs must invest in talent as much as they invest in innovation to thrive amid these uncertain times,” said Rudy Abrahams, vice-president, head of SAP SuccessFactors, South East Asia and interim managing director SAP Philippines.

How are SMEs mitigating the effects of the Great Resignation?

To alleviate the Great Resignation’s effects and boost their organizations’ ability to deliver digital transformation, SMEs across APJ are investing in their workforce.

Survey respondents said they are improving their financial incentives (43%) and introducing flexible working arrangements (43%) to ensure talent retention over the next 12 months. Meanwhile, four in ten (40%) SME respondents said they would provide upskilling opportunities to retain key talents.

SMEs in the region also focus on training, with more than two-thirds (68%) of the respondents noting that upskilling to support digital transformation is urgent, leading to 72% of SMEs who will focus on digital training throughout this year.

Despite these challenges, SMEs in the region remain optimistic. Having managed significant challenges over the past two years, they are looking beyond a focus on resilience. Almost half (49%) of the respondents say that their organization is highly or fully resilient in weathering the pandemic’s impact. On the other hand, 4% believe they are not resilient.

The confidence in their ability has also resulted in optimism about their growth prospects. A total of 81% of the respondents said they are moderately, very, or extremely confident in their growth over the next 12 months.

“The small and medium-sized enterprise (SME) sector accounts for over 97% of all businesses and employs over 50% of the workforce in the region according to Asia Pacific Economic Cooperation. By harnessing their growth potentials and optimism and combining it with innovations that help foster talents and a strong partner ecosystem, we can help ensure their success in the years to come,” said Mr. Abrahams.

Investree Philippines bolsters financial inclusion efforts for SMEs with new campaign

Investree, the Philippines’ pioneer crowdfunding intermediary and funding platform, celebrates its second anniversary with the launch of the 2gether Towards the Future campaign to uplift the nation’s SME sector.

A venture of F(DEV) Digital Innovations and Ventures, Inc. and Investree Singapore Pte Ltd, Investree Philippines is geared towards building a financially inclusive future for Pinoy SMEs. Toward this end, it aims to focus on enhancing the entrepreneurial journey of SMEs by forging stronger government and industry partnerships locally.

“This year’s anniversary theme is focused on building the future. That future is a financially inclusive Philippines, where financial tools are more accessible to SMEs in order to sustain and expand their businesses. We strive to preserve the company’s agile growth to keep us equipped in pursuing this vision of the future. We are excited even more with the milestones we’ve achieved thus far, and we use these to empower us to forge ahead to reach our goals in uplifting the country, most especially SMEs,” shared Investree Philippines Country Manager Alexander Capulong.

Since its 2020 launch, Investree Philippines has been providing innovative, transparent, and viable financing solutions to local businesses through collaborative opportunities with investors. Making concrete efforts in bridging the financial gap and spurring growth among small and medium enterprises (SMEs) in the country, the company has served more than 100 SMEs and funded over 400 notes as of June 2022.

After securing its SEC-granted permanent license earlier this year, Investree Philippines is now looking to expand its partnership with the Department of Trade and Industry (DTI) in pursuit of their shared mission of providing SMEs with better access to finance, technology and innovation.

In the coming months, Investree Philippines and DTI will work hand-in-hand in organizing educational campaigns through social media content, webinars and events featuring relevant industry or entrepreneurial topics. Through this stronger partnership with DTI, Investree aims to expand its reach to more underserved and under-financed SMEs in the nation.

Partnership opportunities with e-commerce platforms, payment aggregators, third-party logistics providers and other tech-based platforms will advance the vision and mission of the crowdfunding platform at the same time pursue the mandate of DTI.

In further amplification of its digital financial literacy efforts, Investree Philippines proudly joins hands with Asian Institute of Management (AIM), a well-known international management school and research institution in the country.

Through this partnership, both the platform and institution shall fulfill their goal in connecting their respective stakeholders with potential SMEs, investors and partners through collaboration among their networks. Informative programs and mutually-beneficial opportunities await to be executed, aside from generating employment under Investree Philippines’ growing team.

Investree Philippines connects businesses with institutional investors who want to help these enterprises while also securing a return on their investment. To sustain its objective to on-board more institutional investors that share the same mission of supporting SMEs and providing new avenues for development as we enter the post-pandemic era, Investree Philippines reinvents its Investor Dashboard with new features that promote convenience and better transparency.

The dashboard now allows investors to assess investment risks more seamlessly. Investors can now also see information on the approved note and the SME that they are funding. Investors can also monitor their bids and manage their portfolio on the platform.

Investree Philippines also enhanced some of its website’s features to better serve all of its stakeholders. Besides a more dynamic look and friendlier navigation, the website now hosts pages containing partnership opportunities for interested institutional investors and anchors. The new Stories page features success stories of clients and other helpful and relevant information. Furthermore, the website allows registering via mobile devices for the convenience of interested SMEs. 

From the premise of building a world where #EveryoneCanGrow, Investree Philippines has launched the Expertales, Experteam and Expertpreneur video campaign series to further boost its efforts to promote financial inclusion.

Accessible on Investree Philippines’ website and social media channels, the series tackles topics relevant to Filipino SMEs, including out-of-the-box tips from key opinion leaders (KOLs). It will also discuss Investree Philippines’s mission to create a financially inclusive space for businesses of all sizes. The final episodes of the series that rolled out this month feature the business journey of their SME partners, to inspire more entrepreneurs to forge their own path towards growth.

Economy to sustain recovery — BSP

COMMUTERS get off a jeepney along Aurora Boulevard, Quezon City, July 1. — PHILIPPINE STAR/ MIGUEL DE GUZMAN

THE PHILIPPINE ECONOMY will likely sustain its recovery momentum this year, but risks remain from elevated inflation and a possible reimposition of coronavirus disease 2019 (COVID-19) restrictions to curb a fresh surge, the central bank governor said.

Bangko Sentral ng Pilipinas (BSP) Governor Felipe M. Medalla on Monday said the economy will continue to expand amid these “challenging times.”

“On the home front, we expect the Philippine economy to sustain its recovery. We note that quarterly private consumption expenditures have surpassed the pre-pandemic levels already and continue to grow as the economy further opens up,” he said during a lecture series organized by the BSP Research Academy and the University of the Philippines School of Economics (UPSE).

In the first quarter, gross domestic product (GDP) expanded by a better-than-expected 8.3%, surpassing pre-pandemic output level as household spending rose with the easing of mobility curbs.

At current prices, household spending reached P3.86 trillion in the first quarter, higher than P3.40 trillion in the January-March period last year. This was also bigger than P3.34 trillion in the same period in 2019 before the pandemic.

At constant 2018 prices, household spending picked up by 10.1% in the first three months of the year, a turnaround from 4.8% decline in the first quarter last year.

Mr. Medalla noted the “employment picture has improved significantly from pre-pandemic levels,” providing support for future economic growth.

Philippine Statistics Authority (PSA) data showed the size of the labor force in May was approximately 49.011 million, up by 618,000 from 48.393 million in April. This brought the labor force participation rate (LFPR) to 64% of the country’s working-age population in May improving from 63.4% the previous month.

The employment rate was recorded at 94% in May, equivalent to 46.084 million employed people versus April’s 94.3%, which is equivalent to 45.631 million.

Economic managers expect GDP to grow by 6.5-7.5% this year, faster than last year’s 5.7% growth.

RISKS
The BSP chief said the domestic economy faces risks from elevated inflation, as well as a possible reimposition of restrictions to curb a surge in COVID-19 infections.

“The greater risks emanate from the policy spillovers as monetary authorities respond to inflationary pressures with hikes in policy interest rates,” Mr. Medalla said.

In a surprise move, the Monetary Board last week raised its key policy rate by 75 basis points (bps), bringing the benchmark rate to 3.25%. Rates on the overnight deposit and lending facilities were also hiked by 75 bps to 2.75% and 3.75%, respectively.   

The BSP expects inflation to remain elevated in the next few months. Inflation rose by 6.1% year on year in June, the fastest in nearly four years and exceeded the central bank’s 2-4% target band for a third straight month. The average inflation rate in the first six months is 4.4%, still below the BSP’s full-year forecast of 5%. 

“Another pocket of risk is the possible imposition of local COVID-19 restrictions amid an uptick in infections. The confluence of events poses a challenge to risk pricing and market valuations of financial assets,” Mr. Medalla said.

The Philippines is currently facing a spike in new COVID-19 cases, driven by more infectious variants, increased mobility of citizens, and waning immunity.

The Philippines posted 14,640 new COVID-19 infections from July 11 to 17, with a daily average of 2,091 cases, the Health department said on Monday. The latest daily average is 44% higher than the 1,467 average cases per day from a week earlier.

Metro Manila and most parts of the country remain under the most lenient Alert Level 1.

“The BSP remains vigilant to the possible spikes in financial instability and stands ready to employ all the available tools to maintain the orderly conduct of transactions in our financial system and in the broader economy,” Mr. Medalla said.

The Monetary Board’s next policy meeting is on Aug. 18. — K.B.Ta-asan 

Elevated inflation may push central bank to further hike rates

Fuel retailers will roll back the pump prices of petroleum products on Tuesday. — PHILIPPINE STAR/ WALTER BOLLOZOS

RISING INFLATION may prompt the Bangko Sentral ng Pilipinas (BSP) to consider more rate hikes this year, according to Fitch Solutions Country Risk & Research.

At the same time, the central bank should make sure its efforts to tame inflation won’t hurt the Philippines’ post-pandemic recovery, Moody’s Analytics said.

“The central bank is likely to continue tightening to rein in inflation, which will likely stay well above the BSP’s target range throughout the rest of 2022,” Fitch Solutions said in a July 15 report.

The think tank raised its average inflation forecast for the Philippines to 5.6% in 2022 from 5.1% previously. This is above the BSP’s 5% average inflation forecast this year.

Inflation rose by 6.1% year on year in June, the fastest in nearly four years and exceeded the central bank’s 2-4% target band for a third straight month. The inflation rate averaged 4.4% in the first six months.

With inflation to remain elevated, Fitch Solutions said it now expects the BSP to raise rates by another 100 basis points, which will take the benchmark rate to 4.25% by end-2022.

The Bangko Sentral ng Pilipinas (BSP) unexpectedly tightened its monetary policy by 75 basis points (bps) on July 14, bringing the benchmark rate to 3.25%. Rates on the overnight deposit and lending facilities were also hiked by 75 bps to 2.75% and 3.75%, respectively.

“In addition to inflation, an aggressive tightening cycle in the US will put further pressure on the BSP to hike aggressively, in order to preserve financial and currency stability,” Fitch Solutions said, adding that rate hikes would help offset the depreciatory impact of “hot money” outflows.

The US Federal Reserve is widely expected to raise interest rates by 75-100 bps at its July 26-27 meeting, after inflation soared to 9.1% in June.

Meanwhile, Moody’s Analytics Associate Economist Sonia Zhu said they expect another two rounds of rate hikes this year, bringing the key policy rate to above 4%.

“However, hiking interest rates aggressively can be a double-edged sword. On one hand, higher interest rates can take some steam off rebounding domestic demand and cool inflation. On the other side, higher rates risk a hard landing if policy makers overcompensate as households and businesses pull back spending and investments,” Ms. Zhu said in a July 17 note.

“The BSP will need to strike a fine balance, as it will not want to stifle the post-pandemic growth as it seeks to keep inflation under control,” she added.

For Fitch Solutions, the Philippine economy’s “resilience” will give the BSP space to accelerate policy tightening.

The think tank forecasts gross domestic product (GDP) growth for the Philippines at 6.1% this year, below the government’s 6.5-7.5% target.

Moody’s Analytics, on the other hand, is hopeful the Philippine economy will grow by “the low 7% range” this year.

The Philippine Statistics Authority is scheduled to release July inflation data on Aug. 5, and second-quarter GDP data on Aug. 9. — Keisha B. Ta-asan

BSP-approved foreign loans jump 26% in second quarter

US dollar banknotes are seen in this photo illustration taken Feb. 12, 2018. — REUTERS

THE PHILIPPINE central bank approved $3.54 billion in external borrowings by the government in the second quarter in order to fund its ongoing pandemic response and major infrastructure projects.   

In a statement, the Bangko Sentral ng Pilipinas (BSP) said approved public sector borrowings in the April to June period were 26% higher than the $2.80-billion loans in the same period of 2021.

Quarter on quarter, the approved foreign loans dropped by 26% from the $4.8-billion greenlit in the first quarter of 2022.   

The BSP said the government borrowings included a Japanese yen-denominated bond issuance amounting to $513.41 million as well as three project loans worth a total of $2.16 billion. It also included three program loans equivalent to $869.72 million.

“These borrowings will fund the National Government’s general financing requirements ($513.41 million), COVID-19 (coronavirus disease 2019) pandemic response and recovery (i.e., vaccine procurement and continuing requirements in light of the pandemic), among others ($869.72 million), bridge projects ($405.99 million), and a railway project ($1.75 billion),” the central bank said.

Under the 1987 Constitution, the Monetary Board is mandated to give its prior approval for any foreign loan agreement entered into by the National Government.   

“The BSP promotes the judicious use of the resources and ensures that external debt requirements are at manageable levels, to support external debt sustainability,” it said.   

As of end-March, the Philippines’ external debt hit a record $109.8 billion, up by 3.1% from the $106.4-billion level as of end-December 2021.

“The rise in the debt level during the first quarter of 2022 was due to net availments of $3.5 billion, mainly by the National Government and private nonbanks,” the BSP said in June.

Public sector external debt rose by $3.4 billion to $67.4 billion as of end-March, from $63.9 billion as of end-December 2021. Around $58.8 billion or 87% were National Government borrowings while the rest were loans of government-owned and -controlled corporations, government financial institutions and the BSP.

On the other hand, private sector debt slipped to $42.4 billion as of end-March, from $42.5 billion as of end-2021.

The Philippines’ debt stock remained largely denominated in US dollar (55.4%).

The government incurred $2.3 billion in loans from official creditors to support its COVID-19 pandemic response programs and infrastructure projects. It also raised $2.3 billion from the issuance of global bonds.

The government borrows from local and foreign sources to plug its budget gap. — Keisha B. Ta-asan

Three years ‘enough’ for telcos to cover all areas 

BW FILE PHOTO

By Arjay L. Balinbin, Senior Reporter

A THREE-YEAR period is enough for fixed and mobile internet service providers to cover all unserved and underserved areas in the Philippines, according to DITO Telecommunity Corp., agreeing with the proposed measure that seeks to improve internet service and access across the country.

“Three years is enough. For us in DITO, covering the underserved is already part of our government commitments,” DITO Chief Administrative Officer Adel A. Tamano told BusinessWorld in a phone message on Monday, when asked to comment on Senator Mary Grace S. Poe-Llamanzares’ Senate Bill No. 329, or the Better Internet Act.

Ms. Poe’s bill wants the National Telecommunications Commission to require all public telecommunications entities, or telecommunications companies that require a Congressional franchise, and internet service providers, which operate without a franchise, to extend and expand the service coverage of fixed and mobile internet service in all unserved and underserved areas “within three years from the effectivity of the measure.”

“The two other major telcos have had two decades to do just that and with more funding available,” Mr. Tamano said.

Globe Telecom, Inc. and the PLDT group were also asked to comment.

Under the bill, service providers are encouraged to provide a higher internet speed to their customers. There is no minimum internet speed requirement for free internet service.

Eastern Communications, a broadband provider jointly owned by PLDT, Inc. and Globe Telecom, said it agrees with the intention of the bill to provide underserved and unserved areas around the Philippines, “which has always been part of our company’s plans.”

“We are fervently working on our regional expansion, providing connectivity to areas across Visayas and Mindanao, recently reaching areas such as Butuan, Naga, Bacolod, Sorsogon, and Legazpi, among other areas,” Eastern Communications Co-Coordinator Aileen D. Regio said in an e-mailed reply to questions on July 15.

“We also believe in the thrust that reliable internet connection is crucial for the advancement of Filipino businesses and everyday life,” she added.

Sought for comment, Alliance Towers Corp. President and Chief Operating Officer Alvin D. Tolentino said the three-year period “is very challenging coming from where we are now.”

“Unserved and underserved areas need to be defined. We have a lot of areas where it is sparsely populated. Are they going to be covered, too?” he said in a phone message on July 14.

Ms. Poe’s bill seeks to require the Department of Information and Communications Technology to identify unserved and underserved areas in the Philippines.

The bill directs service providers to adhere to minimum standards for connection, reception, pricing, and billing practices to uphold and protect consumer rights.

“The internet has become a necessity as indispensable as electricity and water. We rely on it for health, education, business, governance and more,” Ms. Poe said.

In a related development, fiber internet provider Converge ICT Solutions, Inc. announced on Monday that it won the Ookla Speedtest Award for “Top-Rated Fixed Network in the Philippines for the first half of 2022, reflecting the results from consumer-initiated ratings during the six-month period.”

The Top-Rated Awards is part of the semi-annual Speedtest Awards presented by Ookla, the network testing company behind Speedtest.

“Last June, the company upgraded the speed of its base FiberX internet plan for free, from 50 megabits per second (Mbps) to 100Mbps, making it faster than the country’s median average,” Converge said in an e-mailed statement.

Hastings Holdings, Inc., a unit of PLDT Beneficial Trust Fund subsidiary MediaQuest Holdings, Inc., has a majority stake in BusinessWorld through the Philippine Star Group, which it controls.

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