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Local stocks sink as new virus cases climb

Philippine Stock Exchange index

A surge in new cases of coronavirus disease 2019 (COVID-19) sent Philippines shares tumbling on the last trading day of the year, analysts said on Friday when the market also took in news that existing mobility restrictions will be unchanged until mid-January.

The Philippine Stock Exchange index (PSEi) plunged 211.93 points or 2.88% to close the week at 7,122.63, while the broader all shares index fell by 65.26 points or 1.68% to 3,818.12.

“The local bourse declined on the last trading day of the year due to the surge in COVID-19 daily cases with a positivity rate of 6.6%, higher than the World Health Organization’s benchmark of below 5%,” Philstocks Financial, Inc. Senior Research and Engagement Officer Claire T. Alviar said in a Viber message.

On Thursday, the Philippines recorded 1,623 new COVID-19 cases, the highest since Nov. 21. On the same day, the government announced that the whole country will remain in Alert Level 2 or the second most relaxed quarantine category.

The Health department has so far announced four confirmed patients positive of Omicron, the latest coronavirus variant.

Ms. Alviar also noted that the net market value turnover was lower than the year-to-date average of P7.4 billion.

Value turnover inched up P5.38 billion with 623.43 million issues traded, from the P5.23 billion recorded on Wednesday with 1.75 billion shares switching hands.

“The PSEi also lowered as the country’s Alert Level 2 [is] maintained until mid-January 2022 as a matter of prudence to better deal with the threat of the Omicron variant, thereby making Alert Level 1 not possible for now,” Rizal Commercial Banking Corp. (RCBC) Chief Economist Michael. L. Ricafort said in a Viber message.

Mr. Ricafort said that had it not been for the Omicron variant, the alert level would have been eased.

Meanwhile, all sectoral indices declined on the last trading day of the year led by holding firms, which dove down 250.08 points or 3.54% to 6,807.27.

Financials declined by 54.74 points or 3.29% to 1,606.17; services retreated 47.14 points or 2.31% to 1,986.37; industrial lost 158.82 points or 1.50% to 10,404.09; property decreased 39.83 points or 1.22% to 3,219.68; and mining and oil dropped 31.61 points or 0.32% to 9,601.70.

Foreigners turned sellers with P413.64 million in net outflows, a reversal of the P568.3 million logged in net purchases on Wednesday. Trading was closed on Thursday in observance of Rizal Day, a national holiday.

The market closed earlier on Friday as Filipinos prepare for New Year’s Eve celebrations.

Decliners outnumbered advancers, 111 against 73, while 49 names were unchanged.

Diversified Securities, Inc. Equity Trader Aniceto K. Pangan said that with the anticipated surge in COVID-19 cases in the country, negative sentiment will prevail in the market and may break the 7,000 level. — Marielle C. Lucenio

Air quality in Manila worsens over holidays, returns to pre-pandemic levels

PHILIPPINE STAR/ MIGUEL DE GUZMAN

By Patricia B. Mirasol 

Satellite data suggests that the air quality in the capital worsened this Christmas season, reverting to pre-pandemic levels.   

According to STAMINA4Space, a Philippine space research program, emission of NO2, a gaseous pollutant from cars that burn fossil fuels, and aerosol optical depth (AOD) are back to 2019 levels. Aerosols refer to particles suspended in the atmosphere. It includes volcanic ash, urban haze, and factory pollution.  

The increase in these pollutants, which began to climb in June, coincides with the loosening of restrictions in the capital and the volume of vehicular traffic in Metro Manila returning to pre-COVID days. 

It also comes at a time when mobility restrictions have been eased, spurring economic managers to raise the country’s GDP growth projection to 5.5%, up from 4% in August.  

“The really nice thing is that the market has stabilized even with the short-term sell-off that showed up in the tail end of November, so hopefully we can continue at this pace,” said Lawrence C. Lee, president and chief executive officer of global trading firm CTS Global Equity Group. 

“I believe that 2022 is our bounce back year. Hospitals are empty with regards to COVID-19 cases and, if we continue in this trajectory, businesses will also follow suit,” Mr. Lee told BusinessWorld in a Dec. 27 e-mail, prior to the holiday surge of coronavirus cases. 

AIR QUALITY MANAGEMENT  

The local governments of Parañaque and Pasig have been partnering with Clean Air Asia since 2019 to improve the air quality management in their cities.  

The non-governmental organization, in collaboration with global logistics company United Parcel Service (UPS), conducted learning sessions for Parañaque’s government employees, barangay representatives, and college students to build their capacity in implementing different components of air quality management.   

“The balance between clear skies and the effect of economic activity is a tough challenge for businesses and every Filipino who is concerned about the environment,” said Christopher Buono, managing director of UPS Philippines in an e-mail to BusinessWorld. 

Businesses can continue to thrive by putting sustainability practices such as waste segregation and the use of biodegradable materials into practice in the workplace, he added. 

“I have friends and know of UPS employees who recycle their packages delivered from online shops and have ventured into urban gardening,” he said. “Management must walk the talk on sustainability and lead by example. … Everyone is hopeful that the economy will improve, and I am confident that business leaders will take more action that support eco-friendly activities.”  

THREAT TO HUMAN HEALTH

Clean Air Asia is also developing a Clean Air Action Plan with Pasig City’s government in order to identify air pollution sources and mobilize resources to address them. Pasig, too, has an office that develops sustainable forms of transportation like a bike-sharing system. Emissions from mobile sources (including motor vehicles) is a major contributor to air pollution in the Philippines.

According to a landmark study released this year by the World Health Organization, “air pollution is now recognized as the single biggest environmental threat to human health.” It added that “air quality has … generally deteriorated in most low- and middle-income countries, in step with large-scale urbanization and economic development.”

The World Economic Forum in 2018 said that conservation and development are not an either-or proposition. Striking this balance, however, requires mutual cooperation and fast action.

Thai farmers fear loss of land to mega industrial zone

UNSPLASH

BAN PHO, Thailand — Ubon Chansoi has lived in a modest wooden home in rural Thailand for about 60 years, farming and rearing fish for a living that is now threatened by an ambitious plan to turn agricultural land in her village in Chachoengsao province into an industrial zone.  

Chachoengsao is one of three provinces covered by the Eastern Economic Corridor (EEC) project that includes several industries, a high-speed railway line, an airport and upgrades to two deep-sea ports in an area of about 1.3 million hectares.  

The $45 billion EEC project is a centerpiece of the Thai government’s efforts to boost economic growth and encourage investment with speedier approvals, tax breaks, and special visas for investors, as well as land leases for up to 99 years.  

But for tens of thousands of villagers who have lived in the three EEC provinces of Chachoengsao, Chon Buri and Rayong for generations, there are few benefits, and many will lose their land and homes, activists warn.  

“The government only cares about business — it is giving away our land to big companies,” said Ms. Ubon, 73, gesturing to the trees and the ponds teeming with tilapia and catfish.  

“For us, this is our life and our livelihood, and it will be very difficult to adjust to a new place and a new life if we have to leave,” she told the Thomson Reuters Foundation.  

Thailand’s tourism-reliant economy, Southeast Asia’s second largest, suffered its deepest slump in over two decades last year due to the impact of the coronavirus pandemic, and authorities are keen to lure back local and foreign investors.  

The EEC is a key part of the plan, with authorities expecting at least $10 billion in investments this year.  

But residents say authorities did not consult with them on the plans, and that the project will damage the environment and livelihoods that rely largely on farming and fishing.  

“There were some public hearings, but many were held far away, or were online, or we were not informed. Some had a lot of police, making it difficult for us to voice our concerns,” said Sarayut Sonraksa, 40, a farmer in Ban Pho village in Chachoengsao.  

“We are already seeing more flooding, more coastal erosion, and waste being dumped, and we are worried it will get worse and affect the land and water even more,” said Mr. Sarayut, who has taken the lead in campaigning against the EEC in his village.  

More than 40 public hearings were held to seek residents’ opinions, said Tasanee Kiatpatraporn, a deputy secretary general in the Eastern Economic Corridor Policy Committee (EECPC), a state agency.  

Further, forested areas and “good agricultural land” are being maintained, and the EEC promotes industries engaged in “activities which employ advanced and modern technologies, innovations, and are environmentally friendly,” she added.  

‘SECOND-CLASS CITIZENS’  

Across Asia, governments have embraced so-called special economic zones (SEZs) to spur growth and generate jobs. These are generally governed by special laws related to land use and environmental clearances, and offer tax incentives.  

Many SEZs have, however, fallen short of targets on investment, revenue and jobs, and have instead caused mass displacements, as well as social and environmental impacts, according to researchers.  

Thai SEZs date back to the 1970s, and the country has more than 50 large industrial estates, with a majority located in the eastern region, including local and foreign auto manufacturers, petrochemical and electronic companies.  

The military-led government that took charge after a coup in 2014 has made SEZs key to its economic policy, even as protests over evictions from farms and forests have risen.  

The Eastern Economic Corridor bill was passed in 2018, with provisions to allow industrial development on agricultural land, and with less rigorous environmental-impact assessments and waste management rules, according to activists.  

“The project has a top-down approach that minimized public participation and engagement of local people, who do not get any benefits from the project,” said Somnuck Jongmeewasin, research director at EEC Watch, an advocacy group.  

“EEC projects are being developed without respect for community rights and are leaving local communities, especially poor people, behind,” he said, adding that people who live in the EEC zone are “downgraded to being second-class citizens, alienated in their own homeland.”  

An administrative court last year ordered officials to follow local town planning and zoning regulations.  

But authorities have continued to ignore public participation requirements in meetings on town planning and re-zoning, Mr. Somnuck said.  

YOUNGER GENERATION  

In the three provinces of the EEC, land prices have surged as agricultural land is designated for industry, and the project is promoted as a key part of the Belt and Road Initiative, China’s massive global infrastructure push.  

Some residents have sold their land and moved away as it becomes harder to farm and rear fish. Villagers on leased land risk becoming landless and being left without any compensation.  

Ms. Ubon, who has leased her land for several decades, says her landlord is supportive of her, but she cannot be sure for how long. Her daughter has set up a small business making traditional Thai sweets as a backup plan.  

“I’m already old; I won’t live very long. But what about the younger generation — where will they go if we lose our land?” said Ms. Ubon.  

Ms. Ubon and others are encouraged by a victory earlier this month for campaigners against an industrial zone in Thailand’s southern province of Songkhla.  

Authorities agreed to put the project on hold to do a strategic environmental assessment, and set up a new panel to look into concerns after protests.  

“What they have achieved is remarkable — the entire community came together, and never gave up. We have a lot to learn from them,” said Mr. Sarayut.  

Mr. Sarayut has received death threats for his opposition, and a village headman was killed some years ago. A lawsuit against the EEC is being heard in court.  

“It is our last option,” said Mr. Sarayut.  

“It’s not that we don’t want development, but we want it to be done in a way that does not hurt us or the environment.” — Rina Chandran/Thomson Reuters Foundation

Experts, governors warn of US Omicron ‘blizzard’ in weeks ahead

A woman takes a coronavirus disease test at a pop-up testing site as the Omicron coronavirus variant continues to spread in Manhattan, New York City, U.S., Dec. 27, 2021. — REUTERS

WASHINGTON — US health experts on Thursday urged Americans to prepare for severe disruptions in coming weeks as the rising wave of coronavirus disease 2019 (COVID-19) cases led by the Omicron variant threatened hospitals, schools, and other sectors impacting their daily lives.  

The warning came as the United States reached a record high in COVID-19 cases, while federal officials issued more travel warnings and reportedly prepared to authorize booster shots for 12 to 15-year-olds next week.  

For the second day in a row, the United States had a record number of new reported cases based on the seven-day average, with more than 290,000 new infections reported each day, a Reuters tally showed.  

At least 18 states and Puerto Rico have set pandemic records for new cases, according to the tally. Maryland, Ohio and Washington, DC, also saw record hospitalizations as overall US COVID-19 hospitalizations rose 27%.  

The surge comes amid increased holiday travel, with New Year’s celebrations still to come, and as schools grapple with students’ return to classrooms following winter breaks.  

“We are going to see the number of cases in this country rise so dramatically, we are going to have a hard time keeping everyday life operating,” Dr. Michael Osterholm, an infectious disease expert at the University of Minnesota, told MSNBC.  

“The next month is going to be a viral blizzard,” he said. “All of society is going to be pressured by this.”  

Dr. Anthony Fauci, the nation’s top infectious disease official, on Wednesday said cases will likely rise throughout January, a warning echoed by the governor of Louisiana, where hospitalizations have more than tripled in the past two weeks.  

“We are still at the very beginning of this current surge,” John Bel Edwards told a news conference on Thursday. “January is going to be very, very challenging.”  

US health officials have said early data show Omicron appears less severe but have continued to push vaccinations, masks and physical distancing. The Centers for Disease Control and Prevention (CDC) has also issued new guidelines shortening isolation and quarantine periods, which have been criticized by some disease experts and health care workers.  

US health regulators plan to approve a third vaccine dose for 12 to 15-year-olds next week, according to media reports. Boosters are already approved for those 16 and older.  

With testing shortages and breakthrough cases, experts warn the surge would stress hospitals and businesses, although some state and city leaders said on Thursday they would keep schools open for children returning from winter break next week.  

“We are committed in Arkansas to in-class instruction,” Arkansas Governor Asa Hutchinson said. “It’s so important to our future, to our students, to their mental health.”  

Rising hospitalizations as healthcare workers are sidelined with their own COVID-19 infections is also concerning, as are fewer effective therapeutics, Dr. Peter Hotez, an infectious disease expert at Baylor College of Medicine, told CNN.  

A rise in hospitalization of children across the United States has also fueled concerns.  

Already, 825,663 people have died in the United States from COVID-19 since early 2020, data showed, with the latest wave of hospitalizations driven by those not vaccinated.  

President Joseph R. Biden, Jr., this month announced new plans to combat Omicron, but some experts have criticized the measures as arriving too late.  

‘HUNKER DOWN’  

Cruise operators took a hit on Thursday after the CDC warned people to avoid cruises regardless of their vaccination status due to onboard outbreaks, a potential drag on an economy that otherwise appears to be holding up.  

While airline travel has been widely disrupted, holiday sales were strong, new claims for state unemployment benefits fell last week to their lowest level of the pandemic, and US stocks hit record highs on Thursday.  

How schools handle the surge is also key, especially for working parents. US Education Secretary Miguel Cardona told MSNBC that schools should stay open and that federal funds were available for staffing and testing to help make that happen.  

“We can’t shut down our city again,” New York City Mayor-elect Eric Adams said while unveiling his plan on Thursday to fight COVID-19 while keeping the country’s most populous city —  including its schools — open for business.  

Conditions should improve after January, as testing shortages ease and recently approved medicines become more widely available, experts said.  

“We do have light at the end of the tunnel,” said University of Minnesota’s Mr. Osterholm. “But for right now, you’re going to have to hunker down.”  

In Arkansas, which on Thursday reported a record high of 4,978 new cases, Mr. Hutchinson said the state would make 1.5 million at-home tests available to residents, a move he hoped would free up health care workers to staff hospitals.  

West Virginia Governor Jim Justice urged the relatively high proportion of unvaccinated people in his state to get inoculated but said he was against mandates.  

If the situation worsens “and a bunch more people die, you’ll have a run on the bank as far as people running to get vaccinated or to get their booster shots,” Mr. Justice said. —  Susan Heavey/Reuters

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Furniture giant IKEA raises prices as supply chain woes persist

STOCKHOLM — The world’s biggest furniture brand IKEA is raising prices by an average of 9% as it faces increasing costs in transport and raw materials, the owner of most of its stores worldwide said on Thursday.  

IKEA had previously said it was leasing more ships, buying containers and re-routing goods between warehouses to mitigate supply chain disruptions but said it was now having to pass the costs onto customers, as it expected the turbulence to continue.  

Ingka Group said prices would go up around 9% on average across its markets, with local variations reflecting different inflationary pressures, including commodity and the supply chain issues.  

“Unfortunately now, for the first time since higher costs have begun to affect the global economy, we have to pass parts of those increased costs onto our customers,” retail operations manager Tolga Öncü said.  

“IKEA continues to face significant transport and raw material constraints driving up costs, with no anticipated break in the foreseeable future,” the group said in a statement, adding it expected disruptions to continue “far into 2022.”  

Ingka Group has seen strong demand during the pandemic as people stayed at home more.  

It operates through a franchise system, with Ingka the main franchisee to brand owner Inter IKEA with 392 stores including city stores, and 73 smaller store formats. — Reuters

Myanmar court jails celebrities who supported democracy protests 

Actor-director Lu Min. Image via @luminn_official/Instagram

A court in military-ruled Myanmar jailed three prominent show business figures for three years each on Thursday for their part in protests against a February coup, media reported.  

The military overthrew an elected government led by Aung San Suu Kyi on Feb. 1, triggering protests and turmoil that is still unfolding.  

In the early days of the protests, huge crowds gathered in cities and towns with many actors and singers using social media to voice their support and some speaking at rallies.  

Among those who took part were high-profile actor couple Pyay Ti Oo and Eaindra Kyaw Zin, who were arrested in April and charged under a section of the penal code that outlaws the spreading of dissent.  

A court in the main city of Yangon jailed them for three years with hard labor, the Mizzima news agency and the BBC’s Burmese-language service reported.  

Reuters was not able to contact the court or the couple’s lawyers for comment. A spokesman for the military junta did not answer a call seeking comment.  

Famous actor-director Lu Min, who has starred in more than 1,000 films, received the same sentence on the same charge, Mizzima and the BBC reported. Reuters was not able to contact his lawyer.  

Another celebrity, male model Paing Takhon, was sentenced to three years in jail with hard labor on Monday, according to his lawyer.  

Myanmar has a thriving arts and entertainment scene. Much of the theatre and music is rooted in traditional themes but Burmese-language cover versions of Asian and Western pop songs are hugely popular and young Myanmar singers and actors have big followings.  

At least 1,377 people have been killed and more than 11,000 jailed in a crackdown on protests and armed opposition since the coup, according to a tally by the Association for Assistance of Political Prisoners.  

The military government disputes those numbers and says soldiers have also been killed in clashes. — Reuters

Smart livelihood programs boost farmers, coops in 2021

PLDT’s wireless arm Smart Communications, Inc. (Smart)’s sustainable livelihood initiatives for the agriculture and cooperative sectors have benefited more than 6,500 farmers and over 80 cooperatives nationwide in 2021 via the Buy Local, Digital Farmers Program (DFP), and Smart Coops programs.

Championing corporate RICEponsibility, Smart’s Buy Local campaign is a farm-to-market initiative ensuring small-scale farmers access to capital funding and guaranteed markets, including PLDT and Smart’s employees, partner companies with rice subsidy programs, and the general public.

 

As of end 2021, BuyLocal generated PhP8 million in gross sales for 4,208 farmers and has raised more than Php 330,000 for the farmers’ sustainability fund as capital support for 72 farmers. Crops purchased from 14 farming communities in Luzon were donated by PLDT and Smart and its employees and partners to community pantries, relief operations, and to vulnerable families through a community-based feeding program in partnership with Coca-Cola Foundation Philippines and Philippine Business for Social Progress. BuyLocal enabled vegetable farmers struggling with oversupply to sell their surplus to employees and companies and provided additional income opportunities to marginalized groups such as an Aeta community from Zambales and a group of women seamstresses in Quezon City.

 

“Ako po’y nasisiyahan at lalong ginaganahan dahil po kinakampanya ng Buy Local ng Smart ang aming mga produkto,” said Patricio Castillo, a rice farmer from Balungao, Pangasinan.

To contribute to the government’s goal of increasing livelihood opportunities of farmers and helping improve the competitiveness of coops through technology, Smart continued its rollout of DFP trainings in partnership with the Department of Agriculture – Agricultural Training Institute (ATI) to train farmers on smartphone basics, internet use, social media marketing, e-commerce transactions, and basics of digital wallet apps like PayMaya. Through its Smart Coops program, Smart introduces a suite of digital solutions and additional income opportunities to its partner cooperatives nationwide.

With over 100 digital literacy training sessions conducted in 2021, Smart trained over 4,000 participants, including over 2,100 farmers and youth, 2,100 coop members, and around 100 agri-extension workers. Smart also recently closed two partnerships with Aboitiz Foundation and financial services firm Sun Life Philippines for Smart Coops.

“As we implement the whole-of-nation approach in the sector, this collaboration with Smart is truly instrumental in ensuring that our farmers and fishers are adaptive to the changing times. There is no more denying that we are really going digital, and we must, in all our capacity, assist our farmers and fishers in such change,” said Dr. Rosana P. Mula, OIC of DA-ATI.

These initiatives to empower Filipino farmers and cooperatives through technology are part of the PLDT Group’s long-standing commitment to help attain the UN’s Sustainable Development Goals, particularly Goal 1 – No Poverty and Goal 8 – Decent Work and Economic Growth. 

 


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Laying the foundation for a stronger electricity market in 2022

The Independent Electricity Market Operator of the Philippines (IEMOP), with persistent efforts of stakeholders and trading participants, accomplished a number of significant milestones this year. These milestones are all aimed in making the electricity market better for the Filipino consumers.

On Feb. 26, 2021, the Energy Regulatory Commission (ERC) lowered the threshold for the Retail Competition and Open Access (RCOA) to 500kW-749kW level. Upon its declaration, IEMOP, as the Central Registration Body for RCOA, immediately took actions to prepare for the increased volume of new contestable customers. Moreover, IEMOP also enhanced its processes to shorten the timeline for RCOA switching as mandated by the Department of Energy (DoE). As such, IEMOP commenced its new seven-day switching timeline on July 25 of this year.

In a pioneering step to make the Wholesale Electricity Spot Market (WESM) more accurate and efficient, the Enhanced WESM Design and Operations (EWDO) project or the 5-minute Market was launched on June 26, 2021. With almost six months in to the EWDO, the industry has observed efficiency gains and improvements in market operations such as better forecasting, lesser intra-hour dispatch deviations, simpler settlement mechanisms, among others.

In addition, to fully implement the Renewable Energy Act of 2008, IEMOP, with the policies and rules promulgated by DoE and ERC, launched the Green Energy Option Program (GEOP) last Dec. 3, 2021. This program provides consumers an option to source their electricity supply from renewable energy resources, such as biomass, solar, wind, geothermal, ocean energy, and hydropower.

This year, IEMOP also finally obtained a Ruling from the Bureau of Internal Revenue (BIR) on the proper tax treatment of WESM transactions as well as the tax regime applicable to the Market Operator. These have been deemed as unresolved issues since the inception of the WESM in 2006. Since 2020, IEMOP has been constantly coordinating with the stakeholders, DoE, BIR, and Department of Finance (DoF) for the promulgation of the Ruling. Upon receipt of the BIR Ruling on September this year, IEMOP immediately initiated stakeholder engagements and briefings with all affected sectors of the industry through their representative organizations to prepare its systems and processes for the full implementation of the Ruling.

In the coming year, IEMOP is determined to sustain its momentum in implementing innovative market solutions. IEMOP is now inching ever closer to the full integration of WESM in Mindanao, which is expected to commence upon the energization of the Mindanao-Visayas Interconnection. Meanwhile, IEMOP is set to carry out the Revised Central Scheduling guidelines for Mindanao issued by the DoE this December.

IEMOP is also cognizant that WESM is primarily designed as a co-optimized market for energy and reserves. Reserves or Ancillary services are commodities which are necessary to maintain a safe and reliable delivery of power from generators to customers. In this context, IEMOP launched its Mock Operations Program (MOP) as a crucial preparatory activity for the Reserve Market. Moreover, the requisite rules changes have already been drafted and filed for the eventual approval of the DoE. In parallel, IEMOP is polishing its systems and processes for the full integration of reserves in the WESM which is expected to commence in 2022.

There are other equally relevant market developments IEMOP is currently preparing and studying. However, IEMOP recognizes that these endeavors would not be possible without the support of the DoE, ERC, and the trading participants. Thus, IEMOP makes serious efforts to be proactive in engaging with government entities and its key stakeholders to fully understand their directives, intent, and needs.

In concluding 2021, IEMOP reiterates its commitment to its stakeholders — to ensure a competitive, efficient, reliable, and transparent electricity market in service to the Filipino people. — Andrea May T. Caguete

 


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Duterte signs P5-T budget into law

PHILIPPINE STAR/ MICHAEL VARCAS
A woman gets a booster shot in Marikina on Nov. 25. — PHILIPPINE STAR/ MICHAEL VARCAS

By Alyssa Nicole O. Tan

PRESIDENT Rodrigo R. Duterte on Thursday signed into law the P5.024-trillion national budget — the country’s largest ever — for 2022, as the government aims to drive the economy’s recovery from the coronavirus pandemic.

The 2022 national budget is equivalent to 21.8% of the gross domestic product (GDP) and also 10% higher than this year’s P4.506-trillion budget. The government set a 7-9% GDP growth target for 2022.

About a fifth or P1.019 trillion of the budget will go to capital outlays, which includes infrastructure spending, budgetary support for government-owned and -controlled corporations, and capital transfers to local government units (LGUs).

“This (budget) will also cement this administration’s legacy of real change for future generations guided by the three main pillars of building resiliency amidst the pandemic, sustaining the momentum towards recovery and continuing the legacy of infrastructure development,” Mr. Duterte said after signing Republic Act 11639 during a ceremony in Malacañang on Thursday.

The President also expressed concern the coronavirus disease 2019 (COVID-19) Omicron variant, which is now spreading rapidly around the world, will once again put a strain on state coffers.

“I just hope that we will cope… (I’m worried) the budget will run out to respond to the new challenge of a new variant of the COVID-19,” he said, adding that Congress may need to pass laws to address this looming problem.

“It’s not a matter of predicting how many will die, but rather preparing for how many people that will be affected by this (variant).”

Budget Undersecretary Tina Rose Marie L. Canda said she agreed with the President’s sentiments. “It is scary because the budget was crafted pre-Omicron.”

Asked which items were vetoed, Ms. Canda only said: “Maybe tomorrow, when we see the final version.” A copy of the veto message was not made available as of press time.

Under the signed law, the education sector will receive the largest allocation with P788.5 billion, up 5% from this year’s budget.

The Department of Public Works and Highways will get the second-biggest budget with P786.6 billion, followed by the Department of Health (DoH), including the Philippine Health Insurance Corp., with P268.4 billion.

A total of P88.9 billion was allocated for health facilities and the procurement of drugs, medicines, and vaccines.

The government will spend up to P48.2 billion to buy COVID-19 vaccine boosters — of which P2.8 billion is under the DoH budget and P45.4 billion under unprogrammed allocations. Unprogrammed allocations may be tapped if there are excess revenue collection, new revenue sources or approved loans for foreign-assisted projects.

Also, P983 million will go to the establishment of the Virology Science and Technology Institute of the Philippines to help the government study and address emerging viruses. The Philippine Genomic Information Resource Hub was also given P200 million to sustain its genomic bio surveillance efforts.

The national budget also includes P51 billion for the Special Risk Allowance of health workers.

Senator Juan Edgardo M. Angara, who chairs the Senate Finance Committee, said key agencies’ budgets were “beefed up to prepare for potential outbreaks and any assistance that may be needed by our countrymen.”

“Legislators recast the budget in the second half of the year since initially it did not foresee or anticipate the possibility of new variants like Delta and now Omicron, and we prepared for worst-case scenarios,” he said in a Viber message to BusinessWorld.

The 2022 budget included funding to support displaced workers affected by the COVID-19 pandemic — P26.5 billion for the Tulong Panghanapbuhay sa Ating Disadvantaged or Displaced Workers Program, and P52.7 million for the Government Internship Program.

The Pantawid Pamilyang Pilipino Program was also given a P107.7-billion budget, the Protective Services for Individuals and Families in Difficult Circumstances with P18 billion, and the Sustainable Livelihood Program with P4.7 billion.

Budgetary support for priority education programs included the Basic Education Learning Continuity Plan with P14.7 billion to cover the development, reproduction, and delivery of learning modules, and the Computerization Program with P11.8 billion for the procurement of technological equipment.

The 2022 national budget adheres to the recent Supreme Court ruling on the Mandanas-Garcia case wherein the total National Tax Allotment share of local government units for next year stands at P959.04 billion, higher by 38% than its shares this year.

Also on Thursday, Mr. Duterte signed Republic Act No. 11640 which effectively extends the validity of the 2021 General Appropriations Act, the first pandemic-era national budget, until the end of next year.

Under the measure, appropriations for maintenance and operating expenses, and capital outlays are now available for release, obligation, and disbursement until the end of 2022.

Moreover, funds for infrastructure capital outlays, including those subsidy releases to government-owned and -controlled corporations for infrastructure, can now be obligated, completed, and paid out until end-December 2022.

However, funds for Personnel Services will expire this year.

After the one-year extension, all unreleased appropriations and unobligated allotments shall lapse, while unexpended or undisbursed funds will be reverted to the National Treasury.

The budget department will issue the necessary guidelines pursuant to the law’s provisions.

Central bank relaxes regulations on foreign currency deposit system

EURO, Hong Kong dollar, US dollar, Japanese yen, pound and Chinese 100 yuan banknotes are seen in this picture illustration, Jan. 21, 2016. — REUTERS
EURO, Hong Kong dollar, US dollar, Japanese yen, pound and Chinese 100 yuan banknotes are seen in this picture illustration, Jan. 21, 2016. — REUTERS

THE Philippine central bank approved new amendments to the regulations on the foreign currency deposit system.

“The second phase of the reforms will afford banks the opportunity to perform efficient and flexible liquidity cash management of foreign currency denominated funds by easing the stringent conditions on lending to regular banking unit by the FCDU (foreign currency deposit unit),” Bangko Sentral ng Pilipinas (BSP) Governor Benjamin E. Diokno said in a statement.

FCDUs are local units of banks that are allowed by the BSP to participate in activities involving foreign currency transactions. These units may be granted authority to engage in financial futures and options trading, provided they have sought approval from the central bank.

Signed by Mr. Diokno on Dec. 28, Circular 1134 Series of 2021 streamlined related licensing requirements for banks applying for FCDU authority.

“Covered banks will only have to notify the BSP of their intention to engage in expanded/FCDU operations. They are, however, expected to comply with the standards and requirements of the expanded FCDU license on a continuing basis,” the BSP said.

Banks were previously required to seek the BSP’s prior approval before they can engage in expanded FCDU transactions.

The circular also allowed Islamic banks and digital banks to engage in foreign currency deposit units, as the BSP announced earlier this month.

Banks are now expected to adopt a risk management framework that will be commensurate to the scope and risk profile of their foreign exchange activities.

“This framework should cover all material risks from foreign currency denominated transactions including market risk, liquidity risk and operational risk, among others,” the circular read.

Financial institutions are required to maintain a separate accounting for these FCDU transactions, the circular said. This will be used to prepare for the balance sheet and income statement, as well as risk management reports and tax purposes of FCDUs.

There are 76 banks that were granted FCDU authority by the central bank as of May 2021. — L.W.T.Noble

Domestic shipping firms worry over proposed law allowing full foreign entry

REUTERS
Cargo and other vehicles are pictured inside the inter-island roll-on roll-off ferry as it leaves a port in Lucena City in this file photo dated March 10, 2016. — REUTERS/ERIK DE CASTRO 

By Arjay L. Balinbin, Senior Reporter

LISTED shipping companies are expected to benefit from the law allowing full foreign ownership of public services, but some domestic shipping firms worry about the potential negative impact on their business.

“I just hope that our lawmakers will reconsider this [bill], and that they help the domestic industry first,” Philippine Inter-island Shipping Association (PISA) President Christopher S. Pastrana told BusinessWorld in a recent phone interview, referring to Senate Bill 2094, which seeks to amend the 85-year-old Commonwealth Act 146 or Public Service Act.

Voting 19-3-0, senators earlier this month approved a measure that effectively allowed full foreign ownership in public services such as domestic shipping, telecommunications, air carriers, railways, and subways, which are also classified as “critical infrastructures.” The Constitution previously limited foreign ownership in these sectors.

However, the proposed measure also stated that an entity controlled by or acting on behalf of a foreign government or foreign state-owned enterprises are prohibited from owning capital in any public service classified as critical infrastructure.

It also has a “reciprocity clause” that prohibits foreign nationals from owning more than 40% of capital in public services engaged in the operation and management of critical infrastructure unless their countries accord reciprocity to Philippine nationals.

“There is still hope because this bill categorizes domestic shipping as a critical infrastructure, but let us help Filipinos first,” Mr. Pastrana noted.

“This measure could really affect the investments of the domestic shipping industry. The foreign shipping companies already enjoy certain benefits that we don’t have as domestic shipping companies.”

The Export Development Council said in a statement that the proposed legislation “will redound to facilitate greater competition and investment in the transportation sector for better services and lower costs, to support the flow of goods and services, for the growth of national exports.”

According to Mr. Pastrana, the main argument of those who are pushing for the passage of the bill is the high shipping costs, which they claim will go down once there is more competition.

However, he said the government and the private sector should instead focus on addressing existing issues that contribute to such high costs rather than allowing full foreign entry.

“They perceive that by opening and liberalizing the industry, it will create competition and reduce the transport costs, but we’ve been saying that shipping is just 30% to 35% of the entire transportation costs, and you still have the ports, you have all these roads, you have all these infrastructure that is needed, you have containers going south but empty going north. I mean, there are so many things that have to be done,” he said.

The PISA official said that compared with foreign ships, domestic shipping companies “don’t get any subsidy while foreign companies “use tax-free fuel from overseas.”

“We only have good equipment at major ports like Manila or Cebu, so loading and unloading is different compared with those highly developed ports. How do we solve these? Even the roads — Manila to Davao is only 1,200 kilometers, but it takes almost 40 hours for a truck to get to Davao,” Mr. Pastrana noted.

Sought for comment, Chelsea Logistics and Infrastructure Holdings Corp. President and Chief Executive Officer Chryss Alfonsus V. Damuy said in a phone message: “In the domestic shipping, allowing 100% ownership gives leeway for local players to have foreign investors not worrying about percentage ownership.”

He noted that domestic shipping companies, by allowing full foreign entry, can adopt global best practices.

“This may also boost the modernization the government is advocating. Shares of listed companies will also be openly traded to foreign buyers or investors, which may result in higher trade volume or liquidity,” Mr. Damuy added.

Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort concurred, noting that foreign investments in the local shipping industry would lead to new and expanded capacity in terms of more ships servicing additional routes across the archipelago.

This could also “facilitate more technology transfer, increase efficiency, and help lower shipping rates or prices,” he noted.

“Consistently, more foreign portfolio investments would also flow into the listed shipping companies. Thus, a bigger set/roster of investments from overseas would also effectively lower the cost of capital for FDIs (foreign direct investments)/portfolio investments into the local shipping industry,” he added.

Patrick Ronas, president of the Association of International Shipping Lines, said, international carriers will have an advantage as the tonnage deployed will be much larger than the domestic players.

“But the challenge will be on the terminals, whether they have the capacity for the added volumes should carriers accept domestic cargo. A lot of major ports differentiate themselves, whether they cater to international or domestic cargo. Not both. Because of this, the tariff will be different,” he said in an e-mailed reply to questions.

Sonny A. Africa, executive director at think tank IBON Foundation, told BusinessWorld that the national security implications should not be overshadowed by the possible entry of more foreign investments.

He said there are also inherent limitations to foreign investors who decide according to their global conditions and options.

“For instance, they can decide to leave if for whatever reason it is no longer profitable for them to stay like Intel and Hanjin did. These foreign firms left without leaving any domestic capacity behind,” he added.

Mr. Africa also noted that profit-seeking foreign shipping firms will have undue leverage over the government because of the threat of exiting and disrupting shipping services.

“At worst, they may leave if it’s no longer profitable for them and leave the country in a lurch. Also, foreign firms are more likely to prefer their existing foreign suppliers of ships and maintenance services. This will have the effect of stifling the development of domestic capacity in these areas beyond marginal segments.”