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Metaverse touted as means to democratize access to technology

By Brontë H. Lacsamana, Reporter

THE METAVERSE, a virtual world that relies on technologies like artificial intelligence (AI) and blockchain, is seen as the next big thing by companies like Meta, as it is seen to change the way we work and connect with each other.

“It’s the virtual equivalent of being together. It’s going to be as close as possible to that,” John Rubio, country director of Meta Philippines, said at the BusinessWorld Virtual Economic Forum on Thursday.

Mr. Rubio described the metaverse as an immersive world of interconnected virtual spaces and three-dimensional experiences where one can move around via an avatar.

An early example of this is Meta’s platform Horizon Workrooms, a virtual reality (VR) meeting space where work colleagues can connect and collaborate in real time. Unlike the usual video conferencing platforms like Zoom, each person can actually feel and hear as if they are in a real-life meeting room.  

Mr. Rubio added that this vision presents an opportunity for brands and businesses.

“Imagine being able to quickly press a button and you’ll have a virtual avatar assistant of your bank or digital wallet right beside you helping you sort out [your problem] at that moment,” he said.

Similar to what happens in a Facebook or Instagram feed where ads are aligned with one’s passions and interests, virtual billboards can also allow people to click and create a path to purchase with almost no friction.

“You can directly interact with your consumer whether it’s to solve problems for them or to sell your new products,” said Mr. Rubio.

EVOLUTION OF TECH
It will not only be big brands and businesses making use of this technology. The democratization of these tools for small and medium enterprises (SMEs) will allow anyone from Luzon, Visayas, or Mindanao to sell in other regions or around the world.  

This will also benefit other use cases like travel and education, with people being able to see any tourist spot in the world without having to physically go there or practice heart surgery via 3D modelling without operating on a real body.

“Imagine a world where you could go back to a different place in a different time and actually experience that. Imagine how immersive that could be,” Mr. Rubio said.

This vision is about a decade away, however, he warned. Companies like Meta are building the foundations for it, but it won’t be fully realized until the next five to 10 years.

A major requirement is fast, reliable Internet, which the Philippines is far from attaining. United Kingdom-based analytics company Opensignal Ltd., ranked the Philippines’ mobile download speed 67th out of 100 global markets as of the fourth quarter of 2021.

Still, enterprises must already begin preparing for the future.

“Every company should take their current plans and continue on their digital journey, especially after COVID-19 (coronavirus disease 2019) which accelerated a lot, and then slowly start incorporating a lot of these experiences that we’re talking about as [the metaverse] comes to fruition,” said Mr. Rubio.

Promises, promises

PIXABAY
PIXABAY

One of the few concrete policy promises Ferdinand Marcos, Jr. made during his campaign for the Presidency of these isles of forgetfulness was to make rice available at P20 per kilo.

The average price of a kilo of the staple was more than twice P20 at P41.68 in 2020, and is rising as the inflation rate surges. Depending on its quality, the retail price of rice is currently from a low of P35 to a high of P60 per kilo or even higher.

Rice is at the core of every Filipino meal, and its cost is crucial to whether a family can so stay within its budget as to afford medical care, housing, education for its children, and other essentials. The Marcos Junior promise was therefore enthusiastically received by his followers and most likely helped swing who knows how many votes in his favor.

With his proclamation as the next Philippine President, some of the media have looked into whether he can make good on that promise. What they established was not only the complexity of the issue, but also Marcos Junior’s limited understanding of it. In addition, however, their looking into it was a welcome sign that at least some of the more independent media organizations and practitioners are determined not only to examine the wisdom or lack of it, not only of the campaign promises of Marcos and company, but also their conduct of the affairs of government in the six long, long, long years ahead and to hold them to account.

Their reports on Marcos’ “rice-at-P20-a- kilo” promise are illustrative of the kind of accurate, detailed, and analytical enterprise reporting that monitoring every administration, and most specially the performance of a problematic and worrisome national leadership, demands. They thus reported the views of farmers’ and other groups, whose leaders pointed out that, among other constraints, Marcos’ making good on his promise would first of all require the further lowering of the price of palay (unmilled rice) to levels that would further impoverish poor farmers.

The only way that the retail price of rice could be reduced, the leaders of farmers’ groups told the media, and through them the public, is to increase the country’s rice productivity. But the current system of land tenancy, and the Duterte policy of importing rice which has kept palay farm gate prices low, have discouraged farmers. Throughout his 30 years in government (as governor, congressman, and senator), they continued, Marcos Jr. never looked into addressing these and other agricultural issues.

Former National Economic and Development Authority (NEDA) Director General Cielito Habito agreed with farmers’ groups when he weighed in on the problem. He told the media that “the farm gate price of unmilled palay is about half the retail price of milled rice, given milling recovery efficiency, and costs of milling, transport, and logistics through the supply chain.”

That means that Marcos’ making good on his campaign promise would require lowering farm gate palay prices to about P10 a kilo, or way below farmers’ production costs. In his column in a Manila broadsheet, Habito also described Marcos Junior as “confused and out of touch.” Marcos, he continued, is helping neither farmers nor consumers, and has the makings of “a dangerous leader.”

In this instance, the media provided the information consumers need on the issue. But as encouraging as this example of media enterprise is, the Duterte regime has been demonstrating during the past six years that such initiatives could always be frustrated through several means.

It could be as simple as barring reporters from covering public events, or, as Marcos Junior’s spokesperson did on May 11, by refusing to answer questions from journalists, and just ignoring them. Marcos himself has waved away journalists who wanted to interview him, thus establishing what could be a policy contrary to the democratic imperative of government transparency.

President Rodrigo Duterte has prevented some journalists from covering events in which he was present. He shut down ABS-CBN’s free radio and TV services and caused the cancellation of Rappler’s Securities and Exchange Commission (SEC) registration. He did not file libel complaints against journalists, but he encouraged, through his frequent criticism of certain media organizations and their staff, other individuals, among them government officials, to lodge libel suits against this or that journalist.

The libel law and the libel provisions in the 2012 Cyber Crime Prevention Act, which make libel a criminal offense have been especially problematic for free expression and press freedom. Media advocacy groups and organizations, individual journalists, human rights defenders, and the National Union of Journalists of the Philippines (NUJP) have been campaigning for the decriminalization of libel for decades. But instead of reviewing the libel law that the United Nations described in 2011 as “excessive,” Congress included it in the Cyber Crime Prevention Act provisions that even more harshly penalize libel when found to have been committed through any computer-mediated platform such as cell phones and online news sites.

The failure despite the campaign of the last 30 years to decriminalize libel shows how difficult it has been to move Congress into doing so, and has led many opponents of libel as a criminal offense to conclude that it just cannot happen. But a promise to work for it in the Senate has come from an unlikely source: broadcaster and incoming Senator Raffy Tulfo.

His brother, columnist Ramon Tulfo, did not protest a Manila court’s 2020 conviction for cyber libel of Rappler CEO and editor Maria Ressa and the online news site’s researcher Reynaldo Santos because, he said then, they “besmirched a private individual’s good name.” He thereby implied that their possible imprisonment, should a higher court uphold their conviction, would be justified. But when interviewed in the aftermath of his arrest last May 19 on the same charge, Tulfo seemed to have realized how extreme is the penalty of imprisonment for libel in the Philippines.

Tulfo in effect agreed with those groups and individuals who have been campaigning for the decriminalization of libel. He announced his support for his brother Raffy’s declared intention to file a bill that would do so, and which would make libel a civil rather than a criminal offense.

Both Tulfos were presumably referring not only to the Cyber Crime Prevention Act of 2012 but also to libel as defined and penalized with imprisonment in Article 352 of the Revised Penal Code. If incoming Senator Raffy Tulfo does file such a bill and it passes Congress, it would remove a decades-old threat to press freedom and encourage independent journalists and media organizations to closely monitor and hold to account the incoming Marcos II administration.

The distinct possibility that the brothers Tulfo have been moved to favor the decriminalization of libel out of self-interest — both have been the targets of numerous libel suits — is immaterial. Not only against them and Nobel Peace Prize Laureate Maria Ressa, but against many other journalists as well have the libel laws been used with the aim of intimidating and silencing them. One can only wish that with incoming Senator Raffy Tulfo as advocate, and given his alliance with the members of the “super majority” in Congress, criminal libel could eventually be a thing of the past.

Hopefully, however, the incoming Senator’s pledge to file a bill limiting the penalties for libel to civil liabilities like fines will not end up among such empty promises as that of lowering the price of rice to P20 per kilo.

 

Luis V. Teodoro is on Facebook and Twitter (@luisteodoro).

www.luisteodoro.com

Sunshine by day, water by night: Indonesia could pair its vast solar and hydro storage to decarbonize the country

REGIONAL off-river PHES potential in Indonesia. Green and red circles represent PHES potential and required storage respectively. — THECONVERSATION.COM

As one of the world’s largest greenhouse gas emitters, Indonesia has pledged to achieve carbon neutrality by 2060.

However, rising living standards, population growth, and massive electrification will increase Indonesia’s electricity demand 30-fold, to 9,000 terawatt-hours (TWh) per year. This rapid increase in electricity consumption raises concerns about energy security and affordability, and environmental sustainability.

Our previous study shows the country could meet its energy needs by relying on its abundant solar energy. By installing billions of solar panels, Indonesia could harvest about 190,000 TWh of solar energy per year. This amount of energy is larger than world’s electricity consumption in 2020.

However, relying on solar energy means Indonesia must be able to deal with the risk of shortage because the sun doesn’t shine all the time. To balance a solar-dominated electricity system overnight and during rainy periods, Indonesia will need large amounts of energy storage.

Fortunately, Indonesia has a nature-based solution to this problem: the country can use its enormous potential for off-river pumped hydro energy storage (PHES).

PHES is a technique to store energy by using excess power produced from solar panels during sunny days to pump water uphill to a higher reservoir. When power generation is low during cloudy weather or at night, electricity can then be dispatched on demand from PHES by releasing the stored water downhill to the lower reservoir through the turbine.

In our latest study, we have identified that excellent sites for PHES reservoirs are available all over the country, including the heavily populated islands of Java, Bali, and Sumatra.

To develop an off-river PHES, we need two closely spaced lakes or reservoirs of about one square kilometers each that have an altitude difference of about 600 meters. They are connected by a tunnel containing a pump-turbine.

Unlike conventional (river-based) PHES, we don’t need to build dams on rivers because the water flows through tunnels connecting two reservoirs. We can also use old mining sites, as well as existing lakes and reservoirs. This means off-river PHES systems can have low environmental and social impacts.

The area of land required for an off-river PHES is also relatively small. A typical 150 gigawatt-hour (GWh) off-river pumped hydro requires about eight hectares (ha) of land per GWh. In comparison, the river-based Upper Cisokan PHES project in West Java with 7 GWh of storage requires a flooded area of 340 ha (50 ha per GWh).

With a lifespan of 50-100 years, off-river PHES systems also could reduce our dependency on conventional batteries, which typically have a storage lifetime of 10-15 years. Batteries also contain materials that are in short supply such as lithium and cobalt.

Indonesia has 26,000 potential pumped hydro sites, which is far more than needed. We narrowed it down by choosing the best possible resources all over the country with the highest storage quality and the lowest cost with potential of 321 TWh.

Eastern Indonesian regions (Sulawesi, Maluku Papua, and Kalimantan) have the most potential, with low storage requirements. This contrasts with the western Indonesia region (Java and Sumatra), which is expected to have substantial future storage demands.

The figure illustrates the size of best PHES potential in each Indonesian region compared with the requirements in 2060 for an affluent, decarbonized Indonesia.

In our future work, we will examine whether Indonesia needs to build strong electricity transmission links from east to west for a low-cost power grid or whether the system is better operated independently in each region.

Pumped hydro storage is by far the cheapest way of storing solar energy overnight, and has by far the largest share of the global energy storage market.

In our recent paper, we modelled a hypothetical 150 GWh site in Wonosobo Regency in Central Java with power capacity of 7.5 gigawatts — which is a large storage system. This system could run at full generating power for 20 hours. The site has a height difference between the reservoirs of 741 meters, a tunnel length of 4 km and requires 4 ha of flooded land per GWh.

We estimated a capital cost of $9.4 billion to develop this site, including the cost of the initial water filling and land acquisition. For comparison, a Tesla utility-scale battery pack will require a capital cost of $60 billion for the same capacity (150 GWh) — $1.2 million per 3 MWh.

By knowing Indonesia’s off-river PHES potential, the government could plan to develop very large-scale solar generation with confidence. Thus, an energy transition towards carbon neutrality is a realistic target to achieve.

 

David Firnando Silalahi is a PhD candidate in the School of Engineering, Australian National University.

Andrew Blakers is a professor of Engineering, Australia National University.

Managing challenges in US equity and fixed income markets today

ADAM SMIGIELSKI-UNSPLASH

Looking back to the latter part of 2021, the US market environment was robust for equities, with strong economic growth that led to stock valuations that appeared appropriate to us. At the same time, the US Federal Reserve’s (Fed’s) accommodative environment — put in place during the pandemic — impacted fixed income markets.

So far this year, market performance has been challenging across a broad range of asset classes. Growth-oriented stocks, as measured by the NASDAQ Composite, declined even more than the S&P 500. The broader bond markets, as measured by the Bloomberg US Aggregate Bond Index, have also declined this year. Investment-grade and noninvestment-grade bonds within the aggregate index have also fallen, reflecting the broader rise in yields and some weakness in corporate credit spreads.

Entering 2022 Investors expected that US gross domestic product growth would decelerate, but we still believe growth is likely to be above long-term trends. In our opinion, it was inevitable that US year-over-year growth would slow following robust growth in 2021 as economies reopened. Also, the fading monetary and fiscal stimulus contributed to the US economy slowing. Economies worldwide are also moderating, with Canada doing better than other places due to the commodity-oriented nature of its economy.

INFLATION CONCERNS HAVE BECOME TOP PRIORITY
While economic activity in the United States has been normalizing as it gets past the pandemic, a lot of inflationary pressures have been more pronounced and are rotating through different parts of the economy. This scenario is what is leading the Fed to raise the federal funds rate, and the market has baked in more frequent rate hikes for this year. These likely increases have rippled across the Treasury yield curve in general, which is what we believe is driving the challenging performance in fixed income markets. Thus, the backdrop remains highly uncertain in terms of the kind of tightening that is possible as the economy decelerates. In addition, there are other risks for investors — mainly geopolitical risks. These include of course the Russian-Ukraine war, which could further dampen economic activity in certain regions, particularly in the eurozone.

Consequently, rising inflation and its impact on the economy has become the primary focus. One of the bigger questions the market has right now is whether or not the Fed can successfully engineer a soft landing, or if a hard landing is more likely, given the pace of rate hikes and quantitative tightening starting up in June. With the Fed starting to make aggressive rate hikes and reducing its balance sheet, it is a dynamic time for the markets. Challenges are likely to stick around for quite some time. Thus, we believe that being nimble in finding opportunities will be critical.

Previous US rate hike cycles, specifically the last time the Fed raised rates in 2015-2018, played out over a long period of time as the economy generally slowed without elevating inflation. This time, it is radically different, with inflation at a very high level at the same time economic growth is decelerating. The United States has not experienced this type of inflation outlook in more than four decades, leading to newer challenges and uncertainties impacting current market performance.

CORPORATIONS STARTING 2022 ON A POSITIVE NOTE
Historically, earnings expectations for companies tend to start the year on an optimistic note, and then decline over the course of the year. An exception was 2021, which started with a high degree of uncertainty around the level of earnings coming out of corporate America, but then surprised on the upside as companies managed supply challenges and other logistical issues.

As for the outlook for 2022, companies are generally performing well in terms of meeting first-quarter expectations. For the remainder of 2022, expectations are starting to come down as companies will likely vary in how they navigate the changing macroeconomic environment. Demand is still very strong, and challenges with logistics still exist; COVID-19 lockdowns are still occurring in China and may ripple through the United States and the world.

Meanwhile, the US labor market is nearing record low levels of unemployment, with elevated numbers of job openings. Employee sentiment is still high, and while tempered by market declines and higher inflation, household wealth and wages remain robust. The challenge for consumers is how to maintain purchasing power. In our analysis, the resilience of the US labor market — as well as how monetary policy transitions impact the economic outlook — could delay or prevent a US recession.

 

Ed Perks is the CIO of Franklin Templeton Investment Solutions.

Asia’s war on inflation targets supply, not consumers

PEOPLE wearing protective face masks shopping in Tanah Abang textile market in Jakarta, Indonesia, May 3, 2021. — REUTERS

FROM EXPORT BANS to price controls, governments in Asia are taking a much more targeted approach than their Western counterparts in curbing global inflationary pressure, a strategy that appears to be working at least for now.

While inflation remains a serious economic challenge in Asia, the measures have in many countries helped shield the public from some of the price rises and meant most central banks in the region have not had to raise interest rates as quickly as they have elsewhere.

The various efforts have also shifted some of the cost burdens away from consumers and small businesses largely to government balance sheets.

“We have not seen any weakening in purchasing power,” said Baskoro Santoso, investor relations officer at Indonesian snack maker Mayora Indah.

The company has adjusted prices since the second half of last year but has not seen a material hit to business, especially during the Ramadan festive period, he said.

Indonesia, a country with a history of financial volatility and price swings, last week hiked energy subsidies by $24 billion to contain energy costs, having only just lifted a controversial export ban on palm oil.

Although many retailers in Southeast Asia’s largest economy have still had to pass on price hikes, household demand remains strong and inflation is within the central bank’s 2-4% target band.

In South Korea, government caps on electricity bills provide a competitive edge for global manufacturers like Samsung Electronics and Hyundai Motor and help cushion the hit to households’ disposable incomes.

The caps instead have squeezed state-run power utility Korea Electric Power Corp., which reported a record quarterly loss on sharply higher fuel import costs, increasing the chance of a government capital infusion.

India this month banned wheat exports as a scorching heat wave curtailed output and domestic prices hit record highs. And this week, Malaysia said it would stop exports of 3.6 million chickens monthly from June until prices stabilized. It also runs mechanisms to subsidize fuel and cooking oil.

Gareth Leather, senior Asia economist at Capital Economics, said Malaysia’s heavy fuel and transport subsidies have likely knocked about 1.5 percentage points off the country’s inflation, which was just 2.3% in April.

Such intervention in domestic supply is not new for many Asian governments, which are sensitive to public backlash from price hikes, although economic reforms and a stronger focus on fiscal discipline over the past decade have given greater room for market forces.

SHOOTING UPSTREAM
In contrast, Western governments have been reluctant to intervene in production lines to bring down prices of key items such as food and fuel. US and UK inflation has now surged to decade-highs, crimping retailers’ profit and shoppers’ spending power.

Walmart, Target and Kohl’s were among major US retailers that reported earnings this month that missed Wall Street expectations by the widest margin in at least five years due to surging inflation.

The burden to contain prices in Europe and the United States has mostly been carried by monetary policy, with the US, UK and Canadian central banks now engaged in aggressive interest rate hike cycles.

That contrasts with a markedly more benign policy outlook in Southeast Asia, where most central banks have only recently commenced a very cautious shift away from extremely low interest rates, with tightening expected to be more gradual than in the West.

In Thailand, headline inflation has only just breached the central bank’s target range of 1-3% and the bank’s chief has pledged continued monetary support for the economic recovery.

But while that outlook remains broadly supportive for business, many retailers in Thailand still feel the squeeze as customers refuse to accept price increases, a sign policy alone won’t be able to help all sectors.

“It’s the peak of the durian season that you normally make big profits,” said Radavadee Ratanachaiuchukorn, president of fresh fruit exporter Chotakkarasup Co. Ltd, referring to the tropical fruit.

“But because of higher costs, we hardly get a profit margin. This really hurts us… For new orders, we will have to increase the prices or we can’t survive.” — Reuters

Japan set to allow some foreign tourists in June

REUTERS

JAPAN is set to allow in some package tourists from overseas starting June 6, broadcaster TV Asahi reported Thursday, in the latest step to ease controls that were introduced in a bid to limit the spread of the coronavirus.

The Mainichi newspaper reported separately that Prime Minister Fumio Kishida will make an announcement on the move as soon as Thursday. Neither outlet specified where they obtained the information.

Japan has already announced it would double its cap on overseas arrivals to 20,000 a day starting next month, far below the levels seen before the pandemic. Mr. Kishida pledged in a London speech to make it as easy to enter Japan as other Group of Seven wealthy nations.

Mr. Kishida has come under pressure from business lobbies to further open the borders, as the travel industry is losing out on what could have been a windfall from the weak yen. The premier must at the same time avoid alienating a public wary of the potential health implications ahead of a July election for the upper house of parliament.

A poll published by the Mainichi newspaper at the weekend found 43% of respondents were in favor of relaxing border controls, while 41% were against the idea.

Chief Cabinet Secretary Hirokazu Matsuno said this month that the easing of restrictions would mean about 80% of arrivals would be able to enter the country without undergoing testing on arrival, or quarantine.

Countries and regions will be divided into three categories — red, yellow and blue — depending on their assessed virus risk, according to a joint statement from the Foreign Ministry and other ministries.

Travelers arriving from countries or regions on the blue list would be able to bypass quarantine as long as they pass a pre-departure PCR test, according to the Foreign Ministry. Those on the yellow list would require proof of vaccination with selected vaccines to skip quarantine. The South China Morning Post reported Thursday that Japan is considering putting Hong Kong on the blue list, citing an unidentified person.

The move comes after the government allowed some small package tours for overseas visitors to be conducted on a trial basis this month.

Japan has fared relatively well during the pandemic, recording just over 30,000 deaths from the virus so far, compared with about 179,000 in the UK, which has a population approximately half as large.  Bloomberg

Russia prepares to seize Western companies looking to leave

A RUSSIAN FLAG flies with the Spasskaya Tower of the Kremlin in the background in Moscow, Russia, Feb. 27, 2019. — REUTERS

RUSSIA is advancing a new law allowing it to take control of the local businesses of Western companies that decide to leave in the wake of Moscow’s invasion of Ukraine, raising the stakes for multinationals trying to exit.

The law, which could be in place within weeks, will give Russia sweeping powers to intervene where there is a threat to local jobs or industry, making it more difficult for western companies to disentangle themselves quickly unless they are prepared to take a big financial hit.

The law to seize the property of foreign investors follows an exodus of western companies, such as Starbucks, McDonald’s and brewer AB InBev, and increases pressure on those still there.

It comes as the Russian economy, increasingly cut-off due to western sanctions, plunges into recession amid double-digit inflation.

Italian lender UniCredit, Austrian bank Raiffeisen, the world’s biggest furniture brand, IKEA, fast food chain Burger King, and hundreds of smaller firms still have businesses in Russia. Any that try to leave face this tougher line.

IKEA, which has paused all operations in Russia, said it was closely following the development. Raiffeisen, said it was assessing all options, including a carefully managed exit. UniCredit declined to comment while Burger King did not immediately respond to a request for comment.

The bill paves the way for Russia to appoint administrators over companies owned by foreigners in “unfriendly” countries, who want to quit Russia as the conflict with Ukraine drags down its economy.

Moscow typically refers to countries as “unfriendly” if they have imposed economic sanctions on Russia, meaning any firms in the European Union or United States are at risk.

The European Commission proposed toughening its own stance on Wednesday to make breaking EU sanctions against Russia a crime, allowing EU governments to confiscate assets of companies and individuals that evade restrictions against Moscow.

Meanwhile, in a move that could push Moscow closer to the brink of default, the Biden administration announced it would not extend a waiver that enabled Russia to pay US bondholders.

ECONOMIC PAIN
The departures of western firms have angered Russian politicians. Former president Dmitry Medvedev, who is now deputy chairman of Russia’s Security Council, has been a particularly vocal critic of western companies who left, attacking “enemies who are now trying to limit our development and ruin our lives”.

“The government is interested in preserving jobs and tax revenues,” said Sergej Suchanow, a lawyer with risk management and compliance consultancy RSP International.

“First and foremost, the government will apply the rules to big companies. To avoid an administrator, companies must show they are not leaving their Russian businesses in the lurch.”

Ulf Schneider, a consultant working with German companies in Russia and an expert in the region with Germany’s mid-sized or ‘Mittelstand’ industry group BVMW, said he and others are working on proposals to allow foreign companies to voluntarily hand over control to a trustee of their choice.

That could convince Russia they are being responsible while at the same time distancing themselves.

“Sale is an option but the conditions for a sale are not good,” Schneider said.

The draft law outlines how Russia could appoint an administrator to firms where at least 25% of the shares are in “unfriendly” foreign hands.

It lays down a wide range of criteria for intervention, such as when a company plays a critical role as a local employer or provides important services. It makes clear that the state can justify taking control on many grounds.

The bill cites the example of companies making medical devices but also lists a host of other sectors, such as transport and energy, as well as any firm whose closure could push up shop prices.

The state-appointed administrator would also be allowed to sell the confiscated business, while its former owners would be barred from doing business in Russia.

A court or the Ministry of Economic Development could decide to put an administrator, such as Russia’s development bank VEB, in charge.

The bill passed its first reading in the lower house of parliament, or Duma, this week but still faces two further readings and an upper house review before being signed by President Vladimir Putin into law.

That could take several weeks. Russia’s economy ministry said it would pick out companies only in ‘critical cases’ where it was necessary to shield production or jobs.

Scores of foreign companies have announced temporary shutdowns of stores and factories in Russia since Mr. Putin launched what he calls a “special military operation” to demilitarize and “denazify” Ukraine, dismissed as a baseless pretext for the war by Ukraine and its allies.

“Russia was already isolated and no longer of interest to investors,” said Michael Loewy of the Federation of Austrian Industries. “This law can only make that worse.” — Reuters

Despite banking apps, budgeting basics still a problem — study 

TOWFIQU BARBHUIYA-UNSPLASH

Bank customers still struggle with the basics of budgeting and investing amid rapid digitalization, according to a 2021 study on financial wellness by fintech company Backbase. 

“The broader themes they were struggling with was how do I save, how do I invest, and how do I pay my bills in time,” said Riddhi Dutta, Backbase regional head for Southeast Asia and South Asia, in a May 25 webinar organized by Fintech Fireside Asia 

In countries like the Philippines, Malaysia, Vietnam, and Indonesia, the study found that customers did not have enough tools available for savings and budgeting. 

Designing customer experience from a technology perspective is easier if it’s correlated with what customers are looking for and what they aspire to do, Mr. Dutta said.  

RCBC (Rizal Commercial Banking Corporation), for example, has a green time deposit wherein proceeds are used to fund renewable energy projects. “We build experiences in our bank where such advocacies can be furthered by [the use] of the products we build for our customers,” said Eugene S. Acevedo, RCBC president and chief executive officer.   

Tyme, a digital bank set to launch in the Philippines, integrates its onboarding kiosks in retail infrastructure. 

“People don’t wake up in the morning and say, ‘Oh, I want to get a bank account,’” said Rachel Freeman, Tyme chief growth officer, on why it’s better to meet potential clients where they are already in the mindset of using money.

In the Philippines, Tyme will deploy mobile kiosks through the retail outlets of its partner, JG Summit Holdings.  

Meanwhile, Philippine National Bank (PNB) expressed its support for an open finance framework. “You let the customer choose which channel he wants to go to —  but be sure that you’re there,” said Paolo Eugenio J. Baltao, PNB senior vice president and special assistant to the president on digital bank initiatives. — Patricia B. Mirasol

Talk to Ukraine about ports, not us, says Russia ahead of UN talks in Moscow

Aktron/Wikimedia Commons/CC BY 3.0

UNITED NATIONS — A senior United Nations (UN) official is due to visit Moscow in the coming days to discuss reviving fertilizer exports, Russia’s UN Ambassador Vassily Nebenzia said on Wednesday, stressing that the talks were not linked to a resumption of Ukrainian grain shipments. 

Since Russia invaded Ukraine on Feb. 24, Ukrainian grain shipments from its Black Sea ports have stalled and more than 20 million tonnes of grain are stuck in silos, while Moscow says the chilling effect of Western sanctions imposed on Russia over the war have disrupted its fertilizer and grain exports. 

The conflict is fueling a global food crisis with prices for grains, cooking oils, fuel, and fertilizer soaring. Russia and Ukraine account for nearly a third of global wheat supplies, while Russia is also a key global fertilizer exporter and Ukraine is a major exporter of corn and sunflower oil. 

Mr. Nebenzia said that “formally fertilizers and grain are not under sanctions, but there are logistical, transport, insurance, bank transfer problems” created by Western sanctions that “prevent us from exporting freely.” 

“We are prepared to export fertilizers and grain from our ports to the world market,” he said, adding that when it came to Ukrainian grain exports — “I think that should be negotiated with the Ukrainians, not with Russians.” 

However, Western officials say any deal on access to Ukrainian ports would need Russian agreement, citing what they say is a Russian blockade and a need for security guarantees. 

UN Secretary-General Antonio Guterres, who visited Moscow and Kyiv last month, is in “intense contact” with Russia, Ukraine, Turkey, the United States and the European Union in a bid to broker what he calls a “package deal” to resume both Ukrainian food exports and Russian food and fertilizer exports. 

“Turkey is ready to contribute to a kind of monitoring of these exports from Odesa through the Black Sea because Turkey traditionally is very strong in the Black Sea and they are ready to help,” said a senior European diplomat, speaking on condition of anonymity. 

‘CORRIDOR EXISTS’
Mr. Nebenzia said that top UN trade and development official Rebecca Grynspan was due to discuss Russian exports during a visit to Moscow in the coming days. She is coordinator of the UN Global Crisis Response Group on Food, Energy and Finance that aims to combat global economic shocks from the Ukraine war. 

Mr. Nebenzia also said he believed UN aid chief Martin Griffiths was due to visit Moscow sometime in early June, but that he did not know “to what extent” Mr. Griffiths was involved in the discussions on grain and fertilizer exports. 

UN spokesman Stephane Dujarric declined to comment. 

The United States and others accuse Russia of blockading Ukraine’s ports. Mr. Nebenzia has said there is an 80 nautical mile (148 km) long and 3 nautical mile (5.5 km) wide “safe corridor” allowing access to the major Ukrainian Black Sea port of Odesa, but that Ukraine needs to remove mines from the waters. 

“They mined the ports, not us,” Mr. Nebenzia said on Wednesday. “There is a corridor which exists, which they don’t use.” 

Ukrainian Foreign Minister Dmytro Kuleba poured scorn on the suggestion that Moscow wanted to allow Ukraine to ship grain, telling the World Economic Forum in Davos: “You could not find a better example of a blackmail in international relations.” 

Odesa is Ukraine’s main deep-water port and used to handle almost all its grain exports. It has suffered a number of Russian missile attacks, and Kyiv fears that Moscow wants to capture it, potentially through an amphibious assault. 

Russia’s defense ministry said the port of Mariupol, the Ukrainian city on the shallow-water Azov Sea which was taken by Russia after a long siege, was operating normally after Russian forces finished removing mines. — Reuters

Global stocks set for partial, lackluster and uneven recovery

JCOMP-FREEPIK

BENGALURU — Global stocks are forecast to recover from current levels but stay well below record highs this year and next as a majority of more than 150 equity analysts polled by Reuters predicted a rebound that is both lackluster and uneven. 

Unlike previous episodes where investors saw corrections as opportunities to pick up stocks at a bargain, the current downtrend was expected to be more persistent, underscoring the deteriorating outlook for risk assets. 

That shift in view was largely down to stocks no longer having a backstop from central bankers, who are turning off the liquidity taps and are now more focused on fighting decades-high inflation by hiking interest rates, in many cases aggressively. 

While analysts were predicting a dull year for equities in the previous poll, taken only days before Russia’s Feb. 24 invasion of Ukraine, the war threw stocks into disarray, with the US Standard & Poor’s 500 nearly in an official bear market last week. 

The May 12–24 Reuters polls covering 17 major indices showed most major bourses struggling to recoup year-to-date losses by end-2022. Almost all were expected to end the year below lifetime highs, and remain below them by mid-2023. 

“Global equities are in the midst of a bear market that is not yet finished. Macro and earnings data points continue to soften as global economies move toward later-cycle phases. Furthermore, our work shows that earnings revisions are slowing globally,” noted Michael Wilson, chief US equity strategist and chief investment officer at Morgan Stanley. 

Over three-quarters of analysts, 79 of 104, who answered a separate question said the current downturn would last at least another three months. 

While 48 said three to six months, 21 said six to nine months, six said nine to 12 months, and four said over a year. The remaining 25 chose less than three months. 

Underscoring that negative outlook, end-2022 medians for 16 of 17 indices polled were downgraded from the February polls. 

Only the outlook for Mexico’s IPC index was upgraded, and just by a slight amount. 

The wider range of forecasts for end-2022 compared with the February poll, despite being three months closer, shows a greater degree of uncertainty about what lies ahead. 

Nearly 60% of analysts, 61 of 104, who answered an additional question expected volatility, which is off its highs for the year, to increase in their local markets over the coming three months. The remaining 43 said it would decrease. 

“As growth slows, and inflation remains sticky, markets will exhibit more volatility,” said Sameer Samana, senior global market strategist at Wells Fargo Investment Institute. 

Value stocks were expected to outperform growth stocks for the remainder of the year by 82 respondents while 23 said growth stocks would outperform. 

While Wall Street strategists expected the S&P 500 to end 2022 above current beaten-down levels and gain over 10%, it was not expected to recoup all of its near-17% losses for the year. 

Even the volatile Sao Paulo Bovespa stock index, up a little over 5% this year, was expected to rise less than previously forecast as jitters ahead of a national election and double-digit interest rates prompt a switch to deposit accounts. 

European shares, which have sunk over 10% so far this year, suffering their worst start to a year since the coronavirus disease 2019 (COVID-19) outbreak in 2020 and their second-worst start since 2008, were also not expected to mark any significant gains. 

India’s equity markets were expected to mark their first annual decline in seven years in 2022 as higher interest rates and weakening growth prospects reduce the chances of a quick rebound from this year’s already sharp drop. — Reuters

Global automakers face electric shock in China

Image via Ivan Radic/CC BY 2.0

BEIJING — If global automakers think they can extend their dominance in China into the electric era, they may be in for a shock. 

Kings of the combustion age such as General Motors and Volkswagen are falling behind local players in the booming electric vehicle (EV) market in China, a country that’s key to funding and developing their electric and autonomous ambitions. 

For Beijing office worker Tianna Cheng, the main dilemma when she was buying a 180,000-yuan ($27,000) Xpeng electric crossover was whether she should go for a BYD car instead, or a Nio; she did not seriously consider overseas marques. 

“If I was buying a gasoline car, I may have considered foreign brands,” the 29-year-old said as she drove home from work. “But I wanted an EV, and other than Tesla, I saw few foreign brands applying advanced smart technology properly.” 

Buoyed by demand from consumers like Ms. Cheng, electric car sales are rocketing in China’s roughly $500 billion auto market, the world’s biggest. 

In the first four months of 2022, the number of new energy passenger cars — pure EVs and plug-in hybrids — more than doubled from a year earlier to 1.49 million cars, according to data from the China Association of Automobile Manufacturers. 

The cleaner technologies accounted for 23% of China’s passenger car market, where overall vehicle sales fell 12%, reflecting a steep decline in demand for gasoline cars. 

There are no foreign brands among the top 10 automakers in the new energy vehicle (NEV) segment this year, with the notable exception of US electric pioneer Tesla in third place, according to China Passenger Car Association data. 

All the rest are Chinese brands, from BYD and Wuling to Chery and Xpeng. China leader BYD has sold about 390,000 EVs in the country this year, more than three times as many as global leader Tesla sold there. The top-ranked traditional carmaker is Volkswagen’s venture with FAW Group, in 15th place for EV sales. 

Ms. Cheng said that overseas marques, whether the Buick Velite 7 or Volkswagen’s ID. series, failed to provide what she was looking for: an EV capable of giving her the “comfort” of having a smartphone-like experience in her vehicle. 

“Foreign brands are so far from my life and lifestyle,” said Ms. Cheng, whose digital assistant handles connections to apps like Alipay and Taobao and “does everything for me from opening the windows to turning on music,” while her car software provides over-the-air updates. 

It’s quite a reversal. Global brands have dominated in China since the 1990s, typically winning a collective 60–70% share of passenger car sales in recent years. In the first four months of 2022 they captured 52%, with their April monthly share at 43%. 

Signaling the scale of the challenge facing traditional automakers, Nissan Chief Executive Officer Makoto Uchida told Reuters that some brands “could disappear in three to five years” in China. 

“Local brands are becoming stronger,” said Mr. Uchida, who was formerly Nissan’s China chief, adding that the quality of EVs from Chinese makers had improved rapidly, with advances being made in the space of months. 

“There will be a lot of transformation in China and we need to carefully watch the situation,” said the CEO, adding that carmakers had to be nimble in the design, development and launch of new models. 

“In those aspects, if we were slow, we would be left behind.” 

‘HI-TECH NATIVES’
Bill Russo, a former Chrysler executive who now heads Shanghai-based consultancy Automobility, said global brands need to turn the situation around quickly because they controlled less than 20% of China’s only growth auto market. 

“Chinese brands are winning the race to EV,” said Mr. Russo, adding that consumers’ shift to cars that are essentially smartphones on four wheels appeared irreversible and that traditional carmakers were having trouble keeping up. 

“I think it’s a secular shift toward hi-tech,” he said of the consumer demand for a “user-centric digital services experience” with a focus on interface, connectivity and apps. 

“Traditional companies are not hi-tech natives.” 

Volkswagen Group brands, including Volkswagen, Audi, Bentley, Lamborghini, Porsche and Skoda, have led the market for much of the past two decades, alongside General Motors marques such as Buick, Chevrolet, and Cadillac. 

The two global groups had overall auto market shares of almost 13% and 12% respectively in China last year, according to LMC Automotive. Detroit giant GM also has a 44% stake in the locally controlled SAIC-GM-Wuling Auto (SGMW) venture, and includes its sales in group numbers, though SGMW does not make American brands, only Wuling and Baojun cars. 

GM is now focused on winning over younger buyers in big cities that have hitherto largely snubbed its models according to two people familiar with the automaker’s business in China. 

The group has announced electrification plans to spend more than $35 billion globally by 2025, including more than 30 new EVs, over 20 of them in China, starting this year with the launch of the all-electric Cadillac Lyriq crossover SUV. 

The two sources said the Lyriq launch would be followed by an electric Buick SUV and a smaller, sportier electric crossover, both also planned for as early as this year. 

Sales of Buicks have declined 32% over the last five years to 828,600 vehicles in 2021, while Chevrolet has shrunk more than half to 269,000 vehicles, according to LMC Automotive. 

GM told Reuters it was aiming to install capacity to produce 1 million EVs a year by 2025 in China, adding that demand for the Buick Velite NEV family and Chevrolet Menlo EV “both grew significantly” in 2021 and the first three months of this year. 

It said it was deploying smart technologies including hands-free driver assistance on highways, “aviation-grade” cyber security and over-the-air software updates. 

AUTOBAHN SPEED?
Volkswagen, which is spending around $55 billion globally on EVs by 2026, launched its new-generation of ID. series in China early last year but missed its goal of selling 80,000 to 100,000 cars last year. It aims to sell 160,000 to 200,000 ID. cars this year, though it has sold only 33,300 through April. 

A key concern for foreign brands, according to one of the people close to GM plus a Volkswagen insider, is that their new EVs are being designed more for American and European markets in mind, with a heavier focus on performance and durability. 

“Autobahn speeds? In most big cities in China traffic is so congested people can’t even drive above 60 km/h on most days,” said the source close to GM, who is familiar with the automaker’s product plans and product-development processes. 

Volkswagen said NEV demand in China was strongly linked to the “smart car” theme, adding that it was investing in local R&D, especially in software. 

“Our strategy will enable us to achieve our ambitious targets in China. By 2030, we also want to be the market leader in e-vehicles and thus ensure that Volkswagen remains the number one in China in the future,” it added. 

The challenge for global brands is to find the formula to win over consumers in big cities with disposable incomes, like Cheng in Beijing and Li Huayuan, a civil engineer from Shanghai. 

Mr. Li only half-heartedly considered Japanese and German brands when he bought his BYD electric sedan last year for 290,000 yuan including insurance. 

“Seems to me only Tesla stands out when it comes to American brands,” he said from his parked BYD car in the Sichuan provincial city of Mianyang where he’s working on a project. “The other brands don’t even look competitive to me.” ($1 = 6.6499 Chinese yuan renminbi) — Reuters

China seeks Pacific islands policing, security cooperation — document

PIXABAY

SYDNEY — China will seek a region-wide deal with almost a dozen Pacific island countries covering policing, security and data communication cooperation when Foreign Minister Wang Yi hosts a meeting in Fiji next week, documents seen by Reuters show. 

A draft communique and five-year action plan sent by China to 10 Pacific islands ahead of a meeting of foreign ministers on May 30 has prompted opposition from at least one of the invited nations, which says it showed China’s intent to control the region and “threatens regional stability.” 

In a letter to 21 Pacific leaders seen by Reuters, the president of the Federated States of Micronesia (FSM), David Panuelo, said his country would argue the “pre-determined joint communique” should be rejected, because he feared it could spark a new “Cold War” between China and the West. 

In Washington, US State Department spokesman Ned Price said the United States was aware of Wang Yi’s plans and was “concerned that these reported agreements may be negotiated in a rushed, non-transparent process.” 

He said recent security agreements reached by China had been conducted with little regional consultation, provoking concern in the United States and across the region. 

“We don’t believe that importing security forces from the PRC and their methods will help any Pacific Island country,” he said. “Doing so can only seek to fuel regional and international tension and increase concerns over Beijing’s expansion of its internal apparatus to the Pacific.” 

Mr. Wang will visit eight Pacific island nations that China has diplomatic ties with between May 26 and June 4. 

He arrives on Thursday in the Solomon Islands, which recently signed a security pact with China despite objections from Australia, the United States, Japan and New Zealand, all of which fear it could upset regional security and give China a military foothold in the Pacific. 

China rejects this, saying the pact is focused on domestic policing and criticism by Western countries was interference in the Solomon Island’s sovereign decision-making. 

Asked to respond to the letter, first reported by Reuters, China’s foreign ministry spokesman Wang Wenbin told a regular media briefing in Beijing that he was unaware of it, adding that China and South Pacific countries “are good friends and partners in mutual respect, equality and mutual benefit and common development”. 

“I do not agree at all with the argument that cooperation between China and the South Pacific island countries will trigger a new Cold War,” he added. 

Mr. Wang’s visit would “consolidate mutual political trust, expand practical cooperation, deepen people-to-people ties and jointly build a closer community of destiny among China’s Pacific island countries”. 

The FSM government, which has a defense agreement with the United States as well as an economic cooperation agreement with China, declined to comment to Reuters on the letter. 

Mr. Price, the US State Department spokesman, said Washington respected the ability of regional countries to make sovereign decisions in the best interests of their people, while adding, referring to China: 

“It’s worth noting that PRC has a pattern of offering shadowy, vague deals with little transparency or regional consultation in areas related to fishing, related to resource management, development assistance and more recently, even security practices.” 

NEW VISION 

A region-wide agreement covering security and trade between China and Pacific islands would represent a shift in Beijing’s focus from bilateral relations to dealing with the Pacific on a multilateral basis. 

China circulated the China-Pacific Island Countries Common Development Vision draft document, as well as a five-year action plan, ahead of the Fiji meeting. 

It states China and the Pacific islands will “strengthen exchanges and cooperation in the fields of traditional and non traditional security.” 

“China will hold intermediate and high-level police training for Pacific Island Countries through bilateral and multilateral means,” the document says. 

The action plan outlines a ministerial dialogue on law enforcement capacity and police cooperation in 2022, and China providing forensic laboratories. 

The draft communique also pledges cooperation on data networks, cyber security, smart customs systems, and for Pacific islands to “take a balanced approach” on technological progress, economic development and national security. 

Chinese telecommunications firm Huawei, which is barred from 5G networks run by several US allies, has been repeatedly thwarted in attempts to build submarine cables or run mobile networks in the Pacific by Australia and the United States, which have offered rival bids for the sensitive infrastructure, citing national security. 

The communique also proposes a China-Pacific Islands Free Trade Area, and support for action on climate change and health. 

In his letter to other leaders, Mr. Panuelo said the communique would draw Pacific islands that have diplomatic relations with China “very close into Beijing’s orbit, intrinsically tying the whole of our economies and societies to them.” 

He highlighted the risk of being caught in conflict as tensions rise between the United States and China over Taiwan. 

“The practical impacts, however, of Chinese control over our communications infrastructure, our ocean territory and the resources within them, and our security space, aside from impacts on our sovereignty, is that it increases the chances of China getting into conflict with Australia, Japan, the United States and New Zealand,” he said. 

China’s provision of customs systems would lead to “biodata collection and mass surveillance of those residing in, entering and leaving our islands”, he added. 

He was also critical of Australia’s lack of action on climate change. 

New Australian Prime Minister Anthony Albanese pledged this week to increase climate financing to Pacific islands, saying climate change was their main economic and security challenge. 

“China has made its intentions clear,” Australia’s foreign minister, Penny Wong, said when asked about the Reuters report. 

“So too are the intentions of the new Australian government. We want to help build a stronger Pacific family. We want to bring new energy and more resources to the Pacific.” 

Ms. Wong, who travels to Fiji on Thursday, has pledged to increase opportunities for Pacific island citizens to work and migrate to Australia. — Reuters