PHL growth to lag behind region — Nomura

January 7, 2022 | 5:49 pm

PHILIPPINE economic growth is likely to lag behind the region due to its low vaccination rate and weak fiscal support, Nomura Global Research said on Friday.

Nomura in its Asia Economic Monthly report noted the recent surge in coronavirus disease 2019 (COVID-19) cases that prompted government to put stricter restrictions in place.

Typhoon Odette also caused billions in damage to crops and infrastructure, which could lead to rising food inflation. Agriculture damage due to the typhoon has exceeded P11 billion.

“These developments support our relatively cautious view on the economic outlook in 2022,” Nomura said.

“We expect the Philippines to be one of the region’s major laggards in the recovery from the pandemic during this period.”

Nomura expects the economy to expand 6.5% this year. This is at the low end of the government’s 7-9% target for 2022.

The country’s low vaccination rate also puts it at risk of a surge in COVID-19 cases.

“This would hamper further economic re-opening and could even lead to a reimposition of lockdown measures, disrupting economic activity and hurting consumer and business confidence, as we saw during the onset of the Delta variant,” the report said.

About 50 million Filipinos have been fully vaccinated against the coronavirus disease 2019 (COVID-19), which means the government missed its 54 million end-2021 target.

Despite the elections in May, Nomura said government fiscal support is still weak.

It suggested that fiscal policy paralysis could happen due to the Supreme Court ruling that devolved more functions and a bigger share of national taxes to local governments this year.

This could limit national government spending on COVID-19 responses, Nomura said.

“Local government units’ absorptive capacity of higher allocations likely remains weak and this suggests significant underspending is a risk.” — Jenina P. Ibañez

Agricultural damage from typhoon hits P11.5 billion

January 7, 2022 | 5:46 pm

TyphoonOdettedamage-Palawan-NDRRMC.GOV.PH — NDRRMC.GOV.PH

AGRICULTURAL DAMAGE from Typhoon Odette (international name: Rai) has reached P11.5 billion, according to data from the Department of Agriculture (DA).

This is equivalent to 405,921 farmers and fishers across 435,447 hectares of agricultural areas. The volume of production loss was at 257,672 metric tons (MT).

Fisheries was the most affected sector with P3 billion in losses or 26.2% of the total damage. This was followed by rice, with losses valued at P2.6 billion or 22.2% of the total, high-value crops such as banana and cacao at P1.6 billion or 13.7%, and coconut at P1.5 billion.

Other affected crops include sugarcane, abaca, and livestock. There was also damage to agricultural infrastructures, machineries and equipment.

Losses were mainly reported in Calabarzon, Mimaropa, Bicol, Western Visayas, Central Visayas, Eastern Visayas, Zamboanga Peninsula, Northern Mindanao, Davao, SOCCSKSARGEN, and the Caraga region.

The DA said it was able to save 11,454 hectares of rice or 34,433 MT worth P615.53 million and 2,452 hectares of corn or 6,965 MT worth P82.55 million ahead the typhoon.

The government will provide P828 million from the Philippine Crop Insurance Corp. to indemnify affected farmers, P500 million under the Survival and Recovery Assistance Program, and P47 million worth of assistance from the Bureau of Fisheries and Aquatic Resources.

The Department of Agrarian Reform (DAR) also said in a press release that it would distribute generators to Negros Occidental due electrical shortages caused by the storm.

“We will try to address all requests because if everything is in order, we have no excuses in accomplishing our goals of serving our farmers,” DAR Field Operations Office Undersecretary Elmer N. Distor said. — L.M.J.C. Jocson

DoF expects passage of remaining tax reform measures this year

January 7, 2022 | 5:44 pm

THE Department of Finance (DoF) is optimistic that Congress will pass the Duterte administration’s final tax reform packages this year.

Finance Secretary Carlos G. Dominguez III said the approval of amendments to the Public Service Act, Foreign Investments Act, and Retail Trade Liberalization Act last year “bode well for the approval of the remaining tax reform packages.”

The Duterte administration wants Congress to pass the proposed Real Property Valuation and Assessment Reform Act. The House of Representatives passed its version on third reading in 2019.

The third part of the Duterte administration’s comprehensive tax reform program, real property valuation reform is pending at the committee level in the Senate.

“Package 3 aims to develop an equitable and efficient real property valuation system while broadening the tax base used for property-related taxes of the national and local governments,” the DoF said in a statement Friday.

“Reforming the property valuation system to make it on par with global standards and shielding it from political influence will help local government units raise more revenues without increasing the existing tax rates or imposing new taxes.”

Meanwhile, the Passive Income and Financial Intermediary Taxation Act, or the fourth package of the government tax reform program, aims to simplify the taxation of passive income.

“This last package under the comprehensive tax reform program will reduce the number of differing tax rates from 80 to 36 and harmonize the tax rates on interest, dividends and capital gains, and the business taxes imposed on financial intermediaries,” the DoF said.

The House has approved its version of the bill. Meanwhile, it remains pending at the committee level of the Senate. — J.P. Ibañez

MRT-7 now 62.1% complete

January 7, 2022 | 5:32 pm

THE Metro Rail Transit Line 7 (MRT-7) is now 62.1% complete, Transportation Secretary Arthur P. Tugade said in a social media post on Friday.

“[The] delivery of brand-new trains from South Korea is already ongoing,” Mr. Tugade said.

Upon completion, the MRT-7 is expected to have a capacity that can accommodate 300,000 passengers in its first year of full operations. The Transportation secretary said its capacity can increase to up to 850,000 in its 12th year.

“Once completed, the 22-kilometer railway will link North Avenue, Quezon City and San Jose del Monte, Bulacan, reducing travel time from the present two to three hours to just 35 minutes,” Mr. Tugade said.

The construction of the railway began in August 2016. Mr. Tugade noted it took almost 20 years from the submission of the unsolicited proposal for the MRT-7 before work on the project commenced.

The P63-billion project, done in partnership with San Miguel Corp., has three major components. These are the mass railway transit system, an intermodal transportation terminal, and a highway from San Jose del Monte to Bocaue, Bulacan spanning 19 kilometers. — Keren Concepcion G. Valmonte

NGCP working to reconnect transmission lines affected by Typhoon Odette

January 7, 2022 | 5:28 pm

THE National Grid Corp. of the Philippines (NGCP) said permanently reconnecting Bohol to Leyte transmission lines affected by Typhoon Odette last month is still their biggest challenge and is targeted to be done by April 30.

“There is much to be done in reconnecting the Tagay-Ubay 138-kilovolt (kV) line to fix transmission in Bohol to Leyte lines,” Randy A. Galang, NGCP Head of Visayas Systems Planning, said at a press conference on Friday.

The grid operator has restored 87 or 92% of its 95 transmission lines that were affected by Typhoon Odette last month.

The official said they will use a 500-kV design, which is sturdier compared to the toppled 138-KV towers.

The toppled towers are in Mainland Bohol and Lapinig island in Leyte, crossing the Basiao Channel.

The new towers will also be able to withstand 300-kilometer-per-hour (kph) wind velocity, higher than the previous 240-kph capacity.

They will be made from lighter materials, specifically a 27.73-millimeter (mm) conductor versus 29 mm previously, as this would prevent the lines from sagging, allowing the new tower to be built shorter at 120 meters from 150 meters.

“Aside from working on this permanent solution, we are also looking into a temporary solution by using an emergency restoration system (ERS), which we are currently studying,” Mr. Galang said, adding they are working on finalizing this as soon as possible.

“The challenge there is on how we can bring the ERS to the restoration sites as most are located on top of the mountains,” he said. — MCL

From trash to cash: waste pickers help stem the plastic pollution tide, earn thousands

January 7, 2022 | 5:25 pm

The world’s ability to produce waste outpaces its ability to manage it. In Cavite, informal waste pickers are helping stem the plastic pollution tide by turning trash into useful products with the assistance of Project ASEANO.

ASEANO is a project under Partnerships in Environmental Management for the Seas of East Asia (PEMSEA), a regional organization that advocates integrated solutions for coastal and marine problems. It promotes sustainable measures to reduce the environmental impact of plastic pollution. Cavite’s Imus River is the main area of focus of its Philippine sub-component.

A GREENER OPTION

Metals, plastics, and other useful trash are sold by waste pickers to junkshops, which then sell them to recycling facilities that have the capacity to convert the trash into raw materials, explained Gregg H. Yan, a PEMSEA consultant, in an e-mail.

“The energy needed to create new metal alloys via mining greatly exceeds the effort needed to just melt copper, steel, or iron,” he told BusinessWorld. “Recycling is a green and more economical option.”

In a press statement, Thomas Bell, PEMSEA’s resource facility program manager, added that supporting waste pickers and recycling facilities helps convert a significant portion of waste – which would otherwise be dumped in landfills or rivers – into useful products.

“These cottage industries also support the lives and livelihoods of thousands of Filipinos,” he said.

In 2018, Cavite generated an average of 1,514 tons of waste daily – 22% of which was still recyclable, according to the Environmental Management Bureau (EWB). The average volume of wastes generated within the Calabarzon region, where Cavite is located, is about 5,694 tons a day.

The Imus River flows through the waste-generating cities of Bacoor, Dasmariñas, and Imus, before flowing out to Manila Bay.

Plastic’s largest market is packaging, noted Science Advances in a July 2017 journal, and this market growth has only increased since the world shifted from reusable to single-use containers.

FROM TRASH TO CASH

In the Philippines, the informal waste sector consists of waste pickers in dumpsites and communal waste collection points. Among these are women, children, and the elderly who depend on informal waste collection due to poverty and a lack of education.

“The most sought-after types of plastics [by waste pickers] are PET bottles and hard plastics called sibak. These are what plastic monobloc chairs, jerry cans, and many toys are made of,” Mr. Yan said. “The plastics they don’t collect are disposable sando and trash bags, plus the plastic and foil packaging of sachets. This is a primary reason why these types of single-use plastics are causing enormous environmental challenges.”

One such waste picker is Sherwin Salazar, who has been hunting for scrap for 25 years in Cavite.

“I was still in school when I started pawing through old lots, dumps, and river banks in a never-ending search for bakal, bote, plastik at dyaryo (scrap metal, bottles, plastic, and newspapers). I used a big old sack that weighed so much,” he said in a PEMSEA press release. From earning P100 a day as a 12-year-old, he now earns P1,000-P1,500, thanks in part to a motorized tricycle that allows him to travel to nearby cities like Tagaytay.

Mr. Yan said that – like all business ventures – it takes time, trustworthy contacts, and capital to get to the P1,000-P1,500 a day level.

“Expanding one’s territory and creating networks is an important consideration for waste pickers to ‘lay claim’ to a large enough area to net good finds on a regular basis. Moving up the chain might also mean hiring junior waste pickers and investing in better collection equipment, like a kariton [a pushcart] or a pedicab [a tricycle with a two-seat passenger compartment],” he told BusinessWorld.

Mr. Salazar added that the life of a waste picker is dirty, but “if you meet life’s challenges head-on and ask for a little help from above, then it’s really rewarding.”

The results of Project ASEANO, which ends this year, will be synthesized into an LGU (local government unit) training manual, toolkit, and best practices handbook. The aim is for the materials to be a reference for the Philippines and the rest of the ASEAN region.

In May 2009, the National Solid Waste Management Commission prepared a National Framework Plan for the Informal Sector in Solid Waste Management. While this national plan recognizes the informal waste sector’s contribution to waste collection and disposal, a 2008-2018 report by the EWB noted that LGUs have yet to develop and implement their respective plans for this sector. — Patricia Mirasol

BSP fully awards offer of short-term bills

January 7, 2022 | 5:24 pm

THE CENTRAL BANK fully awarded the short-term securities it auctioned off on Friday as the tenor’s average yield eased on increased demand.

The Bangko Sentral ng Pilipinas (BSP) raised P100 billion as planned from its offer of 28-day bills that attracted P211.39 billion in tenders, more than double the P104.56 billion in bids seen on Dec. 17.

Accepted rates for the one-month debt papers ranged from 1.72%-1.78%, lower than the 1.785%-1.98% band seen the previous week.

This brought the average rate of the one-month securities to 1.7666%, down by 8.68 basis points from the 1.8534% fetched during the previous offering.

The central bank uses its short-term securities and term deposit facility to mop up excess liquidity in the financial system and guide market rates.

Michael L. Ricafort, chief economist at Rizal Commercial Banking Corp., said the average yield on the BSP bills eased on higher demand.

He also attributed the lower yield to slower inflation and the continued rejection of bids for Treasury bonds (T-bond).

“BSP 28-day auction yield also lower amid recent concerns over the resurgence of COVID cases locally and worldwide amid lingering concerns over the Omicron variant and the increase in COVID cases,” he said in a Viber message.

Inflation eased to 3.6% in December, the lowest in 12 months, amid a slower increase in food and transport prices.

Still, the full-year inflation average of 4.5% exceeded the central bank’s 2-4% target.

Meanwhile, the Treasury rejected all bids for its offer of reissued seven-year T-bonds on Tuesday as bids exceeded market expectations even as inflation eased.

The government also rejected all bids for its two T-bond offerings in December.

National Treasurer Rosalia V. de Leon said the government’s cash position can comfortably meet funding requirements despite these rejections. — J.P. Ibañez

Central bank books higher net profit in first 11 months of 2021

January 7, 2022 | 5:23 pm

THE BANGKO SENTRAL ng Pilipinas (BSP) posted higher earnings in the first 11 months of 2021 as its interest income increased.

Data released on its website showed the central bank recorded a net income of P67.08 billion in the first 11 months of 2021, almost double the P34.51 billion recorded in the same period in 2020.

Revenues rose by 42.1% year on year to P154.14 billion in the period from P108.5 billion a year earlier.

Broken down, the central bank’s interest income stood at P104.05 billion, up by 33.6% from the P77.86 billion in the same period last year.

Miscellaneous income — which includes trading gains, fees, and penalties — grew 63.5% to P50.09 billion from P30.64 billion.

Meanwhile, BSP’s expenses grew by 43.4% to P97.74 billion as of November from P68.14 billion a year earlier. Interest expenses also rose to P55.54 billion from P42.04 billion.

The BSP reported P10.71 billion in net gains on foreign exchange rate fluctuations in the 11-month period, reversing the P5.67-billion net loss logged a year prior.

The central bank’s total assets reached P7.989 trillion as of November 2021 from P7.34 trillion the previous year.

Meanwhile, liabilities rose by 9.5% year on year to P7.858 trillion from P7.173 trillion.

The BSP posted a net worth of P130.7 billion as of November 2021, 11.8% higher than the P116.93 billion seen a year earlier. — Jenina P. Ibañez

Banks leave rediscount facility untouched in December

January 7, 2022 | 5:20 pm

LENDERS did not tap the central bank’s rediscount facility in December as loan growth remained relatively slow.

“For the period 01 January to 31 December 2021, total availments of banks against their rediscount loans remain unchanged at P6.12 million for loans under the peso rediscount facility,” the Bangko Sentral ng Pilipinas (BSP) said in a statement on Friday.

Banks also left the Exporters’ Dollar and Yen Rediscount Facility (EDYRF) untouched.

The BSP’s rediscount window gives banks access to additional money supply by posting their collectibles from clients as collateral.

Banks may then use the cash — in peso, dollar or yen denominations — to grant loans to corporate or retail clients and service unexpected withdrawals.

In 2021, banks only tapped the central bank’s rediscount facility in June, July, and September.

Bank lending has been relatively slow in recent months, which reduced the need to tap the BSP’s rediscount window, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.

“Banks also have other options for funding such as the interbank market and the capital markets, in view of the increase in fund-raising/investment banking activities in recent months, thereby also reducing the need for banks to tap the BSP rediscounting facility,” he said.

Outstanding loans issued by big banks went up 4% year on year to P9.349 trillion in November 2021, quicker than the 3.5% expansion in October 2021 and marking the fourth straight month of annual growth in lending.

Meanwhile, for January, the central bank said peso rediscount loans are priced at 2.5%, regardless of maturity.

On the other hand, the rates for dollar and yen rediscount loans, regardless of maturity, are 2.20913% and 1.924%, respectively. – Jenina P. Ibañez

Peso declines vs dollar as COVID-19 cases continue to climb

January 7, 2022 | 5:18 pm

THE PESO weakened against the dollar on Friday as coronavirus disease 2019 (COVID-19) cases continued to surge.

The local unit closed at P51.35 per dollar on Friday, sinking by 17 centavos against its P51.18 finish on Thursday, data from the Bankers Association of the Philippines showed.

The peso opened at P51.25 versus the dollar. Its intraday high was at P51.18, while its worst showing was at P51.37 against the greenback.

Dollars traded fell to $1.017 billion on Friday from $1.151 billion the previous day.

A trader in an email said the peso weakened as local participants remained cautious over increasing COVID-19 cases in the country.

Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort also said in a Viber message that the peso declined in response to the rapid increase in new COVID-19 cases, which prompted the government to announce stricter mobility restrictions.

“Peso (was) also weaker after local monetary authorities signaled smooth transition on unwinding extraordinary easy monetary measures,” he said in a Viber message.

The daily COVID-19 tally went up to 21,819 cases on Friday, data from the Health department showed, for bringing active infections to 77,369.

The government placed Metro Manila and nearby provinces under Alert Level 3, a stricter form of lockdown.

Meanwhile, the Bangko Sentral ng Pilipinas (BSP) said the date of its exit from easy policy is still uncertain, with BSP Governor Benjamin E. Diokno noting the transition will be done smoothly. — JPI

Stocks sink on rising cases, losses from tighter restrictions

January 7, 2022 | 5:12 pm

042321-PSEi-Closing — Philippine Stock Exchange index

STOCKS declined further on Friday due to the continued surge in infections after economic managers said the country will lose about P3 billion a week due to stricter mobility restrictions.

The bellwether Philippine Stocks Exchange index (PSEi) dropped 74.41 points or 1.05% to 7,011.11 on Friday, while the broader all shares index fell 31.97 points or 0.84% to 3,745.61.

“Market is pricing the estimated cost of P3 billion in weekly losses in terms of gross value added,” First Metro Investment Corp. Head of Research Cristina S. Ulang said in a Viber message.

“Sentiment was dented by the surge in infections with the placing of more areas in the country under Alert Level 3 status,” Philstocks Financial, Inc. Senior Research Analyst Japhet Louis O. Tantiangco said in a Viber message.

Economic managers said in a statement on Friday that the country is projected to lose P3 billion a week due to the imposition of Alert Level 3 in Metro Manila and nearby areas.

President Rodrigo R. Duterte on Thursday night placed five provinces and nine cities under Alert Level 3 starting Jan. 9 in addition to Metro Manila, Rizal, Bulacan, Laguna, and Cavite as part of efforts to curb the rapid spread of coronavirus disease 2019 (COVID-19).

The Health department reported 21,819 new COVID-19 cases on Friday.

Mr. Tantiangco added that Friday trading was lethargic, with the value turnover below last year’s daily average of P7.38 billion.

Value turnover inched up to P5.85 billion with 647.43 million issued traded on Friday, from the P5.21 billion with 771.81 million shares that switched hands the previous day.

All sectoral indices closed lower on Friday. Property decreased 54.84 points or 1.75% to 3,068.75; mining and oil plunged 164.88 points or 1.7% to 9,524.90; industrials went down by 108.86 points or 1.06% to 10,110.81; holding firms fell 65.21 points or 0.94% to 6,845.80; services lost 14.02 points or 0.71% to 1,941.77; and financials slipped 6.46 points or 0.40% to 1,582.14.

Decliners outnumbered advancers, 136 versus 51, while 46 names closed unchanged.

Net foreign selling increased to P284.75 million on Friday from the P103.55 million recorded on Thursday. — MCL

Sounding alarm on China, Japan and U.S. vow to collaborate more on defence

January 7, 2022 | 2:53 pm

OKYO/WASHINGTON – The United States and Japan on Friday voiced strong concern about China’s growing might and pledged to work together to push back against attempts to destabilise the region, including against emerging defence threats.

The comments from the two allies, in a joint statement that followed a virtual “two-plus-two” meeting of their foreign and defence ministers, highlights how deepening alarm about China – and increasing tension over Taiwan – have put Japan‘s security role in greater focus.

In their meeting, the ministers expressed concerns that China’s efforts “to undermine the rules-based order” presented “political, economic, military and technological challenges to the region and the world,” the joint statement said.

“They resolved to work together to deter and, if necessary, respond to destabilising activities in the region,” it said.

The ministers also said they had “serious and ongoing concerns” about human rights issues in China’s Xinjiang and Hong Kong regions and underscored the importance of peace and stability in the Taiwan Strait.

While pacifist Japan retains close economic ties to China, there is growing concern in Tokyo about a potential move by Beijing against democratic Taiwan.

“This is clearly a combined message reflecting a common concern, not a case of U.S. arm-twisting to get Japan to sign onto vague euphemisms,” said Daniel Russel, who served as the top U.S. diplomat for Asia under Obama and is now with the Asia Society Policy Institute.

“In particular, the expression of joint resolve to respond if necessary to destabilising activities comes across as a powerful expression of alliance solidarity and determination.”

Earlier, U.S. Secretary of State Antony Blinken said the two countries would sign a new defence collaboration deal to counter emerging threats, including hypersonics and space-based capabilities.

NEW TOOLS

Blinken said the U.S.- Japan alliance “must not only strengthen the tools we have, but also develop new ones”, citing Russia’s military buildup against Ukraine, Beijing’s “provocative” actions over Taiwan and North Korea’s latest missile launch. North Korea fired a “hypersonic missile” this week that successfully hit a target, its state news agency said.

Following the meeting, Japan‘s foreign minister, Yoshimasa Hayashi, said Tokyo had explained its plan to revise the national security strategy to fundamentally boost defence capabilities, which he said was strongly supported by his U.S. counterparts.

Prime Minister Fumio Kishida in October promised to revise Japan‘s security strategy to consider “all options including possession of the so-called enemy-strike capabilities”.

Kishida’s government has approved record defence spending, with a 10th straight annual increase in 2022.

Jeffrey Hornung, a Japanese security policy expert at the Rand Corporation, a U.S.-backed think tank, said while options for Japan to use force are realistically limited, a Taiwan emergency would be one potential scenario that Japan could deem as threatening its survival.

“There is no coded messaging here,” Hornung said.

“China is the challenge and they said as much, then detailed all the ways the alliance is determined to work to counter its destabilising activities.” – Reuters