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This year’s National Economics Summit to discuss economy in light of upcoming elections

The UP Economics Society will livestream the annual National Economics Summit (NES) on Sept. 18 to 19, with the theme “Electionomics: Philippine Economics in the Face of Elections.”

In its 11th year, the Summit will be open to the public to discuss Philippine Economics in the Face of Elections, specifically the following: political motives behind economic policies and programs, analyzing the impact of political beliefs and influences on the economy, gauging the impact of the economy in determining electoral outcomes, and the relationship of economic outcome with political decisions.

The annual NES is a forum for the brightest Economics and Business undergraduates across the Philippines. The NES evaluates key issues in the country and around the world from the viewpoint of economics with the purpose of leaving a lasting and beneficial impact on the next generation of economists and leaders of the country.

Over the years, the Summit has grown into a renowned economic event tackling topics such as Jobs and Unemployment, Inequality and Poverty, ASEAN Integration, Philippine Economic Growth, Case Study Competitions, Business Economics, and many more.

The Summit has established its reputation as one of the premier economic forums in the country, gaining endorsements and connections with various Senatorial offices, the Department of Labor and Employment (DoLE), the Securities and Exchange Commission (SEC), the National Economic and Development Authority (NEDA), Commission on Higher Education (CHEd), Junior Philippine Economics Society (JPES), Philippine Center for Economic Development (PCED), and the Office of the Vice-President (OVP).

The event has also invited reputable speakers such as former NEDA Director Dr. Cayetano Paderanga, Jr., UP Diliman Professor Emeritus Winnie Monsod, former DENR Secretary Gina Lopez, PCC Commissioners Stella Quimbo and Johannes Bernabe, Dr. Bernardo Villegas, and Dr. Ernesto Pernia.

 

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Chinese developer’s problems threaten wider real estate market

REUTERS

SINGAPORE/SHANGHAI – China Evergrande is teetering between a messy meltdown with far-reaching impacts, a managed collapse or the less likely prospect of a bailout by Beijing for what was once the country’s top-selling property developer.

Founded in Guangzhou in 1996, Evergrande has epitomized China’s freewheeling era of borrowing and building, but with liabilities of nearly two trillion yuan ($305 billion) its possible collapse looms as one of China’s largest for years.

Debt and land-buying curbs and hundreds of new rules have been imposed on Chinese developers over recent years as part of a push to cut financial risks and promote affordable housing.

Evergrande, which accelerated efforts to cut its debts in 2020 after regulators introduced caps, does not have any major offshore bond maturities until early next year but tardy payment of suppliers and interest on loans have brought to a head concerns that have long nagged at investors.

Now, without access to fresh funding, Evergrande cannot pay suppliers, finish projects or raise income, prompting it to hire advisors and warn of default risk. This, along with a buyout, break-up or bailout are the scenarios now being evaluated.

And while analysts have played down comparisons to the 2008 collapse of U.S. investment bank Lehman Brothers, which caused crises at counterparties and ultimately seized up global markets, some investors have similar contagion concerns.

“If as expected Evergrande is defaulting on its debt and goes through a restructuring, I don’t see why it would be contained,” Michel Lowy of banking and asset management firm SC Lowy, which focuses on distressed and high-yield debt, said.

“There are other developers that are suffering from the same problem of no access to liquidity and have extended themselves too much,” Lowy added.

Other worries include the exposure of banks and the determination of regulators to press on with property market reforms despite hints of damaging consequences.

Reaction has so far concentrated in the bond market and on Evergrande’s stock, as well as the stocks and bonds of other developers such as, among others, Guangzhou R&F Properties Co and Xinyuan Real Estate Co.

Evergrande shares are down about 90% in 14 months, while its dollar bonds are trading at 60-70% below par.

“Stress is mounting for the most obvious grey rhino in China, namely the real estate sector,” Natixis economist Alicia Garcia Herrero said.

FIRE SALE

The most immediate concern is of a real estate crash rather than a Lehman-style financial crisis. An Evergrande fire sale could crush prices, causing leveraged developers to blow up and crippling a sector comprising a quarter of China’s economy.

“Lehman (was) very different as it went across the financial system, freezing activity,” said Patrick Perret-Green, an independent London-based analyst.

“Millions of contracts with multiple counterparties, everyone was trying to work out their exposure,” he said. “With Evergrande it depresses the entire real estate sector.”

Bank exposure is also wide and a leaked 2020 document, written off as a fabrication by Evergrande but taken seriously by analysts, showed liabilities extending to more than 128 banks and over 121 non-banking institutions.

But data suggests non-performing loans at commercial banks were a manageable 1.76% last quarter, and compared to the United States, China has far greater control over its financial system.

A drive by authorities to cut developers’ debts is also seen as increasing the likelihood of a property liquidation.

“The government has worked tirelessly to drive de-leveraging in the bloated real estate sector, so throwing a lifeline to Evergrande now is unlikely,” said James Shi, distressed debt analyst at credit analytics provider Reorg.

Analysts are increasingly expecting a managed collapse that seeks to protect smaller investors, with around a hundred angrily showing up to Evergrande’s headquarters on Tuesday, while bondholders take a haircut.

“We do not believe the government has an incentive to bail out Evergrande (which is a private-owned enterprise),” Nomura analyst Iris Chen said in a note to clients.

“But they will also not actively push Evergrande down and will supervise a more orderly default, if any, in our view.”

If Evergrande is to recoup anything, it must first find buyers for its assets, which it has been struggling to do as potential saviours seem content to wait for more distress.

In a stock exchange announcement on Tuesday, Evergrande said it had not been able to complete the disposal of its office building in Hong Kong “within the expected timetable”.

“The ongoing negative media reports concerning the group have dampened the confidence of potential property purchasers,” Evergrande added. — Reuters

In retail, consumer-centric digital experience is key differentiator

Tectonic shifts in consumer habits are underway, according to a retail playbook by software solution company VMware, and consumer-centric experiences are a key differentiator in retail.  

“The pandemic has redefined retail in Southeast Asia (SEA) and the Philippines is no exception to this,” said Walter So, VMware country manager, in an e-mail to BusinessWorld. “Filipino consumers have clearly indicated that they not only hope but demand that retail organizations meet their expectations for digital experiences.” 

The Digital Frontiers 3.0 Study highlights trends among Filipino shoppers, including the use of virtual technology in consumer experiences, and the preference for brands that commit to sustainability.  

SHOPPING PREFERENCES  

Forty-one percent of SEA consumers do not miss in-store shopping as much as they thought they would, the study found.  

In the Philippines, 66% of consumers welcome the advantages virtual technology brings, such as its ability to simulate what an item looks like on them, or how an item will fit in a desired space. This makes them more open to virtual technology than their global counterparts in the US (43%), France (43%), Germany (32%), and the UK (45%).   

More than half (58%) of Filipino consumers have also said they prefer shopping with a fashion retailer that already knows their clothes size and color preference. This contrasts with the sentiments of those in the US (27%), France (40%), Germany (23%), and the UK (19%).   

DIGITAL EXPERIENCES  

Despite embracing these new artificial intelligence (AI)- and cloud-powered experiences, survey respondents said they are prepared to switch to a competitor if a digital experience is not up to par (60% in SEA, 50% in the US, 40% in Germany, 36% in France, and 51% in the UK).    

“In SEA, businesses are now facing their ‘sink or swim’ moment of leveraging cutting-edge innovations such as cloud and modern apps to redefine how they connect with customers digitally, or risk losing them to a competitor,” Mr. So said in a press statement.  

“Apart from making sure that they are delivering hyper-personalized, seamless digital services, retail organizations now also have to focus on bridging the gaps in their offline and online operations and delivering a superior omnichannel experience to stay competitive in the digital economy ahead.”  

Cloud technology may provide the agility to scale the business and the data to prioritize services, added Mr. So, but it has to be underpinned with “cloud smart” principles.  

“Being cloud smart means having a clear multi-cloud framework aligned to our business goals.  It is not a one-cloud-fits-all approach, but rather, a fit-for-purpose cloud architecture whether that be of a private or public cloud,” Mr. So told BusinessWorld. “This will ultimately enable the retailers to improve customer experience while optimizing operating models.”  

SUSTAINABILITY EFFORTS  

Sustainability has also emerged as a differentiator, including in the Philippine market. This trend is driven by the next generation of eco-conscious consumers who see the potential of technology as a force for good, said Mr. So. 

Almost two-thirds (63%) of survey respondents indicated wanting to use more digital services to reduce their carbon footprint. More than half (55%) also said they would stop engaging with companies or buying from brands if they do not publicly share their ethical policies.  

Fifty-seven percent of Filipino consumers, in particular, say they are happy to pay a premium on products and services from retailers that demonstrate a commitment to carbon neutrality. This, the VMware study reported, is higher than the 43% average for the SEA region. Sixty-six percent of Filipinos, moreover, indicated their willingness to digital services to likewise reduce their carbon footprint.  

SECURITY MEASURES  

Mr. So added that trust is the most valuable asset for any business. 

“Amid an evolving cyberthreat landscape, businesses need to make sure that they are not only deploying plug-and-play tools like installing firewall at the perimeter of their businesses, but also adopting a zero-trust approach that protects all apps, on any cloud and device to the edge,” he said, noting that zero-trust serves as an additional layer that strengthens a business’s ability to spot security anomalies.  

This principle is even more crucial for smaller businesses, as they do not have the luxury and time to recover from a host of cyberattacks, Mr. So said. 

Only 36% of the aforementioned survey’s SEA respondents believe that retail organizations have given them assurance their data and information is secure.  

“By baking security into all touchpoints, information technology (IT) teams within small and medium enterprises (SMEs) can gain greater visibility and control over policies that protect their business transactions and better proactively prevent, detect, and respond to threats in real-time,” added Mr. So. — Patricia B. Mirasol  

  

  

Conducted between November and December 2020, the VMware Digital Frontiers 3.0 Study surveyed the behaviors, preferences, and attitudes towards digital services and experiences of 1,000 consumers per market from Southeast Asia (Singapore, Malaysia, Indonesia, Thailand, and the Philippines), the United States, the United Kingdom, Germany, and France. Findings from Southeast Asia represents an aggregated average from the five geographies included in the study.     

AboitizPower focuses on Renewable Energy to support the energy transition in the future

SacaSun Solar Power Plant

The Philippines faces the twin challenges of supporting high economic growth and contributing to a more environmentally sustainable economy.

High economic growth requires building reliable and affordable power infrastructure to power businesses, communities, and homes and this infrastructure historically has been thermal in nature.

On the other hand, the increasing pressure to mitigate climate change requires power players to build renewable energy capacity to decarbonize the energy system.

AboitizPower is committed to meeting these challenges head-on. Together with its partners, AboitizPower currently is the largest owner and operator of renewable energy based on installed capacity in the Philippines.

Over the next 10 years, AboitizPower will expand its investments in renewable energy both here and abroad to a total of 4,600 MW, resulting in a 50:50 balance between its renewable and thermal portfolios.

This aspiration supports the government’s efforts in the Philippines to build a more sustainable energy system and supports the United Nations’ Sustainable Development Goal no. 7 of Affordable and Clean Energy.

As of August 2021, AboitizPower has already identified about 2,900 MW of new RE projects across the country, all in varying stages of development.

“We are committed to seeing through our 10-year strategy and to supporting the energy transition. The RE pipeline we have identified today is only the beginning. We will work hard to continue to grow it in order to meet our long-term aspirations,” AboitizPower President and CEO Emmanuel V. Rubio said.

The company’s RE pipeline projects are currently 60 percent solar, 32 percent wind, and 9 percent hydro. Since all of these projects are still in the development stage, specific details on size and cost are still being finalized.

“We look forward to making further announcements in the coming months as we progress with these projects,” Rubio added.

As AboitizPower identifies more RE projects in the next 10 years, the company is optimistic that it can hit its 2030 goal without building any new coal-fired power plant facilities.

AboitizPower recently announced that this year it will start building a 74-MW solar power facility in Cayanga in the town of Bugallon, Pangasinan. The majority of the facility’s capacity will be contracted for retail electricity supply, which can help bring more sustainable energy to power consumers across the country.

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July infrastructure spending rises

PHILIPPINE STAR/ MICHAEL VARCAS
GOVERNMENT spending on infrastructure jumped in July amid looser quarantine restrictions. — PHILIPPINE STAR/ MICHAEL VARCAS

STATE INFRASTRUCTURE spending jumped by 39% in July as the government ramped up construction works despite the onset of the rainy season, data from the Budget department showed.

Preliminary data from the Department of Budget and Management (DBM) released on Tuesday showed infrastructure and other capital outlays increased to P72.8 billion in July from P52.3 billion a year ago. However, the July figure was 23% down from the P94.4 billion spent in June.

The DBM attributed the higher infrastructure spending to the projects implemented by the Department of Public Works and Highways (DPWH). These projects include construction and repairs of roads and bridges, flood mitigation structures, drainage systems, buildings, as well as payment for right-of-way access.

Disbursements under the modernization program of the Armed Forces of the Philippines and the payments for the digital equipment and supplies acquired by the Philippine National Police also supported higher infrastructure spending in July, the DBM said.

“The July slowdown may have been related to the weather, when most infrastructure projects slow down because of the rainy season, and a timelier reason can be due to the lockdowns,” UnionBank of the Philippines, Inc. Chief Economist Ruben Carlo O. Asuncion said via Viber on Tuesday.

In the seven months to July, DBM reported infrastructure spending surged by 42.6% to P499.4 billion from P350.3 billion a year ago, due to sustained implementation of infrastructure projects and capital outlay projects of other state agencies.

State spending on infrastructure could further increase for the rest of the year according to the Budget department as the government continues to settle payments for its ongoing infrastructure projects.

Base effects may have also propped up infrastructure spending in July given that quarantine restrictions are more relaxed and allowed more construction activity, University of Asia and the Pacific Senior Economist Cid L. Terosa said in an e-mailed response.

“Growth, however, was slower than June 2021 mainly because of administrative issues related to disbursements,” he said.

For the rest of the year, Mr. Asuncion said infrastructure spending should pick up further, especially when rainy season ends.

“Remember that a ban on infrastructure projects is looming on the horizon as part of the election,” he said.

Mr. Terosa said he expects the government to intensify further its investments on infrastructure, especially as a bigger portion of the population is vaccinated and the economy recovers.

Colegio de San Juan de Letran Graduate School Dean Emmanuel J. Lopez said the infrastructure projects are being fast-tracked to stimulate the economy and create much-needed jobs.

“Implicitly it can be implied that increased spending, creates political leverage to the administration which is a natural advantage to a sitting politician,” he said via e-mail.

For this year, the government set a P1.02-trillion infrastructure budget, which is equivalent to 5.1% of GDP.

The Development Budget Coordination Committee raised the infrastructure program to P1.29 trillion, equivalent to 5.8% of GDP, for 2022. — Beatrice M. Laforga

Revenue boost seen if VAT imposed on digital services — IMF

PHILIPPINE STAR/ MICHAEL VARCAS

EMERGING ECONOMIES including the Philippines could get a much-needed boost in revenues if they start collecting value-added tax (VAT) from the digital economy, a study by the International Monetary Fund (IMF) showed.

In a paper “Digitalization and Taxation in Asia” released on Tuesday, IMF economists Andrew Hodge and Dinar Prihardini said increasing digitalization has raised new tax challenges for Asian countries, especially since their existing systems have been criticized for failing to tax highly digitalized businesses.

“Extending the value-added taxes to capture e-commerce and digital services more effectively could yield significant short-term revenue and other efficiency gains. Capturing VAT on digitally provided services and e-commerce supplied from abroad will help countries increase revenue unilaterally. Applying VAT consistently on all digital imports also levels the playing field between domestic and foreign suppliers, and between goods and services — thus enhancing efficiency,” the IMF economists said.

Countries like the Philippines, Indonesia and Vietnam may see an increase in overall VAT revenue if digital services are taxed.

“Estimates based on survey data suggest that charging VAT on remotely delivered digital services and some goods to customers could directly increase overall VAT revenue by between 0.04% and 0.11% of gross domestic product (GDP) in Bangladesh, India, Indonesia, the Philippines, and Vietnam,” the IMF economists said.

The IMF economists noted that many Asian countries are exerting additional efforts in taxation to meet its revenue goals.

“Asia’s unrivalled level of internet connectivity, which has underpinned the economy’s digitalization beyond the ICT sector, creates enormous scope for future growth,” they said.

However, the IMF economists warned that unilateral digital service taxes may also have repercussions.

“Digital service taxes are simpler in design and implementation than corporate income tax initiatives, but risk introducing distortions of double taxation and trade retaliation,” they said.

The IMF economists noted that US multinational enterprises (MNEs) would be the primary taxpayers for digital service tax schemes. This as 25% of profits earned by foreign MNEs are made by those based in the United States.

In this scenario, potential retaliatory trade measures could be a possibility once digital service taxes are imposed, the IMF said.

“For countries such as Bangladesh, India, Indonesia, the Philippines, Singapore, and Vietnam, US MNEs dominate, accounting for more than 50% of profits earned by foreign MNEs,” it said.

In the Philippines, House Bill 7425 proposed a 12% VAT on digital services, particularly those offered by technology giants such as Facebook, Netflix, Inc., Alibaba’s Lazada and Alphabet’s Google. The measure has been approved by the House Ways and Means Committee in July last year.

Based on estimates from the Department of Finance, the measure could generate P10.66 billion in annual revenues for the government.

“The pandemic and associated lockdown measures are accelerating the development of digital economic activity, including transactions and sales of digital goods and services. This trend would likely have a bearing on future revenue potential,” the IMF said. — Luz Wendy T. Noble

Philippine capital tests new lockdown strategy

PHILIPPINE STAR/ MICHAEL VARCAS

THE GOVERNMENT is set to begin the pilot test of granular lockdowns in Metro Manila on Thursday (Sept. 16), as it seeks a new strategy that will revive the economy and curb the spike in coronavirus disease 2019 (COVID-19) infections.

Under the new virus containment strategy, the Inter-Agency Task Force (IATF) will implement localized lockdowns with five COVID-19 alert levels in Metro Manila.

The capital region will be placed under Alert Level 4, the second strictest level, until Sept. 30, Presidential Spokesperson Herminio “Harry” L. Roque, Jr. told a televised news briefing.

Areas under Alert Level 4 are those with high or increasing coronavirus transmission and high healthcare system utilization rate. To compare, areas will be placed under Alert Level 5, equivalent to an enhanced community quarantine, only if case counts are “alarming” and hospital utilization rates are at “critical” levels.

The new quarantine classification is “good news” for workers of restaurants and other food establishments, Mr. Roque said, noting that several businesses would be allowed to operate at limited capacity.

“The Alert Level 4 that we are pilot testing right now is just like a modified enhanced community quarantine (MECQ). The only difference here is that we have a system of granular lockdowns with alert levels from one to five,” Trade Secretary Ramon M. Lopez said at the same briefing.

Mr. Lopez said some businesses, including manufacturing firms, would be permitted to operate in Metro Manila, restoring as many as 200,000 jobs.

Business groups have been pushing for a further reopening of the economy. The government earlier said economic losses averaged P73 billion for every week of the implementation of a MECQ in Metro Manila. Economic managers slashed the full-year growth target to 4-5% to reflect the impact of strict lockdowns.

Under Alert Level 4, restaurants will be allowed to offer al fresco dine-in services at 30% capacity. Restaurants can also offer indoor dine-in services but at 10% capacity and only for fully vaccinated people.

Still, local government units may decrease the allowable capacity for these food establishments.

Personal care services such as barbershops, hair spas, nail spas, and beauty salons will be allowed to operate at 30% capacity, but only if the services are rendered outdoors. They can operate indoors but only at 10% capacity and for fully vaccinated people.

Workers of these establishments must be fully inoculated against COVID-19.

Religious gatherings are also allowed but at a maximum of 30% venue capacity if conducted outdoors, regardless of vaccination status, and 10% capacity if conducted indoors but only for those fully vaccinated. Religious leaders should also be fully vaccinated against COVID-19.

All other establishments or activities, except for those located in areas covered by granular lockdowns, may be allowed to operate at 100% capacity “provided they implement the minimum public health standards,” according to the guidelines.

“However, they are encouraged to operate with a minimal on-site capacity necessary to implement full operations, while applying work-from-home and other flexible work arrangements,” it said.

“For this purpose, the movement of workers of said establishments residing in areas not covered by granular lockdowns shall remain unrestricted.”

The IATF also said government agencies should be fully operational, with at least 20% on-site capacity while allowing work-from-home and other flexible work arrangements.

Gatherings for necrological services, wakes, inurnment and funerals “for those who died of causes other than COVID-19” are allowed as long as these are limited to the immediate family members.

However, World Health Organization (WHO) Country Representative Rabindra Abeyasinghe warned that relaxing the quarantine rules in Metro Manila may worsen the coronavirus situation.

“We have significant population coverage within the National Capital Region and I believe it’s about 60% now. But this is not adequate at this point to relax quarantine positions,” he said.

“You may recraft the terminology but basically what we are advising is make sure that those restrictions are followed, that we don’t relax too much because we are not in a position where we can relax and experience further worsening of the current transmission level because our health systems are just holding up,” the WHO official added. 

The Philippines continues to struggle with its pandemic response amid a Delta-driven surge in COVID-19 cases and a sluggish vaccine rollout.

As of Tuesday, the Health department reported 18,056 new coronavirus cases, bringing active cases to 177,670.

More than 17 million people or 22.14% of the country’s adult population had been fully vaccinated against the coronavirus as of Sept. 13, Mr. Roque said. The government aims to inoculate 70% of its population against COVID-19 by end-2021.

In the next few weeks, the Philippines will get 10 million more doses of coronavirus vaccines from a global initiative for equal access, WHO’s Mr. Abeyasinghe said. — Kyle Aristophere T. Atienza

Domestic trade of goods sees slight recovery in Q2

COURTESY OF ICTSI

By Ana Olivia A. Tirona, Researcher

DOMESTIC TRADE ACTIVITY slightly bounced back in the second quarter from the previous year, albeit still lower compared with value of locally traded goods in 2019, data by the Philippine Statistics Authority (PSA) showed.

Preliminary results from the PSA report on “Commodity Flow in the Philippines” showed the value of goods traded in the second quarter expanded by 24.5% year on year to P141.77 billion from P113.84 billion in the same period last year when it declined by 46% year on year.

Still, this was lower than the P211.01-billion worth of domestic trade in the second quarter of 2019 prior to the coronavirus disease 2019 (COVID-19) pandemic that has constrained economic activity since the first quarter of last year.

Likewise, the volume of these traded goods went up by 30.1% to 3.74 million tons from 2.88 million tons previously. Similar to the value of trade, volume was also significantly lower compared with the 8.11 million tons logged in the second quarter of 2019.

Commodity flow, also known as domestic trade, refers to the flow of goods in the country through water, air, and rail transport systems. Almost all of the commodities were mainly facilitated through water transport systems.

Six out of the 10 commodity categories monitored by the PSA showed year-on-year growth in trade value. Machinery and transport equipment — which accounted for the biggest share of trade in terms of value at 30.9% — grew 106.3% to P43.83 billion. Its trade volume also jumped with a 92.9% growth to 429,583 tons.

The fastest annual growth rate was seen in “crude materials, inedible, except fuels” with 151.9% to P3.40 billion from last year’s P1.35 billion. Its volume went up 177% to 414,761 tons.

Other commodity groups whose value of trade grew were manufactured goods classified chiefly by material (30.8% to P32.39 billion); commodities and transactions “not elsewhere classified by the Philippine Standard Commodity Classification” (22.9% to P9 billion); beverages and tobacco (17.9% to P5.74 billion); and miscellaneous manufactured articles (7.1% to P4.63 billion).

Eastern Visayas was the top source of commodities in the second quarter, with outflows amounting to P28.87 billion. It had a domestic trade surplus of P15.65 billion, the biggest among the six regions whose exports outnumbered those of imports.

Meanwhile, Northern Mindanao was the top destination of commodities with total inflows reaching P40.35 billion. It posted the biggest trade deficit among 10 regions with P12.59 billion.   

Five regions saw their respective trade balances shift in the second quarter compared with the same period last year. Of these, three swung to a surplus from a deficit: Mimaropa (Oriental and Occidental Mindoro, Marinduque, Romblon and Palawan) Region, Western Visayas, and Eastern Visayas. Meanwhile, two of the regions — Northern Mindanao and Soccsksargen (South Cotabato, Cotabato, Sultan Kudarat, Sarangani, and General Santos City) — recorded trade deficits.

In an e-mail, UnionBank of the Philippines, Inc. Chief Economist Ruben Carlo O. Asuncion attributed the second-quarter results to the “momentum coming from the [April lockdown].”

“There was a pickup in manufacturing and construction in 2Q21. It was also obvious with import recovery during the said quarter,” he added.

To recall, Metro Manila, Cavite, Laguna and Rizal were placed under an enhanced community quarantine (ECQ) from March 29 to April 11 as the government tried to slow the surge in COVID-19 cases. This was later relaxed to a more lenient modified CQ from April 12 to 30.

The economy has been under varying degrees of quarantine since March 2020.

“We see the economy rebounding to 4.9% [GDP] in 2021 and this is an underperformance because of persistent lockdowns and difficult challenges dealing with the control of the spread of the virus,” Mr. Asuncion said when asked on what the latest domestic trade figures signify for this year’s prospects of recovery. 

Mr. Asuncion sees domestic trade “sliding to the positive side of year-on-year growth” but that the persisting threats such as the emergence of the more infectious Delta COVID-19 variant “would still be a drag” to domestic trade moving forward.

As of Tuesday, the Health department reported 18,056 new COVID-19 infections and 222 additional deaths. Active cases now stand at 177,670.

Domestic trade in the regions: Which have (un)favorable trade balances?

Senate approves amendments to foreign investments law

PHILIPPINE STAR/ MIGUEL DE GUZMAN

THE SENATE approved on Tuesday a bill that amends the country’s foreign investments law, a move that is expected to further open up the economy. 

Senate Bill (SB) No. 1156, which introduces amendments to the Foreign Investments Act (FIA) of 1991, was approved on third and final reading on Tuesday evening. It was certified as urgent by President Rodrigo R. Duterte.

Under the bill, the required number of direct hires for foreign companies will be reduced to 15 from the current 50.

The bill will also allow foreigners to invest 100% equity in domestic market enterprises except in areas included in the foreign investment negative list. 

Foreign investors will also be allowed to set up and own 100% of small and medium-sized enterprises (SMEs) under the measure. 

The Philippines’ foreign direct investment (FDI) rules have been considered more restrictive than other Southeast Asian economies, which have received more investments.  

The Philippines ranked third most restrictive out of 83 economies on the FDI Regulatory Restrictiveness Index compiled by the Organization for Economic Cooperation and Development (OECD), based on 2020 data.

Business groups have been urging Congress to pass three reform measures, namely amendments to the FIA, Retail Trade Liberalization Act (RTLA) and Public Service Act (PSA). 

The House of Representatives has passed the three measures, although the Senate has yet to approve the PSA amendments.

“All three measures will relax FDI restrictions and together could result in many billions of new investments in future years, creating more jobs, diversifying the economy, bringing new technology, and increasing competition, and providing better services to the benefit of Filipino consumers,” local and foreign business groups said in a Sept. 7 statement. — ANOT 

Robinsons Land REIT inches up on market debut 

By Keren Concepcion G. Valmonte, Reporter

RL Commercial REIT, Inc. (RCR) inched up by one centavo on its first day at the Philippine Stock Exchange (PSE), closing the day at P6.46 each from its listing price of P6.45.

RCR is the real estate investment trust (REIT) sponsored by Robinsons Land, Corp. (RLC). It is the fourth and the “largest” REIT listing at the local bourse so far, breaking records upon listing.

Its initial public offering (IPO) raised a total of P23.5 billion, which RLC plans to use to build more projects. RCR’s market capitalization stands at P64.2 billion, said to be the highest among REITs in the country.

“The success of our IPO is an affirmation of RCR as an attractive investment and of REITs as a new facet of the Philippines’ financial landscape,” RCR Chairman Frederick D. Go said during RCR’s listing ceremony.

RCR was among the most traded stocks on Tuesday at P499.7 million with 77.28 million issues traded.

On Tuesday, value turnover at the PSE surged by over six times to P31.17 billion with 4.71 billion shares switching hands from the P5 billion with 1.75 shares traded on Monday.

“Trading activity was focused on the maiden voyage of RCR, which finished slightly up to end its first trading session,” Regina Capital Development Corp. Head of Sales Luis A. Limlingan said in a Viber message.

RCR opened with a gap up from its P6.45 offer price and traded for as much as P6.55 each.

“But [it] immediately saw profit taking activity take place in the open market, causing the stock to dip to as low as P6.44, but eventually moving sideways above the P6.46 area for the most part of the day. Eventually, the stock closed at this price and ended up being one of the most actively traded issues today,” Timson Securities, Inc. Trader Darren T. Pangan said in a separate Viber message.

RCR has branded itself as the most geographically diverse REIT, with over 94% of its initial portfolio spread in the business districts of Makati, Bonifacio Global City, Ortigas as well as in Mandaluyong, Quezon City, Metro Cebu, Metro Davao, Naga, and Tarlac.

It also has the largest portfolio valuation at P73.9 billion as of end-June, according to Santos Knight Frank.

RCR’s initial portfolio spans 425,315 square meters (sq.m.) of gross leasable area (GLA), which makes its asset size the largest. Its assets also have land leases that last for as long as 99 years.

“Its leasable area is expected to grow through the full support of RLC, the majority owner and sponsor of RCR,” RCR said in a statement on Tuesday.

Robinsons Land is expected to infuse one or two assets every year into its REIT unit. Within the next 18 months, it is planning to inject 40,000 to 100,000 sq.m. into RCR.

In July, RCR and RLC entered into a memorandum of agreement for the potential acquisition of Cyberscape Gamma and/or Robinsons Cybergate Center 1. The two assets have a combined GLA of 72,100 sq.m. equal to around 17% of RCR’s initial portfolio.

RLC also has existing office assets, business process outsourcing (BPO) spaces in various commercial centers, and other projects under construction, which it may inject into the REIT subject to market conditions, regulatory approval, among others.

“Overall, RLC’s potential pipeline for infusion to RCR amounts to a total GLA of approximately 422,000 sq.m. over time,” RCR said.

Mr. Go said RLC will be “keenly observing the market,” especially the BPO industry. He also expressed confidence in the office market.

RCR Treasurer Kerwin Max S. Tan said the REIT listing “crystalizes the value of RLC” and it also allows RLC to recycle capital to develop more projects in the future.

“This RCR listing just contains 65% of our office portfolio, then what more if we include our malls, our other offices under RLC, our residential, our land, and our destination estates? It just shows how valuable RLC is,” said Mr. Tan, who is also the chief financial officer of RLC.

Robinsons Retail expects more sales via e-commerce 

ROBINSONS Retail Holdings, Inc. (RRHI) said it expects its e-commerce channels to contribute a larger part of the company’s total sales even post-pandemic.

“We pivoted to e-commerce rather fast and we see now that the percentage contribution of e-commerce to total sales is growing very fast,” Robinsons Retail President and Chief Executive Robina Gokongwei-Pe told BusinessWorld at the second episode of its Crisis Insights from Business Tycoons series.

Robinsons Retail was formerly a “pure brick-and-mortar retailer,” however, the pandemic pushed the company to quickly set up shop online as lockdown restrictions halted physical store operations.

With the national elections just around the corner, Ms. Gokongwei-Pe said Robinsons Retail is hoping for consistency in policy.

“We want to see more consistent policies so that we can prepare better,” she said without elaborating. 

Business groups last week voiced concern after the government decided at the last minute to reverse its plan to place Metro Manila under a looser general community quarantine with targeted lockdowns beginning Sept. 8.

As small business owners prepared to reopen and bought supplies, the government announced on the evening of Sept. 7 that the stricter modified enhanced community quarantine classification would be maintained until Sept. 15. Granular lockdowns will be implemented this week starting Thursday, Sept. 16.

“The slowdown in economic recovery offers challenges to RRHI’s own recovery plans. The speed of the recovery of the economy largely depends on how fast the rollout of vaccines would be,” Ms. Gokongwei-Pe said.

The company said its brick-and-mortar stores still make up for a big part of its total sales. Robinsons Retail plans to continue working on its presence both offline and online moving forward, keeping in mind the “experience factor” to ensure that customers still enjoy shopping.

“Robinsons Retail will no longer be known as a pure brick-and-mortar retailer. We want to be known as an omnichannel retailer expanding both offline stores and our online business,” said Ms. Gokongwei-Pe.

For the first half of the year, the company reported that its e-commerce sales grew fourfold. Its own e-commerce site GoRobinsons.ph saw the most significant growth. Its Southstar Drug, Robinsons Appliances, and Savers Appliances also have their own websites.

Gina R. Dipaling, Robinsons Retail vice-president for corporate planning and investor relations, said the company might reach its target e-commerce sales contribution this year.

The company will be adding more stores and brands in GoRobinsons, which currently houses Robinsons Supermarket, Robinsons Department Store, The Marketplace, Shopwise, Handyman, True Value, Toys R’ Us, and No Brand.

Higher e-commerce sales are also expected as the government continues to implement lockdown restrictions due to rising coronavirus disease 2019 (COVID-19) infections.

“[It] seems we will likely exceed the high-end of the 2-3% target range sales contribution from e-commerce and call/deliver/collect services to total retail sales for 2021,” Ms. Dipaling told BusinessWorld in an e-mail.

E-commerce sales of the company only accounted for 0.4% of total retail sales back in 2019.

On Tuesday, shares of Robinsons Retail at the stock exchange declined by 0.30% or 15 centavos to close at P49.50 each. — Keren Concepcion G. Valmonte

Malampaya gas field’s normal delivery set to go back — SPEx

By Angelica Y. Yang, Reporter

SHELL Philippines Exploration B.V. (SPEx), the operator of the Malampaya gas-to-power project, expects the offshore natural gas field to go back to normal delivery levels by Tuesday evening.

Its assurance came after an extended gas restriction following a scheduled production hold, cutting off gas supply to some power plants in Luzon, including four facilities run by Lopez-led First Gen Corp., namely: the 1,000-megawatt (MW) Santa Rita, 500-MW San Lorenzo, 97-MW Avion, and 420-MW San Gabriel.

“Normal gas delivery levels [are] expected by this evening,” SPEx through the media manager for Shell companies in the Philippines told BusinessWorld via Viber on Tuesday.

“[The offshore platform is] already ramping up gas production,” it said, adding that Santa Rita “would start receiving gas this morning, per plan. Then increase Ilijan gas supply this afternoon.”

BusinessWorld sought comments from KEPCO Ilijan Corp., the consortium that operates and maintains the 1,200-MW Ilijan natural gas plant, but it has not replied as of deadline time.

SPEx said the Malampaya gas field previously undertook a planned production hold to prepare for the scheduled Malampaya maintenance shutdown next month. But it said there was a “slight delay” in the platform’s startup, which led to the prolonged gas supply restriction starting over the weekend.

In a disclosure on Tuesday, First Gen confirmed that over the weekend, the Malampaya gas field fully halted gas supply to First Gen Clean Energy Complex, which houses its four natural gas-fed plants.

“As a result, the Santa Rita and San Lorenzo plants have been operating using condensate as fuel while Avion has been using diesel. San Gabriel does not have dual-fuel capability and had to shut down because of the absence of natural gas supply from Malampaya,” the listed power firm told the local bourse.

It said it was hopeful that its plants could return to gas-fired operations soon after receiving word from the consortium behind Service Contract (SC) 38 that the gas field will gradually supply fuel to its facilities.

In a media release on Tuesday, Energy Secretary Alfonso G. Cusi asked SPEx to explain the gas restrictions that affected fuel supply to natural gas plants.

“These restrictions affect the electricity prices that consumers pay and they will have to be informed on the causes of price increases,” Mr. Cusi said.

He also instructed the Independent Electricity Market Operator of the Philippines to simulate the impact of gas restrictions on power prices, as well as the effects of the 20-day maintenance shutdown of the Malampaya field in October.

The Department of Energy said it would call a “coordination meeting” with SPEx, natural gas plant operators, distribution utility Manila Electric Co., and the market operator to address issues as well as concerns arising from the upcoming Malampaya shutdown.

Firms holding interests in SC 38 are SPEx with 45%; Udenna Corp. subsidiary UC38 LLC with 45%, and state-led Philippine National Oil Co. Exploration Corp. with 10%.

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