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After lockdown, Shanghai tries to mend fences with foreign firms

A VIEW of the city skyline in Shanghai, China, Feb. 24, 2022. — REUTERS

SHANGHAI — Shanghai officials are seeking to revive confidence among multinational companies bruised and frustrated by the city’s coronavirus disease 2019 (COVID-19) lockdown by holding multiple meetings with foreign firms and easing a key border requirement for overseas workers. 

The image of China’s most cosmopolitan city and its biggest business hub was badly damaged by the two-month lockdown, with countless expatriates relocating and foreign businesses warning that they are reconsidering investment plans. 

The Shanghai government plans to hold 20 meetings this month with foreign firms engaged in key industries such as automobiles, trade, semiconductors and biomedicine, a report by the Jiefang Daily, a Shanghai government-backed newspaper, said on Sunday. The report was reposted on the Shanghai city website. 

The firms would be picked from major investment countries and regions, including the United States, Europe, Japan, and South Korea. 

Four online meetings have been held so far since June 1, when the city eased its lockdown, according to Shanghai government statements. 

The first was attended by executives from US blue chips such as Procter & Gamble and Johnson & Johnson, and the second included automakers Tesla, General Motors, and Ford. The companies did not respond immediately to requests for comment on Wednesday. 

In addition, the European Chamber of Commerce said on Tuesday it had been informed during a meeting with the city’s vice mayor that Shanghai will no longer require official invitation letters, so-called PU letters, for foreigners returning for work and their dependents, addressing what had become a bugbear for the expat community. 

China began in early 2020 to require foreigners to obtain PU letters as part of their visa application as it dramatically tightened border controls when the coronavirus pandemic hit. 

Many firms had complained about the difficulties and long waits in obtaining the document, which impeded the hiring of foreign staff. 

‘INITIATIVE TO ENCOURAGE WORK’ 

The removal of this requirement was “an initiative from central government to encourage work and production resumption in Shanghai,” the European Chamber said. 

Asked for comment on Wednesday, the Shanghai government referred to remarks city official Gu Jun made at a press conference in late May, in which he acknowledged that the epidemic had impacted foreign trade and investment in the city. 

He said the city would take measures to boost confidence among businesses and support multinationals in setting up regional headquarters and research centers in Shanghai. It did not provide further comment. 

Tom Simpson, managing director of the China-Britain Business Council, said it was expecting to meet with the Shanghai government in the coming weeks. 

Shanghai had provided its members “more practical” business resumption support including issuing logistics permits and reopening warehouses, he said. 

During the lockdown, Shanghai tried to keep factories open under “closed loop” operations but businesses said the arrangements posed numerous difficulties. 

The lack of flights into China — the vast majority have been canceled for more than two years – also remains a key hindrance. 

China has resolutely stuck to a “zero-COVID” policy that aims to eradicate the spread of the virus, an approach that is increasingly out of step with the rest of the world where economies have reopened after vaccination campaigns. 

Joerg Wuttke, president of the EU Chamber, said the zero-COVID policy was not just denting Shanghai’s attractiveness, but China as a whole, especially as other rival markets open and try to lure companies away from China. 

“The world is not going to wait for China to clean this mess,” he said. — Reuters

Manufacturing growth eases to 13-month low in April

Factory output eased to its lowest in 13 months in April, the Philippine Statistics Authority (PSA) reported this morning.

Preliminary results from the PSA’s Monthly Integrated Survey of Selected Industries (MISSI) showed manufacturing output, as measured by the volume of production index (VoPI), went up 3.4% year on year in April.

This was slower than the revised 352.3% growth in March and the 157.8% in April last year.

It marked the slowest pickup in 13 months or since the 73.1% contraction in March last year.

Manufacturing growth averaged 54.8% in the first four months to April.

Fourteen out of 22 industry divisions recorded expansions in April, led by textiles with 45.6% which grew almost twice from the previous month’s record of 24%. This was followed by manufacture of machinery and equipment except electrical with 39.2% (from March’s 48.4%).

On the other hand, declines were recorded for eight industry divisions.

In comparison, S&P Global’s Philippines Manufacturing Purchasing Managers’ Index rose to 54.3 in April from 53.2 in March. It was the highest reading in more than four years since the 54.8 print in November 2017

The 50-mark separates manufacturing expansion from contraction.

The capacity utilization — the extent to which industry resources are used in producing goods — averaged 69.2% in April, slower from the revised 70.9% in the previous month. Of the 22 sectors, 18 industries reached an average capacity utilization rate of at least 60%. — AMPY

 

April trade deficit narrows as import growth eases to 13-month low

The country’s trade-in-goods deficit narrowed in April as merchandise import growth eased to 13-month low, the Philippine Statistics Authority (PSA) reported earlier this morning.

Preliminary PSA data showed the value of merchandise exports grew by 6% year on year to $6.129 billion in April.

This was lower than the 74.1% increase in the same month in 2021 but higher than the 5.9% growth in March.

It was the highest export growth in two months since the 15.8% recorded in February.

Meanwhile, the country’s merchandise imports rose by 22.8% to $10.902 billion in April. This was slower than the 153.2% growth in the same month last year and the 27.7% import growth the previous month.

This was the lowest import growth in 13 months or since the 22.1% growth in March 2021.

This brought the trade-in-goods deficit to $4.773 billion in April, wider than the $3.098-billion shortfall recorded a year ago, but narrower than the $5.007-billion gap in March.

Exports rose by 8.9% year on year to $25.55 billion in the four months to April, above the revised 7% growth projected by the Development Budget and Coordination Committee for 2022.

Imports climbed by 26.7% to $44.22 billion in the January to April period. This pace was above the government’s also revised 15% assumption.

Year to date, the trade balance ballooned to a $18.668-billion deficit, from a $11.442-billion trade gap in the comparable four months last year. — LOP

AllDay Marts, Inc. announces annual meeting of stockholders to be held online on July 4

 

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A Brown Company, Inc. to hold annual stockholders’ meeting via remote communication on June 30

 

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Philippine Realty and Holdings Corp. to conduct annual stockholders’ meeting on June 30

 

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Philex Mining Corp. to hold annual meeting of stockholders virtually on June 30

 

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PHL debt is still manageable — WB

The view of the Makati skyline seen from EDSA, Sept. 24, 2020. — PHILIPPINE STAR/ MICHAEL VARCAS

THE PHILIPPINES’ outstanding debt remains manageable despite breaching the internationally accepted sustainable threshold, the World Bank (WB) said, but stressed the need for a solid fiscal consolidation plan and high economic growth.

“We think the debt is still manageable. Most of our debt is long term, domestic and peso-denominated,” Kevin C. Chua, World Bank senior economist in Manila, said during a briefing on Wednesday.

The Philippines’ debt-to-gross domestic product (GDP) ratio reached 63.5% as of the end of the first quarter of 2022. This was above the 60% threshold considered as manageable by multilateral lenders for developing economies, and much higher than the 39.6% seen as of end-2019.

As of end-April, the National Government’s outstanding debt stood at a record-high P12.76 trillion. The bulk or 70% of the debt was obtained domestically.

However, Mr. Chua said the debt will remain a drag to the country’s economic growth, which the World Bank sees at 5.7% GDP for 2022 and 5.6% on average in 2023-2024.

“We are recommending fiscal consolidation. The way to address the high debt ratio would be higher economic growth and the pursuit of fiscal consolidation,” he said.

The Department of Finance (DoF) last month unveiled a fiscal consolidation plan which aims to raise an average of P284 billion every year for the next 10 years to repay the P3.2-trillion additional debt incurred during the pandemic.

“Some of the recommendations would be improved revenue collection, digitalization, making it easier for businesses and individuals to pay. Also making spending more efficient to avoid leakages and wastage. Third will be to increase the value of money in procurements,” Mr. Chua said.

GROWTH FORECAST
Despite the strong 8.3% growth in the first quarter, the World Bank retained its 5.7% GDP growth forecast for the Philippines this year due to the “very weak external environment,” Mr. Chua said.

The multilateral lender in April cut the GDP outlook from the 5.8% forecast given in December 2021.

“The trend in the recent quarters reflects our optimism the country can maintain robust growth this year. Continuing growth in 2022 will be driven and supported by greater mobility of people, wider resumption of face-to-face economic and social activities

and strong public investments,” World Bank Country Director Ndiamé Diop said during the same briefing.

“To sustain growth beyond 2022, we believe increasing private investments and further reducing infrastructure gaps will be essential.”

Mr. Chua said its forecast for the Philippines is still one of the fastest in the region for this year. However, the forecast is still below the government’s revised full-year growth target of 7-8%.

“Global growth has been downgraded to 2.9% from 4.1%. This weak external environment will impact the economy because our main trading partners’ — China, United States — growth are decelerating and this will affect our exports,” he said.

Other risks to the Philippines economic outlook include geopolitical uncertainty, tightening global financing conditions, as well as threat of a new variant-driven surge in coronavirus disease 2019 cases.

“Another reason why we gave a 5.7% growth forecast for the Philippines is that rising inflation may also impact consumption in the country,” Mr. Chua said.

Inflation accelerated by 5.4% year on year in May, the highest in three and a half years, as food and fuel prices continued to rise.

Mr. Chua said the Philippines has to keep a close eye on inflation, especially since the Russia-Ukraine war continues to impact global food and commodity prices.

Higher prices have a direct impact on poverty, with World Bank estimates showing a 10% increase in the global price of cereals will raise the poverty headcount by one percentage point. This means an additional 1.1 million Filipinos will be plunged into poverty.

A 10% rise in energy prices is projected to increase the poverty headcount by 0.3 percentage point, pushing 329,000 more Filipinos into poverty, it said.

“Authorities have to use all available policy tools to address inflation, including monetary measures to prevent the de-anchoring of inflation expectations, and supply-side measures such as importation and lower tariffs and non-tariff barriers for important commodities to help augment domestic supplies as needed, and greater support to agriculture production through extension services, seeds, and fertilizer,” Mr. Chua said.

Also, Mr. Chua said there is no risk of “stagflation,” or high inflation and slow growth for the Philippines.

“As you can see the 5.7% growth for the country is really high, really good… I don’t see stagflation in the country,” he added. — K.B.Ta-asan

Philippines may need ten years to bring debt-to-GDP ratio down to 40%

PHILIPPINE STAR/EDD GUMBAN

THE PHILIPPINES may need at least 10 years before its debt-to-gross domestic product (GDP) ratio will return to its pre-pandemic level of 40%, Finance Secretary Carlos G. Dominguez III said.

“Assuming that a debt-to-GDP ratio of 40% is the ideal health…It could take us a minimum of 10 years to get back [on track]. That is the effect of COVID-19 (coronavirus disease 2019),” he said during a briefing on Wednesday.

The Philippines’ debt pile ballooned to a record P12.76 trillion as of the end of April, reflecting the surge in borrowings to finance its pandemic response.

The country’s debt-to-GDP ratio stood at 63.5% as of the end of the first quarter, which surpasses the 60% threshold considered as manageable by multilateral lenders for developing economies.

This is also much higher than the 39.6% debt-to-GDP ratio seen as of end-2019 or before the pandemic.

The Philippine Institute for Development Studies (PIDS) estimated the debt-to-GDP ratio will peak as high as 66.8% by 2023 and 2024, before falling to 65.7% by 2026.

The PIDS presented to the Department of Finance on Wednesday its report on the fiscal effect of the COVID-19 on the country.

PIDS Research Specialist John Paul C. Corpus outlined three scenarios and dates when the government could achieve the ideal debt-to-GDP ratio of 40%.

In order to reach this ratio by 2031, a median annual primary balance (revenues minus non-interest expenditures) increase of 2.42% of GDP would be needed, based on the most optimistic scenario that assumes a GDP growth rate of 7% and a real interest rate of 2%.

To reach the 40% debt-to-GDP ratio by 2041 and 2051, a median annual increase of primary balance of 0.86% of GDP and 0.35% of GDP respectively are needed, under optimistic conditions.

“So, the longer the terminal date, the easier it becomes. So, the long COVID could be 20 years,” Mr. Dominguez said.

PIDS fellow Justine Diokno-Sicat, who co-authored the report, told reporters it will not be easy to return to pre-pandemic debt-to-GDP ratio.

If the government does not immediately return to a pre-pandemic debt-to-GDP ratio, she said the only real risk is a credit rating downgrade.

Fitch Ratings in February affirmed the Philippines’ investment grade rating but also maintained the “negative” outlook amid “possible challenges in unwinding the policy response to the health crisis and bringing government debt on a firm downward path.”

A negative outlook means Fitch could downgrade the Philippines’ credit rating in the next 12 to 18 months.

“We’ve been talking with multilaterals; the World Bank was one of them. There’s some sort of meeting of minds that the primary goal is really to bring life back into the economy, and that will naturally correct the debt,” Ms. Diokno-Sicat said.

Economic managers target a 7-8% GDP growth this year.

Mr. Dominguez earlier said the Philippines has to grow an average of 6% annually in the next six years to reduce the country’s debt. — T.J.Tomas

Dollar reserves drop to $103B

REUTERS

THE COUNTRY’S dollar reserves declined as of end-May amid higher foreign currency withdrawals to repay debt and the lower valuation of the central bank’s gold reserves.

Gross international reserves (GIR) — which shield the country from liquidity shocks — stood at $103.53 billion as of end-May, data from the Bangko Sentral ng Pilipinas (BSP) showed on Tuesday.

The end-May GIR fell by 1.7% from the $105.4 billion as of end-April, and by 3.4% from $107.25 billion in May 2021.

“The month-on-month decrease in the GIR level reflected mainly the National Government’s (NG) foreign currency withdrawals from its deposits with the BSP to settle its foreign currency debt obligations and pay for its various expenditures,” the BSP said in a statement on Tuesday evening.

Ample foreign exchange buffers protect the country from market volatility and ensure that it is capable of paying its debts in the event of an economic downturn.

The level of dollar reserves as of end-May is enough to cover about 6.6 times the country’s short-term external debt based on original maturity and 4.5 times based on residual maturity.

It is also equivalent to 9.1 months’ worth of imports of goods and payments of services and primary income.

“At 9.1 import cover, international reserves remain more than adequate to cover the dollar needs of the economy; and it is very much above the 3-month rule of thumb where reserves will be considered worrisome,” China Banking Corp. Chief Economist Domini S. Velasquez said in a Viber message.

The BSP also attributed the drop in the dollar reserves to the downward adjustment in the value of the BSP’s gold holdings as the price of gold declined in the global market.

The BSP’s gold holdings were valued at $9.02 billion as of end-May, a 2.7% decline from the $9.27 billion as of end-April. This was also 8.8% lower than the $9.90-billion level a year earlier.

The central bank’s reserve assets also include foreign investments, foreign exchange, reserve position in the International Monetary Fund (IMF) and special drawing rights (SDR).

The BSP’s foreign investments amounted to $87.874 billion as of end-May, 1.8% down from $89.562 billion in the prior month and 5% down from $92.835 billion in 2021.

Meanwhile, the level of foreign exchange reserves rose by 3% to $2.074 billion as of end-May from $2.012 billion in April, but 15% lower than the $2.464 billion seen last year.

Reserves with the IMF tripled to $3.783 billion as of end-May, from the $1.235 billion in May 2021.

In August 2021, the Philippines received $2.8-billion worth of SDRs from the IMF, as part of the latter’s efforts to help countries recover from the coronavirus pandemic.

“Moving forward, we expect a slight weakening of reserves towards the end of the year as the current account balance is expected to widen. Imports are bound to increase due to the high price of oil, and food and exports will likely weaken due to a more subdued global economy,” Ms. Velasquez said.

The BSP expects to end the year with $108 billion in dollar reserves.

GIR stood at $108.891 billion as of 2021, 1.11% lower than the record $110.117-billion level as of end-2020. — Keisha B. Ta-asan

Philippine banana growers plead for Japanese consumers to bear price hikes

REUTERS

TOKYO — The Philippines on Wednesday appealed directly to consumers in its top export market Japan to pay higher prices for imported bananas to help shoulder a surge in production costs.

Prices for fuel and agricultural supplies are driving many farmers to the brink of bankruptcy, according to a report by the Philippines’ embassy in Tokyo that pleaded for Japanese consumers to share the burden for “sustainable bananas.”

“It will be unrealistic and unfair for Philippine banana farmers to maintain the status quo,” Philippine Ambassador to Japan Jose C. Laurel V told reporters.

Producers have been negotiating with Japanese retailers and trading companies on prices, but were told to take their concerns to the public.

“It was impressed upon us that one of the important things that we need to do is to explain to the consumers why there needs to be a price increase,” said Robispierre L. Bolivar, second in command at the Philippine embassy.

Consumer prices are surging in Japan after decades of deflation, accelerated by the yen’s drop to a 20-year low, soaring energy costs and logistical logjams caused by the crisis in Ukraine.

Food prices are in particular focus, with everything from snack makers to breweries instituting their first price increases in many years.

Researcher Teikoku Databank reported that prices on more than 10,000 food items in Japan would rise in 2022.

Japan was the top export destination for Philippine bananas in 2020, just exceeding shipments to China, United Nations’ trade data showed.

Japanese households on average spend 4,387 yen ($32.92) on bananas a year, more than any other fruit, according to data from the agriculture ministry.

Prices for Philippine bananas have been flat for seven years, but a surge in production costs amid the Ukraine crisis have made current margins untenable, embassy officials said. — Reuters

Prime Infra unit plans world’s largest solar farm

STOCK PHOTO | Image from Pixabay

RAZON-LED Prime Infrastructure Holdings, Inc. (Prime Infra) plans to build what it claims to be the world’s largest solar power facility with a capacity of up 3,500 megawatts (MW) plus a battery energy storage system that can hold up to 4,500 MW hours.

“Prime Infra finds a sweet spot to pursue solar as we take advantage of the steep decline in installation costs over the past decade and the improved battery energy storage system technology that allows us to build an economically critical and socially relevant infrastructure at a scale the world has never seen before,” said Guillaume Lucci, president and chief executive officer of Prime Infra, in a media release on Wednesday.

Prime Infra said the project is to be led by Terra Solar Philippines, Inc., which is a unit Terra Renewables Holdings, Inc., the renewable energy subsidiary of Enrique K. Razon, Jr.’s infrastructure firm that partnered with Solar Philippines Power Project Holdings, Inc.

Terra Solar will supply 850 MW to Manila Electric Co. (Meralco) from power generated by the proposed facility.

Terra Solar late last year submitted an unsolicited offer to supply Meralco’s supply requirements, for which the distribution utility sought challengers through a competitive selection process. Two entities challenged the bid but failed to submit, paving the way for the forging of a power supply agreement with Meralco.

Earlier this year, Meralco said that the competitive bidding was in compliance with the Department of Energy’s policy on renewable portfolio standards (RPS). It said the power supply forms part of its efforts to source up to 1,500 MW of renewable energy (RE).

The RPS program requires power distribution utilities, including electric cooperatives and retail electricity suppliers, to source or produce a fraction of their requirements from eligible RE resources.

Mr. Lucci said the “record-breaking” project highlights solar power’s contribution to boost the country’s energy security, adding that “solar, which is normally looked at for peaking, is now being made available by Terra Solar to answer Meralco’s mid-merit requirement, thereby addressing both the need for additional capacity and compliance with RPS.”

Mid-merit power plants operate to fill the gap between baseload generation capacity and peak generation capacity.

Prime Infra described the project as “a model of dependable renewable energy, which represents a stable price not subject to fuel imports volatility for the rest of its 20-year contract.”

It cited Terra Solar’s projection that the 850-MW supply can displace a yearly usage of around 1.4 million tons of coal or 930,000 liters of oil.

“This means reduction in both greenhouse gas emissions and import dependency for the country from 2026 to 2046,” it added.

The company said that of the power supply contracted with Meralco, 600 MW will be available by 2026, while 250 MW more will be delivered in 2027. Meralco previously said that the mid-merit power it bid out was for 20 years.

Prime Infra did not say where the facility will be built, but Meralco earlier said that Terra Solar had proposed its solar power plants with an energy storage system in Batangas, Cavite, Nueva Ecija, Tarlac, and Zambales.

Meralco’s controlling stakeholder, Beacon Electric Asset Holdings, Inc., is partly owned by PLDT, Inc. Hastings Holdings, Inc., a unit of PLDT Beneficial Trust Fund subsidiary MediaQuest Holdings, Inc., has interest in BusinessWorld through the Philippine Star Group, which it controls. — Victor V. Saulon

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