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Shares may move sideways after five-day rally

REUTERS

PHILIPPINE SHARES could move sideways this week as investors monitor overseas developments, with profit-taking also likely to ensue after the market’s five-day rally.

On Friday, the bellwether Philippine Stock Exchange index (PSEi) rose by 1.25% or 78.33 points to close at 6,298.29, while the broader all shares index went up by 0.67% or 25.1 points to 3,724.20.

This was the PSEi’s best finish in six weeks or since it ended at 6,378.86 on Jan. 23.

Week on week, the PSEi surged by 5% or 300.32 points from its 5,997.97 close on Feb. 28.

“The local market exhibited upward momentum last week as it went on a five-day gaining streak. It was able to get past its 10-day and 50-day exponential moving averages, which are taken as bullish signs. Trading activity also improved, implying that the rally had conviction,” Philstocks Financial, Inc. Senior Research Analyst Japhet Louis O. Tantiangco said in a Viber message.

For this week, the market could move sideways, he said.

“Given the five-day rally, we may see some episodes of profit taking, which could cause the market to decline. Still, we expect optimism to remain driven by prospects on the BSP’s (Bangko Sentral ng Pilipinas) monetary policy easing following our latest inflation print, and our robust fourth quarter and 2024 corporate results,” he said.

Headline inflation slowed to 2.1% in February from 2.9% in January, the government reported last week. This was the slowest monthly print in five months or since the 1.9% in September 2024.

This was also below the BSP’s 2.2%-3% forecast for the month and the 2.6% median estimate in a BusinessWorld poll of 18 analysts.

The Monetary Board will next meet to discuss policy on April 3. Analysts said slower February inflation gives the BSP room to resume its rate-cut cycle at next month’s meeting following its surprise pause at the February review.

“The peso’s appreciation, if it continues, is also expected to help,” Mr. Tantiangco added. “A key downside risk to the market, however, is the uncertainties with respect to the US’ trade policies.”

He put the PSEi’s major support at 6,000 and major resistance at 6,400.

US President Donald J. Trump suspended on Thursday tariffs of 25% he had imposed last week on most goods from Canada and Mexico, the latest twist in a fluctuating trade policy that has whipsawed markets and fanned worries about inflation and growth, Reuters reported.

The exemptions for the two largest US trading partners, expire on April 2, when Mr. Trump has threatened to impose a global regime of reciprocal tariffs on all US trading partners.

Meanwhile, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort placed the PSEi’s support at 6,000 and resistance at 6,300-6,400.

Online brokerage 2TradeAsia.com pegged the PSEi’s immediate support at 6,000 and resistance at 6,400. — Revin Mikhael D. Ochave with Reuters

Tourist convenience seen key to growing hospitality industry

PHILIPPINE STAR/ MIGUEL DE GUZMAN

By John Victor D. Ordoñez, Reporter

THE PHILIPPINE government should increase direct flight connections and make mobility more convenient for visitors, a Thai Chamber of Commerce official said.

Panida Thepkanjana, a director at the Thai Chamber of Commerce and Erawan hospitality group director, told BusinessWorld on the Thaifex Horec Asia 2025 trade show in Bangkok that if these issues are addressed, Thai investors see potential in the Philippine hospitality industry.

“I think that for the tourists, the important thing is convenience in traveling,” she said, noting that Philippine geography requires people to fly around “because you have so many islands.

Nevertheless, she added, “We see the potential of the Philippine market.”

The Philippine Statistics Authority reported that in 2023, Filipino tourist spending consisted of 19.3% hotels and restaurants, 17.1% on transportation and 16% on recreation and culture.

Erawan Group, which develops and operates hotels, has invested in more than 20 hotels in the Philippines, Ms. Thepkanjana said.

Last year, Philippine tourism receipts topped P760 billion, up 9.04% from a year earlier, exceeding the pre-pandemic level of P600.01 billion in 2019.

The US accounted for 947,891 visitors, boosted by nonstop flights from San Francisco to Manila offered by United Airlines, with Philippine Airlines also offering new nonstop service from Seattle.

Japanese arrivals rose 27% to 388,316, while visitors from China totaled 312,222, still significantly lower than pre-pandemic levels.

Ms. Thepkanjana said the Philippine hospitality industry should also embrace new technology such as artificial intelligence to reduce operating costs.

“But the human touch is also still important. If you go to the hotel and nobody is there, then the feeling is different, right? But we can have AI for the back of the house, to achieve efficiencies in booking, in operations,” she said.

The Philippine Hotel Industry Strategic Action Plan 2023-2028, which was launched by the Department of Tourism (DoT) and the Philippine Hotel Owners Association, Inc. in October, aims to close the Philippines’ 120,463-room gap by 2028.

According to the 2024 Philippine Accommodation Pipeline Report, private sector hotel developers have committed to 158 new accommodation projects, totaling 40,084 rooms and generating P250 billion in investment.

The DoT and Air France-KLM Group in December  inaugurated direct flights between Manila and Paris.

Ms. Thepkanjana said more flights from budget airlines would encourage more travel to the Philippines.

“In one trip you have to pay maybe 30% for traveling costs,” she said. “But budget airlines are very cheap. More and more people now have the power to travel.”

Thailand’s Charoen Pokphand Foods plans food processing operation in the Philippines

CPF-PHIL.COM

THAILAND’s Charoen Pokphand Foods PLC (CPF) plans to set up a food processing facility and distribution network in the Philippines within the next three years, officials said.

The Philippine Department of Agriculture (DA) made the announcement after sending a delegation to Thailand to explore best practices in farming, product development, and agricultural supply chain management.

The DA delegation led by Secretary Francisco Tiu Laurel, Jr. toured the company’s Nong Chok factory, which processes 70,000 metric tons of food products, including fillets, ready meals, hams, and sausages, largely for export to Europe.

The delegation also visited CPF group company Makro, a wholesale retailer.

The DA said the delegation discussed bilateral trade opportunities and potential investments in Philippine agriculture with their Thai counterparts and the private sector.

Mr. Laurel paid a visit to his Thai counterpart, Agriculture and Cooperatives Minister Narumon Pinyosinwat, and expressed the Philippines “openness to sourcing more rice, vegetables, poultry, and pork from Thailand.”

Mr. Narumon “expressed Thailand’s interest in exporting longan and poultry meat to the Philippines,” the DA said.

It said Mr. Laurel cited the Philippines’ desire to export Hass avocados and processed meats to Thailand. “We hope this recent visit will lead to greater trade between Manila and Bangkok, as well as more Thai investment in the Philippine agricultural sector,” he said.

“Thailand, a major rice exporter, offers many lessons in agricultural efficiency and food product exports to Europe.”

The DA team also visited several Thai agricultural projects to observe sustainable farming practices including the Cassava Collaborative Farm in Wang Muang, Saraburi, which practices a Bio-Circular-Green Economy model.

The team also visited an asparagus farm in Nakhon Pathom, inspecting efficient irrigation systems, contract farming practices, and implementation of farming and product standards, which have increased yields and incomes. The farm exports asparagus to Taiwan.

The Sanamchan Community Enterprise in Nakhon Pathom demonstrated the benefits of local wisdom, technology, and community resources in producing high-quality crispy vegetables and fruits for export, the DA said.

At the Asian Institute of Technology’s Smart Greenhouse, the delegation observed advanced climate control systems designed to optimize crop yields.

Potential collaborations were discussed regarding climate-resilient structures, crop varietal development, and sustainable agricultural and fisheries research, the DA said.

The delegation also visited major food and agricultural wholesale and retail markets, including Or Tor Kor, Simummuang, and Talaad Thai, which serve as critical hubs in Thailand’s agricultural supply chain, distributing fresh produce domestically and internationally.

“The visit to these markets provided the delegation with ideas to incorporate in the improvement plans for food terminals in the Philippines,” DA said. — Kyle Aristophere T. Atienza

NG gross borrowings hit P2.56 trillion in 2024

BW FILE PHOTO

THE National Government’s (NG) gross borrowings hit P2.56 trillion in 2024, coming in just under the P2.57 trillion borrowing plan, the Bureau of the Treasury (BTr) said.

The BTr said borrowing in 2024 rose 16.93%.

Gross domestic debt increased to P1.92 trillion last year, up 17.69%, accounting for 75% of borrowing in 2024.

The BTr was expected to borrow P1.928 trillion from domestic sources last year.

It raised P1.11 trillion from fixed-rate Treasury bonds (T-bonds), P584.86 billion from retail T-bonds, and P224.28 billion from Treasury bills (T-bills).

The government did not offer retail onshore dollar bonds and tokenized bonds in 2024, after raising P71.78 billion and P15 billion from these instruments in 2023, respectively.

Gross external debt rose 14.69% to P641.17 billion in 2024, also less than the P642.5-billion target for foreign borrowing.

External debt included P271.34 billion in program loans, P256.24 billion in global bonds and P113.59 billion in project loans.

In August, the government raised $2.5 billion from a triple-tranche, dollar-denominated global bond issue, the second such offering by the Marcos administration.

The first issue raised $3 billion in January 2023.

In December, gross borrowing fell 24% to P69.77 billion.

Domestic borrowing rose 78.06% year on year to P11.02 billion.

The BTr raised P15 billion from fixed-rate T-bonds while T-bills generated P3.99 billion.

On the other hand, external debt dropped 40.21% year on year to P58.76 billion. Borrowing consisted of P40.83 billion worth of new program loans and P17.93 billion in project loans.

Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said elevated prices and interest rates since 2022 drove up government expenditure over the past three years resulting in higher borrowing.

“Reduced (gross borrowing) by the National Government of about P20 billion could signal a narrower budget deficit as a percentage of GDP or even in terms of the peso amount,” Mr. Ricafort said. 

The NG posted a budget deficit of P1.506 trillion in 2024, narrowing 0.38% year on year.

However, it overshot the P1.48-trillion deficit ceiling set by the Development Budget Coordination Committee.

Mr. Ricafort said this could bring the NG debt share of gross domestic product (GDP) to under the 60% international threshold for developing countries, from 60.7% at the end of 2024.

In an e-mail, Ateneo School of Government Dean and Economics Professor Philip Arnold P. Tuaño said the slight increase in borrowing may have been caused by the NG’s “desire to retire some of its debt given the lower interest rates environment in the past year.”

The Bangko Sentral ng Pilipinas (BSP) slashed borrowing costs by a total of 75 basis points in 2024. 

In its first policy meeting in February, the BSP left the target reverse repurchase rate unchanged at 5.75%.

He also noted that the 11% increase in expenditure lagged the 15% growth in government revenue, which paved the way for a decline in borrowing.

For 2025, Mr. Tuaño expects government spending to be significantly higher due to the midterm elections.

“It could be possible that the government might breach the deficit target,” he said.

The government borrowing plan is P2.55 trillion for 2025, against P2.57 trillion this year, consisting of P2.04 trillion in domestic borrowing and external borrowing of P507.41 billion.

Finance Secretary Ralph G. Recto in January said the Philippines is hoping to raise $3.5 billion in global bonds during the first half of 2025. — Aubrey Rose A. Inosante

Hostility to subsidies underlying Trump CHIPS Act repeal move

REUTERS

By Justine Irish D. Tabile, Reporter

THE Philippine chip industry will need to contend with the new mood in Washington that has made subsidizing foreign programs less likely to pass White House scrutiny, analysts and industry officials said.

The Philippine response to President Donald J. Trump’s call to repeal the US CHIPS and Science Act should be to develop new markets if semiconductor companies are to remain viable, with US policy now weighted towards imposing tariffs on many imports, analysts said.

“The Trump administration is seeking to shift from a policy of subsidies and fiscal support to the semiconductor industry to increasing tariffs on foreign imports,” Ateneo School of Government Dean and Economics Professor Philip Arnold P. Tuaño said in an e-mail.

Last week, Mr. Trump proposed to US legislators the repeal of the CHIPS Act, which provides $52.7 billion in federal subsidies for semiconductor chip manufacturing and production, encouraging them to revive chipmaking in the US and diversify manufacturing sites away from China.

The Philippines is one of seven countries tapped to help diversify US on semiconductor supply chain.

“If this results in American semiconductor companies looking for more cost-efficient locations in terms of manufacturing and assembly, this may benefit the growth of Philippine semiconductor operations,” Mr. Tuaño said.

“But if the protectionist policies in the US result in higher tariffs, this could disrupt exports of semiconductor components assembled in this country for the US,” he added.

He said that the Philippines has been a top destination for US semiconductor investment.

“While the reversal of the CHIPS Act may result in lower investment by American manufacturers in the country … we could see this offset by the Philippines as an alternative to China, in which the US government has already erected tariff walls, in terms of semiconductor testing and assembly,” he added.

However, he said that the Philippines will need to position itself as a semiconductor testing and assembly hub.

This is through “strengthening its ties across the Southeast Asian region to increasingly leverage itself as part of the regional electronics ecosystem, improving training and education programs in engineering and assembly, and enabling stronger investments in infrastructure.”

Foreign Buyers Association of the Philippines President Robert M. Young said that he expects the Philippines to be the least affected by Mr. Trump’s America First policies.

“Somehow, if ever that will happen, the Philippines will be the least affected. I am saying this because we are the smallest player in the industry of chips. The lion’s share is in South Korea, Taiwan, and China,” he said via phone.

“There is another school of thought that perhaps this might be selective … Perhaps he will say that the Philippines is just a small player and we will just retain the chip subsidies,” he added.

However, he said that the Philippines will need to explore new markets to be able to maintain employment levels.

“We just have to look for other markets just to survive and at least continue what we are doing right now so that employment is not affected. Otherwise, it will really affect our economy,” he said.

“South Korea and Taiwan will be needing some subcontractors, and the Philippines can be one of them,” he added.

Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said that scrapping the US CHIPS and Science Act in an effort to cut the US government’s expenditures will effectively reverse one of former US President Joe Biden’s initiatives.

“This effectively nullifies subsidies for US chipmakers to better secure the sources of semiconductors from allied countries such as the Philippines. So it is an opportunity lost for local electronic exporters to sell more to the US chipmakers,” he said in a Viber message.

Philippine Economic Zone Authority Director General Tereso O. Panga said that the reversal of the support will affect manpower training in the semiconductor industry amid a Philippine push to host front-end fabrication and advanced chip manufacturing facilities.

“The repeal of the Act may delay our vision of hosting more assembly, testing, and packaging (ATP)-based semiconductor firms and advanced wafer fabrication manufacturing facilities for lack of the skilled and knowledgeable workforce,” he said.

“The Philippines is currently recognized as a deep pool for engineering talent, which enables us to maintain a competitive edge in the global semiconductor industry,” he added.

Meanwhile, Semiconductor and Electronics Industries in the Philippines Foundation, Inc. (SEIPI) President Danilo C. Lachica said that the industry remains optimistic for modest growth despite Mr. Trump’s policies, specifically his plans to impose 25% tariffs on imported chips.

“It actually caused a little scare … But as we’ve kind of waded through the noise, as you know, we have a lot of several US multinational companies here, specifically in semiconductor ATP, which export back to the US,” he said during the Money Talks with Cathy Yang program on One News Channel.

“So, it seems like at this point anyway, we haven’t been affected by any tariffs. It’s business as usual. We’re still optimistic about growth being at least flat,” he added.

He said the volatility of US policy highlights the urgency of negotiating a free trade agreement (FTA) with the US.

“What’s important really is to establish an FTA with the US, whether bilateral or multilateral. Because while today we’re not seeing any impact, it’s evident that some of our members who deal with the federal government are seeing some delay, or if not cancellation, of orders because we’re not in trade agreement compliance,” he said.

“As soon as we get those FTAs and, of course, the Department of Trade and Industry (DTI) is on the ball working on it, we’ll see (these concerns diminish),” he added.

He said that the International Technology Security and Innovation Fund of the CHIPS and Science was also frozen along with the US Agency for International Development and State Department (USAID) grants.

“We’re looking at other avenues to continue advance ATP because that’s part of the new roadmap that DTI has funded. We’re going to grow ATP, integrated circuit design, and electronic manufacturing services,” he said.

“Hopefully, we can take baby steps towards having a lab scale or wafer fab operation,” he added.

Food service competitiveness seen depending on gov’t, private-sector tieups

ASIAFOODBEVERAGES.COM

THE GOVERNMENT needs to build more partnerships with the private sector to develop the food service industry and to promote its food products globally in keep in step with its neighbors, according to the Food Caterers Association of the Philippines (FCAP).

“The only difference between Thailand and Philippines is the support from the National Government,” FCAP President Francis Sevilla, Jr. told BusinessWorld on the sidelines of the Thaifex Horec Asia 2025 in Bangkok.

“In Thailand, we found out that their National Government through the Department of Tourism and Promotion have really supported the food service industry.”

According to the US Department of Agriculture’s (USDA) Foreign Agricultural service, the Philippine food services industry is projected to grow 12% this year as store networks and foot traffic are expected to expand.

The USDA said more customers are dining out due to the opening of new restaurants, cafés, kiosks, and bars, as more franchise international restaurants enter the Philippines.

It said that sales in full-service restaurants are expected to grow 10% next year due to store expansion. Full-service restaurants account for 17% of the industry.

When it comes to internationalizing its industry, however, the Philippines needs to invest in state-of-the-art kitchen equipment if the food service industry is competing with regional rivals.

“All the efforts to make the food service industry globally competitive, usually in our country, were initiatives of the private sector,” he said.

Thailand’s bid to position itself as the “kitchen of the world” has been key to its success in promoting its food products globally, Department of International Trade Promotion of the Thai Ministry of Commerce Director General Sunanta Kangvalkulkij told reporters at the trade fair.

“We also have some kind of policy to support Thai food and now we see that Thai food has some kind of good reputation. A lot of people around the world know Thai food more than ever,” she said.

She said her agency works closely with the Thai Ministry of Agriculture to boost the production and marketing of its produce, mainly fruit and rice.

“The Philippines, I think, has a very good opportunity (to develop hospitality and food services),” she said. — John Victor D. Ordoñez

Cybersecurity, digital infra seen as next DICT Secretary’s top priorities

IVAN JOHN E. UY — FACEBOOK.COM/DICTGOVPH

By Ashley Erika O. Jose, Reporter

A UNIFIED national cyber defense center and the expansion of digital infrastructure should top the to-do list of the next Secretary of Information and Communications Technology, technology and cybersecurity analysts said.

“The new Secretary should support the national development goals of the government, particularly in digital transformation, economic growth, and national security,” Samuel V. Jacoba, founding president of the National Association of Data Protection Officers, said via Viber.

Last week, President Ferdinand R. Marcos, Jr. accepted the resignation of former Secretary Ivan John E. Uy from the Department of Information and Communications Technology (DICT).

Mr. Uy was appointed to head the DICT in June 2022. Among his initiatives were the SIM Card Registration Act, a law designed to curb spam calls and texts.

His tenure also focused on the expansion of the Free Public Internet Access Program to over 16,000 active sites and the drafting of the National Cybersecurity Plan.

The Palace and the DICT have not said why Mr. Uy resigned on March 6.

Presidential Communications Office Undersecretary Claire B. Castro said last week that Mr. Marcos will appoint an officer-in-charge until he names a new Secretary.

“Under (Mr. Uy’s) leadership, the Philippines made significant strides in improving its global standing in government digital transformation, cybersecurity, connectivity, and inclusivity,” the DICT said.

“The DICT assures the public that there will be no disruption in its services amid the leadership transition. The Department looks forward to welcoming its new Officer-in-Charge,” DICT Spokesperson and Assistant Secretary for Legal Affairs Renato A. Paraiso said in a statement.

Ronald B. Gustilo, national campaigner for Digital Pinoys, said the next Secretary must focus on cybersecurity, data privacy, improvement of digital infrastructure and artificial intelligence.

“The resignation of Mr. Uy comes at a critical time when digital transformation, cybersecurity, and consumer protection should be top priorities. Moving forward, the next Secretary must have strong expertise in digital technology, cybersecurity, and public policy to ensure that ongoing projects do not stall and that new initiatives effectively address the country’s growing digital challenges,” Mr. Gustilo said via Viber.

Mr. Gustilo said the new leader must have a clear position on artificial intelligence to address its misuse, possible risks posed by deepfakes, online scams and digital fraud.

The next Secretary should also expedite infrastructure and technology projects for government and underserved communities, according to Terry L. Ridon, convenor of think tank InfraWatch.

“The next appointee should also focus on strengthening government cybersecurity at all levels to stop massive data breaches happening across government agencies,” Mr. Ridon said.

Philippine organizations suffered an estimated $1 million in losses in 2023 due to cybersecurity incidents, according to connectivity cloud company Cloudflare, Inc.

According to a report by consulting firm Frost & Sullivan, the Philippines could sustain up to P200 billion in economic losses per year due to cybercrime.

The Philippines faces increasing threats of cyber attacks from ransomware to state-sponsored espionage, Mr. Jacoba said, adding that a national cyber defense center to centralize real-time cyber threat intelligence is necessary for rapid response and cyber resilience.

“These three priorities — Cybersecurity, Digital Infrastructure, and E-Governance — are essential for national security, economic growth, and government modernization. They also align with the administration’s push for digital transformation across all sectors of our society,” Mr. Jacoba said.

Agriculture industry group seeks restoration of 35% rice import tariff

PHILSTAR FILE PHOTO

AN AGRICULTURE industry association asked the Tariff Commission to restore rice import tariffs to 35% for Southeast Asian grain, while imposing a 50% rate for all other countries of origin.

Executive Order No. 62, which reduced the tariffs to 15%, has failed to reduce rice prices, as it had been designed to do, Samahang Industriya ng Agrikultura (SINAG) Chairman Rosendo O. So said in a petition filed with the Commission.

SINAG said between July and December the tariff reduction resulted in P15 billion worth of foregone government revenue.

The Rice Tariffication Law liberalized rice imports while requiring shippers to pay tariffs, which the government then used to fund rice industry modernization.

SINAG said allocating the P15 billion to 1.5 million hectares of rice land could reduce cost of palay production by P2.9 per kilo, which is equivalent of a reduction of P5 per kilo of domestically grown rice.

It estimated revenue foregone due to EO No. 62 at P27 billion this year.

Global rice prices have fallen by $146 to $422 per metric ton, according to the group.

“This translates to a decrease of P8.54 per kilo in the global rice market, which exceeds our target reduction of P6-7/kilo through EO 62.”

SINAG spokesman Jayson H. Cainglet said via Viber that the Tariff Commission has yet to set a hearing on the petition.

Mr. Cainglet has said that the farmgate price of palay remains low at P15-16 per kilo for freshly harvested grain, which could be subject to minimal changes during the peak of the harvest.

He said traders are only willing to pay between P16 to P18 per kilo given the competition from imported rice, whose landed cost is now about P35 per kilo.

Inflation eased to 2.1% in February from 2.9% in January as rice inflation dropped to 4.9%, the sharpest decline since April 2020.

To bring down rice prices, the government has lowered tariffs and declared a food security emergency to facilitate the release of government rice stocks.

Rice imports hit a record of nearly 4.7 million MT in 2024 due to a shortfall in domestic supply.

In mid-January, Agriculture Secretary Francisco P. Tiu Laurel, Jr. said the government does not plan to resort to imports to bring down rice prices, which he said are also caused by profiteering. — Kyle Aristophere T. Atienza

Digital transformation and upskilling in banking

IN BRIEF:

• The banking industry faces a growing skills gap as demand for expertise in data science, cybersecurity, and software development surges to support digital transformation efforts.

• While automation and AI are seen as productivity drivers, banks are still grappling with how to effectively integrate these technologies and scale their operations.

• The most competitive banks will adopt a strategic approach to workforce transformation, prioritizing upskilling and reskilling employees to ensure the integration of new technologies and improved customer experiences.

The banking industry has long been at the forefront of technological innovation, with an increasing need for a highly skilled, tech-savvy workforce as the shift to digital continues. Digital transformation in banking goes beyond just updating legacy systems and adopting new technologies. It involves rethinking entire processes and the way banks interact with customers. One of the most significant challenges banks now face is closing the skills gap.

According to the EY Work Reimagined Survey,57% of Chief Risk Officers (CROs) globally consider talent to be one of the most significant long-term risks facing the banking industry. Additionally, 52% of respondents reported challenges in attracting the right talent to meet the demands of digital transformation. Digital transformation in banking is about closing the skills gap, using AI and automation, upskilling employees, and balancing workforce needs with cost discipline to help employees focus more on customer-centered roles.

This is the second article in a series that explores the salient concerns of the banking and financial industry.

CLOSING THE SKILLS GAP
Traditional banking roles are rapidly evolving, and new skills are required to design and implement solutions that offer a consistent and connected customer experience.

However, banks are struggling to close the skills gap. This is especially prominent in areas such as data science, cybersecurity, and software development — roles that banks historically didn’t need. Though banks increasingly become technology-enabled and data- driven, they also remain highly reliant on human talent. To maintain their competitive position, banks must prioritize both technology and talent, not one or the other. Even if banks can develop and secure the talent, it is important to note that the half-life of skills is shortening. Aside from foundational and technical skills, banks are also prioritizing digital acumen, adaptability in a changing environment, and deep specialization in at least one domain, according to the EY Institute of International Finance global bank risk management survey.

Moreover, banks today are competing with other industries for the brightest minds in these fields, making technology recruitment, training, and retention a critical focus. It would be instructive to note whether transformation and modernization initiatives will allow the banking sector to acquire a certain level of magnetism in connecting with employees and attracting new ones, something that the technology and startup sectors enjoyed for a time. Without the right talent, the digital transformation that banks hope to achieve may face significant roadblocks.

EMBRACING AI AND AUTOMATION
Technology modernization and adoption will continue to significantly drive transformation for Philippine banks within the next five years, underpinned mainly by cloud, data and AI.

Embracing AI and automation presents a significant opportunity for banks to increase efficiency and enhance customer service. The most competitive banks will view this new wave of technology as a chance to streamline operations, with machines expected to handle up to 10-25% of tasks across various bank functions. Automation will not displace workers but rather free them up to focus on higher-value, customer-centric roles.

However, to fully capitalize on this potential, banks need to take a strategic and deliberate approach to design and implementation. While many have launched AI and automation pilots, the lack of a systematic approach has led to scalability challenges and underwhelming results, highlighting that the full benefits of these technologies are yet to be realized.

There is a process that banks can adopt to maximize value creation, where use cases and initiatives are evaluated, ranked and developed based on strategic alignment, impact, and feasibility, allowing informed decision-making for resource allocation and implementation. This process will also benefit from embedded agility, particularly as innovation curves and technology developments move. For instance, some banks are looking at exploring concurrently generative and agentic AI — a union of creation and action — that will require not only broad and deep skills but also ethical considerations and accountability.

UPSKILLING AND RESKILLING EMPLOYEES
Studies show that businesses that prioritize human capital during digital transformation are more successful. According to EY, organizations that focus on upskilling and reskilling employees are 2.6 times more likely to succeed in their digital transformation efforts. For banks, this means prioritizing workforce development to ensure that employees can add value in a digital-first environment.

To successfully navigate this digital revolution, banks need to adopt a strategic approach to workforce transformation. This means not only recruiting new talent but also retraining and reskilling current employees. The introduction of AI and automation will require banks to redesign workflows, with a focus on optimizing processes for machines rather than humans. Banks will also need to merge specialized domain expertise with in-house capabilities to create a seamless, automated workforce.

Skills development is only one part. Banks looking to channel the talent flow their way also need to respond to employee needs in culture and total rewards.

WORKFORCE TRANSFORMATION AND COST DISCIPLINE
Amid the growing demand for specialized talent, banks must balance workforce transformation with cost discipline. To remain competitive, many banks are reducing headcounts while investing in technology to drive efficiency. This includes attracting talent in fields like AI, cloud computing, and cybersecurity, which often demand higher compensation.

Balancing these investments with cost discipline is crucial. Banks must ensure that they are not only investing in technology but also managing costs effectively to maintain profitability. This requires a strategic approach to workforce planning, where banks identify the skills needed for the future and invest in training and development programs to build these capabilities internally.

THE ROLE OF LEADERSHIP IN DIGITAL TRANSFORMATION
Leadership plays a critical role in the success of digital transformation initiatives. Bank leaders must foster a culture of innovation and continuous learning, encouraging employees to embrace new technologies and adapt to changing roles. This involves clear communication about the benefits of digital transformation and the opportunities it presents for career growth and development.

Leaders must also be proactive in addressing the challenges associated with digital transformation, including managing risks such as cybersecurity threats and data privacy concerns. By taking a proactive approach to risk management, leaders can ensure that digital transformation initiatives are implemented safely and securely.

THE FUTURE OF BANKING IN A DIGITAL WORLD
As digital technologies continue to transform the banking industry, embracing AI and automation, upskilling and reskilling employees, and balancing workforce transformation with cost discipline will be critical to success. The most competitive banks will be those that view digital transformation not as a threat to their workforce, but as an opportunity to enhance their people’s potential.

By investing in talent, embracing new technology, and fostering a culture of continuous learning, banks can position themselves to thrive in the digital age. The future of banking lies in the ability to adapt to technological advancements and leverage them to improve customer experiences, streamline operations, and drive growth.

CHARTING THE PATH FORWARD
Digital transformation is reshaping the banking sector, and it is only an interim stage towards a combination of a project, platform and network economy. Banks must close the skills gap, embrace AI and automation, and prioritize upskilling and reskilling employees to stay competitive.

By fostering a culture of innovation and continuous learning and balancing workforce transformation with cost discipline, banks can enhance their workforce’s potential and position themselves for long-term success in the digital age.

This article is for general information only and is not a substitute for professional advice where the facts and circumstances warrant. The views and opinions expressed above are those of the author and do not necessarily represent the views of SGV & Co.

 

Christian G. Lauron is the financial services organization (FSO) leader of SGV & Co.

Opposition Senate bets face arduous battle vs candidates from ruling party

PRESIDENT FERDINAND R. MARCOS, JR. — PHILIPPINE STAR/NOEL PABALATE

By Kenneth Christiane L. Basilio, Reporter

OPPOSITION and independent senatorial candidates face an uphill battle in this year’s midterm elections as administration bets continue to dominate election polls, thanks to their political machinery and the fact that they are more popular, analysts said.

They would also find it more difficult to win Senate seats as the worsening Marcos-Duterte feud fuels partisanship among Filipino voters, they added.

“In Philippine politics, Senate elections are usually won by candidates with a high level of voter awareness,” Arjan P. Aguirre, who teaches political science at the Ateneo de Manila University, said in a Facebook Messenger chat. “Opposition candidates have super low voter awareness levels at this point, with less than 90 days before election day.”

“It would be really impossible for them to catch up and be known more by the people, unless they have a ‘celebrity status’ or a deep ‘war chest,’” he added.

February election polls showed that at least eight senatorial candidates endorsed by President Ferdinand R. Marcos, Jr. are within the winning margin of the 12-seat Senate race.

“That’s consistent with the trend during midterm elections,” Cleve V. Arguelles, chief executive officer and president of think-tank WR Numero Research, told BusinessWorld in Filipino. “If you look back at previous midterm elections, the administration typically wins seven to nine candidates.”

Nine senatorial bets from the tickets of former Presidents Rodrigo R. Duterte and Benigno S.C. Aquino III won.

“We can attribute their good performance in the recent surveys to the political machinery and the enormous resources available to the administration coalition,” Dennis C. Coronacion, who heads the University of Sto. Tomas Political Science Department, said via Messenger chat.

“These give them an advantage over the opposition, who mostly rely on their personal resources in mounting a national campaign,” he added.

The administration’s Senate bets have been faring well in election polls due to their “individual strengths,” with many of them coming from political dynasties.

“Given that the [administration] candidates have reputations that grew independently from President Marcos, then we can deem their performance more as an approval of the Marcos administration’s return to normalcy than a translation of support for himself,” Anthony Lawrence A. Borja, an associate political science professor at De La Salle University, said in a Facebook Messenger chat.

“It is a return to politics that is not framed by the haphazard and off-the-cuff rantings of the chief executive, hence, less vulnerable to arbitrary power,” he added, referring to ex-President Rodrigo R. Duterte, who was swept to power in 2016 as a maverick, crime-busting mayor. As President, he upended Philippine foreign policy and launched a drug war that killed thousands.

Opposition senatorial candidates should start highlighting key issues affecting Philippine society, such as the education crisis and spiraling prices to steer the political conversation ahead of the May 12 elections, Mr. Aguirre said.

“This way, they can at least contribute to a more serious discussion about things that matter — topics that candidates should be talking about,” he said. “These are the things that I think opposition candidates can do to make themselves heard and noticeable.”

Up for grabs in the May 12 elections are more than 300 congressional seats and thousands of local posts. But the biggest battle will be for 12 spots in the 24-seat Senate, a chamber packed with political heavyweights and wielding outsized influence.

Philippines told to boost defense relations with UK

UK SECRETARY of State for Foreign, Commonwealth, and Development Affairs David Lammy paid Philippine President Ferdinand R. Marcos, Jr. a courteay call at the palace on March 8, 2025. — MARK BALMORES/PPA POOL

By Adrian H. Halili, Reporter

THE PHILIPPINES and the United Kingdom (UK) should improve defense and security cooperation, political analysts said on Sunday after the visit of a high-ranking British envoy at the weekend.

“London and Manila can focus on police and military educational exchanges,” Chester B. Cabalza, founding president of Manila-based International Development and Security Cooperation, said in a Facebook Messenger chat. “The UK has a lot to offer when it comes to intelligence system, military modernization and people-to-people engagement.”

Mr. Cabalza added that the UK and the Philippines could improve their defense partnership through a visiting forces agreement as part of “their efforts to cement their presence in the Indo-Pacific region.”

“The two countries may opt to focus on bolstering their existing strategic partnerships on key issues, which include defense, maritime affairs and climate action,” Josue Raphael J. Cortez, who teaches diplomacy at De La Salle College of St. Benilde, said in via Messenger chat.

“These facets are among those that our country needs support amid our maritime tensions with China and the fact that the negative repercussions of climate change today have been more pronounced,” he added.

The Philippines has sought defense pacts with like-minded nations like the US, Japan and Canada amid more serious encounters with China in the South China Sea, where they have competing claims.

Manila and Beijing have repeatedly clashed in the in the South China, with both sides accusing each other of raising tensions.

China claims more than 80% of the disputed waterway, that a United Nations-backed tribunal based in The Hague rejected in 2016 for being illegal.

The sea is a vital waterway for more than $3 trillion of annual ship-borne commerce, putting it at odds with Brunei, Indonesia, Malaysia, the Philippines and Vietnam.

Hansley A. Juliano a political science professor at the Ateneo de Manila University, said the Philippines and the UK should expand their “cultural or educational exchange and trade reorientation.”

He added that continuing military exercises and partnerships with the Philippines would be mutually beneficial.

“The UK could also bolster the engagement of fellow Commonwealth nations like Australia, especially since Australia is closer to us geographically,” Mr. Juliano said.

UK Secretary of State for Foreign, Commonwealth, and Development Affairs David Lammy during his visit to Manila at the weekend signed the Philippines-UK joint framework alongside Philippine Foreign Affairs Secretary Enrique A. Manalo.

The agreement seeks to enhance both countries’ partnerships in defense and security, human rights, maritime and economic resilience.

The pact is “envisioned to chart the depth and direction of our Enhanced Partnership across various areas in the years ahead,” Mr. Manalo said at a signing ceremony on Saturday.

In 2021, the Philippines and the UK signed their Enhanced Partnership, which has so far achieved £2.9 billion (P214.4 billion) in bilateral trade.

“We are working on a number of proposed agreements such as an implementing arrangement under our 2024 memorandum of understanding (MOU) on defense cooperation, and an MOU on information-sharing concerning improving our maritime domain awareness,” he added.

Last year, the Philippines and the UK agreed craft a framework for defense and security cooperation. The agreement includes training and capacity-building, peacekeeping operations, humanitarian assistance and disaster relief, weapons, as well as research and technology.

He added that Manila and London had also agreed to continue joint military exercises and maritime patrols, including port calls by British ships.

“We’re charting a new course for our relationship amidst a lot of global volatility, and we must strengthen ties with like-minded partners like the Philippines,” Mr. Lammy said at the same event.

He also met with President Ferdinand R. Marcos, Jr. and Defense Secretary Gilberto C. Teodoro, Jr.

Congressman seeks probe of land leases to Chinese

PHILIPPINE STAR/ EDD GUMBAN

THE PRESIDENTIAL palace should probe the grant of land leases to more than 80 Chinese-owned companies by some local governments along coastal provinces in the Philippines, a congressman said on Sunday, citing national security concerns.

In a statement, Surigao del Norte Rep. Robert Ace S. Barbers said these companies have barred Filipino fishermen in Bataan, Pangasinan and Zambales provinces from fishing near their shorelines.

“According to one of my fisherman-sources, almost all the fishermen in the shorelines leased to Chinese nationals are losing their livelihoods because they are being driven away and not allowed to pass through the leased shorelines,” he said.

“If indeed these more than 80 Chinese firms were allowed to lease, operate and exploit properties in those coastal towns, which government agencies, aside from the local government units, have allowed them to operate, and what type of businesses are they engaged in?” he asked.

Mr. Barbers said some Chinese nationals have used “illegal business patterns” such as bribing Philippine authorities to provide them with a shroud of legality and allow their spying to go unhindered.

The Chinese Embassy in Manila did not immediately reply to a Viber message seeking comment. It earlier said in a statement that it “firmly opposes any baseless accusations and speculations aimed at smearing China and Chinese citizens.”

Philippine authorities earlier this year arrested a number of Chinese nationals accused of spying on joint Philippine-US military sites, the palace and the headquarters of the country’s military and police.

The Philippines has increased counterintelligence efforts amid increasing tensions with China.

The Southeast Asian nation does not have any specific foreign interference law, but lawmakers are drafting one.

The Philippines’ National Security Council pressed Congress in January to fast-track the approval of amendments to anti-espionage laws to make the country’s legal framework responsive to “evolving security threats.” — Kenneth Christiane L. Basilio

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