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Slower recovery seen for PHL this year

By Luz Wendy T. Noble, Reporter

THE Philippines will likely see a slower pace of recovery this year, as the International Monetary Fund (IMF) and a United Nations (UN) think tank trimmed their growth forecasts amid uncertainty over the vaccine rollout and continued restriction measures.

The IMF cut its gross domestic product (GDP) forecast for the Philippines to 6.6% this year, from the initial forecast of 7.4% given in October. The economy is expected to grow by 6.5% in 2022.

“The projected rebound in 2021 and 2022 is primarily driven by a renewed infrastructure investment push and a gradual recovery of the private sector, supported by accommodative monetary policy and global recovery,” IMF Representative to the Philippines Yongzheng Yang said in an e-mail to BusinessWorld.

The IMF’s 2021 GDP estimate is well-within the government’s 6.5-7.5% target growth while the 2022 projection is less optimistic than the 8-10% estimate given by economic managers.

Mr. Yang identified several downside risks to the growth outlook, including the ongoing lockdown restrictions and uncertainty over the government’s COVID-19 vaccination program.

“We expect that social distancing and some forms of restrictions will persist this year,” he said, despite noting the country has already seen a “steady flattening of the infection curve” since September last year.

The Health department reported 1,173 new COVID-19 infections on Tuesday, bringing the total to 516,166, with active cases at 30,357.

“Like in most other countries, vaccination is a gradual process and progress is subject to uncertainty,” he said.

The government is aiming to start immunization next month, with the goal to inoculate 70 million people within the year.

This year, IMF’s Mr. Yang said headline inflation in the Philippines may average 3.1%, which is slower than the 3.2% forecast by the Bangko Sentral ng Pilipinas, but quicker than the 2.6% in 2020. Its forecast of 3% inflation in 2022 is faster than the central bank’s 2.9% projection.

The IMF said ASEAN-5 economies — comprising Indonesia, Malaysia, the Philippines, Thailand, and Vietnam — are projected to grow by 5.2% this year, slower than the previous forecast of 6.2%. On the other hand, the 2022 estimate was upwardly revised to 6% from 5.7%.

“The strength of the recovery is projected to vary significantly across countries, depending on access to medical interventions, effectiveness of policy support, exposure to cross-country spillovers, and structural characteristics entering the crisis,” the IMF said.

WEAK GROWTH
At the same time, the UN Department of Economic and Social Affairs (DESA) said it expects the Philippines to grow by 6.2% this year, lower than its earlier 6.3% forecast.

This after the Philippines likely saw the worst contraction in Southeast Asia in 2020 due to the pandemic.

In its World Economic Situation Prospects 2021 report released on Tuesday, UN DESA said the Philippine GDP likely shrank by 8.8% last year, a reversal from the 6.2% growth forecast it gave in January 2020.

Official GDP data will be released on Thursday. A BusinessWorld poll showed a median 9.5% contraction for the entire 2020.

“While Singapore, Thailand, and Vietnam flattened the curve relatively quickly and with shorter lockdowns, Indonesia, Myanmar and the Philippines are still struggling with high daily levels of new infections. In the latter group, a more prolonged period of limited mobility and weak sentiments will depress consumer spending and private investment, thus constraining the pace of recovery,” it said.

This year, all Southeast Asian economies are expected to post growth, led by Vietnam (7.8%), followed by Malaysia (6.6%), Myanmar (6.5%) and the Philippines.

The UN DESA said the Philippines’ likely 8.8% GDP contraction was the worst economic performance among 11 economies in Southeast Asia in 2020.

The Philippines lagged behind Thailand (-6.6%), Singapore and Timor Leste (-6.5%), Malaysia (-4.8%), Indonesia (-1.6%), and Cambodia (-1.4%). Four countries likely expanded last year, namely Vietnam (3.4%), Myanmar (2.3%), Brunei (1.2%), and Laos (0.5%).

The UN DESA expects headline inflation to ease to an average of 2.1% this year from 2.6% in 2020, and pick up by 2.8% in 2022.

GLOBAL RECOVERY
In its World Economic Outlook Update released on Tuesday, the IMF said global economic activity will remain below the pre-pandemic levels this year, even as recovery gets under way.

For this year, the IMF said the global economy will grow by 5.5%, faster than the 5.2% earlier estimate. The growth forecast for 2022 is kept at 4.2%.

“Much remains to be done on the health and economic policy fronts to limit persistent damage from the severe contraction of 2020 and ensure sustained recovery,” it said. — with Beatrice M. Laforga

Manila falls in 2021 list of top real estate investment destinations

MANILA dropped two spots to 19th in a ranking of city investment prospects in the Asia-Pacific for 2021, a joint report from the Urban Land Institute (ULI) and PricewaterhouseCoopers (PwC) said. Read the full story.

Manila falls in 2021 list of top real estate investment destinations

Manila’s appeal as property investment site declines

Manila dropped two spots to 19th in a ranking of city investment prospects in the Asia Pacific for 2021, the joint report from the Urban Land Institute and PricewaterhouseCoopers showed. — PHILIPPINE STAR/MIGUEL ANTONIO N. DE GUZMAN

MANILA dropped two spots to 19th in a ranking of city investment prospects in the Asia-Pacific for 2021, a joint report from the Urban Land Institute (ULI) and PricewaterhouseCoopers (PwC) said.

The 2021 Emerging Trends in Real Estate report released on Tuesday said that Manila’s prospects as a real estate investment destination have dropped over recent years. The Philippine capital ranked as high as third in 2017, then dropped to 18th a year after.

Ranking 19th out of 22 cities in the region, Manila was classified as having “fair” investment prospects this year.

ULI said Manila had fallen in the rankings due to “Southeast Asia’s reputation as a high-risk play in times of global recession.”

Topping the list this year are Singapore, Tokyo, and Sydney.

Overall scores in 2021 are not too different from the previous year, ULI said, likely due to the cities’ effective pandemic containment measures, and profitable investment opportunities.

Real estate investors said their top concerns for this year include the impact of the pandemic on property values, economic growth, trade or geopolitical tensions, and vacancy rates.

In the ULI report, Manila ranked 13th in the city development prospects ranking and 20th among cities most likely to see rental growth this year.

ULI said that there are lower scores overall for city development as developers weather “questionable” demand during a region-wide recession.

Future office demand, it added, will be decentralized to reduce commutes, which means satellite cities like Clark could signal some real estate growth in the Philippines.

“The Philippines is a good example of this, with moves afoot to establish new satellite cities, such as Clark, on the periphery of Manila, as a way to relieve the demographic stress,” ULI said.

ULI Philippines Chairwoman Jean Jacquelyn de Castro noted the decline in the country’s investment prospects ranking over recent years.

“Building back investor confidence will require stakeholders to work closely with the government to improve the attractiveness of Philippine real estate as an investment class,” she said.

Real estate services firm Santos Knight Frank Chairman and Chief Executive Officer Rick M. Santos said that the Philippines can have real estate opportunities in logistics, data centers, and industrial sectors.

“With megatrends such as e-commerce growth, decentralization outside Metro Manila, and continued outsourcing and BPO (business process outsourcing) expansion in the Philippines, we expect to see a soft rebound in the real estate market as the economy gradually recovers,” he said. — Jenina P. Ibañez

Manila falls in 2021 list of top real estate investment destinations

Typhoons likely hurt farm output growth

By Revin Mikhael D. Ochave, Reporter

THE agriculture sector’s growth likely slowed in the fourth quarter, after a string of strong typhoons devastated rice-producing areas.

Glenn B. Gregorio, director of the Southeast Asian Regional Center for Graduate Study and Research in Agriculture (SEARCA), said the agriculture sector will post 0.58% growth in the fourth quarter, slower than the 0.7% growth in the third quarter. However, this will be a slight improvement from the 0.1% drop in farm output in the fourth quarter of 2019.

Mr. Gregorio said the crops subsector is seen to grow by 3.66%, while the fisheries subsector is estimated to rise by 1.69%.

“However, comparable to the previous quarters, the livestock and poultry sectors are estimated to experience negative growth rates at -6.37% and -3.45%, respectively,” Mr. Gregorio said.

Several typhoons, namely, Quinta, Rolly, Ulysses and Vicky, swept through the country in the last three months of 2020. Data from the Department of Agriculture showed the combined crop damage caused by Quinta and Rolly reached P8.46 billion, while losses from Ulysses amounted to P6.72 billion, and damage from Vicky totaled P129.8 million.

In a mobile phone message, Roy S. Kempis, a professor at Pampanga State Agricultural University, said the agriculture sector’s slow growth in the fourth quarter was due to the massive flooding that damaged crops and other farm produce.

“The growth of the agricultural sector in the fourth quarter of 2020 is slower than the third quarter of 2020, and is seen to improve 0.25% to 0.75%,” Mr. Kempis said.

Mr. Kempis said increased food consumption during the holiday season might have a positive effect for the farm sector, but is not enough to offset the typhoons’ damage.

“With recovery still ongoing in Luzon in the fourth quarter and then the weather disturbances in Visayas and Mindanao, the last quarter of 2020 could not be better than the third quarter,” he added.

In an e-mail interview, former Agriculture Undersecretary and current Bangko Sentral ng Pilipinas (BSP) Monetary Board member V. Bruce J. Tolentino said historical data show about 90% of typhoon damage takes place from July to December, with November being the most affected.

“The quarterly numbers are the result of artificially dividing the seasonal performance of crops. Most of the movements in these numbers are due to price fluctuations,” Mr. Tolentino said.

Rolando T. Dy, executive director of Center for Food and Agri-Business of University of Asia and the Pacific (UA&P), expected the farm sector to have declined by 2% in the October to December period.

“Typhoons and floods are setbacks for crops, while hogs are afflicted with African Swine Fever (ASF). I see the sector posting -2% for the fourth quarter,” Mr. Dy said in a mobile phone message.

During a virtual briefing on Tuesday, Agriculture Secretary William D. Dar said they are hopeful that the PSA’s result will turn out positive.

The Philippine Statistics Authority (PSA) is scheduled to release agricultural production data today.

Mr. Dar previously said he is hoping that the agriculture sector could grow by 1.5% by the end of 2020, lower than the previous 2% target.

According to PSA data, the farm sector accounts for about a tenth of the country’s gross domestic product (GDP) and around a quarter of the national workforce.

BIR collected P7.2 billion from POGOs in 2020

THE Bureau of Internal Revenue (BIR) collected P7.18 billion in taxes from Philippine Offshore Gaming Operators (POGOs) last year, even as some offshore companies reportedly left due to the tighter tax rules.

In a statement, BIR Commissioner Caesar R. Dulay said taxes from POGOs were 12% higher than the collection in 2019, although he did not provide the exact figure.

In 2018, the BIR collected P2.8 billion in taxes from POGOs.

BIR Deputy Commissioner for Operations Arnel SD. Guballa attributed the higher POGO tax collections last year compared with 2019 to the additional revenues generated through the 5% franchise tax.

“The increase in tax collection in taxable year 2020 over 2019 is primarily due to the compliance in the payment of franchise tax by some POGO Licensees, which was made a prerequisite for the issuance of a BIR clearance to allow them to resume partial operations during the ECQ (enhanced community quarantine) periods,” Mr. Guballa said in a text message on Tuesday.

The government began its campaign against tax-dodging POGOs and their service providers in 2019. It set deadlines for POGOs to secure Tax Identification Numbers (TINs) for their employees and remit withholding taxes.

In 2020, the BIR started collecting a 5% franchise tax after Republic Act 11494 or the Bayanihan to Recover as One Act (Bayanihan II) changed the basis of the tax rate to gross bets amid alleged cheating when computing their net winnings.

Earlier this month, the Supreme Court issued a temporary restraining order (TRO) against the BIR, preventing it from collecting the franchise tax after 14 licensed POGOs questioned the new tax.

The BIR’s total collections reached P1.94 trillion last year, down 11% year on year but 15% higher than the P1.69-trillion revised target.

“It’s the first time that BIR went above its goal by 15%. The last time the BIR hit its goal was in 2001 and 2003, that was 17 years ago,” said Mr. Dulay in the statement. — B.M.Laforga

ERC readies report on Visayan Electric’s alleged high power rates

By Angelica Y. Yang

THE technical staff of the Energy Regulatory Commission (ERC) is set to complete by February its evaluation on whether the biggest power provider in the Visayas had charged “high electricity rates” in the area as alleged by a business group, an official of the agency said on Tuesday.

Floresinda G. Baldo-Digal, ERC commissioner-in-charge, said the regulator’s technical team is evaluating the letter sent by Visayan Electric Co., Inc. to explain its side.

“The explanation is currently under evaluation by our technical staff, they are targeting to present their recommendation to the Commission by next month,” Ms. Digal told BusinessWorld in a text message.

On Monday, Visayan Electric said it had responded to the ERC’s letter, but declined to disclose details of its explanation.

“Visayan Electric has already submitted its explanation to the ERC and we are waiting for ERC’s evaluation,” the company told BusinessWorld in an e-mailed response.

“We assure our customers that Visayan Electric is transparent in its dealings and processes and that the electric utility is committed to providing reasonably priced power in its franchise area,” it added.

On Jan, 4, the ERC directed Visayan Electric, the country’s second largest power utility, to explain why it bought power from Cebu Private Power Corp. at an average of P35.3852 per kilowatt-hour (kWh) for the January-October period.

The power generation rate hit as high as P1,470.90/kWh for September last year, it added.

In contrast, the utility’s average generation rate for Green Core Geothermal, Inc. was at P4.8922/kWh for the 10-month period, while those for Cebu Energy Development Corp. and Therma Visayas, Inc. were at P5.6821/kWh and P5.5584/kWh, respectively, the ERC said.

The regulator also said that at the Wholesale Electricity Spot Market, the average generation rate during the period was at P2.5946/kWh.

The ERC’s letter, a copy of which was obtained by BusinessWorld, directed Visayan Electric to explain the power firm’s generation charges during the subject billing period in relation to the least-cost principle called for under Republic Act No. 9136 or the Electric Power Industry Reform Act of 2001 (EPIRA).

The law mandates distribution utilities to supply power at the “least cost to its captive market, subject to the collection of retail rate.”

The ERC’s letter was addressed to Raul C. Lucero, president and chief operating officer of Visayan Electric.

It was prompted by a letter from the Central Visayas Regional Development Council, which endorsed to the ERC a letter from the Cebu Chamber of Commerce and Industry regarding the high electricity rates charged by Visayan Electric and alleged violation of Section 45 of EPIRA.

Earlier, Senator Sherwin T. Gatchalian said a refund should be in order if Visayan Electric’s alleged violations are proven.

“If it will be proven that [Visayan Electric’s] collection is not justifiable, they should return the excess to the consumers. It’s the mandate of the ERC to protect the interest of the public,” he said in a press release last week.

SM Prime sets interest rates for retail bond offering

PROPERTY developer SM Prime Holdings, Inc. has set the interest rate of its retail bonds due on 2023 at 2.4565%, while those due on 2026 at 3.8547%, it said in a regulatory filing on Tuesday.

The peso-denominated 2.5-year series M and the five-year series N retail bonds will be offered to investors from Jan. 25 to 29, after receiving the necessary permit from the Securities and Exchange Commission (SEC). They will be issued on Feb. 5.

SM Prime is issuing an aggregate principal amount of P5 billion for the two bonds with an oversubscription option of an additional P5 billion.

“The proceeds of the retail bonds will allow SM Prime to continue its expansion plans in its core business, which will further drive the company’s growth,” SM Prime Chief Finance Officer John Nai Peng C. Ong was quoted as saying.

According to SM Prime, the proposed issuance is the second drawdown from its P100-billion debt securities program under shelf registration with the SEC.

The company said Philippine Rating Services Corp. (PhilRatings) had given a rating of “PRS Aaa” for its series M and N retail bonds.

The rating is the highest assigned by PhilRatings and is given to long-term debt securities that have the smallest investment risk.

BDO Capital and Investment Corp. and China Bank Capital Corp. are the joint issue managers for SM Prime’s bonds. The two companies also join BPI Capital, First Metro Investment Corp., and SB Capital Investment Corp. as joint lead underwriters for the issuance.

As of September 2020, SM Prime posted a 48% decline in its consolidated net income to P14.4 billion. The company’s consolidated revenues fell 29% to P60.7 billion.

On Tuesday, shares in SM Prime at the stock exchange fell 1.31% or 50 centavos to close at P37.70 apiece. — Revin Mikhael D. Ochave

Greenergy signs deal with tech firm ITBS for e-platforms integration

ANTONIO L. Tiu-led Greenergy Holdings, Inc. on Tuesday said it signed a memorandum of agreement with technology company ITBS (Information Technology Business Solutions Corp.) to integrate their electronic platforms.

Greenergy’s payment platform ePitaka will be integrated with ITBS’ Know Your Citizen platform installed in various local government units, the listed company told the local bourse in a disclosure.

ePitaka was developed by Greenergy’s related parties.

The company’s agreement with ITBS has a term of three years. They can choose to renew the deal for another two years upon expiration of the original term.

According to its website, ITBS is a Filipino company with presence in Japan, Pampanga, Manila, Cebu, and General Santos. The technology firm provides end-to-end solutions for government and private entities.

Its research and development portfolio include artificial intelligence checkpoint solutions, airport ground operation monitoring solutions, behavioral analysis and transportation management solutions, and a disaster management system with artificial intelligence, among others.

Greenergy trimmed its losses to P15.15 million in the first nine months of 2020.

The listed firm’s losses were lower than the previous year’s P18.07 million.

The company said the coronavirus pandemic has “less significant impact” on its business.

“While management recognizes that the COVID-19 (coronavirus disease 2019) pandemic poses potential impact on the group’s activities in terms of risks related to exposures to industries severely affected by COVID-19, the related amount of financial effect cannot be reliably and reasonably determined or estimated,” it added. — Arjay L. Balinbin

Gov’t to exert more pressure on telcos — Roque

THE national government will exert more pressure on telecommunications firms to improve their services, Malacañang said on Tuesday.

Presidential Spokesperson Harry L. Roque, Jr. said President Rodrigo R. Duterte had agreed with the recommendation of the Department of Information and Communications Technology (DICT) that telco companies should continue to “shape up” to improve the internet speed in the Philippines.

“The President agrees with the recommendation of the DICT. It is certainly needed to continue the ‘shape up’ and to really focus on telecoms to ensure that their services will continue to improve,” he said in mixed English and Filipino during a televised press briefing.

Mr. Roque said Mr. Duterte had agreed that internet connectivity in the country should be at the same level of Vietnam and Thailand.

DICT Assistant Secretary Emmanuel Rey R. Caintic earlier said there was “no reason” for the government to stop pushing for better telecommunications services, after Malacañang reported that internet speeds had improved due to the construction of new communication towers and the installation of fiber optic lines across the country.

A total of 2,939 telco towers were built between July and December last year.

Citing a report by Ookla, an internet speed testing site, Mr. Roque earlier said mobile download speeds improved by 202.4% between July 2016 and December 2020, while fixed broadband speeds rose 297.47% during the same period.

Ookla measured fixed broadband speed at 31.44 megabits per second (Mbps) in December last year from 7.91 Mbps in July 2016. Meanwhile, mobile download speeds improved to 22.50 Mbps from 7.44 Mbps over the same period.

Mr. Duterte in July 2020 told telcos to improve their services “before December” or risk shutdown. — Kyle Aristophere T. Atienza

Maynilad realigns 6.7-kilometers of pipes for gov’t infra projects

WEST ZONE water provider Maynilad Water Services, Inc. has completed the replacement and realignment of 6.7 kilometers of water pipelines in 2020 to assist ongoing government infrastructure projects.

In a statement on Tuesday, the concessionaire said primary and secondary pipelines were reconfigured in portions of Caloocan, Quezon City, Valenzuela, Parañaque, and Las Piñas.

The reconfiguration is to give way for ongoing construction works such as the construction of the Philippine National Railways North, Metro Rail Transit Line 7, and Light Rail Transit Line 1 extension, which aim to help improve the travel of commuters.

Maynilad Chief Operating Officer Randolph T. Estrellado said the reconfiguration of the pipelines is needed to avoid delay in the said government projects.

“We strive to support by accommodating requests to realign some of our existing pipelines, with due consideration to Maynilad customers whose water supply may be temporarily affected by such realignments, as well as to motorists who pass by our construction sites,” Mr. Estrellado said.

Maynilad provides water to areas in the west zone of the National Capital Region such as Caloocan, Pasay, Parañaque, Las Piñas, Muntinlupa, Valenzuela, Navotas, Malabon, Manila, Makati, and Quezon City, as well as parts of Cavite province including Bacoor, Imus, Kawit, Noveleta, and Rosario.

Metro Pacific Investments Corp., which has a majority stake in Maynilad, is one of three Philippine units of Hong Kong-based First Pacific Co. Ltd., the others being Philex Mining Corp. and PLDT, Inc.

Hastings Holdings, Inc., a unit of PLDT Beneficial Trust Fund subsidiary MediaQuest Holdings, Inc., has an interest in BusinessWorld through the Philippine Star Group, which it controls. — Revin Mikhael D. Ochave

The beauty of Betsy Westendorp

IT IS believed that we are a sum of our surroundings. Judging from portraits of her by other artists (including one by Fernando Amorsolo), Betsy Westendorp, one of the grandes dames of Philippine art, had been and continues to be a beautiful woman at the age of 93. She was surrounded by beautiful people and beautiful things, and in such a setting, nothing else but beauty is expected. The rarefied world that Ms. Westendorp lived in seemed to be a set path: to paint society portraits; then paint something beautiful; then see those hung on either the homes or the offices of the powerful she painted. Her works then serve as a salve, and an escape from this world, and an exercise in the purpose of beauty.

All this beauty will be on view in a retrospective exhibition called “Passages” at the Metropolitan Museum of Manila, which runs from Jan. 29 to March 15.

Art, said the artist, is a balm for life. “Certainly I’d recommend everybody to paint, to do sculpture, do some art, because I think they can endure many hardships in life if you have that,” Ms. Westendorp told BusinessWorld’s High Life magazine in a video interview several years ago.**

Ms. Westendorp has multiple identities: she comes from another era, her maiden last name is Dutch (she was named after an aunt who was an artist); but she was born and raised in Spain, and then she was married to a Filipino businessman, Antonio Brias. As Emmanuel A. Miñana, head of the Betsy Westendorp Retrospective Committee, said in a statement, “It was love at first sight. They moved to Manila and raised their three children amidst newfound friendships.”

Ms. Westendorp is best known for her cloudscapes, her flowers, and her high-society portraits, including those of Spain’s Royal Family — she painted the now-King Felipe VI and his sisters as a child. For her various achievements, Ms. Westendorp earned the  Lazo de Dama de la Orden de Isabela Catolica (Order of Isabella the Catholic), as well as the Presidential Medal of Merit for Art and Culture.

Mr. Miñana emphasized Ms. Westendorp’s contribution to the body of Philippine art. “The object of her affection was her newly adopted home — its people, flora and fauna; effervescent and luminous skies and seascapes; and commonplace shanties and fishermen’s homes by Manila Bay. She focused her eyes, and ours, to the grandeur and beauty of a country she passionately painted. She took ordinary, taken-for-granted subjects and made them sublime. As advocate and patriot of her second home, Westendorp has contributed to the life and culture of Philippine art by generously lending her voluble voice and artistic vision unflinchingly to this country. This is her truest legacy.”

The retrospective, curated by Dannie Alvarez, will display over 100 works spanning more than 60 years of Ms. Westendorp’s career. In keeping with the current health guidelines, the retrospective will be presented in both real and virtual space. The museum will present a 3D virtual tour, a biographical film documentary, and interviews and tributes. A printed retrospective monograph with text by Cid Reyes will be produced in partnership with De La Salle University Publishing House. There will also be continuous education and public programs throughout the retrospective, including a fireside chat with the artist.

The exhibition has been organized by the Metropolitan Museum of the Philippines in partnership with Bangko Sentral ng Pilipinas (BSP), De La Salle University Publishing House, and Pioneer Insurance, together with the Retrospective’s executive committee headed by Mr. Miñana and its members gallerist Silvana Diaz, writer Cid Reyes, and photographer Denise Weldon-Miñana.

The retrospective is sponsored by the Alay ng Inang Maria Foundation, Ramon Antonio, Antonio and Maricris Brias, Rosemarie T. Delgado, Jay and Ana De Ocampo (of Wildflour), Raul and Joanna Francisco, Randy and Irene Francisco, Antonio and Linda Lagdameo, Jaime Ponce de Leon, Alfonso and Yolanda Reyno, Beatrice Roxas, Carlos and Isabelita Salinas, Rick and Bonnie Santos/Santos Knight Frank, Teresita Sy-Coson, Steve and Loli Sy/ (Focus Global, Inc.), Bienvenido Tantoco, Sr. (SSI Group, Inc.), Rico and Nena Tantoco (Sta. Elena Golf & Country Estate), Wilfred and Kerri Uytengsu, Randy and Pia Young, and Jaime and Bea Zobel de Ayala. — JLG

**(https://www.bworldonline.com/celebrating-beauty-betsy-westendorp/)

BSP tightens watch on VASPs

THE CENTRAL BANK has tweaked its regulations to cover more types of virtual asset service providers (VASPs) and better guard against risks amid the heightened use of these services.

“This is in line with the thrust of the Bangko Sentral to promote financial innovation while remaining sensitive to the attendant risks. The said guidelines amended the regulations on virtual currency exchanges (VCE) that were issued in 2017,” the central bank said in a statement on Tuesday.

“We have seen accelerated growth in the use of virtual currency exchanges in the past three years and it is high time that we broaden the scope of existing regulations in recognition of the evolving nature of this financial innovation and set out commensurate risk management expectations,” Bangko Sentral ng Pilipinas (BSP) Governor Benjamin E. Diokno said in the statement.

The BSP’s expanded guidelines for VASPs use the Financial Action Task Force’s (FATF) definition of the types of these providers.

Under the revised framework approved by the Monetary Board, VASP activities covered by the central bank will now include the exchange between one or more forms of virtual assets, transfer of virtual assets, and safekeeping and/or administration of virtual assets or instruments enabling control of virtual assets.

These will be subject to the BSP’s licensing requirements, regulatory expectations for money service businesses and anti-money laundering, countering the financing of terrorism and proliferation financing obligations.

The initial framework released in 2017 only covered providers facilitating the exchange of fiat and virtual assets.

The BSP, however, did not include VASPs participating in an issuer’s offer or sale of virtual asset in its framework, which were also included in the FATF definition. This is because these activities fall under the jurisdiction of the Securities and Exchange Commission, BSP Managing Director for Policy and Specialized Supervision Lyn I. Javier said in a text message.

“The BSP will continue to scan for existing players that would potentially be covered by the expansion of the regulatory scope,” Ms. Javier said.

Under the new guidelines, all transactions involving the transfer of virtual assets will be treated as cross-border wire transfers.

This means service providers of virtual asset-related transactions will now need to comply with regulations on wire transfers, such as providing immediate and secure transmission of originator and beneficiary information from one service provider to another for certain transactions.

Once they secure the BSP’s clearance to perform VASP activities, these service providers will also need to comply with other existing rules for money service businesses, such as those on outsourcing, liquidity risk management, operational risk management, information technology risk management, and financial consumer protection,

The BSP said the VASP regulatory framework is aligned with fintech industry’s best practices and is consistent with international risk management standards, such as those from the FATF.

“This will ensure that activities relating to virtual asset service providers are executed within an unbroken chain of regulated entities,” Mr. Diokno said.

The central bank’s new guidelines for VASPs are a “welcome” and encouraging development for financial technology players, an industry group said, noting the regulator is likely “looking to plug regulatory holes” that may not be under the watch of the Securities and Exchange Commission.

“It seems to me the BSP wants the market to leverage the benefits of blockchain technology to lower costs and introduce competition in the consumer finance industry,” Fintech Alliance.ph Chariman Angelito “Lito” M. Villanueva said in a Viber message. 

However, Mr. Villanueva said decentralized finance may challenge the central bank’s ability to regulate.

“I believe regulation of decentralized finance means the ability to properly audit and impose rules on the writers of code (for smart contracts). Either the private sector provides these services or the government has to be in a position to do their own audit,” he said.

He added that the central bank also needs to look into other terminologies that can be used for VASP as the same acronym is used for value-added service providers regulated by the National Telecommunications Commission.

There were 17 money service businesses with virtual currency exchange services authorized by the BSP as of November, data from its website showed. — L.W.T. Noble

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