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PCC pushes transition period for lower capital requirement for foreign retail investors

THE COMPETITION regulation body is proposing a grace period for the lowering of the capitalization requirement for foreign retail investors.

The Retail Trade Liberalization Act (RTLA) or House Bill No. 59 passed on third reading in March seeks to reduce the required minimum paid-up capital for foreign retail investors to $200,000, or around P10 million, from $2.5 million.

Under the version being tackled by the Senate, the proposed capitalization requirement is $300,000 or just below P15 million.

“Perhaps we can have a short transition period commencing with a $300,000 minimum capitalization requirement and then after x number of years, whether it’s three years or some other period, lower it down to $200,000,” Philippine Competition Commission (PCC) Commissioner Johannes Benjamin R. Bernabe said in a webinar organized by the American Chamber of Commerce of the Philippines on Friday.

“That might be a more suitable way of addressing the concerns about the actual figure to be finally agreed upon, and also provide some degree of grace period for the local MSMEs (micro-, small-, and medium-sized enterprises) to adjust,” he added.

The RTLA has been touted by the Trade department and foreign business chambers as a means to attract more foreign direct investments (FDI), especially after the Philippines was ranked as one of the most restrictive in terms of FDI regulations by the Organisation for Economic Cooperation and Development.

But local retailers flagged the RTLA as a threat to MSMEs as it could subject them to unfair competition from foreign investors.

The PCC said it supports the amendments to the RTLA but with measures to address the challenges faced by MSMEs.

Mr. Bernabe said there should be easing of regulatory permit requirements in improving credit access. The traditional criteria for credit access should be made more flexible for small businesses during the pandemic, he said.

Some other flanking measures include “enhancing the ability of MSMEs to partake of improvements in technology, reducing high electricity costs, and providing for a stronger linkage between the manufacturing supply base and those which are in the supply sector, the retail trade sector,” he said. — Jenina P. Ibañez

Q2 foreign investment pledges lowest in 9 quarters

By Marissa Mae M. Ramos, Researcher

Investment pledges made by foreign companies in the second quarter slumped to its lowest level in over two years, amid the global economic downturn caused by the coronavirus pandemic, according to data from the Philippine Statistics Authority (PSA).

The PSA said approved foreign investment pledges plunged 69% to P15.461 billion in the three months to June from P49.575 billion in the same period last year. This represents the amount of foreign-led projects given the go-signal by the country’s seven investment promotion agencies (IPAs).

The second-quarter result was the lowest amount since the P14.208 billion recorded in the first quarter of 2018, as well as the largest quarterly decline since the 82.8% plunge in the fourth quarter of 2017.

For the first six months of 2020, the approved foreign investment pledges reached P44.604 billion, only roughly half of the P95.560 billion during the same period a year ago.

Meanwhile, combined pledges of foreigners and Filipinos approved by IPAs totaled P575.34 billion, 5.4 times more than the year-ago P106.963 billion. Domestic pledges reached P559.879 billion in the second quarter, accounting for 97.3% of the total.

Should these commitments materialize, foreign and local investments pledged in the second quarter would generate 36,572 jobs, 21.4% higher than the projected additional employment of 30,135 a year ago.

Only six of the 17 regions recorded foreign pledges in the second quarter. Of these, the National Capital Region got 85.8% of the total or P13.262 billion. This is triple the commitments in the region in the second quarter of 2019.

CALABARZON — the region immediately south of Metro Manila consisting of Cavite, Laguna, Batangas, Rizal, and Quezon — received P1.884 billion in investment pledges or 12.2% of the total, followed by Ilocos Region’s P130.8 million (0.8% share), Davao Region’s P74 million (0.5%), Cagayan Valley’s P57.5 million (0.4%), and Central Luzon’s P51.7 million (0.3%).

Among the seven IPAs monitored by the PSA, the Philippine Economic Zone Authority contributed 65.4% of the total foreign investment pledges in the second quarter at P10.106 billion.

It was followed by the Board of Investments (BoI) at P5.258 billion; Cagayan Economic Zone Authority at P57.5 million; Subic Bay Metropolitan Authority at P25.8 million; Clark Development Corp. at P13.6 million; and the Authority of the Freeport Area of Bataan’s P45,672.

There are no approved commitments for the BoI-Bangsamoro Autonomous Region in Muslim Mindanao.

The United States was the biggest source of investment commitments during the period with P9.079 billion, nine times more than the P997.1 million in the second quarter of 2019 and accounting for 58.7% of the total. It was followed by the United Kingdom with P2.033 billion (13.2% share) and the Netherlands with P1.853 billion (12% share).

PANDEMIC’S EFFECT

“The decline in approved foreign investment pledges in the second quarter may still be due to the effects of the COVID-19 (coronavirus disease 2019) pandemic on investor sentiment and confidence on how the Philippines’ approach to managing and containing the pandemic relative to other neighboring economies,” John Paolo R. Rivera, an economist from the Asian Institute of Management, said in an e-mail.

The economist also said the surge in commitments from Filipino nationals would likely indicate “improving local sentiment on the domestic economy and optimizing opportunities on sectors that thrived during the quarantine period and will continue to thrive in the new normal.”

By sector, the administrative and support service activities made up 53.4% of the total foreign pledges in the second quarter with P8.262 billion. This was 2.6 times more than the P3.126 billion a year ago. This was followed by transportation and storage’s 25.3% share at P3.916 billion, up 4.4 times from last year’s P893.8 million. Manufacturing was third at P1.731 billion with an 11.2% share, but the amount of total pledges was 71.8% less than a year ago.

Mr. Rivera said enterprises under administrative and support services may have been operational during the lockdowns and would most likely grow in the new normal.
Asked for his outlook for the rest of the year, the economist said it would still depend on how the economy performs amid the pandemic.

“[A]s the Philippines moves on its way to ‘flattening the curve’, industries and sectors seen to survive and expand in the new normal would expect growth in [approved foreign investments,” Mr. Rivera said.

The foreign investment commitments tracked by the PSA are different from actual capital inflows tracked by the Bangko Sentral ng Pilipinas (BSP) for balance of payments purposes.

The BSP recorded $2.379-billion in January-May net inflows, down 25.6% from the past year’s $3.196 billion.

SEC strengthens stockholders’ right to inspect corporate records

The Securities and Exchange Commission (SEC) will investigate complaints against companies that refuse to allow stakeholders to inspect or reproduce corporate records.

The SEC issued a new memorandum circular on Aug. 20 to uphold the right of any director, trustee, stockholder or member of a corporation to request copies or excerpts of corporate records for inspection. This right is guaranteed under the Revised Corporation Code of the Philippines.

If such a right is violated, the memorandum said affected individuals may file a complaint with the SEC, through its Company Registration and Monitoring Department or any of its extension offices. Complainants need to pay a filing fee of P10,130.

The SEC considers it a violation if the company refuses to allow a stakeholder to inspect corporate records, fails to take steps to allow access to corporate records, and fails to give a reasonable amount of time to inspect records.

Upon receipt of a complaint, the regulator will investigate the case by summoning the involved respondents to a clarificatory conference.

The parties have an option to settle the matter amicably, but the SEC may still proceed with its investigation and decide on whether the respondents may be penalized.

The sanctions for such violation will be any or all of the administrative sanctions listed in the Revised Corporation Code of the Philippines. These are a P5,000-P1,000 fine per day of violation, a permanent cease and desist order, revocation of certification of incorporation, and dissolution of the corporation and forfeiture of its assets.

While the guidelines aim to enforce the right to inspect and/or reproduce corporate records, such activity is still bound by confidentiality rules under prevailing laws, such as the Intellectual Property Code of the Philippines, the Data Privacy Act and the Securities Regulation Code. — Denise A. Valdez

Duterte signs Bayanihan II into law

President Rodrigo R. Duterte on Friday signed the Bayanihan to Recover as One Act (Bayanihan II), which provides a P165.5 billion fund to boost the country’s coronavirus disease 2019 (COVID-19) response.

Executive Secretary Salvador C. Medialdea confirmed that Mr. Duterte signed on Friday the Bayanihan II law, which also extends the special powers granted by Congress to the President to deal with the health crisis.

The Bayanihan II law will provide a stimulus package of P140 billion plus a P25.5 billion standby fund. The law is expected to benefit industries and sectors affected by the COVID-19 crisis, while also providing more funding to the healthcare sector.

This is a follow up to the Bayanihan to Heal as One Act which was signed last March 24. The first Bayanihan law granted Mr. Duterte special powers to realign the funds under the 2019 and 2020 national budgets to COVID-19 measures. The law expired on June 24.

The second Bayanihan law will expire on December 31, 2020.

Bayanihan II forms part of the Finance department’s P180-billion stimulus plan, which also includes the tax relief contained in the Corporate Recovery and Tax Incentives for Enterprises Act (CREATE).

Mr. Duterte first imposed a Luzon-wide lockdown in mid-March to contain the spread of the COVID-19. The stringent lockdown halted nearly all economic activity, plunging the economy into a recession when gross domestic product contracted by a record 16.5% in the second quarter. — Gillian M. Cortez

Security Bank records surge in digital transactions

SECURITY BANK Corp. recorded higher digital transactions during the last five months amid restrictions due to the coronavirus disease 2019 (COVID-19).

The bank’s digital transactions soared 170% from March 17 to Aug. 31, it said in a statement on Friday.

Security Bank said the growth was driven by the implementation of the enhanced community quarantine which began in April.

Online fund transfers were among the growth drivers as these climbed 312% this year from the 2019 level. Security Bank said these transactions included remittances sent via eGiveCash and withdrawn from its automated teller machines as well as online interbank fund transfers via InstaPay.

Online transactions for bills payment also grew by 48% from the year-ago level.

“We have seen a surge in the number of people transacting via Security Bank Online with transactions growing steadily month-on-month. We’ve also noticed that a huge chunk of transactions come from online bills payment. This has been one of the main drivers of our electronic channel growth with a 48% increase versus the previous year,” Security Bank Executive Vice President and Head of Transaction Banking Group John Cary L. Ong was quoted as saying.

The bank said it is developing more digital tools to ensure clients can make financial transactions safely amid the COVID-19 pandemic.

“Security Bank will continue to test and roll out new user-friendly features, streamline our digital solutions, and strengthen our technology and platforms to support the changing needs of our customers. Our commitment to continuous innovation allows us to provide BetterBanking services to those we serve,” Mr. Ong added.

Security Bank’s net income increased 8% year on year to P2.8 billion in the second quarter.

The bank’s shares closed at P95.10 apiece on Friday, gaining 10 centavos or 0.11% from its previous finish. — K.K.T. Jose

Philippines probes 57 persons of interest over Wirecard scandal

Philippine authorities are investigating 57 foreign and local “persons of interest” potentially involved in a scandal at German payments firm Wirecard AG, an official at the country’s anti-money laundering agency said on Friday.

The Southeast Asian nation became embroiled in the collapse of Wirecard in June, with the payments firm initially claiming it kept $2.1 billion in two Philippine banks, which the central bank and the lenders denied.

The persons of interest were included in a report sent to the National Bureau of Investigation, Mel Georgie Racela, executive director of the Philippines‘ Anti-Money Laundering Council (AMLC), told a virtual news conference.

The list includes officers at Philippine lenders BDO Unibank Inc and Bank of the Philippine Islands believed to have forged documents to show Wirecard is a depositor, Racela said, adding that the banks were no longer part of the investigation.

In addition, immigration personnel who were said to have created fake entry and exit information on Wirecard’s former chief operating officer are among the persons of interest, according to Mr. Racela. The Bureau of Immigration did not respond to a request for comment.

“After we coordinate, we will now build up the case and file the necessary case,” Mr. Racela said, adding that not all the 57 would face criminal charges.

German lawmakers this month launched a parliamentary inquiry into the implosion of Wirecard, the country’s biggest post-war corporate fraud.

The AMLC is working with German authorities as it pursues a case against foreigners, Mr. Racela said.  — Reuters 

Bank account ‘portability’ for employees pushed

A BILL pushing to let private sector workers choose the bank for their payroll accounts has been filed at the House to give them freedom to weigh each lender’s benefits and to increase competition in the banking industry.

Marikina City (2nd district) Rep. Stella Luz A. Quimbo has filed House Bill 7619, also known as the Bank Account Portability for Workers Act, which gives private sector employees the freedom to choose their own bank accounts so they can transact “based on various factors, such as the attractiveness of their financial products, interest rates offered, and the location of their branches.”

The measure also seeks to strengthen competition among banks, Ms. Quimbo said. She said competition in the banking industry would result in the improvement of financial services and would make banks more responsive to the demands of clients.

“No bank shall secure more clients just because a single client — the employer — made the choice for others. This will force the banks to offer better financial products and more responsive and convenient services in order to attract more clients,” Ms. Quimbo said on Friday.

The lawmaker noted the current setup prevents healthy competition in the industry.

“By leaving it up to employers to decide on behalf of many, these competition dynamics are dampened in our current system,” she said.

Ms. Quimbo also noted that the Constitution prohibits “combinations in restraint of trade and unfair competition,” adding it is the mandate of the government to “protect the rights and welfare of workers.”

“Grant the employees their freedom of choice and we improve employee welfare,” she said.

The measure also seeks to make employees’ financial transactions “hassle-free” as a provision allows them to use their existing bank accounts for withdrawing their salaries, Ms. Quimbo added.

“It will allow them to use their existing personal bank accounts for withdrawing their wages without having to open a new account. Presumably, an employee picked his/her existing bank because s/he desires the services offered by that bank and due to the proximity from the employee’s residence. Hence, withdrawing their wages will now be hassle-free,” she said. — K.A.T. Atienza

AMLC logs 400,000 suspicious transactions so far this year

The Anti-Money Laundering Council (AMLC) on Friday said the number of suspicious transaction reports has already reached 400,000 this year, as in online fraudulent transactions have increased during the pandemic.

“Currently our suspicious transaction reports are approximately 400,000. We reached the same number last year. For the entire year, approximately 400,000.  So yes, it’s been increasing,” AMLC Executive Director Mel Georgie B. Racela said in an online briefing on Friday.

Mr. Racela clarified not all of these reports are dirty money cases. He said only one in six of these suspicious transactions would be related to unlawful activities.

Suspicious transaction reports are filed with the AMLC when institutions see financial transactions that do not appear to be ordinary or could potentially be part of a dirty money scheme.

In its study regarding financial crime trends seen from January to April, the AMLC said suspicious transaction reports reached 104,138 from March 1 to April 24. The Luzon-wide lockdown began in mid-March. 

It noted the value of transactions linked to possible money mule accounts and unauthorized transactions such as phishing and card skimming reached P341 million. The study also noted suspicious transaction reports related to online sexual exploitation of children with an estimated value of P11.93 million were also filed during the period. — L.W.T.Noble

Peso rises as US senators reject fresh stimulus

THE PESO strengthened further on Friday as some US lawmakers rejected a fresh stimulus program meant to stem the impact of the coronavirus disease 2019 (COVID-19) and as the clinical trial for a possible vaccine was halted.

The local unit closed at P48.54 per dollar on Friday, rising three centavos from its P48.57 finish on Thursday, data from the Bankers Association of the Philippines showed.

The peso opened Friday’s session at P48.60 per dollar which was also its weakest showing for the day. Meanwhile, it reached an intraday high of P48.505 against the greenback.

Dollars traded climbed to $903.65 million on Friday from $548.96 million the day prior.

Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said the peso appreciated after US senators from the Democratic Party rejected the proposed $500-billion funding for COVID-19 relief measures from Republican senators allied with President Donald J. Trump.

Meanwhile, a trader said the suspension of the clinical trial of AstraZeneca Plc for its vaccine against COVID-19 also continued to dampen investor sentiment. — KKTJ

Stocks rebound on economic recovery hopes

THE MAIN INDEX closed higher on Friday as investors gained some optimism before heading into the weekend.

The benchmark Philippine Stock Exchange index (PSEi) picked up 65.57 points or 1.11% to close at 5,967.96, while the broader all shares index added 23.82 points or 0.67% to end at 3,577.38.

The PSEi dropped to a low of 5,888.36 early in the day but quickly entered green territory where it stayed for the rest of the session, reaching a peak of 5,967.96 upon closing.

“Local shares closed higher as investor hopes for a further recovery took precedence over weak labor market data and a lack of progress on another fiscal stimulus bill in Washington,” Regina Capital Development Corp. Head of Sales Luis A. Limlingan said in a mobile message.

Economic data released recently point to some recovery: the unemployment rate went down to 10% in July from a record 17.7% in April, foreign portfolio investments rose 42% in May after a three-month decline, and cash remittances grew 7.7% in June after contracting since March.

These data, along with the relative slowdown in local coronavirus cases this week, helped improve investor sentiment.

The PSEi’s movement was also in line with some Asian markets, such as Japan, China and Hong Kong, which were trading in green territory when the local bourse closed.

Meanwhile, US stocks fell on Thursday. The Dow Jones Industrial Average, S&P 500 and Nasdaq Composite indices went down by 1.45%, 1.76% and 1.99%, respectively.

Most sectoral indices at the local bourse ended Friday’s session with gains. Holding firms rose 117.08 points or 1.92% to 6,212.94; services grew 16.50 points or 1.12% to 1,487.51; property climbed 16.68 points or 0.61% to 2,733.67; and industrials improved 41.13 points or 0.51% to 8,071.54.

However, mining and oil shed 18.37 points or 0.30% to 5,991.36 and financials dropped 2.91 points or 0.25% to 1,150.90 at the end of trading.

Some 1.11 billion issues valued at P4.18 billion switched hands on Friday, growing from the previous day’s 770.87 million issues worth P5.96 billion.

Decliners narrowly beat decliners, 92 against 90, while 51 names ended unchanged.

Foreign investors returned to selling on Friday, posting net outflows of P527.02 million versus net purchases worth P420.91 million on Thursday. — Denise A. Valdez

Metro Manila-based manufacturers of critical goods to get tax breaks

Metro Manila-based investment projects involving the manufacture of critical goods such as test kits, personal protective equipment (PPE) and medicine may now avail of tax perks amid the coronavirus pandemic, according to the Board of Investments (BoI).

In Memorandum Circular no. 2020-006 dated Sept. 4, the BoI said it can revise the 2017 Investment Priorities Plan (IPP) that identifies projects that are given income tax holidays.

Based on the memorandum, identified goods and services addressing the pandemic will now be exempt from the “locational restriction policy” or the rule that incentives are not applied to most projects in the National Capital Region.

BoI said these projects will also now be exempt from the modernization requirement, or the policy to improve facilities and processes that will result in a 25% substantial reduction of production cost.

These projects include the production of medicine considered critical by the Health department; medical equipment like thermometers and test kits; PPE such as masks, goggles and face shields; and surgical equipment; laboratory equipment. Also covered are projects involving the manufacturing of medical supplies such as alcohol, sanitizer, hand soap, cleaning materials, and common medicine such as paracetamol, vitamins and mefenamic acid.

Raw and packaging materials used for the production of these goods as well other supplies identified by the Health department will also be included. Support and maintenance services for laboratory and medical equipment are also covered by the circular.

The policy is considered in effect “during the existence of the pandemic” and can be extended in cases of national interest or emergency.

Under the 2017 investment priorities plan, BoI said that it selects projects with substantial benefits to the economy for incentives. The income qualified for the income tax holiday is limited to the income directly attributable to eligible revenue from the registered project. — Jenina P. Ibañez

Phoenix taps Petarmina for petroleum supply, regional opportunities

Phoenix Petroleum Philippines, Inc. has entered into a strategic partnership with a subsidiary of Indonesia’s state-owned PT Pertamina (Persero) for the supply of petroleum products and exploration of regional opportunities.

The company told the exchange on Friday it has signed a new deal with Pertamina International Marketing and Distribution Pte. Ltd.

Pertamina International will be supplying petroleum products to Phoenix in the Philippines and Singapore. The partnership also allows them to “explore and co-develop other international downstream business opportunities in the region.”

Pertamina International, which was formed in 2019, is being used by PT Pertamina for overseas sales and marketing. The Indonesian firm has six refinery units with a total capacity of more than 1 million barrels a day.

“We are proud and happy to work with Pertamina as our supply partner,” Phoenix Petroleum President Henry Albert R. Fadullon said in the statement.

“As both homegrown oil companies, we believe that the synergy between Phoenix and Pertamina will bring mutual and complementing value and opportunities, especially since the Philippines and Indonesia are geographically situated close to each other,” he added.

Phoenix currently operates units in Singapore and Vietnam and has existing partnerships with other firms within the ASEAN.

During the first semester, Phoenix swung to an attributable net loss of P367.8 million, reversing its attributable net profit of P903.94 million in the same period last year.

Shares in the company at the stock exchange closed flat on Friday at P11 each. — Denise A. Valdez

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