PHL likely exited recession in Q2

August 9, 2021 | 12:34 am

Looser lockdown restrictions likely boosted economic growth in the second quarter. — PHILIPPINE STAR/ MICHAEL VARCAS

LOOSER LOCKDOWN restrictions, coupled with base effects likely lifted the Philippine economy out of the recession in the second quarter, economists said, adding that the outlook for sustained recovery remains cloudy due to the reimposition of tighter restrictions this month.

A BusinessWorld poll of 20 analysts yielded a gross domestic product (GDP) growth estimate of 10.6% for the second quarter, a turnaround from the annual contractions of 4.2% and 17% posted in the first quarter of 2021 and the second quarter of 2020, respectively.

If realized, this would be the fastest year-on-year GDP growth rate since the 12% expansion in the fourth quarter of 1988. This would also be the first time the Philippine economy posted growth since the fourth quarter of 2019, right before the coronavirus disease 2019 (COVID-19) brought economic activity to a near standstill.

This would also bring the GDP growth to average 3.2% in the first half, still below the government’s GDP growth target of 6-7% for this year.

The Philippine Statistics Authority is scheduled to release second-quarter economic data on Aug. 10.

While less restrictive than the first enhanced community quarantine (ECQ) last year, Metro Manila and its nearby provinces were once again placed under the strictest form of lockdown from late March to May 15 this year to curb a renewed surge in COVID-19 cases. These were gradually relaxed until a Delta-driven spike in infections forced the government to once again put the capital region under ECQ from Aug. 6-20.

Analysts were in agreement that the April-June period marked an economic rebound, although they offer different views on its extent.

Ateneo de Manila University economist Ser Percival K. Peña-Reyes gave a forecast of 15.2% growth for the second quarter based on a reading of other available economic indicators.

“The economy has been much more open in the second quarter this year versus last year, which was the height of the hard lockdown and when the economy bottomed out. Commercial and business establishments have been busier this year. As a result, employment figures have also been much better in the second quarter this year versus last year,” Mr. Peña-Reyes said.

Makoto Tsuchiya, an economist at Oxford Economics Japan, penciled in a 12.9% expansion in the second quarter, citing the “steady growth” in the Philippine manufacturing production.

“Moreover, the manufacturing PMI (purchasing managers’ index) surveys signaled that the business conditions for manufacturers continued to improve toward the end of the quarter and new export orders jumped, pointing to strong foreign demand. The robust recovery in the labor market should also support household spending,” he said.

“However, we expect the recovery in spending to remain relatively subdued given that much of the rise in employment has been part-time work, meaning average monthly earnings are generally lower and the unemployment rate is still elevated,” he added.

The country’s PMI, an indicator of manufacturing activity, sharply fell to 49 in April from 52.2 in March, slipping below the 50 neutral mark that separates deterioration from expansion and ending three straight months of growth. May saw a softer downturn with 49.9 before returning to expansion territory with 50.8 in June.

A separate data by the Philippine Statistics Authority showed manufacturing volume of production posting year-on-year growth rates of 154.3% in April, 263.2% in May, and 453.1% in June. These marked three straight months of growth following a 13-month losing streak.

Besides the gradual lifting of mobility restrictions, economists also pointed to base effects.

“While [GDP growth in the second quarter] is positive, it must be interpreted with caution given that we recorded an all-time high GDP contraction last year at 16.9%. It means that the growth for this quarter is just base effects,” said University of the Philippines Los Baños economist Jefferson A. Arapoc, who gave an estimate of a 9.5% growth in the second quarter.

ING Bank N.V. Manila Senior Economist Nicholas Antonio T. Mapa gave an annual growth forecast of 10.9% for the second quarter, noting that all sectors are expected to post growth led by capital formation, government spending, and household consumption.

“Despite the headline grabbing year-on-year print, the economy is expected to have slowed relative to [the first quarter] as tighter mobility curbs were implemented for all of April and most of May. The impact of such measures manifested immediately in jobs and manufacturing numbers and we expect quarter-on-quarter GDP to actually contract by 1.5%,” Mr. Mapa said.

UNCERTAINTIES AHEAD
Despite the expected rebound in the second quarter, economic prospects in the next few quarters remain uncertain given the reimposition of tighter lockdowns due to Delta variant driving fresh COVID-19 cases, economists said.

Security Bank Corp. Chief Economist Robert Dan J. Roces said growth is “still expected to improve gradually” driven by better business and consumer confidence on the back of steady vaccination rate and election-related spending.

“The reimposed ECQ this August may complicate the overall growth picture though, and the Philippines will be hard-pressed to hit the 6.0-7.0% GDP growth target… [W]e expect the BSP (Bangko Sentral ng Pilipinas) to keep monetary policy in place for the balance of the year and likely until the first half of 2022 until stable growth is seen,” Mr. Roces said, penciling in a 7.70% annual growth in the second quarter.

ING’s Mr. Mapa is less upbeat on the economy’s future growth.

“With the Philippines (in) yet another lockdown, and one that may be more stringent and protracted than the Alpha variant version, we are expecting the Philippines to post negative quarter-on-quarter GDP growth in the third quarter as well,” he said.

“In a year that started with so much hope for a ‘strong recovery’ and a ‘bounce back,’ 2021 is indeed turning out to be like 2020 with the Philippines likely headed for a lower growth trajectory once base effects fade. Our full-year GDP forecast is now at 3.8% from 4.7% previously, factoring in a four-week community quarantine style lockdown in August,” he added.

For Moody’s Analytics Senior Asia Pacific Economist Katrina Ell: “The Philippines is far from out of the woods when it comes to COVID-19 hurting the economic recovery as evidenced by daily infections once again rising,” she said, forecasting a 13% growth for the second quarter. — Abigail Marie P. Yraola

BSP seen to keep policy rates at record low — poll

August 9, 2021 | 12:33 am

A Delta-driven surge in coronavirus infections is casting a cloud on the Philippines’ economic recovery. — PHILIPPINE STAR/ MICHAEL VARCAS

By Luz Wendy T. Noble, Reporter

THE BANGKO SENTRAL ng Pilipinas (BSP) is widely expected to keep policy rates unchanged at its Thursday meeting, as the economy’s recovery is clouded by the spread of the Delta variant of the coronavirus disease 2019 (COVID-19).

All 18 analysts polled by BusinessWorld expect the Monetary Board to maintain the key policy rate at an all-time low of 2% on Aug. 12.

Analysts said the Delta variant and the reimposition of strict lockdown measures strengthen the case for the BSP to retain policy support.

The Health department recorded 9,671 new infections on Sunday, bringing the active cases to 77,516. It reported 287 deaths, the biggest single-day increase in deaths since April 9, Reuters reported.

Metro Manila and some provinces are currently under an enhanced community quarantine (ECQ) until Aug. 20, as the government seeks to curb a Delta-driven surge in infections that threatens to overwhelm hospitals.

“The ongoing pandemic and mobility restrictions will remain the key factors to watch out for. The current weak credit growth may also be in focus. Inflation is already easing and should be less of a focus,” Standard Chartered Bank ASEAN and South Asia Chief Economist Edward Lee said.

Preliminary data from the BSP showed bank lending marked its seventh month of contraction in June.

Meanwhile, the consumer price index rose 4% in July, easing from 4.1% in June and marking the first time that inflation was within the BSP’s target range of 2-4%.

Makoto Tsuchiya, an economist at Oxford Economics, said that BSP is expected to “not proceed with any policy tightening yet” even though inflation could pick up in the coming months due to higher global commodity prices. Instead, he said the BSP will focus on economic growth concerns.

“Any possible threat of a resurgence of inflation will likely be met with the same response by monetary authorities with BSP Governor Benjamin E. Diokno looking past any supply side-oriented shocks to prices,” ING Bank N.V. Manila Senior Economist Nicholas Antonio T. Mapa said.

Mr. Diokno in July acknowledged that recovery appears to be “slower-than-anticipated” despite some indications of improvement in business activities.

He reiterated that the BSP will maintain an accommodative policy “for as long as necessary” to support recovery, adding that higher prices caused by low supply “are best dealt with supply-side interventions.”

The central bank kept its prudent pause despite beyond-target inflation in the first half of the year. It stressed the need for non-monetary measures including the easing of import quotas and lower tariffs for meat products.

While the BSP is keeping a close eye on signals from the US Federal Reserve regarding its taper policy, analysts believe the central bank will give more importance to local developments for now.

“The Fed is yet to become a major factor in the policy calculus at this stage,” ANZ Research Chief Economist for Southeast Asia and India Sanjay Mathur said, noting there is still “considerable slack in the economy.”

The economy shrank by 4.2% in the first quarter following a record 9.6% contraction last year. A BusinessWorld poll of 20 economists expect second-quarter GDP to grow by 10.6% mainly due to base effects from the 17% decline in the same period of 2020.

The government will release second-quarter GDP data on Tuesday (Aug. 10).

Maybank Investment Bank Chief Economist Suhaimi Bin Ilias said he expects a rate hike only by the fourth quarter of 2022, when the Fed’s reduction of asset purchases nears completion and ahead of the expected Fed rate hike by 2023.

“Focus will be more on vaccination progress to speed up economic reopening and policy reforms to spur private investment and foreign direct investments,” Mr. Ilias said.

On the other hand, Bank of the Philippine Islands Lead Economist Emilio S. Neri, Jr. said there may be a preemptive rate hike at the Sept. 23 policy meeting, noting the BSP may do this to “avoid the urgency of delivering bigger rate hikes in the future, preserve its dollar buffers as well as to help temper the peso’s depreciation.”

“Global fund managers are likely to continue rebalancing their portfolios away from emerging market currencies just as the Federal Open Market Committee starts to hint on policy normalization on or before their own September policy meeting,” Mr. Neri said.

The BSP has kept the overnight reverse repurchase, lending, and deposit rates at record lows of 2%, 2.5%, and 1.5% at its June 24 policy meeting. It last adjusted the policy rates on Nov. 20, 2020.

After Thursday, the Monetary Board will have three more policy reviews this year — on Sept. 23, Nov. 11, and Dec. 16.

Private sector support key to Team Philippines’ success at Tokyo Games

August 9, 2021 | 12:32 am

Weightlifter Hidilyn F. Diaz made history at the Tokyo Olympic Games, after she ended the Philippines’ near century-long wait for an Olympic gold medal. — REUTERS

By Michael Angelo S. Murillo, Senior Reporter

TEAM PHILIPPINES ended the Tokyo 2020 Olympic Games with a record haul of four medals, including the country’s first-ever gold won by weightlifter Hidilyn F. Diaz.

Boxers Nesthy A. Petecio and Carlo Paalam secured silver medals, while Eumir Felix D. Marcial added a bronze (Related story).

Francis Carlos B. Diaz, national team coach and dean of the University of the Philippines College of Human Kinetics, said the impressive showing of the 19-athlete Philippine contingent in Tokyo was not totally surprising, considering how things came together in the lead-up to the Olympic Games.

“Well, definitely this speaks volumes of our capacity in terms of sports performance at the elite level. The road was not easy for the Philippines but I think because of the positive things that happened in the previous years, this was the result of it,” he said in an interview with BusinessWorld.

Mr. Diaz, also the chef de mission of the country for the Tokyo Paralympic Games later this month, cited the partnership between the government and private institutions, the effort to give elite athletes access to international training and competitions, and provisions for athletes’ needs helped contribute to Team Philippines’ success.

“Private sector support was very critical,” Mr. Diaz said.

While the government did a good job in meeting the requirements of the national teams despite the limitations, Mr. Diaz said the partnerships that national sports associations were able to forge with private companies went a long way in preparing the athletes.

The MVP Sports Foundation led by top businessman Manuel V. Pangilinan was at the forefront of such a push, supporting in one form or another the majority of the athletes who competed in Tokyo, including Ms. Diaz.

“It started with the inherent talent of the athletes and was enhanced by the support given for their training. It really became results-oriented,” Mr. Diaz said.

The Philippine Sports Commission (PSC), as per data it provided, released some P2 billion since 2017 for the national team, which also covered the foreign exposure of the Olympians and those who vied for Olympic spots.

“Foreign exposure was a big help. I think the athletes’ confidence was enhanced because of that as they got to learn new things from training abroad and were able to gauge themselves against some of the best in their respective disciplines. With that, heading into the Olympics there is something that had them believing that they are in a good position to compete,” Mr. Diaz said.

Among those who trained abroad were Ms. Diaz (Taiwan and Malaysia), the Philippine boxing team (Thailand), gymnast Carlos H. Yulo (Japan) and Ernest John Obiena (Italy).

The UP dean said the conscious effort to widen the athletes’ preparation to include improved coaching and the hiring of sports nutritionists and psychologists, also helped immensely. Athletes also continue to prepare in “training bubbles” even during lockdowns.

Ms. Diaz, who bagged the gold medal, attested to this, thanking “Team HD” for helping prepare her for the competition.

“I think I was more prepared. I had a whole team behind me. Apart from my weightlifting coach, I have a strength and conditioning coach, a nutritionist and psychologist, and I even had yoga as part of my training. And that is thanks to the PSC, POC (Philippine Olympic Committee) and the private groups,” Ms. Diaz said in one of her interviews upon returning to the Philippines.

The same was true for Ms. Petecio, who like most in the boxing team trained under Australian coach Don Abnett and other Filipino coaches.

“He (Mr. Abnett) helped in my form as a boxer, pointing out the flaws in my mechanics and just working with me and my other coaches to develop my game,” Ms. Petecio shared in a press conference after she won silver.

The athletes’ determination and the “extrinsic motivation” given to them were contributing factors as well.

“The athletes waited for at least another year to compete in the Olympics and I think it gave added motivation for them to do well and represent the country the best way possible,” Mr. Diaz said.

“But the extrinsic motivation that we gave our athletes if they win and garner medals was something. The reward that the government and private sector is giving I’m sure inspired the athletes as well. It’s going to be life-changing. Look at Hidilyn, she looks like she just won the lotto,” he added.

For this Olympics, a gold is worth P33 million as the government will give P10 million under Republic Act 10699, or the National Athletes and Coaches Benefits and Incentives Act, while MVP Sports Foundation and San Miguel Corp. President Ramon S. Ang pledged P10 million each. Sportsman and 1-PACMAN party-list Rep. Michael L. Romero pledged to give P3 million for the gold medalist.

The same entities and individuals also pledged to give a combined P17 million for silver and P7 million for bronze. Other companies have promised to give free flights, house-and-lot, condominium units and even free milk tea to the Olympic medalists.

“So given all these, to say it again, our successful campaign is not surprising,” said Mr. Diaz.

“And the good thing about it is the prospects of even those who did not win are bright since most of them were young first-timers. Hidilyn took four cycles to win gold but these athletes already had it good in their first Olympics. So who knows, maybe in the next Olympics or after that, they get to win gold, too.”

Gross borrowings reach P1.9 trillion in the first half

August 9, 2021 | 12:31 am

The government’s gross borrowings reached P1.93 trillion as of end-June amid the continued coronavirus pandemic. — PHILIPPINE STAR/ MICHAEL VARCAS

GROSS BORROWINGS rose 12.2% from a year ago to P1.933 trillion in the first half as the government continued to raise more funds for its pandemic response.

Data from the Bureau of the Treasury (BTr) showed borrowings in the January-June period were larger than the P1.723 trillion recorded in the same period last year.

In June, the Treasury raised P167.198 billion, 21.6% down from P213.227 billion a year ago.

The government borrows from local and foreign creditors to finance the budget deficit that has widened since last year when the coronavirus pandemic stalled the economy and pulled down tax collections.

Broken down, new debt incurred from the local market slipped by 13.5% to P135.29 billion from P156.41 billion in June last year.

The month saw P46.71 billion in net issuance of Treasury bills (T-bills) — where more debt repayments were made than new debts incurred. This partially offset the P182 billion of Treasury bonds (T-bonds) sold.

The Treasury made P113 billion in redemptions using the government’s Bond Sinking Fund.

Meanwhile, external gross borrowings slumped by 43.8% to P31.91 billion in June from P56.817 billion a year ago. This consisted of P22.958 billion in new program loans and P8.95 billion in project loans.

It settled P6.846 billion of its outstanding foreign debt that month, reducing its net external borrowings to P25.062 billion.

Of the P1.9 trillion in the first semester, gross borrowings from local lenders totaled P1.648 trillion, up 25.8% from P1.31 trillion the year before.

This was comprised of P571 billion in T-bonds, P540 billion of loans from the central bank, P463.32 billion in retail T-bonds, and P73.6 billion in T-bills.

Excluding P53.108-billion debt repaid and those that were settled via the Bond Sinking Fund, the government’s net domestic borrowings hit P1.59 trillion.

On the external side, total gross borrowings from foreign creditors slid by 31% to P284.95 billion in the first half from P413 billion seen in the same period last year.

This was comprised of P122 billion in euro-denominated bonds, P95.1 billion in program loans, P43.7 billion in project loans and P24.2 billion in Samurai bonds.

The BTr repaid a total of P160 billion of foreign loans, cutting its net foreign borrowings to P124.92 billion.

Gross borrowings in the first half accounted for 64% of the P3 trillion the government is planning to raise this year from both local and foreign lenders to plug its budget deficit seen to hit 9.3% of gross domestic product (GDP).

In its latest economic bulletin on Sunday, the Department of Finance said the government’s fiscal standing, along with accommodative monetary policy, absorbed the shocks brought about by the coronavirus pandemic and will continue to do so to support the recovery.

“Government-owned and -controlled corporations (GOCCs) continue to contribute to revenue mobilization through hefty dividends. Unlike in previous crises, especially in the 1980s when GOCCs contributed to the widening fiscal deficit due to their poor financial conditions, GOCCs are now in tip-top financial shape as a result of GOCC reforms including closer monitoring and performance evaluation,” it said.

The country’s debt stock reached P11.166 trillion as of end June. — B.M.Laforga

Del Monte Philippines focuses on product expansion after IPO delay

August 9, 2021 | 12:06 am

By Keren Concepcion G. Valmonte, Reporter

DEL Monte Philippines, Inc. (DMPI) said it will be focusing on product expansion and creating a stronger digital footprint via e-commerce after its parent firm announced the deferment of its listing at the Philippine Stock Exchange (PSE).

“The company will forge ahead in building momentum in convenience cooking as well as healthy beverages in the Philippines as more Filipinos focus on health and wellness as well as wholesome cooking amid the continuing pandemic,” DMPI Marketing Head Cynthia David Icasas said in an e-mailed response to BusinessWorld on Thursday.

On Wednesday last week, its listed parent company Del Monte Pacific Ltd. (DMPL) announced that it is delaying the company’s initial public offering (IPO). It was targeting to raise as much as P44 billion — the offer was scheduled to begin today, Aug. 9.

DMPL said the decision was brought by the “volatile market conditions” brought by the country’s coronavirus disease 2019 (COVID-19) situation. However, it said it remains “committed to listing DMPI” once market conditions improve.

In the meantime, DMPI will be relaunching a new range of its healthy juice Fit ‘N Right products “in recognition of the evolving fitness goals of consumers.”

“The range also includes an improved core Fit ‘N Right product for those that choose weight loss, named BURN, soon to be available in leading supermarkets,” Ms. Icasas said.

DMPI also aims to sustain its fresh pineapples exports business in China, where it has been the market leader with a 53% share of exported pineapple. The company said it is also among the top exporters for premium fresh fruit in Japan and South Korea.

“The company will build on consumption frequency to support its leading brands via integrated marketing campaigns and promotions, both traditional and digital channels,” Ms. Icasas said.

DMPI plans to work on “cementing its footprint” online via its lifegetsbetter.ph website as well as its official Kitchenomics Facebook Page and the Del Monte Kitchenomics mobile app.

“Beyond recipes and cooking tips, the app enables users to prepare a meal plan, generate a shopping list, and order their favorite Del Monte products through Shopee and Lazada,” Ms. Icasas said.

DMPI is said to be Del Monte Pacific’s “most profitable subsidiary,” posting a net income growth of 33% to P4.6 billion in its financial year ending in April 2021. Results for its first quarter ending in July will be disclosed by Sept. 10.

On Friday, shares of listed parent Del Monte Pacific inched up by 2.05% or 28 centavos to close at P13.94 each.

PNOC studies deuterium as possible fuel, power source

August 9, 2021 | 12:05 am

By Angelica Y. Yang, Reporter

STATE-LED Philippine National Oil Co. (PNOC) said it is in the initial stage of exploring the production of fuel from deuterium.

Deuterium, a hydrogen isotope with a neutron, occurs in about one out of 6,400 hydrogen atoms. It is said to be naturally abundant in oceans.

“PNOC’s study regarding deuterium’s feasibility as fuel is currently in the conceptual phase,” the entity told BusinessWorld through the electronic Freedom of Information portal last week.

The firm earlier reported on its website that its business research and development team is studying how deuterium can be used to generate power.

“The study is still ongoing thus it is [too] early to provide findings at this time… If deuterium [will] be used [to produce] fuel, it has to be separated first from the water… which adds another process,” PNOC explained.

“Deuterium as fuel has not been widely researched and has only been used for nuclear fusion reactor prototypes,” it added.

The company said it is also exploring the possibility of generating power from protium, the so-called more dominant hydrogen isotope, which can be found in “regular water.”

This comes as the government looks to augment the country’s power mix.

The Energy department previously said it was looking at adding more renewable energy, nuclear and hydrogen-based power to the country’s supply mix to prepare for any supply crunches in conventional fuels.

Last year, Department of Energy (DoE) Secretary Alfonso G. Cusi endorsed nuclear and hydrogen as possible fuel sources to be incorporated in the power generation mix.

In December, he reported that an interagency body tasked to conduct a study on the adoption of a national position on a nuclear energy program, had submitted its suggestions to President Rodrigo R. Duterte.

In the same month, Mr. Cusi announced that the DoE was looking at generating power from hydrogen, describing it as the “fuel of the future.”

T-bill, bond rates likely to drop

August 9, 2021 | 12:04 am

bureau-of-treasury-052218 — BW FILE PHOTO

RATES OF government securities on offer this week may slip after the central bank said it could cut banks’ reserve requirements further.

The Bureau of the Treasury (BTr) will auction off P15 billion in Treasury bills (T-bills) on Monday, broken down into P5 billion each in 91-, 182- and 364-day debt papers.

On Tuesday, the BTr will offer P35 billion in fresh seven-year Treasury bonds (T-bonds).

A bond trader said the average yields on the T-bills could move sideways or drop by around 5 basis points (bps) from the levels fetched a week ago.

Meanwhile, for the seven-year bonds, the trader expects the tenor to fetch a coupon between 3.625% and 3.75%, while a second trader gave a narrower forecast range of 3.625-3.73%.

The first trader said the market will price in comments from the Bangko Sentral ng Pilipinas (BSP) saying it is open to another cut in banks’ reserve requirement ratios (RRR).

The BSP on Wednesday said further adjustments to the RRR “remain on the table,” Bloomberg News reported.

The reserve requirement for big banks is currently at 12%, still one of the highest in the region. The central bank last cut big banks’ RRR in April 2020 with a 200-bp reduction.

In July 2020, it likewise slashed the reserve requirements of thrift and rural banks by 100 bps to 3% and 2%, respectively.

Meanwhile, July inflation data released last week would also be a factor in the upcoming auctions, the first trader added, as well as the second-quarter gross domestic product (GDP) report, which is due to come out on Tuesday.

Headline inflation stood at 4% last month, slower than the 4.1% print in June but still faster than the 2.7% recorded in July 2020.

This marked the slowest inflation pace in seven months or since the 3.5% logged in December 2020. It was also the first time since December that inflation settled within the BSP’s 2-4% target for the year.

At the secondary market on Friday, the rates of the 91-, 182- and 364-day T-bills closed at 1.111%, 1.396% and 1.642%, respectively, while the seven-year tenor was quoted at 3.436%, based on the PHL Bloomberg Valuation Reference Rates published on the Philippine Dealing System’s website.

The BTr made a full award of the T-bills it offered last week after rates fetched ended mixed and total tenders reached P50.76 billion.

Broken down, it borrowed P5 billion as planned via the 91-day papers at an average rate of 1.053%, inching up from 1.05% in the July 26 auction.

The government also raised P5 billion as programmed from the 182-day T-bills. The six-month debt fetched an average yield of 1.401%, lower than the 1.407% seen previously.

Lastly, the BTr made a full P5-billion award of the 364-day securities it offered at an average rate of 1.632%, down from 1.638% the week prior.

Meanwhile, the last time the Treasury offered seven-year bonds was on July 27 when it raised P35 billion as planned via reissued papers with a remaining life of six years and seven months at an average rate of 3.651%, up by 7.5 bps from the 3.576% quoted for the tenor at the July 6 auction. The offer attracted bids worth P69.758 billion.

The Treasury is looking to raise P200 billion from the local market this month: P60 billion via weekly offers of T-bills and P140 billion from weekly auctions of T-bonds.

The government wants to borrow P3 trillion from domestic and external sources this year to help fund a budget deficit seen to hit 9.3% of GDP. — B.M. Laforga

Agriculture output growth flat to lower in 2^nd quarter

August 9, 2021 | 12:04 am

veterinarian-doctor-with-tablet-examining-pigs-pig-farm — FREEPIK

GROWTH IN the Philippine agriculture sector is estimated to have been flat to lower in the second quarter in the absence of major events that may have dampened production.

Roehlano M. Briones, a senior research fellow at the Philippine Institute for Development Studies, said in a mobile phone interview with BusinessWorld that he is not aware of any large-scale issues that affected the farm sector during the quarter.

“I am not expecting much of a negative result. But neither do we see a very positive outlook for agriculture. I am seeing tempered growth for the sector,” Mr. Briones said.

The Philippine Statistics Authority is set to release its second quarter report on the performance of the agriculture sector today, Aug. 9. The sector posted 0.5% growth by value of production in the second quarter of 2020.

Farm sector output declined 1.2% decline in 2020 and contracted 3.3% drop in the first quarter of this year. Farm production accounts for about a 10^th of gross domestic product and a quarter of the workforce.

The Department of Agriculture (DA) lowered its 2021 growth target for the farm sector to 2%, from the initial goal of 2.5%, citing the challenges posed by the African Swine Fever (ASF) outbreak and lockdown measures due to the coronavirus disease 2019 (COVID-19) pandemic.

Agriculture Secretary William D. Dar said in a mobile phone message that he is hoping for the agriculture sector and subsectors such as crops, poultry, and fisheries to post growth for the quarter, with the exception of the livestock subsector, which was hit by ASF.

“A factor that contributed to achieving growth for the agriculture sector is the hard work done by our farmers and fisherfolk, together with support given by the DA and local government units,” Mr. Dar said.

Roy S. Kempis, Pampanga State Agricultural University professor, said in a mobile phone message that he expects agricultural production to come in little changed.

“My projection is flat (of) 0.21%, (within a range of) 0.1–1.0%. Crops and fisheries subsectors will contribute to positive growth; livestock and poultry subsectors will continue to decline and slow down growth,” Mr. Kempis said.

“The weather is an important factor in this performance as the sun is up and there are fewer rain-producing disturbances during the period. With irrigation, crops produce more; with fewer weather problems, more fish is caught in the open seas as fishermen are likely to go out fishing,” he added.

In a mobile phone message, Federation of Free Farmers National Manager Raul Q. Montemayor said an increase in output will not be “surprising,” but noted that growth figures can be deceptive.

“We can have higher output in terms of volume but lower growth in value of production if farmgate prices are low,” Mr. Montemayor said.

Mr. Montemayor said the second quarter had generally good weather favorable for most crops but production could have been held back by the livestock subsector, particularly the hog industry, due to the ASF outbreak.

“The DA should be focusing more on improving farm productivity and competitiveness instead of just growth targets,” Mr. Montemayor said.

Rolando E. Tambago, Pork Producers Federation of the Philippines, Inc. president, estimated that hog production declined for the second quarter, citing the low confidence of hog raisers in reinvesting.

Mr. Tambago said demand is also weak due to the pandemic and as pork imports enter the country under reduced tariff rates.

“Swine production will continue to decline until early next year since the massive import volume of pork will spill over until the first quarter of 2022,” Mr. Tambago said.

Pork imports were expanded to rapidly augment supply and reduce prices as ASF reduced the hog inventory.

The DA recently declared six locations in Batangas — Lipa City, San Jose, Malvar, Rosario, Taysan, and Nasugbu — as officially free from ASF. — Revin Mikhael D. Ochave

The Velocity Q&A: Raymond T. Rodriguez (Lexus Manila President)

August 9, 2021 | 12:04 am

VELO_Page-1_Lexus-President-RAymond-Rodriguez — PHOTO FROM LEXUS PHILIPPINES

Interview by Kap Maceda Aguila

AS THE LUXURY division of the country’s perennial automotive leader, it’s understandable to say that a lot has always been riding on the shoulders of Lexus from the get go.

When it opened its one-of-a-kind showroom at the Bonifacio Global City in Taguig back in 2009, Lexus served notice even then that it was determined to make waves and it didn’t have modest ambitions. The futuristic-looking three-level structure it calls home was master-planned by noted Japanese designer Yugi Hirata with Recio and Casas, and remains to this day a paradigm for other dealerships. And you could also say it’s a model of productivity because, well, Lexus BGC is the only Lexus facility in the country to this day — when the brand never falls out of the top three luxury auto marques here. “I speak for Lexus Manila, the sole dealer of Lexus vehicles in the country. We are grateful for the trust that customers have,” said Lexus Manila President Raymond T. Rodriguez.

To be fair, Lexus is able to tap into the considerable network of Toyota via accredited Lexus service centers: Toyota La Union, Toyota San Fernando, Toyota Santa Rosa, Toyota Mandaue-South, and Toyota Davao.

From five models (IS, ES, GS, LX, and LS) in 2009, Lexus today offers 11 (SUVs: UX, NX, RX, GX, LX; sedans: IS, ES, LS; performance: RC/RC-F, LC/LC CV; and MPV: LM), “It’s a testament to the vision of both Dr. George (Ty, chairman emeritus of GT Holdings), Alfred, and our partners in Mitsui,” said Mr. Rodriquez in a previous interview.

Part of the Lexus experience is making its customer experience personalized, embodied in the Japanese concept of omotenashi (the act of providing detailed service in a variety of ways to allow guests to spend a relaxing and memorable time by putting customers first). Of course, there’s an inherent challenge to that amid the pandemic.

How is Lexus Manila (which operates the dealership) doing amid the pandemic? Here are excerpts from our exclusive interview with Mr. Rodriguez.

VELOCITY: How did the pandemic affect Lexus Manila sales and even after-sales? Can you describe how business was during the early months of the pandemic?

RAYMOND RODRIGUEZ: Year 2020 was very difficult for everyone but our dealership managed to register sales of 474 units. We had some months in the first semester that had no operations due to the ECQ lockdown. That was from mid-March to the end of April. Our sales during the first five months were down by 43% versus 2019. Likewise, we received less units for service in our workshop and performance declined by as much as 37%.

Gradually, we were able to slowly recover, especially toward the second semester. Sales growth improved to -24% and after-sales by -23% by yearend. Despite the decline in sales during ECQ/GCQ in 2020, Lexus’ market share increased by 2%, to corner 25% of the luxury car market. One of the challenges we experienced is keeping our relationships with our valued customers, including the would-be customers, personable, during the pandemic. Lexus takes pride in exceptional customer service. So amid the unfavorable situation, we conducted webinars, video calls, and sent messages, etc.

We also came up with the Lexus Remote, the Lexus Remote Guest Experience, and ramped up other digital channels for us to reach out to our customers despite the quarantine situations.

To further enhance the hospitality that Lexus extends to its customers, the brand is offering a unique way of showcasing its products where customers who want to get to know the Lexus lineup of vehicles intimately can do so from the comfort and security of their own homes. It’s a series of guided 360-degree walkthrough videos which will make users feel the same experience as they would when in the Lexus Manila showroom, inside of the vehicle, and with a sales consultant by their side.

What are your projections for 2021? Other industry executives have already imagined this to be a recovery year for the industry. What do you think?

Being the only dealer in the country, with the support of Lexus Philippines, we at Lexus Manila are optimistic that we can sell more than 500 units before the year ends. In line with this we also expect our after-sales business to grow as they have been coming back to our dealership primarily for the periodic maintenance services. Of course, we want to keep our customers satisfied no matter where they are in our country — we have select Lexus accredited service centers nationwide, thanks to our partner Toyota dealers.

What are the things that can help this recovery along, and what can derail it?

It’s about keeping in touch with our customers. At Lexus, we believe that luxury is personal — so every touch point should be personalized for us to maintain strong ties with our Lexus clientele. What can derail it is the increasing concern on the spread of the more transmissible Delta variant of COVID-19 and the measures that will be taken, like ECQs.

It seems that the pandemic seems to be accelerating the pace of EV adoption. Quite a number of brands have now brought in electrified models. To be fair though, Lexus has always been offering hybrid models. Can you tell us about this effort, and what kind of reception have you seen from buyers?

Since we started operations in 2009, we have sold close to 500 hybrid Lexus vehicles. We’re a pioneer when it comes to luxury hybrid vehicles. Although we do recognize the general interest toward electric vehicles. At least in the Philippines, there is still huge potential for hybrid technology because of the ease, convenience, and, more importantly, the driving performance of this type of vehicle.

We heard that the LM has also been doing well.

One-hundred percent true! It continues to be our best-selling model to date, accounting for more than 35% of our total sales. In my opinion, it is the only true luxury van in the market today.

What is your observation of the luxury market? How has the pandemic changed their spending habits?

Since the pandemic, leisure travel has definitely been reduced, so the luxury market has been more confined to limited areas for movement. We have observed that spending habits are still quite similar but are geared toward other investments such as vehicles (for safety and space during the pandemic), home improvement, and health. We can even assume that this trend will continue till next year.

Ecozone firms seen keen on switching to natgas

August 9, 2021 | 12:04 am

LOCAL manufacturing and agro-industrial firms in special economic zones (SEZs) are open to shifting to natural gas (natgas) for heat-intensive activities, according to a study published last month on Elsevier.

Forty firms out of the 105 entities surveyed in 2019 considered the compatibility of machines and equipment as their top consideration in switching to natural gas, according to the journal article “Gauging the market potential for natural gas among Philippine manufacturing firms.”

“This gives us an indicator that the use of natural gas is more feasible among firms that operate boilers and other heating equipment in their production process. Firms which mainly depend on electricity for their operations are unlikely to shift to natural gas,” the study said.

The results are based on an online survey conducted among manufacturing and agro-industrial firms located in SEZs under the Philippine Economic Zone Authority in the third quarter of 2019. These zones are in Laguna, Batangas, Cavite, Cebu, Pampanga, Benguet, Bulacan, and Metro Manila.

“Most of these firms are using the more expensive diesel as fuel for their burning or heating process [but using] natural gas as fuel is cheaper. [Natural gas] can potentially lower the cost of their product (or) whatever they’re producing,” Majah-Leah V. Ravago, the lead author of the study and an associate professor of economics at Ateneo de Manila University, told BusinessWorld last week.

The study’s findings also showed that 18 firms considered price and 17 firms pointed to environmental concerns as their top reasons for considering natural gas in their operations.

The study said its ideal sample size for its survey is 91.

The report also identified SEZs in Metro Manila’s Pasay City as having “very high” chance of switching to natural gas, while ecozones in Carmona, Cavite; Calamba, Laguna; and Bauan and Malvar, Batangas have “high” likelihood of switching to the fuel source.

“While we cover only manufacturing and agro-industrial firms in ecozones, the results indicate that markets for natural gas outside of electricity generation exist… From a policy point of view, our results suggest a potential growing market for LNG (liquefied natural gas) in the Philippines in addition to the requirement to fill the gap due to the depletion of Malampaya [gas field],” it read.

According to the report, SEZ exports accounted for around 85% of the country’s total exports in the first quarter this year.

Ms. Ravago said that in order for the Philippines to position itself as an LNG hub in Asia and attract investors, it must find other uses for the fuel aside from electricity generation.

“Based on what we’ve read, the Philippines only uses natural gas for electricity generation because we are just [getting it from] our indigenous source [or the Malampaya gas field]. But other countries like Japan are importing LNG and using it to heat their homes,” she explained.

The published study is supported by the Gas Policy Development Project, and funded by the US Department of State and the University of the Philippines’ Emerging Interdisciplinary Research Program.

The authors of the study said that the funding entities were not involved in the preparation and writing of the article.

The country’s LNG industry is still in its infancy stage. This as the reserves of the offshore Malampaya field is set to be completely depleted in 2027, based on estimates from the Energy department.

Still in its infancy stage, the country’s LNG industry relies solely on the reserves at the Malampaya offshore gas field, which the Energy department estimates to be completely depleted by 2027.

In March, the Department of Energy (DoE) urged investors to consider LNG investment opportunities in the country as it promoted the Philippines as an LNG hub that can serve the energy needs of Southeast Asia.

This comes a few months after DoE Secretary Alfonso G. Cusi tagged LNG imports as the best option to address the country’s power needs in the coming years. — Angelica Y. Yang

Philam Life to rebrand as AIA Philippines

August 9, 2021 | 12:03 am

THE Philippine American Life and General Insurance Co., also known as AIA Philam Life, will rebrand as AIA Philippines as it eyes to expand its reach and offer new products.

“We didn’t make the change [to the brand name in 2009] because Philam Life is a great brand, the company is doing well. We recognize that and we think we need to slowly introduce the AIA brand so that people get to know about it first before we change completely to the AIA company,” AIA Philippines Chief Executive Officer Kelvin Ang said at a briefing last week.

In 2009, Philam Life was brought by Hongkong-based AIA Group Ltd. from American International Group following the global financial crisis in 2008.

The company included AIA in its local brand name three years ago, preferring to retain the Philam brand as it is already a household name in the Philippines, Mr. Ang said.

The company’s chief executive noted that rebranding in the middle of the coronavirus crisis is not easy due to the change in operating environment.

“We think that rebranding will clearly signify that we are making change, too. And that’s not just the way we deliver our service [during the pandemic], but also the way we represent ourselves now in the Philippines,” Mr. Ang said.

“It is important to ensure that their insurance company will still be around,” he added.

Meanwhile, AIA Philippines Chief Marketing Officer Leonardo T. Tan, Jr. said the rebrand will also allow their clients to have access to more products, including investment funds that are part of the AIA Group.

“So will there be global access to different types of funds? It’s a hot topic now — technology stocks, bank stocks, Facebook, Amazon, Netflix, Google, ESG (environmental, social, governance) bonds, green bonds, sustainable index investing — so a lot of these will be made available,” Mr. Tan said.

He said AIA Philippines will also boost its customer and distribution channels as customers are starting to prefer online over offline transactions due to the pandemic.

AIA Philippines recorded the largest assets among life insurers last year with P291 billion, based on data from the Insurance Commission.

The insurer also ranked second in terms of net income that year with P4.52 billion, and fourth in terms of net premiums, logging P16.77 billion. — LWTN

Misamis Oriental to host P500-M coconut processing facility

August 9, 2021 | 12:03 am

A COCONUT processing facility worth P500 million will soon be established in the town of Claveria, Misamis Oriental, according to the Mindanao Development Authority (MinDA).

MinDA Chairperson Emmanuel F. Piñol said in a Facebook post over the weekend that the facility is planned on the site of a former Virginia tobacco drying facility owned by Philip Morris International.

The drying facility was recently donated to the provincial government after Philip Morris halted operations in Claveria.

According to Misamis Oriental Governor Yevgeny Vicente B. Emano, the facility will help improve the coconut industry of the province, which has 10 million productive trees.

The six-hectare site will be equipped with 150 steam drying chambers with 17-ton capacity each and a fully automated greenhouse nursery. Mr. Emano said the plant will produce at least 11 types of high-value products and is expected to raise the buying price to P25 per nut from farmers.

“The drying chambers will be used to produce clean white copra with the husks processed into coconut fiber and coconut peat and the shells into coconut charcoal briquettes. Other high-value products include coconut syrup, coconut sugar and coconut alcohol,” Mr. Emano said.

Mr. Piñol said the facility will be equipped with a locally-designed and fabricated biomass boiler to bring down power costs in steam generation for the drying chambers and make the project viable.

Philippine Coconut Authority Administrator Benjamin R. Madrigal, Jr. has urged businesses to invest in the coconut industry to boost exports and improve the incomes of coconut farmers.

Mr. Madrigal said the investment environment has become more favorable with the passage of Republic Act No. 11524 or the Coconut Farmers and Industry Trust Fund Act, which sets up a P75-billion fund that will support various industry upgrade programs. — Revin Mikhael D. Ochave

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