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US-EU trade spat reignites investment relocation talks

By Jenina P. Ibañez, Reporter

THE TRADE department is positioning the Philippines as an investment destination amid brewing tension between the United States and the European Union (EU) by leveraging its tariff perks in both economies.

The World Trade Organization (WTO) has given the EU permission to impose tariffs on $4 billion worth of US products per year in retaliation against US subsidies for aircraft maker Boeing Co. The EU could be cleared to impose tariffs after it requests authorization at the Oct. 26 meeting.

The Department of Trade and Industry’s Export Marketing Bureau (DTI-EMB), in e-mailed comments, said the Philippines can gain opportunities in both economies since it can export at reduced tariffs under the US Generalized System of Preferences (GSP) and the EU Generalized Scheme of Preferences Plus (GSP+).

US-based firms, the bureau said, may move manufacturing to other countries to avoid EU tariffs.

“Certain lines of handbags are covered under the EU GSP+ which the Philippines is a beneficiary of. This makes the Philippines an attractive location for exporting to the EU of these products,” the bureau said.

US manufacturing firms will be increasingly encouraged to relocate to the Philippines, DTI-EMB Director Senen M. Perlada said in a phone interview.

“In fact that’s happening, and it’s happened now. US brands like the Coach bags, and that’s going into the EU, and the reason why is precisely because of the EU GSP+,” he said.

The Philippines has also been touted as a beneficiary of the US-China trade war, but has taken a backseat as a relocation destination to countries like Vietnam and Thailand. The local Japanese business chamber in April noted that the country is not a top destination for relocating Japanese firms due to local problems in the supply chain and raw material production.

The Board of Investments (BoI) had recently disclosed 14 leads on businesses that could possibly relocate to the Philippines.

Continued Philippine export perks to the EU are also uncertain after the European Parliament voted to ask the European Commission to remove the country’s GSP+ access, citing human rights concerns. The country can export with reduced duties under GSP+ as long as it follows a set of international human rights conventions.

Other countries that have EU GSP+ benefits include Armenia, Bolivia, Cape Verde, Kyrgyzstan, Mongolia, Pakistan, and Sri Lanka.

SUPPLY CHAIN DISRUPTION
Mr. Perlada said trade impact on the Philippine supply chain depends on taxed US exports to the EU that incorporate Philippine parts and components exports. The preliminary list of products that could be taxed include fish, fruits, ketchup, wine, handbags, road tractors, helicopters, bicycle parts, and airplanes.

The Philippines exports aircraft parts to both economies, sending 45% of the goods to the US and 21% to the EU.

“The Philippines is one of the newcomers to aerospace (global value chain). Its participation is concentrated in the manufacture and assembly of a small number of components and subassemblies in the interiors and flight controls systems and (maintenance, repair, and operations) activities,” DTI-EMB said.

Exports under “other parts of aeroplanes and helicopters” to the US last year were valued at $345 million, or around three percent of $11.6 billion in total exports to the US, government data showed.

The local aircraft parts industry, however, is not concerned about the effect of the trade tensions on Philippine exports, explaining that the bigger concern of the industry is the country’s inability to attract investments.

“I don’t think we have any problem there… we’re too small (an industry) because we gave up all our business to — Vietnam is taking most of the aerospace business,” Aerospace Industries Association of the Philippines President Dennis Chan said in a phone interview on Friday.

Return of full hotel operations seen to lift stocks

By Denise A. Valdez, Senior Reporter

HOTEL operators are gearing for their return to operating at full capacity, which analysts expect will prop up stock market activity for the tail end of the year.

In separate messages to BusinessWorld, Filinvest Hospitality Corp. and DoubleDragon Properties Corp. said they are welcoming the government’s easing of restrictions that now allow hotels to operate at 100% capacity under current quarantine protocols.

The Tourism department announced on Wednesday that it would relax the hotel safety guidelines, which used to limit hotel operations to a skeleton workforce.

“With the recent pronouncement of the Department of Tourism (DoT), the hotels of DoubleDragon will now be operating at 100% capacity with continued safety protocols implemented,” DoubleDragon Chairman and CEO Edgar “Injap” J. Sia II said via e-mail.

“We expect this to create revenue step-ups in the last quarter, and will not only positively benefit the hotel businesses but also our economy in general,” he added.

DoubleDragon operates hotel brands Hotel 101 and Jinjiang Inn, which contributed P269.73 million revenues to the group during the first six months of 2020. The contribution was down 8% from last year’s P291.64 million.

The company’s gross revenues, which include contributions from retail, office and industrial leasing, rose 50% to about P8.11 billion. Attributable net income grew more than double to P3.3 billion.

For Filinvest Hospitality, a wholly owned subsidiary of listed Filinvest Development Corp. (FDC), the development is seen to help efforts for economic restart under the “Ingat Angat” program of the government. The company operates hotel brands Crimson Hotels and Resorts, Quest Hotels, and Grafik.

“We look forward to welcoming our guests to our hotels. We assure the public that we continue to fully implement the strict health and safety protocols…, ensuring the well-being of our guests in all Quest and Crimson Hotels nationwide,” Francis Nathaniel C. Gotianun, senior vice-president of Filinvest Hospitality, said via e-mail.

Hospitality operations added P844.6 million to FDC’s revenues and other income in the first semester, lower by 49% from last year. The whole group posted total revenues and other income of P40.63 billion, with attributable net income up 24% to P7.2 billion.

Since the DoT announcement last week, the Philippine Stock Exchange had already started rebounding to its best performance since June. The main index grew 139.43 points or 2.19% to 6,484.06 on Friday, putting it up 585.59 points or 10% on a weekly basis.

“The market has been buoyant the past few days and reopening hotels will  be taken as a further sign that we may have rounded the corner. What we will have [to] watch for now is if cases spike up anew,” PNB Securities, Inc. President Manuel Antonio G. Lisbona said in a text message.

However, he warned any possible rise in fourth quarter revenues of hotel operators “will likely not be enough to put them in the black for this year.”

While the easing of restrictions may allow for more economic activity, the down side is the fear of risking a spike in coronavirus cases, Philstocks Financial, Inc. Research Associate Piper Chaucer E. Tan said.

“I think that the next challenge for these industries is to convince the general public that ‘Hey, it is safe to travel and have a vacation.’ It’s more on a collaboration of the private sector and government,” he said in a text message.

Mr. Gotianun of Filinvest Hospitality shared the same sentiment: “While this measure is a step in the right direction, we believe that demand can be further stimulated by streamlining and standardizing travel and health requirements.”

Coronavirus cases in the Philippines stood at 367,819 as of Saturday, accounting for 2,057 newly reported cases.

Some of the other listed companies with exposure to hotel operations are Megaworld Corp.; Ayala Land, Inc.; SM Prime Holdings, Inc.; Robinsons Land Corp.; Bloomberry Resorts Corp.; and Cebu Landmasters, Inc. They were unable to respond for comment for this story as of deadline.

Cebu Pacific clears 51%, Emirates 95% of refund requests

BW FILE PHOTO

By Arjay L. Balinbin, Senior Reporter

BUDGET carrier Cebu Pacific and Emirates, the flag carrier of the United Arab Emirates, said they had settled 51% and 95%, respectively, of the refund requests from their customers.

“We continue to receive an unprecedented number of refund requests due to the flight cancellations brought about by this pandemic. To date, we have refunded over P2.6 billion in booking cancellations related to COVID-19 (coronavirus disease 2019), equivalent to 51% of refund requests received,” Candice A. Iyog, Cebu Pacific vice-president for marketing and customer experience, told BusinessWorld in a phone message last week.

In an e-mailed statement, Emirates said: “For customers in the Philippines who have purchased their tickets directly from us, we’ve already cleared nearly 95% of backlogged refund requests.”

The Philippine Travel Agencies Association (PTAA) said last week Cebu Pacific, operated by Cebu Air, Inc., and Emirates were among the top airlines with pending refunds.

“Emirates is committed to honouring refunds to our customers. We have authorised all refund requests from Philippine travel agent partners up till 31 July; and from 1 August, [we] have made it easier for them to process refunds for Emirates tickets themselves via the GDS (global distribution systems),” Emirates told BusinessWorld via e-mail.

Cebu Pacific’s Ms. Iyog also assured the budget airlines’ customers that it remains committed to complete pending refunds “as soon as possible.”

“We will provide updates to our passengers once their requests have been processed. We are currently working through refund requests filed in May,” she said.

“We continue to ask for your patience and understanding as we work on resolving this soonest. We know how difficult this crisis is for everyone, and we sincerely apologize for the delay,” Ms. Iyog added.

Cebu Pacific has said refunds may take up to six months to process from the time the request was filed.

“We thank our passengers for their support as we continuously work on enhancing our processes,” Ms. Iyog further said.

PTAA, which has 439 members, said travel agencies were keen on offering their services again, but they were waiting for airlines to provide full refunds for the canceled flights since March.

The government has allowed travel agencies, tour operators, reservation services and related activities to resume operations at 50% capacity for areas placed under general community quarantine (GCQ) and at 100% capacity for areas placed under the modified GCQ (MGCQ).

The ban on non-essential foreign travels by Filipinos has been lifted.

Airlines still owe P315.55 million, said PTAA President Ritchie Tuaño.

“We want our member travel agencies to have the ability to immediately refund their clients, whose flights were canceled while at the same time, have enough flexibility to slowly resume operations even as the country is still dealing with the pandemic,” he added.

Halloween bling for that Zoom party

JUST because you’ll have to spend Halloween at home doesn’t mean you can’t spend it in style. As folks are arranging themed Zoom parties — with some asking participants to wear full-on costumes, to simple hat parties, to others encouraged to slather on the scary make-up — some may opt for a simpler but opulent way to mark this freaky Friday. Here are a few scary accessories we’ve found from both local and international brands that fit the bill.

HELENA ALEGRE
Helena Alegre Sculptural Jewelry is still at it with a new collection centered on bugs. A ring she presents in lapis lazuli has a Brachycerus weevil resting on a large sample of the semiprecious stone. She has other items like brooches, also centered on the theme of the creepers and the crawlers in nature. In a previous interview with BusinessWorld, she said that she started her line when a beetle appeared while she was thinking of a new collection; the deal was sealed when a lizard crawled up her neck while she was having her nails done.

Another ring features a Chalcosoma caucasus beetle resting on a large block of turquoise. The Chalcosoma caucasus is a beetle found in Southeast Asia with a fierce fighting spirit. Perhaps you can wear one to remind yourself of what you have during these trying times?

For orders, visit www.instagram.com/helenaalegresculpturaljewelry.

SCHIAPARELLI
In the 1930s, designer Elsa Schiaparelli, Coco Chanel’s greatest rival, had a flirtation with Surrealism. A friend of artists such as Salvador Dali and Man Ray, Schiaparelli included motifs such as eyes, insects, and moving body parts as part of her collections. The designer closed her doors in the 1950s, but has been revived in the 2000s. Daniel Roseberry has now been sitting as Creative Director for the Maison for almost two years.

While the clothes at last season’s Autumn/Winter show took center stage, we can’t help but note the accessories that are, mercifully, on sale (provided you have thousands of euros sitting prettily in your wallet). Schiaparelli presents earrings shaped like teeth clutching on to white baroque pearls (800 euros), and necklaces of enamel eyes that threaten to wink (1,900 euros). The eyes are repeated in bangles and earrings in gilded brass, inspired by the Surrealist Jean Cocteau.

View the rest of the collection (and maybe get a piece or two) at schiaparelli.com.

ALEXANDER MCQUEEN
Yep, him; the one and only. The late designer had long had a fascination with the mortality associated with the skeletal form — his graduate collection was based on Jack the Ripper (and it was the first time his signature skulls would be seen, in 1992). Other accessories featuring his skulls can be seen in the locks of his clutch bags and his scarves (a ubiquitous accessory during the great emo phase of the early 2000s). Today his brand carries a collection of spiders and skulls made with brass and Swarovski crystals.

Alexander McQueen is distributed in the Philippines by the SSI group, with a store in Shangri-La Plaza.

FAKE ALCHEMY
Handmade jewelry by local brand Fake Alchemy takes a creepy tone with pieces rendered in silver and gemstones. They’re shaped like eyes, the moon and the stars, and sometimes, the claws clutching the cabochon gemstones just look sinister. The use of cabochon gemstones (a rounded dome) also has a mystical air, as if looking into them can reveal a secret.

While custom orders are closed for now, some of their pieces are still available at www.instagram.com/fakealchemy. — Joseph L. Garcia

Socialized housing requirement lowered for BoI-backed projects

LOW-COST housing projects given tax breaks must now place 15% of their project area under socialized housing, lower than the earlier 20% requirement.

The Board of Investments (BoI) in memorandum circular 2020-012 signed on Oct. 15 revised several requirements in its investment priorities plan, under which registered enterprises are given tax breaks. BoI said that it made these changes amid economic disruptions during the pandemic.

All low-cost housing must fulfill the socialized housing requirement covering 15% of the project area or of the total BoI-registered project cost for subdivision housing. They must cover 15% of the total floor area of saleable housing of residential condominium projects.

Developers that don’t comply with the 15% requirement may be denied for succeeding projects.

They may develop new settlements directly or through joint ventures with local government, the social housing finance corporation, or with developers or non-government organizations accredited  by the Department of Human Settlements and Urban Development, not the Housing and Land Use Regulatory Board.

Amendments to Republic Act No. 7279, or the Urban Development and Housing Act, requires at least 15% of total subdivision area or project cost be made available to underprivileged families, reducing the requirement from the previous 20%. At least five percent of condominium area or project cost must do the same.

In addition, wastewater treatment projects now also qualify under the incentives program. Previously, only new bulk water treatment and supply qualified for registration. The wastewater enterprise must submit pollution control certification and wastewater discharge permits before commercial operations.

Other infrastructure and logistics projects that could register include airports and seaports, transport, natural gas storage, oil and gas pipelines, and tollways, among others.

Relocation of facilities from other countries to the Philippines or to less congested areas may utilize used capital equipment, revising an earlier rule requiring the use of brand new equipment, under the condition that foreign national employment is subject to existing labor laws.

Used capital equipment is allowed as long as they are up-to-date, market appropriate, and comply with environmental standards.

“Relocation of facilities from other countries into the Philippines or relocation within the Philippines from congested urban areas into the countryside and less congested areas shall be highly encouraged,” the memorandum said.

The BoI also added the definition for the official commercial start of biomass projects, which is the date the plant starts selling power to the grid and can attain its committed export capacity. This helps enterprises identify requirements that must be fulfilled prior to the start of commercial operations. — Jenina P. Ibañez

Manila FAME goes online

WHILE the pandemic has closed trade fairs around the globe, forManila FAME, the show must go on.

In lieu of the onsite show, the Philippines’ premier design and lifestyle promotion event has come up with FAME+, a new digital trade platform for the home, fashion, and lifestyle industries. Led by the Center for International Trade Expositions and Missions (CITEM), the export promotion arm of the Department of Trade and Industry (DTI), FAME+ provides a new avenue for exhibitors to showcase their products and creativity to the world.

CITEM formally launched FAME+ with a virtual event on Oct. 22 over Zoom and streamed live on the Manila FAME Facebook page.

CITEM partnered with IPG Mediabrands to create the FAME+ platform. IPG Mediabrands is a global company with offices in the Philippines that specializes in creating automated and digital innovation solutions through its network of media agencies. For FAME+, IPG built the website from the ground up, including the product catalogues and digital storefront for exhibitors, and will be providing technical support to CITEM.     

“Manila FAME’s venture to digital is the new direction of Philippine design,” said CITEM Executive Director Pauline Suaco-Juan. “If Manila FAME were to grow and attract more buyers and more prestigious trade exhibitions abroad, we need to invest in and strengthen its digital presence. FAME+ is the realization of the government and private sector’s collective effort to become more competitive with the rest of the world.”

Presented during the FAME+ launch was the new online home of one of Manila FAME’s show highlights, Design Commune. The digital Design Commune is envisioned to be a pilot program that reimagines the process of product development through 3D rendering and virtual exhibitions. Design Commune featured designs and products developed for the Ambiente trade show and the Maison&Objet and More Digital Fair.

The PH x Tokyo 2020-2021 Program was also launched that day. This new initiative from CITEM is an offshoot of the partnership with the Fashion and Design Council of the Philippines (FDCP) and the Philippine Trade Training Center (PTTC). PH x Tokyo is an incubation program that aims to help young and emerging Filipino designers introduce their brands to Japan’s thriving fashion market.

With FAME+ now up and running, CITEM is looking to build its community by onboarding exhibitors, getting buyers to register, and sharing stories and content through its online magazine Touchpoint. FAME+ will also host digital events focusing on information, creativity, and entertainment for its registered members, making sure that using the website will be an engaging experience.     

Among the benefits in joining FAME+ are 24/7 year-round promotion of products in a virtual showroom, a digital storefront for each exhibitor, complimentary digital content production and curation for 100 exhibitors, one-on-one consultations with product development specialists, and access to forecasts and industry insights to keep stakeholders updated on the latest trends.

The website also has messaging and conferencing features to connect exhibitors with buyers and other brands and manufacturers. Exporters can build their online presence and enjoy these benefits at no initial cost until October 2021.

Visit www.fameplus.com for more features and information.

Rates of T-bills likely to inch up as market tracks US Treasuries

TREASURY BILLS (T-bills) on offer this week are expected to fetch slightly higher rates as investors take their cue from offshore developments amid a lack of local leads.

The Bureau of the Treasury (BTr) is looking to borrow P20 billion via the T-bills on Monday: P5 billion each in 91-day and 182-day papers and P10 billion in 364-day securities.

UnionBank of the Philippines, Inc. Chief Economist Ruben Carlo O. Asuncion said T-bill rates may increase slightly, especially for the longer tenors, as investors take a cue from US markets.

“With muted threat of upside inflation risk, onshore liquidity may be taking its cue from offshore markets wherein liquidity has started migration from a defensive portfolio headlined by US treasuries into a cyclical risk-based portfolio,” Mr. Asuncion said in an e-mail.

He said the US presidential elections may boost government spending there as many Americans are hopeful that candidates from the opposition Democrat Party will lead the election results and fulfil its proposed recovery programs to mitigate the impact of the coronavirus pandemic on the world’s largest economy.

“As the markets price in a Democrat party sweep in the elections, it insinuates a condition of strong fiscal stimulus by which spending is likely to boost next year’s US prospects,” he said.

The US presidential elections on Nov. 3 pits Republican President Donald J. Trump and Vice-President Michael R. Pence against Democrat presidential candidate Joe R. Biden and his vice-presidential candidate Kamala D. Harris.

Meanwhile, a trader said in an e-mail that rates of the longer T-bill tenors may climb amid ample liquidity among investors and a benign inflation outlook.

The Treasury awarded P20 billion in T-bills as programmed last week as the offering was more than thrice oversubscribed, with total tenders amounting to P68.962 billion.

Broken down, the BTr borrowed P5 billion as planned via the 91-day T-bills, with tenders reaching P21.87 billion. The three-month debt fetched an average rate of 1.086%, inching down by 0.2 basis point (bp) from the 1.088% logged in the previous auction.

The Treasury likewise awarded the programmed P5 billion in 182-day debt papers as bids for the tenor amounted to P21.632 billion. The six-month papers were quoted at an average rate of 1.597%, slipping by 0.1 bp from the 1.598% seen in the previous offering.

Lastly, the government made a full P10-billion award of 364-day securities as tenders totaled P25.46 billion. The average rate of the one-year papers settled at 1.793%, unchanged from the previous auction.

At the secondary market on Friday, the three-month, six-month and one-year T-bills fetched yields of 1.124%, 1.571% and 1.808%, respectively, based on the PHL Bloomberg Valuation Service Reference Rates published on the Philippine Dealing System’s website.

The Treasury is looking to raise P140 billion from the domestic market this month: P80 billion in weekly T-bill auctions and P60 billion in fortnightly T-bond auctions.

The government wants to borrow around P3 trillion this year from local and foreign lenders to help fund its budget deficit expected to hit 9.6% of the country’s gross domestic product. — K.K.T. Jose

Davao City partners with tech firm Fusionex for e-halal hub

By Maya M. Padillo, Correspondent

DAVAO CITY has partnered with data technology firm Fusionex International to set up a digital platform for halal goods produced by small and medium enterprises (SMEs) in Mindanao.

“By establishing the E-Halal hub, we are hoping to provide access to new markets for the SMEs within Davao and Mindanao area… with this technology they will be able to access markets outside and to be able to extend business beyond the Philippines,” Fusionex International Managing Director Thomas Khoo said during the Oct. 23 session of the Mindanao Business Conference webinar series focusing on halal industry opportunities.

Mr. Khoo explained that the Davao E-Halal Hub Platform will not just be a trading and marketing site, but will integrate the end-to-end supply chain “to make the entire process seamless and more efficient.”

It will be a digital ecosystem that will include information on suppliers along with product origin, warehousing and transport, business matching venue and virtual expo, finance and insurance, and permits and licensing.

Marilou W. Ampuan, vice chair of the Davao Regional Halal Committee, said the agreement for establishing the e-hub was signed August 25 by Mayor Sara Duterte-Carpio of Davao City, the first local government to have an ordinance relating to the promotion of halal goods and services.

Ms. Ampuan said the initiative aims to strengthen the city’s positioning as a “halal-friendly” destination.

“We are happy to be working with the city of Davao for this exciting project,” said Mr. Khoo, noting that the venture contributes to both helping SMEs as well as the push for digitalization.

Fusionex International has offices in Europe, United States, Australia, Hong Kong, and the southeast Asian nations of Singapore, Malaysia, Indonesia, Thailand, and Cambodia.

Senior Trade and Industry Development Specialist Raison D. Arobinto of the Export Management Bureau said the government’s halal development program has been getting a boost from technological innovations covering the global industry.

“The revolutionary factor here is the digital transformation that is taking place nowadays. Digitalization helps the halal industry. We have many halal apps now, halal content,” he said in the same forum.

Mr. Arobinto said the Department of Trade and Industry is continuously pursuing negotiations for mutual recognition arrangements with several countries such as Brunei Darussalam, Indonesia, and the United Arab Emirates to ease the movement of halal goods.

He said aside from food products, there are also opportunities for manufacturing halal clothing, and pharmaceuticals and cosmetics.

Agri dep’t threatens pork price manipulators with prosecution

PHILSTAR/MICHAEL VARCAS

THE Department of Agriculture (DA) acknowledged the possibility of price manipulation in the market for fresh pork and threatened to prosecute farmers and dealers engaged in such activity.

Although the supply of frozen pork is ample, the stockpile has seen a “slow drawdown,” reflecting the market’s preference for freshly-slaughtered pork, whose supply traders may have been “deliberately” withholding “to artificially jack up prices,” Agriculture Secretary William D. Dar said.

He added that the DA’s investigation will also consider the role of supply chain inefficiencies in high prices.

As of Oct. 21, the price of pork shoulder, known in the market as kasim, was P320 per kilogram, while pork belly, or liempo, was at about P360 per kilogram in Metro Manila public markets.

Citing the National Meat Inspection Service, the DA said that as of the third week of October, the frozen pork inventory in government-accredited cold storage was up 55% year on year to 38,216 metric tons (MT).

The inventory of frozen dressed chicken and chicken parts rose 260% to 83,266 MT.

“We’re looking into reasons why there’s a very slow withdrawal of frozen pork products despite the availability of supply, and (as) demand has started to pick up as the government opens up the economy,” Mr. Dar said.

Mr. Dar said he will ask the Philippine Competition Commission (PCC) to conduct a parallel investigation on possible violations of Republic Act No. 10667 or the Philippine Competition Act, by traders that may be controlling the pork supply.

According to the DA, it has a standing agreement with the PCC on investigations, information sharing, and enforcement to deter anti-competitive practices.

In a statement, Samahang Industriya ng Agrikultura (SINAG) President Rosendo O. So said the problem lies in the distribution of pork products from the Visayas and Mindanao to Luzon.

“We have been urging the DA to bring 30% of live hogs from the Visayas and Mindanao to Luzon. There is no pork shortage,” SINAG said.

Early in October, the DA said that pork supply could end the year with a deficit of 231,030 MT or 45 days’ worth of consumption. — Revin Mikhael D. Ochave

Ferragamo family explores stake sale to drive Italian fashion brand revamp — sources

LONDON/MILAN — The family owners of Italian fashion house Salvatore Ferragamo have held informal talks with financial investors to sell a minority stake in their holding firm as they seek to turn around the luxury brand and cope with the fallout of COVID-19 (coronavirus disease 2019), five sources told Reuters.

The company’s chairman Ferruccio Ferragamo, son of late founder Salvatore, held the discussions sometime after the summer, offering about a 20% stake in the holding vehicle that controls the Milan-listed business, banking and private equity sources said, speaking on condition of anonymity as the matter is confidential.

A spokeswoman for the company – which has a market value of 2 billion euros ($2.4 billion) — denied that the Ferragamo family planned to sell the stake.

The sources told Reuters that the family is still in the preliminary stages of testing market appetite and that a deal might face resistance from investors since the family is not willing to give away any governance control.

Famous for shoes worn by Hollywood stars such as Audrey Hepburn, the Florentine leather goods brand saw its revenues plunge 60% in the second quarter, piling pressure on its family members — who control an overall 65% — to turn around the business.

“They have been calling around for a few months, targeting both private equity investors and sovereign wealth funds for a minority deal,” one of the sources said.

A stake sale to deep-pocketed financial investors would help resolve internal disagreements over the company’s turnaround strategy, allowing some of its family members to cash out, the sources said.

The heirs of founder Salvatore Ferragamo, including his four surviving children and several grandchildren, are all invested in Ferragamo Finanziaria SpA, which owns 54.3% of the company. Other family members hold an additional 10.7%. — Reuters

Proposed increase in maximum deposit insurance to boost banks amid pandemic

INCREASING THE maximum deposit insurance for bank clients will benefit lenders and help them ride out the coronavirus pandemic, lawmakers said.

“The higher insurance coverage, the better. But it is something that has to be balanced with what the industry is willing to pay,” Chairperson for the House Committee on Banks and Financial Intermediaries and Quirino Representative Junie E. Cua said in a phone call.

Earlier this month, Chamber of Thrift Banks (CTB) Second Vice- President Francisco A. Dizon asked Bangko Sentral ng Pilipinas Governor Benjamin E. Diokno in a CTB event about the possibility of a higher maximum deposit insurance coverage (MDIC) worth P750,000 to P1 million from the current P500,000. Mr. Diokno vowed to bring the matter to the Philippine Deposit Insurance Corp. (PDIC).

CTB Executive Director Suzanne I. Felix said there will be further discussions on the issue next month.

Marikina Representative Stella Luz A. Quimbo said she fully supports the idea as it will benefit both banks and their clients.

“Risk aversion among depositors increases during an economic downturn, hence the increased demand for deposit insurance,” Ms. Quimbo, who is also a member of the House Committee on Banks and Financial Intermediaries, said in a text message.

“Expanded insurance coverage is needed to encourage deposits, considering that savings have actually increased during the pandemic,” she added, noting a move to raise the MDIC will be a form of economic stimulus.

Mr. Diokno earlier said total deposits inched up 3% to P14.3 trillion as of end-July as Filipinos choose to set aside money amid the continued uncertainty caused by the coronavirus disease 2019.

He said he does not expect the trend to continue as consumption is likely to recover as things normalize.

Mr. Cua said they are working on a briefing to gauge the resilience of the banking industry during the pandemic with the BSP, PDIC, as well as banking groups. He said it could also be a venue where they could discuss the possibility of a higher MDIC.

The PDIC in an e-mailed response to questions reiterated the need for legislation amending its charter to raise the deposit insurance.

“The continuing review of the MDIC considers availability of more recent data and other relevant factors. At this point, any increase in MDIC should be strongly justified including serious consideration for cost and benefit to all stakeholders including regulators, banks and depositors,” the PDIC Corporate Affairs Group Jose G. Villaret, Jr. said.

The MDIC was adjusted to P500,000 in 2009 from P250,000 previously. — L.W.T. Noble

Appellate court affirms P127-M tax credit in favor of Ayala Corp.

THE Court of Tax Appeals affirmed the grant of tax credit certificate (TCC) to Ayala Corp. worth P127 million over its unutilized creditable withholding tax (CWT) for 2012 and 2013.

In a 10-page decision, the court, sitting en banc, denied the appeal of the Bureau of Internal Revenue, saying the arguments raised replicated those in its motion for partial reconsideration in the special first division.

The court said Ayala Corp established the fact of withholding and its entitlement to a TCC with presentation of Summary Alphalist of Withholding Agents of Income Payment Subjected to Withholding Tax (SAWT) and other relevant certificates of CWT at source, which are provided by withholding agents as proof of tax withheld.

“Therefore, respondent should no longer be burdened to show proof of actual remittance in his claim for the issuance of such TCC,” the court said.

“Wherefore, the foregoing considered, petitioner Commissioner of Internal Revenue’s Petition for Review filed on 23 August 2019 is denied,” it added.

The bureau claimed that the court erred in ruling that Ayala Corp. is entitled to refund of unutilized excess CWT “despite no evidence of actual remittance” to it. It said that taxpayer-claimant has to prove that the taxes withheld were actually remitted to the BIR by the withholding agents.

It argued that Revenue Regulations No. 2-2006 requires the submission of SAWT and monthly alphalist of payees.

Ayala Corp., claimed that it has “sufficiently proven its entitlement to its claim for issuance of a TCC.” It also noted that the withholding agents are the bureau’s agents

The court also cited a previous Supreme Court decision which favored the appellate court’s decision, rejecting the bureau’s contention that “proof of actual remittance is required before a refund of excess or unutilized creditable withholding taxes may be granted.”

The court said that the withholding agent’s receipt of tax withheld is tantamount to the BIR’s receipt. It added that failure on the part of the withholding agent to remit the amount withheld to the bureau “is a breach on the part of the agent and not by the taxpayer.”

The court’s division in February 2018, partially granted the claim of Ayala Corp, allowing only the amount of P81.7 million as tax credit certificate out of its P128.7 million claim.

On March 29, the court increased the grant to P127.3 million after the company filed its appeal. The court upheld the decision in July last year. — Vann Marlo Villegas

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