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Philippines says won’t stop projects with China firms blacklisted by US

President Rodrigo R. Duterte will not follow Washington’s move to sanction Chinese firms involved in building and militarizing artificial South China Sea islands because infrastructure is a national priority, his spokesman Harry L. Roque, Jr. said. Image courtesy of the Philippines’ Department of National Defense/Handout via Reuters.

The Philippines will not halt infrastructure projects involving Chinese firms blacklisted by ally the United States and will make its own decisions, not those of a foreign power, the president’s spokesman said on Tuesday.

President Rodrigo R. Duterte will not follow Washington’s move to sanction Chinese firms involved in building and militarizing artificial South China Sea islands because infrastructure is a national priority, his spokesman Harry L. Roque, Jr. said.

“We are not a vassal state of any foreign power and we will pursue our national interest,” Mr. Roque told a regular news conference.

“Our national interest is to ensure flagship projects are completed.”

Mr. Duterte has a race against time to make headway in his $180 billion infrastructure overhaul, which is fraught with complications.

The United States, a defense treaty ally of the Philippines, has blacklisted 24 Chinese companies and targeted individuals over the building of military facilities on submerged reefs in disputed waters, escalating tensions with Beijing.

The Philippine foreign minister recommended terminating deals with those entities.

Mr. Duterte’s non-intervention could cause some friction, as several of China’s islands challenge his country’s interests, most notably Mischief Reef, built within its 200-mile Exclusive Economic Zone and equipped with missiles capable of striking the Philippines.

Among firms involved are China Communications Construction Co (CCCC), which has teamed up with a Philippine partner for a $10-billion airport project, and its subsidiary, China Harbour Engineering Company, which is partnering on a $1.2 billion reclamation project with the firm of tycoon Dennis Uy, Mr. Duterte’s associate and biggest election campaign donor.

China Harbour will partner also with the Philippines’ richest family on separate $1.86 billion reclamation venture.

Those firms have not responded to Reuters requests for comment on the blacklisting.

Opposition lawmaker Risa N. Hontiveros-Baraquel filed a senate resolution on Tuesday to investigate possible collusion by Filipinos over China’s artificial islands.

“It is not hard to suspect dubious engagement by either party,” Ms. Hontiveros-Baraquel said. — Reuters

Global trade seen recovering faster now than after Lehman crisis

Global trade is on course to recover more quickly from the coronavirus pandemic than after the 2008 financial crisis, according to Germany’s Kiel Institute for the World Economy.

Shipping volumes are already back at levels that took more than a year to reach following the collapse of Lehman Brothers, hinting at a V-shaped recovery, the institution’s President Gabriel Felbermayr said.

Trade has seen a “deep slump and a quick rebound,” he said. “The current situation is significantly better” than a decade ago.

The pandemic has pushed the global economy into what may be its deepest slump since the Great Depression. The initial rebound reflects the lifting of severe restrictions to contain the virus, and policy makers have warned against premature optimism that the worst has passed.

The World Trade Organization said earlier this month that projections for a strong, V-shaped trade rebound in 2021 might be “overly optimistic.”

Yet others—including the Kiel Institute—are taking a more confident stance. On Monday, International Monetary Fund Managing Director Kristalina Georgieva pointed to a “revival of trade.”

The Kiel Institute argued container shipping activity in key areas supported its conclusion, with ship movements in the Americas, Asia, and Europe normalizing. Freight capacity was back at levels that would be expected in late August—even without a crisis. — Bloomberg

AstraZeneca’s COVID-19 vaccine candidate begins late-stage US study

AstraZeneca Plc said on Monday it has begun enrolling adults for a US-funded, 30,000-subject late-stage study of its high profile COVID-19 vaccine candidate.

Trial participants will receive either two doses of the experimental vaccine, dubbed AZD1222, four weeks apart, or a placebo, the company said.

The trial is being conducted under US government’s Operation Warp Speed program, which aims to accelerate development, manufacturing and distribution of vaccines and treatments for COVID-19.

US President Donald J. Trump has said a vaccine for the novel coronavirus could be available before the Nov. 3 presidential election, much sooner than most experts anticipate.

AstraZeneca, which is developing its vaccine in conjunction with Oxford University researchers, and Pfizer Inc. with partner BioNTech SE have said they could have data by October to support US emergency use authorization or approval of their respective vaccines.

AZD1222 is already undergoing late-stage clinical trials in Britain, Brazil, and South Africa, with additional trials planned in Japan and Russia. The trials, together with the US Phase III study, aim to enroll up to 50,000 participants globally.

The US trial will evaluate whether the vaccine can prevent COVID-19 infection or keep the illness from becoming severe, the National Institutes of Health said in a statement.

It also will assess if the vaccine can reduce incidence of emergency department visits due to COVID-19. — Reuters

Opening up without control of COVID-19 is recipe for disaster, says WHO

GENEVA — Countries with significant active spread of coronavirus must prevent amplifying events, as opening up without the virus being under control would be a “recipe for disaster,” the World Health Organization (WHO) said on Monday.

WHO director-general Tedros Adhanom Ghebreyesus recognized that many people are getting tired of restrictions and want to return to normality eight months into the pandemic.

The WHO fully supported efforts to reopen economies and societies, he told a news conference, adding: “We want to see children returning to school and people returning to workplaces, but we want to see it done safely.”

“No country can just pretend the pandemic is over,” he said. “The reality is this virus spreads easily. Opening up without control is a recipe for disaster.”

“Explosive outbreaks” have been linked to gatherings of people at stadiums, nightclubs, places of worship, and other crowds, where the respiratory virus can spread easily among clusters of people, Mr. Tedros said.

“Decisions about how and when to allow gatherings of people must be taken with a risk-based approach, in the local context,” he said. — Reuters

[B-SIDE Podcast] Biking the city

When public transportation was suspended to prevent the spread of the coronavirus, people turned to biking as a means of getting from one place to another.

Thousands of bikes were donated to frontliners and essential workers who initially were walking to work. This June, bike lanes popped up along EDSA, the busiest highway in Metro Manila.

Bike commuters like Karen Sison hope that this is the beginning of a bike revolution. Ms. Sison is a member of Cycling Matters, a group that describes itself as “a happy collective of cyclists who have gotten tired of just waiting and ranting about how unhappy our local biking conditions can be.”

Ms. Sison tells BusinessWorld reporter Patricia B. Mirasol what kind of infrastructure Metro Manila needs to become a bike-friendly city. Bikes are “the most accessible, sustainable, and responsible mode of transportation,” she added, making a case for integrating bikes with buses, jeeps, and trains in a bi-modal transportation system.

TAKEAWAYS

Cities should be designed with people, not cars, in mind. 

The Philippines is a car-centric society and it shows in our infrastructure. Decision-makers should rethink urban design and put people at the center. Aside from being more walkable, cities planned with people in mind have a dedicated network of bike lanes and reliable mass transit.

Bicycles complement—not replace—other forms of public transport.

Bicycles aren’t meant to replace public transportation. Cycling complements mass transit — buses, jeeps, trains — in a bi-modal transportation system. 

Cycling is the most accessible, sustainable, and responsible mode of transportation.

Anyone can get a secondhand bike for P2,500. A bike is easier — and cheaper — to maintain than a car, and it has a lower carbon footprint. 

When buying a bike, remember that it isn’t one-size-fits-all.

A few factors to consider when buying a bike: who will use it (the measurements of the bike should be appropriate for the build of its owner), where it will be used (road bikes are different from mountain bikes are different from commuter bikes), and how much load it will carry.  

This episode was recorded remotely on August 13. Produced by Nina M. Diaz, Paolo L. Lopez, and Sam L. Marcelo.

Month-long general quarantine level set in Metro Manila, 4 other areas; only Iligan City under stricter measures

METRO MANILA will remain under a general community quarantine (GCQ) category until the end of September where public transport and most industries are allowed to operate at limited capacities, the government announced late Monday evening.

In his talk to the nation aired on state television, President Rodrigo R. Duterte said the capital, along with two provinces in Luzon and two cities in the Visayas, will be under the GCQ level.

Ang areas ng NCR (National Capital Region), Batangas, Bulacan, Tacloban, Bacolod ay nasa (will be under) general community quarantine,” he said.

Iligan City in Northern Mindanao is the sole area in the country which will be placed under the stricter modified enhanced community quarantine after it recorded a spike in coronavirus cases in recent days.

The rest of the country will be under the more loose modified general community quarantine.

The new quarantine classifications will last until end-September, consistent with Trade Secretary Ramon M. Lopez’ announcement earlier on Monday that the government plans to implement month-long community quarantines instead of changing the classifications every 14 days.

The Philippines, first placed under strict lockdown in mid-March, has one of the longest and most rigid quarantine measures in the world.

It has the highest number of confirmed coronavirus cases among southeast Asian countries, recording over 220,000 as of Aug. 31. — Gillian M. Cortez  

Reforms pushed to attract more FDI

By Jenina P. Ibañez, Reporter

THE Trade department is making a renewed push for the passage of bills that would further open up the economy to foreign direct investments (FDI), after Philippine rules on such were again deemed among the most restrictive in the world.

The Philippines ranked fourth out of 84 economies on the FDI Regulatory Restrictiveness Index compiled by the Organization for Economic Cooperation and Development (OECD), based on 2019 data.

On a scale of 0 (open) to 1 (closed), the Philippines scored 0.374 on the index, with the biggest restriction being the Constitution’s 40% limit on foreign ownership in key industries such as telecommunications, media, real estate, agriculture, and utilities.

Ramon M. Lopez, Trade secretary and chairman of the Board of the Investments, said in a mobile message on Friday that the Philippines’ dismal ranking is the reason behind the urgent need for more reforms such as amendments to the Retail Trade Liberalization Act (RTLA) and the Public Service Act (PSA).

Changes to the RTLA include reducing the required minimum paid-up capital for foreign companies that seek to enter the Philippine retail sector, while amendments to the PSA would lift foreign ownership restrictions in certain sectors.

Mr. Lopez said the country also should work to improve the ease of doing business. He also backed the Corporate Recovery and Tax Incentives for Enterprises Act (CREATE), which would immediately cut corporate income tax to 25%.

Foreign business chambers have been pushing for the passage of these bills as part of overall economic reforms.

“If the Senate can finish these this year, the Philippines will move up a few dozen places. It also will attract tens of billions of US dollars in new investment leading to greater competition and better services for consumers,” American Chamber of Commerce of the Philippines Senior Advisor John Forbes said in a mobile message on Friday.

The House of Representatives has already approved amendments to the PSA and the RTLA, while counterpart bills are pending before the Senate.

“We will try to prioritize all economic related legislation,” Senate President Vicente C. Sotto III said in a mobile message on Monday.

Senate Public Services Committee Chairperson Grace S. Poe-Llamanzares last month said amendments to PSA will be tackled “hopefully this year,” taking a backseat to the pandemic response bills.

LOWERING MINIMUM INVESTMENT
However, local retailers are opposing the measure amending the RTLA, particularly the provision that would significantly lower foreign entrants’ minimum investment from the current $2.5 million.

House Bill No. 59, which was passed on third reading in March, reduced the required minimum paid-up capital for foreign retail investors to $200,000 (around P10 million).

“Low minimum investment will only destroy our micro-, small-, and medium-sized enterprises (MSMEs),” Philippine Retailers Association Vice-Chairman Roberto S. Claudio said in an e-mail on Friday.

Due to the pandemic, Mr. Claudio noted major global retailers are downsizing and few foreign retailers will venture into the Philippines even if the threshold is reduced.

“We will only subject our Filipino MSME retailers to unfair competition. Also, this will negate our program of ‘BUY LOKAL’ initiative launched to help our local industries to recover from the negative economic effects of this pandemic,” he said, adding that the group is looking into compromise positions with the government.

MSMEs make up 99.5% of the total business establishments operating in the country, based on 2018 government statistics. The businesses account for 63% of the country’s total employment.

However, Senator Aquilino L. Pimentel, who chairs the Senate Committee on Trade, Commerce and Entrepreneurship currently tackling the RTLA, said they are making sure local retailers will be protected despite the lower capitalization requirement for foreign retailers.

Under the Senate version, Mr. Pimentel said the proposed capitalization requirement is $300,000, which would be just below P15 million.

“The Magna Carta for MSMEs defines small businesses as those with capitalization of P3 million to P15 million. So we set the new foreign capitalization requirement just above the maximum capitalization for small businesses to make sure they will not be subject to unfair competition from foreign retailers,” he said in a mobile message on Monday.

“A per store requirement of $150,000 will also be imposed to make sure that foreign retailers will not circumvent the law and open stores that will compete with micro enterprises,” he added.

Meanwhile, House Committee on Economic Affairs Chair and AAMBIS-OWA Rep. Sharon S. Garin also pushed for amendments to the Foreign Investment Act to allow more foreigners to practice their professions and set up small businesses in the country.

In a mobile message, Ms. Garin said the measure, along with the PSA and RTLA amendments, would help ensure the country’s economic recovery after the pandemic.

Philippines slips a notch lower in global outsourcing destinations list

THE PHILIPPINES slipped in this year’s list of outsourcing destinations by global strategic firm Tholons, Inc. as the economy is among those hardest hit by the coronavirus disease 2019 (COVID-19) pandemic. Read the full story.

Philippines slips a notch lower in global outsourcing destinations list

PHL slips in global outsourcing ranking; Davao out of top 100 list

By Marissa Mae M. Ramos, Researcher

THE PHILIPPINES slipped in this year’s list of outsourcing destinations by global strategic firm Tholons, Inc. as the economy is among those hardest hit by the coronavirus disease 2019 (COVID-19) pandemic.

The Philippines ranked sixth in the Tholons Global Innovation Index 2020 (formerly known as the Tholons Services Globalization Index), sliding a spot from fifth place in last year’s list of “Top 50 Digital Nations.”

The index ranks the most attractive outsourcing destinations based on indicators that are grouped into five factors: talent, skills and quality; business catalyst; cost and infrastructure; risk and quality of life; and digital and innovation.

Philippines slips a notch lower in global outsourcing destinations list

According to Tholons, the index “evaluates, ranks, and provides location strategies to multinational corporations, countries, governments, multilateral agencies, analysts, and investors.”

India topped this year’s list, followed by the United States (2nd), Brazil (3rd), Canada (4th), and the United Kingdom (5th).

Rounding the top 10 were Russia (7th), Mexico (8th), Vietnam (9th), and Singapore (10th).

The index also features the top 100 “super cities” of which only two from the Philippines made the list: Manila (fourth place from last year’s second) and Cebu City (15th place from 12th). Davao City fell out of the rankings after holding the 95th spot last year.

The cities of Bangalore (India), Sao Paulo (Brazil), and Toronto (Canada) occupied the top three spots in the list, while Dublin (Ireland), Mumbai (India), Singapore, San Francisco (US), London (United Kingdom), and New York (US) make up the rest of the top 10.

Other cities in Southeast Asia that made the list include Hanoi and Ho Chi Minh City in Vietnam (49th and 52nd, respectively), Kuala Lumpur in Malaysia (31st), Jakarta in Indonesia (50th), and Bangkok in Thailand (82nd).

The report cited India and the Philippines as among “hardest hit” as their value proposition was “heavily based on low-cost talent, working out of offices offshore.”

In an e-mail, Pronove Tai International Property Consultants said the Philippines’ slip in this year’s rankings was due to several factors, which include issues on the cost of doing business, lack of support infrastructure, and the “risk on the quality of work and life balance.”

“Primarily, the COVID-19 pandemic and subsequent lockdowns have forced businesses to adapt work-from-home business models…. A work-from-home arrangement presents challenges for IT-BPM (information technology and business process management) employees due to lack of support infrastructure, particularly on internet speed connections,” Pronove Tai said.

“Another factor is the declining quality of life amid the COVID-19 pandemic. While most are working from home, IT-BPM workers are also facing difficulties reporting in their physical offices because of a lack of available public transport, a decline in salary, and threats of job layoffs,” it added.

The Philippines has been placed on lockdown since mid-March to contain the spread of the COVID-19 pandemic. Quarantine measures challenged key industries in the country with economic output falling by nine percent as of the first half of 2020 and the unemployment level reaching 17.7% in the April round of the government’s labor force survey.

The Department of Health reported 3,446 confirmed COVID-19 cases as of Monday, bringing the country’s total to 220,819. The death toll increased by 38 to 3,558.

“Now, more than ever, it is imperative for cities and countries to embrace digital. The effects of the pandemic have highlighted the strengths and weaknesses of nations in transitioning to the new business environment,” Philippine Software Industry Association (PSIA) President Jonathan D. de Luzuriaga was quoted in the Tholons report as saying.

Mr. De Luzuriaga, who is also a board trustee of the Information Technology and Business Process Association of the Philippines, added that the index has become an “essential framework” for the country to measure its readiness and capabilities in providing IT-BPM services.

For the property sector, the Philippine office market will likely depend on the IT-BPM sector as demand from Philippine Offshore Gaming Operators are declining, according to Pronove Tai.

The consultancy firm said the country’s readiness for a digital-based business ecosystem can “slightly impact the attractiveness” of the Philippines as an IT-BPM destination.

“However, it has a limited direct impact on the IT-BPM office demand because expansions are mostly based on the competitiveness of the workforce, supply of office space, and tax perks,” it said.

Property sector outlook remains dim as shoppers stay away from malls

By Denise A. Valdez, Senior Reporter

LISTED PROPERTY companies may continue to see double-digit profit drops for the remainder of the year, as consumers continue to stay away from shopping malls amid the rise in the number of coronavirus infections.

Researchers from brokerages AAA Southeast Equities, Inc. and Philstocks Financial, Inc. continue to see weak mall traffic as an indicator of the slow recovery of the property sector despite the easing of lockdown restrictions since June.

“We are taking a very close look at mall traffic because of its multiplier effect on the property companies. Residential sales are done through booths at the mall. Most property companies will suffer as mall traffic remains low,” said Christopher John Mangun, research head at AAA Southeast Equities.

The coronavirus disease 2019 (COVID-19) has sickened 220,819 and killed 3,558 in the Philippines as of Monday.

The government has locked down parts of the country since mid-March, imposing new quarantine protocols with varying degrees of strictness every two weeks, in hopes of containing the spread of the virus. As a result, nearly all economic activity ground nearly to a halt in April and May, pushing the economy into a recession.

Malls, hotels and office buildings were shuttered across Metro Manila at the height of the lockdown. As a result, earnings of listed companies were lower by a median of 40.5% in the first half. This decline is in line with the estimates of both AAA Southeast Equities and Philstocks.

“The Philippine property sector is one of the most vulnerable sectors, alongside hotels, tourism, gaming, and transportation,” said Piper Chaucer E. Tan, a research associate at Philstocks. “We are not so bullish for the property sector right now.”

AAA Southeast Equities’ Mr. Mangun added: “We saw some traction back in July as mall traffic was beginning to pick up, but the spike in daily new cases and the imposition of tighter restrictions in August diminished mall traffic once again.”

Malls have seen improved foot traffic since lockdown restrictions were eased but sales remain lackluster.

Both analysts anticipate that property companies will still post lower year-on-year earnings in the second half, but efforts to adjust to the pandemic may help them show improvements compared to how they did in January to June.

“We are expecting earnings to improve quarter on quarter but still come in between 15% and 25% lower from the same period last year,” Mr. Mangun said.

“[A] large chunk of second-half earnings will depend on whether consumers are confident to go out and spend during Christmas time in the fourth quarter. With new daily cases on the rise, people may continue to avoid crowds and the malls until a vaccine is available,” he added.

But the quarter-on-quarter growth may sit at around 20% to 30%, Philstocks’ Mr. Tan said, as companies are trying their best to adjust their business operations to the current virus situation.

“I think that people should learn to live with the virus, and property companies must be aggressive with marketing to scrape off the trauma and fear of going to malls,” he said.

“We do not see the mall apocalypse here compared to other countries since the malls here in the Philippines are part of the culture,” he added.

Property giants Ayala Land, Inc. (ALI); Robinsons Land Corp. (RLC); and Megaworld Corp. have all announced reduced capital expenditures this year to help cope with the pandemic.

ALI slashed its capex by 36% to P70 billion, while Megaworld cut its budget by 40% to P36 billion. RLC trimmed its spending plan by 11% to P24 billion, while SM Prime Holdings, Inc. maintained its capital expenditures at P80 billion.

All four companies reported earnings decline in the first half: ALI by 70% to P4.52 billion; RLC by 8% to P3.68 billion; Megaworld by 35% to P5.41 billion; and SM Prime by 46% to P10.43 billion.

The four companies are part of the 30-member Philippine Stock Exchange index, which has fallen 24% or 1,858.35 points since the start of the year to a 5,884.18 finish on Friday.

Philodrill eyes Palawan oil contract extension

LISTED exploration company Philodrill Corp., which operates a petroleum block northwest of Palawan province, will seek an extension of its service contract with the government.

The company would apply for the 50-year extension once its contract expires in 2024, its partner PetroEnergy Resources Corp. said in a stock exchange filing on Monday.

PetroEnergy, which has a 16.67% interest in the block, said the plan came after a contracted study by LMKR, a Dubai-based petroleum technology company, showed four potential oil reservoirs in the 108,146-hectare area.

Philodrill in June raised its work program and budget for the oil block, reallocating some funds from previous technical works.

“The LMKR study is being seen as a technical basis to justify a planned application for a 50-year extension of the service contract, due to expire in 2024, in order for the joint venture to drill and produce beyond 2024,” PetroEnergy said.

In early August, Philodrill said it had shared data from the Octon block under a confidentiality deal with NWP Ventures Ltd., an affiliate of British company Manta Oil Co. Ltd., which expressed interest in exploring the field.

Philodrill posted a P44.3-million net loss in the first half due to drying oil wells and plunging crude prices. Revenue fell by 54% to P60.1 million, it said.

Petroleum earnings fell by three-fifths to P40 million, mainly due to a price slump and lower output volume during the period.

Combined gross production volume fell to 350,957 barrels with an average price of $33.64 a barrel during the period. By end-June, its crude oil inventory stood at P4.1 million.

The company also reported P2.4 million in deferred oil exploration costs. The plug and abandonment activities at two oil wells in Palawan’s Nido block under Service Contract 14 were suspended due to coronavirus quarantine restrictions.

Together with Galoc Production Company, it raised the budget for the operations, which will resume in September.

The listed oil developer is involved in nine petroleum service contracts awarded by the Philippine Department of Energy.

Philodrill shares were unchanged at P0.0094 each on Friday. Trading was suspended on Monday, a holiday. — Adam J. Ang

Custom masks, coronavirus and Black lives dominate VMA show

LADY GAGA dominated the MTV Video Music Awards (VMA) show on Sunday, with a series of visually arresting outfits, masked performances and four wins, including artist of the year.

Gaga, who went into the show sharing a leading nine nominations with Ariana Grande, stormed the ceremony with multiple costume changes ranging from an exotic bird to a bright green ball gown — all accompanied by exaggerated custom-made face masks and muzzles.

Canadian artist The Weeknd won the top prize, taking video of the year for “Blinding Lights.” He also took the award for best R&B video for the same song.

The VMAs marked the first major US awards show to take place during the coronavirus pandemic. It was filmed without a live audience and with most of the performances recorded in advance because of health guidelines.

Host Keke Palmer opened the ceremony by dedicating it to Black Panther actor Chadwick Boseman, who died on Friday at the age of 43.

In the fan-voted show, Gaga and Grande also won two awards for their collaboration “Rain On Me,” while Gaga was given a new lifetime achievement trophy, called the Tricon Award.

“This has not been an easy year for a lot of people,” Gaga said. “Stay safe, speak your minds, and I might sound like a broken record but wear a mask.”

America’s national reckoning over systemic racism was also on the minds of performers and presenters after months of street protests over the deaths of Black people at the hands of police.

“It’s our time to be the change we want to see,” said Palmer. “We need to come together, and music has that power.”

The Weeknd opened the show with a performance on a 1,000 feet high deck overlooking Manhattan, but said he was not in the mood for partying.

“It’s really hard for me to celebrate right now and enjoy this moment, so I’m just going to say justice for Jacob Blake and justice for Breonna Taylor,” he said, referring to the recent police shootings of Blake and Taylor.

The VMAs also recognized essential workers at the frontlines of the outbreak, and handed out trophies to Grande, Justin Bieber, and Latin American boy band CNCO for music recorded during coronavirus lockdowns.

K-Pop sensation BTS made their debut performance at the VMAs, singing their new single “Dynamite,” and the seven member boy band won all four of the awards they were nominated for — best group, pop group, K-pop artist, and choreography. — Reuters