May budget deficit narrows to P200B

June 23, 2021 | 12:34 am

The Public Works department has ramped up the completion of projects such as the Sta. Monica-Lawton Bridge also known as the Kalayaan Bridge. — PHOTO COURTESY OF DPWH

By Beatrice M. Laforga, Reporter

THE NATIONAL Government’s budget deficit narrowed in May as the double-digit surge in revenues outpaced spending on base effects, the Bureau of the Treasury (BTr) reported.

Preliminary data from the BTr showed the fiscal gap fell by 1% to P200.3 billion in May from P202.1 billion a year ago. However, this was nearly five times larger than the P44-billion deficit in April.

Government revenues jumped 69.3% year on year to P256.4 billion in May, mainly due to a 61% rise in tax collections to P183.7 billion.

The Bureau of Internal Revenue (BIR) and Bureau of Customs (BoC) both recorded double-digit annual growth in collections. The BIR’s tax haul rose by 60.5% to P183.7 billion, while the BoC’s collection of duties and taxes went up by 58.05% to P48.6 billion.

Other state offices saw a 505% surge in tax collections to P1.9 billion in May from P300 million a year ago. Other revenues also increased by 270.5% year on year to P22.2 billion.

This was after BTr’s income grew by fivefold to P12.4 billion on higher dividends from its Bond Sinking Fund investment, while other offices collecting nontax revenues also saw their income more than double to P9.7 billion due to low base effect.

Overall spending also rose but at a slower pace of 29.2% to P456.7 billion in May, from P353.6 billion the year before.

“The sizeable increase is attributed mainly to the: disbursements for the capital outlay projects of the Public Works department, banner programs of the Education and Health departments, and releases to the Philippine Health Insurance Corp. (PhilHealth) for the health insurance premiums of senior citizens, and to local government units for the Barangay Development Program,” the BTr said.

Primary spending — which is total expenditures less interest payments — grew by 28% year on year to P427.8 billion, while interest payments climbed by 58% to P28.9 billion.

The government runs on a budget deficit as it spends more than the revenues it generates to boost growth. It borrows from local and foreign lenders to plug this fiscal gap that started to widen since last year after the pandemic-induced recession pulled down tax collections and bloated spending.

FIVE-MONTH PERFORMANCE
Year to date, the budget deficit edged up by 0.7% to P566.2 billion in the five months to May.

Total state revenues increased by 12.9% to P1.245 trillion from January to May, buoyed by the 27% jump in tax collections to P1.132 trillion.

For the five-month period, the BIR increased its tax take by 29% to P872 billion while Customs saw its revenues grow by 19% to P250 billion.

The total was partially offset by lower nontax income of other government offices, which fell by 46.8% to P112.4 billion from P211.2 billion.

BTr’s income plunged by 65% to P60.8 billion because of the high base last year when state-run firms frontloaded their dividend remittances to boost the government’s pandemic response. Nontax revenues by other offices grew by 32% to P51.6 billion.

Meanwhile, overall state spending only grew by 8.8% to P1.811 trillion in the January to May period.

Primary spending jumped 8.5% year on year to P1.632 trillion while interest payments increased by 11.6% to P178.6 billion.

The share of interest payments to overall expenditures went up to 9.86% from 9.62% last year. As a percentage of revenues, this fell to 14.35% from 14.52% a year ago.

ING Bank N.V. Manila Senior Economist Nicholas Antonio T. Mapa said the big jump in revenues last month was buoyed by base effects, as the strict lockdown a year ago brought nearly all economic activity to a standstill.

“We can expect the Philippines to continue to post budget shortfalls for the balance of the year as revenues fall short due to lackadaisical economic activity and the fallout from CREATE (Corporate Recovery and Tax Incentives for Enterprises Act), with the government curtailing spending likely to limit the hit on the overall debt-to-GDP (gross domestic product) ratio,” Mr. Mapa said in a note on Tuesday.

While the Philippines is on track to stay within its deficit limit, he said balancing the budget from here on will be more “complicated” as the government seeks to keep fiscal metrics intact while supporting economic recovery.

Economic managers capped this year’s budget deficit at P1.856 trillion or equivalent to 9.3% of GDP, and stood firm on their policy to observe fiscal prudence amid calls for bigger stimulus package to fast-track the recovery.

“The strategy to hold off on spending has worked to limit the deficit and debt but it also almost ensures that the injured economy stays in sick bay for a little longer. Meanwhile, hopes that previously passed stimulus packages would deliver some form of impetus continues to linger, despite the latter’s inability to deliver only a modest boost to the economy despite all its hype,” Mr. Mapa said.

Meanwhile, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort cautioned that the widening budget deficit in the recent months, as the state aims to hike spending, could force the government to borrow more and increase its outstanding debt.

“For the coming months, increased government spending on various government projects and infrastructure projects around the country could continue especially up to shortly before the May 2022 elections,” Mr. Ricafort said.

A faster recovery backed by sustained vaccination program and further reopening of the economy could help narrow the budget deficit and keep the country’s debt stock in check, he said.

The National Government’s outstanding debt reached P10.991 trillion at the end of April, up 2% from P10.77 trillion as of end-March. Year on year, the debt pile jumped 28% from P8.6 trillion.

Treasury hikes July borrowing program

June 23, 2021 | 12:33 am

THE BUREAU of the Treasury (BTr) raised its planned borrowings from the local market to P235 billion in July, as it seeks to offer longer tenors amid strong demand and a low-rate environment.

In a memorandum posted on its website on Tuesday, the BTr said it is planning to borrow P60 billion via the Treasury bills (T-bills) and another P175 billion in Treasury bonds (T-bonds).

This is 9.3% higher than the P215-billion borrowing plan in June, which consists of P75 billion in T-bills and P140 billion in T-bonds.

“Given June bid to cover, we see strong market liquidity and demand to put money to work,” National Treasurer Rosalia V. de Leon told reporters via Viber on Tuesday.

For next month, the BTr will offer P5 billion each via the 91-, 182-, and 364-day T-bills every Monday.

It will also hold weekly auctions for the T-bonds again every Tuesday at P35 billion each next month. It will offer 11-year bonds on June 29; seven-year papers on July 6 and July 27; 20-year notes on July 13 and 10-year securities on July 20.

Excluding the scheduled T-bill auction next week and the result of the tap facility on Tuesday, the government has raised P242 billion so far this month, bigger than the programmed P215 billion.

It borrowed P80 billion via the T-bills after upsizing the volume of debt papers it accepted in all four auctions, and another P162 billion in T-bonds as it opened the tap facility for the bonds every week.

A bond trader said the bigger July borrowing program fell within market expectations after the past auctions this month showed that players can absorb longer tenors amid robust liquidity and the sustained risk aversion of investors.

“The BTr now tries to borrow longer to extend its maturity profile while it still can, [while the market is] trying to extend as well because they need to earn margins,” the trader said via Viber.

The Treasury planned to issue more T-bonds to take advantage of low rates before the yields increase once the economy’s recovery picks up, the trader said.

The government aims to borrow P3 trillion from domestic and external sources this year to help fund a budget deficit that is expected to hit 9.3% of economic output. — Beatrice M. Laforga

Manila becomes more expensive for expats — survey

June 23, 2021 | 12:32 am

Manila_Isko_-mural — PHILIPPINE STAR/EDD GUMBAN

By Jenina P. Ibañez, Reporter

MANILA is the 78^th most expensive city for expatriates to live in according to Mercer’s 2021 Cost of Living Survey, as the Philippines’ capital city jumped two spots from the previous year’s ranking.

Manila tied with Mumbai, India at 78^th out of 209 cities in the Mercer survey that compares the costs of 200 items in each location, including housing, transportation, food, clothing, household goods, and entertainment.

Julia Radchenko, Mercer Asia Pacific Global Mobility Leader, said that the Philippines’ rise in ranking was due to the Philippine peso strengthening by 4% against the US dollar this year.

“It is also one of the few Asian currencies that has recorded gains versus the greenback, alongside the Chinese yuan and Taiwanese dollar,” she said in an e-mail to BusinessWorld on Tuesday.

“A fall in demand for imports due to a weaker economy as the country went through long and strict lockdowns to contain the virus has in turn strengthened the peso.”

More than half of the top 10 most expensive cities is in Asia. Ashgabat, Turkmenistan topped the list as the most expensive city, replacing Hong Kong which slipped to second spot. Beirut climbed 42 spots to third place, amid the economic crisis in Lebanon. Tokyo, Japan slipped to fourth place.

Shanghai came in sixth, while Beijing took the ninth spot, as the Chinese currency appreciated against the US dollar and the economy’s rebound from the pandemic.

Several cities in Switzerland also held the top spots, including Zurich (5^th), Geneva (8^th), and Bern (10^th).

Among 42 Asia-Pacific countries in the survey, Manila is the 25^th most expensive city, again tied with Mumbai.

“The survey saw a rise in rankings across all Mainland China cities, buoyed by currency appreciation against the US dollar and a swift recovery from the impact of COVID-19,” Mercer said.

Ms. Radchenko in a statement said that companies in the Asia-Pacific region are reassessing workforce mobility amid the pandemic.

“Companies are realizing more than ever that they need to diversify their mobility scenarios and related compensation practices. And it is no longer about just geographical mobility, it is about talent mobility which implies lateral moves, distributed workforce, geographical mobility, international remote working, virtual assignments,” she said.

“What we’ve seen is that companies are exercising more flexibility to accommodate the different personal situations of employees. Broadly speaking, companies are now more open to International remote working arrangements, allowing employers to perform the same role remotely as they would if they were to relocate.”

Michael L. Ricafort, chief economist at Rizal Commercial Banking Corp. (RCBC), said that Manila’s more expensive cost of living could be attributed to a relatively faster hike in real estate rental rates and capital values over the past few years.

Higher housing costs in developed countries also led to a spike in expatriate housing rates in the capital, he said in an e-mail, while a global oil price increase could have also added to transportations costs since the country imports all its oil needs.

“Relatively higher inflation recently also partly contributed to the recent increase in cost of living,” he said.

“However, the COVID-19 pandemic led to some healthy downward correction in the rental/lease rates as well as capital values of housing, after the rising trend in recent years/decades. The pandemic fundamentally reduced demand conditions that also led to some downward correction in the prices of some goods and services in the economy,” Mr. Ricafort added.

Inflation spiked earlier this year as prices of meat products rose due to a supply shortage. Year to date, headline inflation averaged 4.4% as of May, exceeding the central bank’s 2-4% target range.

The BSP expects inflation for 2021 to reach 3.9%.

Reforms may boost LGU property tax haul by P113 billion

June 23, 2021 | 12:31 am

Makati-cityscape-skyline — PHILIPPINE STAR/ MIGUEL DE GUZMAN

LOCAL GOVERNMENT UNITS (LGUs) could boost their real property tax (RPT) collection by P113.4 billion with the implementation of a project that will digitize their tax valuation and collection processes, the Finance department said.

Data from the Bureau of Local Government Finance (BLGF) showed the Local Governance Reform Project (LGRP) is estimated to increase real property tax collection by 61.7% from the P70.14 billion it collected in 2019.

BLGF Executive Director Niño Raymond B. Alvina said in a statement on Tuesday that the program aims to help at least 1,372 LGUs meet 100% of their collection and valuation targets by 2024, and train over 858 or 50% of 1,715 local assessors to use new digital tools.

Mr. Alvina said the share of RPT to total tax collections by LGUs has been on a downtrend since the Local Government Code was enacted in 1992, since it only makes up 9% of overall tax revenues, compared with business tax collections’ 13% share.

Data from the BLGF showed LGUs collected P70.14 billion in RPT in 2019, or 84% of the P83.77-billion target.

City governments reported the highest collection in 2019 with P48.7 billion, followed by municipalities with P10.87 billion and provinces with P10.58 billion.

In the second quarter of 2020, RPT collections fell by 6% to P46.24 billion year on year and also missed the P56.14-billion target by 17.6%.

The Asian Development Bank (ADB) set aside $26.5 million (P1.32 billion) for the program in July 2020 and an initial $300-million (P15-billion) loan in November 2019. The government also allotted $4.96 million (P242 million) from its budget for the project.

The ADB is planning to lend $400 million (P19.5 billion) more for the program this year.

The LGRP aims to improve property valuation systems of LGUs by deploying digital tools to make reporting more transparent and update the tax maps.

The Interagency Governing Board (IGB), chaired by DoF Secretary Carlos G. Dominguez III, was formed to implement the four-year program.

“This project is quite important. We should put our attention to it because in the end it will help the local governments improve their capacity to raise their own finance,” Mr. Dominguez said during the board’s first meeting on May 18. The IGB will meet every two months.

Once a more integrated and reliable valuation database for properties is established, BLGF’s Mr. Alvina said this could provide better benchmarks as it captures the true market value of land.

The Philippines’ share of property tax collection to the country’s economic output lags behind its Asian peers, he added.

Mr. Alvina said the country’s collections only accounted for 0.5% of GDP in 2019, roughly similar to Thailand, but lower than Singapore’s 2% ratio, Japan’s 2.5% and South Korea’s 3%.

It is also far from the standard of 2% property tax-to-GDP ratio set by the Organization for Economic Cooperation and Development (OECD).

A bill reforming the country’s property valuation system is part of the comprehensive tax reform program of the Duterte administration. — Beatrice M. Laforga

DoE orders speedy NGCP deals for power buffer

June 23, 2021 | 12:07 am

THE Department of Energy (DoE) has ordered National Grid Corp. of the Philippines (NGCP) to speed up the acquisition of the required ancillary services (AS) to ensure the electric grid’s reliability.

Signed by Energy Secretary Alfonso G. Cusi, the “advisory” was issued on June 21, or less than a week after the grid system operator announced that it would hold a competitive public bidding for the supply of AS or power reserves to secure the “best value” for consumers.

Separately on Tuesday, the Energy Regulatory Commission (ERC) said that it had begun the virtual inspections of NGCP’s transmission facilities, the results of which will form part of the commission’s compliance review.

Citing Republic Act No. 9511 or the law granting NGCP’s franchise, the Energy department directed the privately led firm to “expedite the procurement of the required reserves to ensure the grid’s secured and reliable operations.”

In the advisory, NGCP is required to make available 4% of the total hourly demand of the regulating reserves or the needed capacity to balance the fluctuations between power supply and load.

It must also have contingency reserve levels — or the energy capacity necessary to automatically adjust to a sudden reduction of generation output or tripping of generating unit — equivalent to the “maximum capacity among the largest synchronized generating unit, a transmission element or power import from a circuit interconnection.”

NGCP was also told to have dispatchable reserves, which will replenish contingency reserves, with the maximum capacity “among the second largest synchronized generating unit, a transmission element or power import from a circuit interconnection.”

The DoE earlier flagged NGCP for not having enough firm-contracted reserves as of end-2020.

In its latest advisory, the DoE also ordered NGCP to ensure ample reactive power support AS (RPSAS), which must be determined a day ahead, and black start AS (BSAS), which involves the contracting of at least two generation units per power restoration highway and one available unit at any given time.

Reactive power ensures quality and stability of the grid while black start service makes sure that the grid can be revived immediately after a collapse.

The department also gave details on procuring reserves through firm-contracted arrangements, reiterating that the system operator is required to enter into these agreements as mentioned by a circular issued in 2019.

“The NGCP and generation companies (or) ancillary service providers (ASP) may negotiate the conversion of non-firm ASPA’s (ancillary service procurement agreements) to firm ASPA’s, pursuant to the system operator’s responsibility,” the advisory read.

After reaching an agreement, the ASP and NGCP must seek the approval of the ERC, the DoE said, adding that “all converted ASPA’s shall follow all provisions of existing ERC-approved ASPA’s.”

Meanwhile, RPSAS and BSAS procurement should be made only through firm contracts.

The department gave NGCP 30 days to convert all of its non-firm ASPA’s to firm ASPA’s, upon receipt of the advisory.

The DoE said that the ERC is in charge of issuing directives to NGCP on its full compliance in the procurement of sufficient AS levels, fast-tracking decisions and approvals related to reserve levels; imposing penalties for non-compliance; and enforcing the relevant policies and regulations.

The advisory was shared on the department’s website on Tuesday.

NGCP President Chief Executive Officer Anthony L. Almeda previously said that procuring reserves on either firm or non-firm arrangements will not solve the recurring brownouts or power interruptions.

“What we have is a supply and not a distribution problem. For the grid to effectively address imbalances between supply and demand, we need to increase the power capacity of the country to meet rising demand as we start to recover and fully reopen the economy,” he said.

VIRTUAL INSPECTIONS
In a statement on Tuesday, ERC Chairperson and Chief Executive Officer Agnes VST Devanadera said that the ongoing inspections will cover the grid operator’s facilities across the three major islands.

Sought for comment, ERC Commissioner-in-Charge Floresinda G. Baldo-Digal told BusinessWorld that eight transmission facilities were inspected on June 10.

Some activities conducted during the virtual inspections include document verification, oculars, and discussions with NGCP workers.

ERC explained that the virtual inspections will form part of NGCP’s compliance review where the system operator is evaluated in terms of its compliance with the rules, sufficiency of its infrastructure, and the accuracy and reliability of its information, among others. — Angelica Y. Yang

San Miguel to issue first tranche of shelf-registered bonds in July

June 23, 2021 | 12:06 am

SAN Miguel Corp. (SMC) said that it will be issuing the P30-billion first tranche of its shelf-registered P50-billion fixed-rate bonds next month.

The first tranche consists of P20-billion fixed-rate bonds, with an oversubscription option of up to P10 billion. It is comprised of six-year Series I bonds due 2027 with a 3.3832% per annum rate with a put option or repricing on the third year and optional redemption on the fourth year or the fifth year.

“The bonds will be listed in the Philippine Dealing & Exchange Corp. on the issue date, July 8, 2021,” SMC said in a disclosure to the stock exchange on Tuesday.

Meanwhile, the offer period will run from June 22 until June 28 at 5 p.m., or any other date agreed between San Miguel and its joint lead underwriters and bookrunners.

San Miguel received approval for the registration statement of the company’s shelf-registration of P50-billion fixed-rate bonds and the permit to sell the first tranche from the Securities and Exchange Commission dated June 21.

The Philippine Rating Services Corp. gave the offer bonds a PRS Aaa rating, the highest corporate credit rating on the PRS scale, which means the company has a “very strong” capacity to meet financial obligations.

SMC aims to raise P19.74 billion from the base offer. Should the oversubscription option be exercised, the company will net an additional P9.88 billion.

Proceeds are said to be used to re-dominate existing dollar-denominated obligations of the company.

On Tuesday, shares of SMC at the Philippine Stock Exchange went down by 1.13% or P1.30 to close at P114.20 each. — Keren Concepcion G. Valmonte

Development of NFTs and crypto art raise many questions

June 23, 2021 | 12:05 am

SCREENSHOT of Satoshi The Creator – Genesis (by L. Buenaventura and J. Delbo) — NIFTYGATEWAY.COM

A COLLABORATION on a minted non-fungible token (NFT) by Filipino artist Luis Buenaventura III and Argentinian comic book artist Jose Delbo began through conversations on Twitter.

“He shared an idea that he had about this particular superhero character. And then he asked me if I wanted to collaborate on it — create the animation, the video, and the sound design,” Mr. Buenaventura recalled of the beginning of their collaboration.

“He is 87 years old. He started drawing comics, Wonder Woman, Transformers, [and] a lot of DC stuff. He started drawing that in the ‘50s and ‘60s,” Mr. Buenaventura said of Mr. Delbo.

“I’ve never met him in real life. He lives in Buenos Aires in Argentina, and I live in La Union in the Philippines… But he is old enough to be my grandfather. In fact, his son is older than me,” he added. “That’s one of the things that makes him very unique is he is probably the oldest NFT artist.”

In April 2021, Messrs. Buenaventura III and Delbo sold 222 editions of Satoshi The Creator – Genesis for $1,999 each on the Nifty Gateway platform.

Art Fair Philippines, which went online on May 6 to 15 this year, highlighted digital arts in a section called the “Metaverse,” with a NFT 101 Showcase. During the virtual fair, visitors were introduced to the local and international digital art scene through various talks, which are available on the Art Fair Philippines’ YouTube page.

Bought through cryptocurrency in a digital ledger called a blockchain, NFTs are one-of-a-kind digital properties such as jpeg files, GIFs, music, and short videos. The sale of limited NFTs or through auctions recently gained traction in the mainstream. Notable NFT platforms include SuperRare, Nifty Gateway, Rarible, and Foundation.

During a panel discussion with ArtReview magazine titled, “NFT: A New Revolution or the Emperor’s New Clothes?,” Dubai-based arts writer and editor Rahel Aima said that NFTs open up access not only to who can sell work but also to who is allowed to buy it.

“As an art critic, I tend to think a lot about where the work begins and ends and how much the context informs and functionality completes the work,” Ms. Aima said. “No matter what their material is, artworks aren’t stable. They’re contingent, messy, constantly building and unraveling. And I think this applies to digital works too. What an NFT does is to point to a single iteration of a work and freeze it forever in time.”

Art historian, critic, and curator at Albright-Knox Art Gallery (New York) Tina Rivers Ryan stressed that the beginning of digital arts should be part of the conversation in understanding developments in the growing technological system.

“As we know now, no technology is neutral. One of my fundamental responses to the rise of the NFTs to try to understand the way in which crypto art is embedded within this larger technological system that does have an ideology and economic history,” Ms. Ryan said.

“It’s very important that people understand that working with new technologies, even with digital technologies, has a history that’s half a century old at this point,” she said, noting that digital arts have a history dating back to the 1960s.

With the advent of digital arts come the questions, “What exactly is an aesthetic object? Who gets to make it? And how does it circulate?”

Ms. Ryan cited the first exhibition of computer-generated images which was mounted in New York in 1965. It was called “Computer Generated Pictures” at the Howard Wise Gallery. It featured works by two scientists, Bela Julesz and Michael Noll, who worked at Bell Laboratories.

Noll recounted in a memoir, Ms. Ryan explained, that he and Julesz argued over whether they should title their show: “Computer-Generated Art” or “Computer-Generated Pictures.”

“In other words, this sort of anxiety about the aesthetic status or validity of the digitally made art object as has been going,” Ms. Ryan said. “There’s so much to learn from that history. And it’s very frustrating to see none of that being part of this conversation.”

Ms. Ryan also clarified that purchasing an NFT does not mean it transfers the ownership of the asset to the buyer.

“In many cases, the legal transaction of buying an NFT according to the terms and conditions of the platforms is that you’re not actually acquiring possession or ownership of the associated asset,” she said. “You’re literally just buying the NFT that points to that asset, which means that the responsibility for acting as a steward and conserving that asset is not being passed from the artist to anybody else.”

NFTS IN SEA, THE PHILIPPINES
In the Philippines, the crypto art scene is slowly gaining traction in the mainstream art market.

“There are definitely Southeast Asian (SEA) artists that are rising to commercial success, generally. [What] we are doing in Narra Art Gallery is trying to help that funnel of getting artists started in Southeast Asia,” Narra Art Gallery co-founder Colin Goltra during the virtual tour of the gallery. Narra Art Gallery is a digital art gallery on Decentraland — a virtual world made possible by the blockchain.

Mr. Goltra said that their gallery has a “First Mint Fund” which helps the artist mint their first NFTs. “We’re willing to subsidize and pay the minting costs of your first NFT and get you started on the platform,” he said.

In his talk called “How to Become a crypto artist,” NFT artist Luis Buenaventura mentioned the basic mechanics of notable NFT marketplaces or platforms.

Mr. Buenaventura explained that platforms such as MakersPlace and Nifty Gateway have an approval process prior to minting NFTs. “What that means is an artist can’t just show up and start selling there… Now, there’s so many artists that are trying to get into this stuff right now, there are very pessimistic estimates of how long it will take you to apply and then get approved,” he said. The approval may take between four to six weeks (for MakersPlace), or five to six months (for Nifty Gateway).

The advantage of entering platforms that require approval is that “they (marketplaces) spend marketing money on promoting the artists,” he said.

Meanwhile, marketplaces such as OpenSea and Rarible require no approval prior to minting.

The cost of minting an NFT also varies and can range from $50 to $300.

“NFTs have to compete for space… the price is different on any given day because sometimes, there is congestion on the network, sometimes there is no congestion,” Mr. Buenaventura said.

“If you’re trying to hit the low end and you don’t want to spend too much money on just the act of minting your piece, the best recommendation I can make is Saturday evenings (Manila Time),” he added.

That payment for a sold NFT is in the digital currency Ethereum, he said. “It is not dollars; it is not pesos. But it has its own exchange rate in the same way as dollars have against pesos.”

For those who want to get started in crypto art, he recommended building a network with artists on social media. Mr. Buenaventura said that he began most of his network on Twitter where he currently has about 9,000 followers.

“You can’t just have thousands of Twitter followers and expect your art will do well. It needs to be the correct type of Twitter (#cryptoartPh) followers,” he said — those who know about NFT art and crypto currencies.

“The type of followers that you have matters more than the number of followers you have.”

ENVIRONMENTAL CONCERNS
In May 2021, CBS News wrote that Ethereum is currently estimated to annually consume “roughly 44.94 terawatt-hours of electrical energy, which is comparable to the yearly power consumption of countries like Qatar and Hungary.” It added that, “It is responsible for about 21.35 metric tons of carbon dioxide released each year, comparable to the carbon footprint of Sudan.”

On separate Art Fair talks, the artists said that there are misconceptions about the energy usage of blockchains.

Mr. Buenaventura said that it is a limited perspective to consider minting in blockchains as the cause of global warming. “This technology is work in progress, and the people that are working on it are trying to make it as sustainable as possible because we’re building this stuff for the long-term,” he said.

“You have to think of the relative energy consumption whether you are minting an NFT, using Google and Facebook servers,” co-founder of Narra Art Gallery Gabby Dizon said. He added that NFTs are a low single digit percentage of the use case of the network. “Doing NFTs is a very small part of that and is negligible compared to the cost of the entire network.”

NFT marketplace SuperRare is looking into more efficient alternatives with the development of ETH2 which aims to increase Ethereum sustainability. Other sustainable blockchain options in development are Polygon (FKA Matic) and Polkadot.

As for questions on whether NFTs will be in the art scene in 10 years, Mr. Buenaventura’s quick and honest answer is, “I don’t know.”

“The thing that you have to remember about crypto in general — it’s a sunrise industry. You can’t see beyond the horizon just yet.”

Like watching a sunrise, he said, “You’re looking, [but] can barely see what’s actually going on, on the horizon. You have to wait until the sun is actually risen.” — Michelle Anne P. Soliman

Treasury makes full award of bond offer on strong demand

June 23, 2021 | 12:05 am

THE BUREAU of the Treasury fully awarded the 10-year bonds it offered on Tuesday amid strong demand from the market. — BW FILE PHOTO

THE GOVERNMENT made a full award of the reissued Treasury bonds (T-bonds) it auctioned off on Tuesday as its average rate dropped on strong demand from the market.

The Bureau of the Treasury (BTr) borrowed P35 billion as planned from reissued 10-year T-bonds, which have a remaining life of five years and 10 months.

Total bids for Tuesday’s offering stood at P65.091 billion, nearly twice as much as the auction volume and also more than the P50.25 billion in tenders seen when the same notes were last offered on March 9.

The 10-year bonds fetched an average rate of 3.185%, down 54.7 basis points (bps) from 3.732% previously.

At the secondary market, before the auction, the 10-year tenor fetched a yield of 3.8374%, the PHP Bloomberg Valuation Reference Rates published on the Philippine Dealing System’s website showed.

The BTr opened its tap facility to raise another P5 billion via the debt papers to accommodate the excess demand and take advantage of the low yield.

National Treasurer Rosalia V. de Leon said investor demand was boosted by recycled funds after some government issuances matured recently.

The market also wants higher returns so they are turning to long-dated bonds for yield pickup, Ms. De Leon added.

Meanwhile, a bond trader said the result of Tuesday’s 10-year T-bond auction fell within market expectations “as players are now on a wait-and-see mode ahead of the Monetary Board meeting.”

The Bangko Sentral ng Pilipinas (BSP) will likely keep benchmark interest rates steady on Thursday to support the “fragile” economic recovery, with inflation improving on the back of government initiatives to ease supply issues, analysts said.

A BusinessWorld poll held last week showed 14 out of 16 analysts expect the central bank to retain its key policy rate at its record low of 2% at the Monetary Board’s fourth policy meeting for this year on June 24.

Analysts said it is crucial for the BSP to retain its accommodative stance in the meantime as the economy’s rebound from the impact of the coronavirus pandemic still has a long way to go.

The BSP slashed benchmark rates by a cumulative 200 bps last year. Borrowing costs have been at record lows since the Monetary Board’s last adjustment, which was a 25-bp cut in November.

Meanwhile, headline inflation rose by 4.5% for the third straight month in May. While this was slower than the two-year high of 4.7% in February, it exceeded the central bank’s 2-4% target range.

Year to date, headline inflation averaged at 4.4% as of May. The BSP expects inflation for 2021 and 2022 to reach 3.9% and 2.8%, respectively, within target but quicker than the 2.6% print in 2020.

The BTr wants to raise P215 billion from the local debt market this month: P75 billion via weekly offers of Treasury bills and P140 billion from weekly auctions of T-bonds.

The government is looking to borrow P3 trillion from domestic and external sources this year to help fund a budget deficit that is expected to hit 9.3% of the country’s economic output. — Beatrice M. Laforga

Shakey’s offers plant-based ‘chicken’ nuggets

June 23, 2021 | 12:05 am

SHAKEY’S PIZZA Asia Ventures, Inc. (SPAVI) introduced plant-based “chicken” nuggets to its menu in partnership with unMeat, a local brand that offers meat-free products.

The listed company said in a stock exchange disclosure on Tuesday that “the Goood Nuggets” will be sold nationwide at P179 and is produced in collaboration with unMeat, which is under SPAVI’s sister company, Century Pacific Food, Inc. (CNPF).

“The Goood Nuggets look, taste, and feel like chicken nuggets but are completely meat-free. These nuggets are baked, not fried, and are loaded with plant-based protein, making them healthier and friendlier to the environment,” SPAVI said.

Vicente L. Gregorio, SPAVI president and chief executive officer, said the plant-based nuggets come after the company’s “Goood Burger” plant-based burger launched last year.

Mr. Gregorio added that the products offer customers with healthy meat alternatives made of non-genetically modified organism (GMO) plant-based ingredients that have no cholesterol and trans-fat content.

“At Shakey’s, our guests’ needs are a top priority. They have been looking for healthier, better-for-you, and better-for-the-planet products, so we co-created ‘The Goood menu’ with unMeat to deliver these at an accessible price point,” he said in the disclosure.

“As we carry on our path to recovery from this pandemic, we remain steadfast in our commitment to wow our stakeholders by becoming a more responsible food company. We will continue to integrate sustainability into our business and boost our efforts in areas that will add value to our guests and stakeholders, our Company, and the communities we serve,” he added.

For the first quarter, SPAVI posted a 75% year-on-year decline in net income to P29 million against P114 million in 2020. The company’s revenues for the quarter fell 30% to P1.28 billion from the P1.83 billion logged in the same period last year.

On Tuesday, shares of SPAVI at the stock exchange improved 0.90% or seven centavos to finish at P7.88 apiece. — Revin Mikhael D. Ochave

Del Monte net income up 33% as sales rise

June 23, 2021 | 12:04 am

DEL MONTE Philippines, Inc. reported a 33% climb in profits for its fiscal year ending on April 30 on the back of improved sales, favorable mix, decreased expenses, and efficiency.

The company said its net income went up to P4.6 billion from P3.47 billion last year, while gross profit went up by 21.5% to P10.4 billion.

“We focused on adapting to consumer trends through product innovation and digital marketing, while at the same time, strengthening our operations and maximizing efficiencies,” Del Monte Philippines Chief Executive Officer Joselito D. Campos said in a statement on Tuesday.

Sales improved by eight percent to P34.5 billion, two-thirds of which were generated in the Philippines. Sales in the country grew by 10% to P19.2 billion as retail sales offset the decline in food service sales.

Products in the company’s convenience cooking and dessert, healthy beverages, and snack segments saw increased sales volume.

“The Company’s spaghetti sauce, pasta, ketchup and packaged fruit products performed well as a result of an increase in home cooking, anchored on quality and nutrition, and communications targeting specific use recipes and occasions,” Del Monte Philippines said.

Its newly launched fruit and yogurt-flavored Del Monte Mr. Milk drink and Del Monte Potato Crisp Biscuits saw “strong annual sales levels” despite the company’s minimal spending on new product marketing.

Meanwhile, the company’s premium fresh fruit segment saw an improved sales volume but having a strong peso against the US dollar cut its revenue growth to one percent.

The fresh fruit segment generated a sales growth of 24% in the second half due to the easing of logistics and retail restrictions in China and other North Asian markets. This allowed the company to meet the demand for fresh pineapples and to adjust product prices.

Affiliate firm Del Monte Foods, Inc. released its deluxe gold pineapple, a “premium” pineapple grown by Del Monte Philippines. The company said it is a “top 3 exporter” of fresh pineapple to growing North Asian markets.

Export sales of packaged food and beverages grew by 15% as it accounted improved sales in the Americas, North Asia, and Southeast Asia, with the US as its main sales driver.

The company attributed the increased at-home consumption of international consumers to lockdown restrictions brought by the health crisis.

In April, Del Monte Philippines filed a registration statement with the Securities and Exchange Commission for the public offering of 699.33 million secondary common shares, with an overallotment option of up to 104.899 million common shares.

The offer consists of existing shares owned by the subsidiaries of listed Del Monte Pacific Ltd.

With shares priced at P54.80 apiece, Del Monte Philippines said it aims to raise as much as P44 billion from the offer. The company said proceeds will be used by parent Del Monte Pacific to repay debts and for the redemption of preferred shares.

On Tuesday, shares of Del Monte Pacific at the stock exchange surged by 6.62% or 98 centavos to close at P15.78 each. — Keren Concepcion G. Valmonte

HSBC, Standard Chartered eye $460M in fee windfall on China-Hong Kong investment link

June 23, 2021 | 12:04 am

GLOBAL BANKS including HSBC Holdings Plc and Standard Chartered Plc are ramping up hiring to tap into China’s latest market opening — a new investment link with Hong Kong that could yield almost $500 million a year in fees.

The investment scheme will allow bank customers in nine southern Chinese cities such as Shenzhen to invest across the border in Hong Kong and vice versa, further integrating the $1.7-trillion Greater Bay Area economy.

The “Wealth Connect” plan, set to launch in the second half of the year, could open up 3 billion yuan ($464 million) in annual fees for global banks and their domestic rivals including Bank of China Ltd., according to Bloomberg Intelligence estimates.

“This is a breakthrough for the retail investor to open up new ways of investing on the other side, across the boundary,” said Daniel Chan, head of the Greater Bay Area at HSBC, which is hiring 300 to 400 people in Hong Kong for its regional expansion. “We are in full swing preparation.”

The program is expected to start slowly. Mainland residents will initially face a 1 million yuan ($154,600) quota for investments in Hong Kong, meaning it will target the mass affluent rather than the super rich. The investments will likely be limited to safe products, which may not appeal to many Chinese investors who prefer higher-yielding bets.

The plan won’t provide “a significant benefit in the short term” given these initial caps, said Paul McSheaffrey, a partner at KPMG in Hong Kong. “However, in the medium term, as more products are added, greater amounts that people can invest, then absolutely we will start to see that coming through.”

The sheer size of the powerhouse region of 70 million people with more than $400 billion of investable assets is hard to ignore, linking the finance hub of Hong Kong with the technology center of Shenzhen and the manufacturing and transport clout of Guangzhou.

“It’s a game of numbers in some ways,” said Hong Kong-based Samir Subberwal, head of consumer, private and business banking for Asia at Standard Chartered, which is hiring or promoting 3,000 managers for its Asia wealth business over five years. “The total revenue pool on account of this could be quite large.”

SOUTHBOUND
The proposal will open a northbound channel for Hong Kong and Macau residents to invest in onshore financial products and a southbound channel for eligible Chinese residents to invest offshore. Over 80% of mainland investors in the Greater Bay Area plan to invest in Hong Kong through the wealth management connect, according to a survey conducted by HSBC and Nielsen Company (Hong Kong).

Mainland clients expect a 13% annual investment return, on average, in Hong Kong fund products through the wealth connect, according to a survey by the Hong Kong Investment Funds Association and Cimigo.

Both investment routes will operate with a closed-loop currency conversion regime, meaning that proceeds from the redemption of products will be remitted the same way, similar to stock and bond connect programs. There will be a 150 billion yuan cap in each direction.

Standard Chartered sees a “huge opportunity” particularly for southbound investments, as mainland investors’ access to global wealth products lags behind their Hong Kong peers, Subberwal said. Based on the bank’s internal estimates, up to 1 million customers will look at investing through the southbound route.

According to consulting firm Z-Ben Advisors Ltd., mainland investors are also more familiar with Hong Kong financial products, which is likely to fuel interest in southbound investments.

Banks will need to have branches on both sides of the border to join the plan, or partner with another bank. Given travel restrictions due to the pandemic, onshore banks can act as witnesses for new customers making southbound investments, according to the draft plan. There was no mention of a similar option for Hong Kong investors looking to invest in China.

Given their extensive branch networks in the area, China’s four biggest banks including Industrial & Commercial Bank of China Ltd., along with HSBC and its Hong Kong unit Hang Seng Bank Ltd. could benefit the most from the program, according to Bloomberg Intelligence analyst Francis Chan.

“The key players on both sides of the border would be the ones leading the game because of their existing customer base,” said Gilbert Lee, head of strategy and planning at Hang Seng Bank, which has 14 branches in the mainland area near Hong Kong. “We have put a lot of resources into making sure we are ready.”

As the financial hub looks at other cross-border programs including a so-called Insurance Connect plan that could allow Greater Bay residents to buy Hong Kong policies remotely, banks are looking to draw on their experience from the wealth link. The stock connect links between China and Hong Kong, first launched in 2014, has gained traction with record southbound flows in 2020.

“If the banks can provide a good track record through the wealth management connect, they can also apply the same approach with the insurance connect,” Mr. Lee said. “So it’s a very important milestone for connect schemes.” — Bloomberg

DDB urges ‘balanced approach’ in treating substance abuse

June 23, 2021 | 12:04 am

IN CONTRAST to President Rodrigo R. Duterte’s hardline stance on drugs, government agencies called for a holistic approach to rehabilitating drug personalities who have surrendered.

“The government approach is transitioning to a more balanced approach to substance use,” Dangerous Drugs Board (DDB) Undersecretary Benjamin P. Reyes said at the first National Substance Use Science Policy and Information Forum held this June. “We already have policies in place to have this implemented in all local government units (LGUs) in the country.”

Community-based rehabilitation programs (CBRPs) focus on “healing of the body, mind, and soul through counseling and other therapeutic sessions.” Based on data from the Department of Local and Interior Government, 723 cities and municipalities already implement CBRPs. After completing rehabilitation, patients are reintegrated into their communities through an aftercare program conducted by the Department of Social Welfare and Development.

Other government initiatives include the development of detoxification package under the Philippine Health Insurance Corporation, as well as inpatient and outpatient packages for substance users. A substance abuse helpline has been available since June 2020 to provide assistance to callers with substance use disorders.

“But government alone can’t implement such a big intervention program. We call on everyone to remain vigilant and help government efforts address this issue,” said Mr. Reyes, who added that DDB has asked several non-government organizations, as well as the Rotary Public, for assistance.

TRANSNATIONAL PROBLEM
The drug problem is not just a drug supply, law enforcement, or public health problem, said Olivier Lermet, senior policy advisor of the United Nations Office on Drugs and Crime (UNODC) in the Philippines.

“This global drug problem is a VUCA problem: volatile, uncertain, complex, and ambiguous,” he said. “If it stops somewhere, it reappears elsewhere. There is not one corner of the world unaffected by illegal drugs. It is transnational,” he said.

Acknowledging that drug dependence is a complex, multifactorial health disorder characterized by a chronic and relapsing nature is part of the solution added Mr. Lermet.

The senior policy advisor also recognized positive developments in the Philippine response, including the agreement between the Department of Health (DoH) and World Health Organization on protocols of treatment; the drug demand reduction section in the Philippine anti-illegal drugs strategy, which aligns with recommendations from the United Nations General Assembly Special Session on the World Drug Problem; and the expansion of treatment for people who use drugs, especially in community-based interventions.

In the Philippines, there are 4,840 beds in 64 drug rehabilitation centers and 16,751 individuals with severe substance use disorders, according to Dr. Jose Bienvenido M. Leabres, program manager of the Dangerous Drugs Abuse and Treatment Program of the DoH.

“We need — this 2021 — an additional 11,911 beds. Once we have the DoH-accredited facilities, we will have added an additional 1,282 beds, decreasing our gap to 10,629,” he said.

THRIVING TRADE
A UNODC report titled “Synthetic Drugs in East and Southeast Asia: latest developments and challenges 2021” revealed that methamphetamine seizures increased substantially despite the coronavirus disease 2019 (COVID-19) pandemic.

“Organized crime groups have been able to continue the expansion of the regional synthetic drug trade — in particular in the upper Mekong and Shan State of Myanmar — by maintaining a steady supply of chemicals into production areas despite border restrictions that have impacted legitimate cross border trade,” said Jeremy Douglas, UNODC regional representative for Southeast Asia and the Pacific. “While the pandemic has caused the global economy to slow down, criminal syndicates that dominate the region have quickly adapted and capitalized.”

Mr. Lermet said it’s difficult for nations to keep pace and be on top of this evolving drug market. “I call it a market because that’s an important aspect of it. It’s a $60 billion market in our region.”

While seizures of crystal methamphetamine in the Philippines in 2020 have increased compared to 2019, the UNODC report also pointed out that admissions for methamphetamine use in the country more than halved. This is partly due to the COVID-19-related lockdown restrictions, the suspension of admission during the height of the pandemic, and a shift in government priorities from rehabilitation to COVID-19 response.

The anti-narcotics campaign, which topped Mr. Duterte’s agenda pre-pandemic, has seized a total of P40.39 billion worth of illegal drugs from the start of the drug war on July 2016, to November 2019, according to government data. More than 150,000 anti-drug operations, conducted since Mr. Duterte assumed office until November 2019, have also led to the arrest of 220,728 drug personalities and the deaths of 5,552 drug suspects.

The Duterte administration rejected the recommendation by the International Criminal Court’s chief prosecutor to formally open a probe into the alleged crimes against humanity committed in Mr. Duterte’s war against drugs, saying the development is “legally erroneous and politically motivated.” — Patricia B. Mirasol

1...7,9047,9057,906...14,246 Page 7,905 of 14,246