‘Fifty drivers fight for one order’: Southeast Asia gig economy slammed by virus

June 11, 2020 | 4:06 pm

Drivers for ride-hailing apps like Gojek and Grab are struggling, with their income slashed by more than half as the pandemic batters Southeast Asia. — *REUTERS*

SINGAPORE/JAKARTA — Indonesian motorcycle taxi driver Aji chain-smokes and checks his smartphone constantly while waiting for orders by the roadside in downtown Jakarta on a hot June morning, but is staring at the prospect of another fruitless day.

Before the coronavirus outbreak hit, the 35-year-old father of four would ferry at least 20 passengers for a daily income of between $13 and $20 as a driver for homegrown ride-hailing app Gojek.

But when transportation services halted under a city lockdown, Aji considered it a good day if he got more than two food delivery orders, which pay him $0.70 each time. On some days, he has had none. Even with restrictions eased this week, he is struggling to feed his family.

“The situation is that there are many drivers but orders are few,” he said, asking to be identified only by his first name.

Eleven drivers for Gojek and Grab, which is backed by SoftBank Group, in Indonesia, Vietnam and Thailand told Reuters they’ve similarly struggled, with income slashed by more than half as the pandemic batters Southeast Asia.

And, disappointingly, for both drivers and the companies, an increase in food deliveries — forecast as a major growth area for both firms — has come nowhere near compensating for the losses in transport.

Even in Vietnam, seen as a recovery success story, drivers are reeling.

“The pandemic may cost me and many colleagues our vehicles, which we had bought using borrowed money,” said Grab car driver Tung in Hanoi, fearing that lenders may repossess the vehicles.

Unions representing Gojek and larger Singaporean rival Grab, Southeast Asia’s most highly valued startup at $14 billion, say thousands of drivers are in the same situation, especially in Indonesia, both firms’ largest market.

CORE PROMISE
Their plight threatens a core promise of both companies: that they can improve the lives of tens of millions of people across Southeast Asia even as they provide big paydays for their blue-chip corporate and financial investors.

Southeast Asian governments have warned millions could end up jobless as a result of the outbreak.

The two firms told Reuters they are supporting drivers with measures ranging from food packages and vouchers to low-interest bank loans and car rental rebates. But the crisis has also led them to cut the subsidies that have fueled their growth.

Doubts have also crept up about the ride-hailing model globally and on whether investors will continue pumping in massive funds into the startups.

Even before the pandemic, Grab and Gojek — like Uber and Lyft in the United States and other ride-hailing firms around the world — were operating at a steep loss.

Grab co-founder Tan Hooi Ling has warned the company may potentially face a “long winter.”

Both companies still have plenty of cash. One source with knowledge of the matter said Grab has $3 billion in reserves. Sources familiar with Gojek’s finances said it was finalising an over $3 billion investment round at a $10 billion valuation; Facebook and Paypal announced investments in Gojek’s fintech arm just last week, and it also counts Google and Tencent among its backers.

Each has avoided major layoffs so far, though Grab is implementing voluntary unpaid leave for staff and Gojek is reviewing its services. In the United States, Uber, whose Southeast Asia business was bought by Grab, said it would cut 23% of its workforce. “Transport has fallen off a cliff, food has held steady, while logistics went through the roof and online payments are high… so having a portfolio of products helps,” said Gojek Chief Operating Officer Hans Patuwo. “If we were only a transport company, I’d be quite bowled over.”

Executives and investors at both firms point to the resurgence of orders at Chinese ride-hailing company Didi Chuxing as cause for optimism.

“The rate of recovery will be mostly dependent on when government lockdowns end,” said Grab Operations Managing Director Russell Cohen, noting Grab’s transport business had previously been profitable in several markets.

The crisis has revived speculation among investors about a merger of the two firms, which sources say has been discussed in early 2020, but not led to serious talks.

Gojek said any reports of a merger are inaccurate. A Grab spokesman declined to comment.

FOOD DELIVERY
Grab and Gojek have long touted the fast-growing food delivery industry as a big opportunity. But with platforms taking only a 20%–30% commission that is shared with drivers, margins are slim. And growth did not materialize in every market during the lockdowns.

A restaurant chain CEO in Jakarta said food delivery had not picked up in Southeast Asia’s largest economy due to people cooking more at home and as most orders traditionally consisted of lunches for office workers, who are now at home.

Aji described food delivery in Indonesia for Gojek as a “fight,” with “sometimes 50 drivers for one order,” with Grab Vietnam drivers recounting similar experiences.

Even in Thailand, where orders jumped for both Grab and Gojek, profitability remains distant.

According to an April interview with local media by then Grab Thailand chief Tarin Thaniyavarn, food delivery was fast-growing but loss-making during the pandemic, with costs mounting and competition steep.

Tarin said Grab Thailand lost more than $22 million in 2018, while rapid growth led to losses nearly doubling in 2019.

“Imagine last year’s loss-making business growing rapidly in a short period of time, while the business that used to make profits for us is nearly gone,” he said. — Reuters

The contract that could: How service contracting can improve public transportation and help Filipinos

June 11, 2020 | 11:11 am

What can be done to help address the transportation woes of a city that loses P3.5 million per day due to traffic congestion? In a Q&A livestream—titled “A Better Normal” and organized by podcast platform PumaPodcast and Asia Society—urban planner Benjie de la Peña proposes a new way jeeps and buses can ply Metro Manila’s roads more efficiently: have the government rent them.

He’s referring to service contracting, an “agreement whereby a contractor supplies time, effort, and/or expertise instead of a good”. In this case, the contractor is the transport operator, offering a transport service defined by an agreed number of kilometers and trips per day. The government, their client, will pay the operators a fixed amount and collect the fares from passengers themselves, possibly through an automated system.

Currently, many jeepneys operate on a boundary system, where the driver’s profit is whatever’s left after gas expense and vehicle “rent” to the operator. This puts pressure on the driver to take on as many passengers as possible per trip, in as many trips as they can make for the day. This incentivizes poor road behavior, like stopping to load passengers at non-designated areas, adding to our traffic problems.

Compounding this issue is the general community quarantine (GCQ), these jeepneys are still not allowed, creating unrest among drivers as they struggle to feed their families. This also makes commuting more challenging for the public, with some lining up at rail stations as early as 4:00 A.M. to ensure that they get to work on time.

By employing service contracting, drivers are assured a fixed salary. And since the number of passengers per trip is no longer a concern, this makes the current general community quarantine (GCQ) period a good transitional phase for service contracting until it becomes, potentially, a permanent arrangement.

“[The driver’s] job is to pick up the passengers but most importantly, [their] second job is to fulfill performance requirements: is it clean, is it safe. And in the time of COVID, [they] can say, ‘I can only take on half the amount of passengers,’” said de la Peña.

While several groups welcomed the proposal, some suggested that it wouldn’t come without its own bumps in the road. Atty. Zona Tamayo of the Land Transportation Franchising and Regulatory Board (LTFRB) mentioned the apprehension of some drivers to transition to a new system. “We can’t blame them naman po… because they’ve been doing this for, let’s say, the past 30 years. Some even inherited the operation or driving of the jeep,” she said.

ASec. Tony Lambino of the Department of Finance cited a huge number of competing requests for the government’s stimulus package, a barrier considering the proposal’s P32 billion price tag for a three-month run. “Our deficit is already higher than 8% of GDP, and the bills that we’ve seen in terms of economic stimulus plan, let’s just say that they blow up the deficit,” he said.

But for de la Peña, it could be a measure well worth the price.

“Competitiveness is not just about our tax levels, because we can have the lowest taxes in the world, but if our workers are exhausted and there’s a high cost to business not because of the taxes but because of the transportation in doing business, then we’re not competitive,” he said.

PHL external trade plunges in April

June 11, 2020 | 12:34 am

THE country’s trade deficit narrowed to its lowest in over five years in April. — *BW FILE PHOTO*

PHILIPPINE international trade performance further shrank in April as the coronavirus disease 2019 (COVID-19) pandemic and the global lockdown restrictions constricted trade activity, the Philippine Statistics Authority (PSA) reported on Wednesday.

Preliminary data by the PSA showed merchandise exports in April contracted by 50.8% to $2.78 billion compared to a revised 24.7% decline in March and a 3.1% uptick recorded in April 2019.

Merchandise imports also plummeted 65.3% to $3.28 billion in April, worsening from a 26.2% decline in March and a 2.9% growth posted in the same month last year.

The April figures marked the biggest year-on-year declines in exports and imports based on available PSA data, surpassing the previous lows of 40.6% for exports in January 2009 and 37.1% for imports in April 2009.

Moreover, the trade figures in April marked the lowest levels since the $2.51 billion worth of exports in February 2009 and $3.06 billion of imports in April 2009.

The trade deficit in April stood at $499.21 million, significantly lower than the $3.80-billion shortfall in the same month last year. The April deficit was the narrowest in more than five years, or since the $257.18-million trade gap in March 2015 and the $64.95-million trade surplus in May 2015.

The country’s total external trade in goods — the sum of export and import goods — was $6.07 billion in April, 59.8% less than the $15.10-billion total in the same month last year. So far, total trade amounted to $45.06 billion, 23.1% less than $58.59 billion in January-April 2019.

For the four months to April, exports were down 16.7% to $18.52 billion, well below the four-percent drop expected this year by the Development Budget Coordination Committee (DBCC), an interagency body that sets macroeconomic and fiscal assumptions of the government.

Meanwhile, the import bill slid by 27% to $26.54 billion on a cumulative basis against the DBCC’s target of a 5.5% contraction for the year.

Year to date, trade balance amounted to an $8.03-billion deficit, narrower than the $14.14-billion trade gap in 2019’s comparable four months.

Export of manufactured goods, which account for around 74% of the total exports that month, declined 55.9% year on year to $2.05 billion from $4.66 billion last year. Total agro-based products were also down 36.4% to $302.91 million in April from $476.22 million previously.

Electronic products, which made up more than half of the total April export sales, plunged by 48.6% to $1.6 billion. Semiconductors, which account for more than four-fifths of electronic products, slumped 41.9% to $1.33 billion.

Exports of forest and mineral products likewise fell by 67.2% and 10.5%, respectively to $7.87 million and $317.73 million. On the other hand, exports of petroleum products amounted to $56.2 million, more than 18 times the $3.03 million in April 2019.

On the import side, raw materials and intermediate goods, which contributed 44.7% to the goods imports bill in April, shrank 58% to $1.47 billion from $3.49 billion in the same month last year.

Capital and consumer goods also went down 58.2% ($1.23 billion) and 76.1% ($387.33 million) in April, respectively. Imports of fuels, lubricant and related materials likewise dropped 87.4% to $163.74 million.

April’s decline, according to the National Economic and Development Authority (NEDA), was due to production supply chain bottlenecks and reduced external demand amid the pandemic and the subsequent lockdown in Luzon.

“For faster trade growth recovery, the government needs to intensify its efforts by prioritizing structural and logistics reforms that will serve as the backbone of ongoing efforts to improve the business environment and create development opportunities,” acting Socioeconomic Planning Secretary and NEDA Director-General Karl Kendrick T. Chua said in a statement.

“The Philippines… experienced a much sharper decline in exports and imports in April [compared to March]… as the world’s biggest economies such as the US, Europe, and other Asian countries (including the Philippines’ biggest export markets and sources of imports)… entered into lockdowns as well, thereby fundamentally cutting exports and imports of the Philippines as aggravated by disruptions in logistics and supply chains locally and globally,” said Rizal Commercial Banking Corp. (RCBC) Chief Economist Michael L. Ricafort said in an e-mail.

Mr. Ricafort said the sharp drop in global oil prices in April that “reflects the dramatic decline in demand for oil at the height of the lockdowns may have also helped narrow the country’s trade deficit.”

In a separate e-mail, UnionBank of the Philippines, Inc. Chief Economist Ruben Carlo O. Asuncion attributed the steep declines to “non-pharmaceutical interventions” (NPI) that were implemented in April to control the spread of COVID-19.

“Aside from the fact that a lot of our major trading partners were also implementing NPIs, China, a significant global trading, was only then starting to lift up economic restrictions, including trade-related ones,” Mr. Asuncion said.

“For the succeeding months, it is expected that trade will cautiously recover as NPIs are lifted across countries in Asia, including our significant trading partners. However, trade environment and demand will continue to be sluggish as the economies continue to deal with COVID-19 and subsequent trade-weakening restrictions,” he added.

Mr. Asuncion said the narrowing of the trade balance, and thus the overall view on trade “will not be able to translate to more economic activity.”

“A clear recovery of trade demand and a better global trading environment is definitely needed,” he said.

In a note to reporters, ING Bank N.V. Manila Branch Senior Economist Nicholas Antonio T. Mapa said the demand for imports would likely resume in the next few months, but the same could not be said for the country’s exports.

“The government has pointed to the resumption of its ‘Build, Build, Build’ infrastructure program as a means to combat the fallout from the COVID-19 pandemic and we expect import growth to return in the coming months. Inbound shipments for construction materials, fuel and capital machinery used for construction will likely bloat the import bill at a time where export prospects look bleak given projected recessions in major trading partners like the US, Japan and China,” Mr. Mapa said.

Hong Kong was the top market for Philippine goods in April, accounting for 20.9% with $582.07 million. It was followed by China with a 13.8% share or $385.28 million, and Japan’s 13.1% share or $363.40 million.

On the other hand, China was the biggest source of foreign goods purchased in April, accounting for 22.3% at $732.47 million. Other major import trading partners were Japan and South Korea, which contributed 10.9% ($357.55 million) and 9.1% ($299.54 million), respectively. — Lourdes O. Pilar

Philippine trade year-on-year performance (April 2020)

June 11, 2020 | 12:34 am

DICT rules allow telcos to build common towers

June 11, 2020 | 12:33 am

THE Department of Information and Communications Technology has released the guidelines for the common tower policy, which it hopes would improve wireless network coverage in the country. — *BW FILE PHOTO*

By Arjay L. Balinbin, Reporter

THE Department of Information and Communications Technology (DICT) finally released on Monday evening the long-awaited rules governing the shared use of telecommunications towers.

Signed by DICT Secretary Gregorio B. Honasan II on May 29, Department Circular No. 8 sets the policy guidelines on the co-location and sharing of telco towers for cell sites, which would provide “quality, efficient, fast, affordable, and secure ICT (information communications technology) services.”

“In order to fast-track the country’s digital transformation and prepare the country for its transition to the ‘New Normal,’ there is a need to expedite the roll-out of ICT infrastructure and facilities that could accommodate the increasing demand for connectivity and better quality of ICT services, especially in the unserved and underserved areas,” the circular stated.

The rules do not include the contentious proposals that would limit the number of common tower companies to two, and restrict existing telecommunications companies from building their own towers.

Under the guidelines, mobile network operators or telcos may build new telecommunications towers, but they should “provide ample access slots” for other players and the DICT to “co-locate, mount or install their respective antennas, transmitters, receivers, radio frequency modules, radio-communications systems, and other similar active ICT equipment.”

“Settled na lahat ’yun. Bago inilabas ang final version na ito. Of course, stakeholders were consulted kaya nga tumagal almost ng one year. So lahat ng mga contentious issues before had been settled,” former DICT Undersecretary Eliseo M. Rio, Jr. told BusinessWorld in a phone interview on Wednesday.

“For example, ’yung gusto ni RJ dalawa lang, wala na ’yun,” he added, referring to newly appointed DICT Undersecretary Ramon P. Jacinto who previously wanted to allow only two companies to build common towers.

Mr. Rio stressed under the DICT circular, all new towers, even if they are built by telcos, will be available for sharing.

“If telcos want to come up with a new tower, they will have to get a permission from the National Telecommunications Commission (NTC) at di naman papayag ang NTC na magbigay ng permit for a tower that will be exclusively used by one telco,” he explained.

Under the guidelines, interested tower companies engaged in the business of establishing or operating one or more shared telecommunications towers should secure a certificate of registration from the DICT. Existing telecommunications companies with legislative franchise and certificate of public convenience and necessity (CPCN) are exempt from the requirement.

Tower companies should have relevant construction experience, registration, license, and financial capacity, equivalent to a category A contractor or higher of the Philippine Contractors Accreditation Board.

The circular also states all private sector agreements for tower-sharing should provide for “fair, cost-based, reasonable, competitive, transparent, non-exclusive, and non-discriminatory terms, conditions, fees, and charges.”

Common tower agreements should be complemented by appropriate service level agreements that comply with global and domestic standards, and subject at all times to pertinent laws and department circulars, rules and regulations.

The DICT, which has the authority to regulate the construction, maintenance, and operation of common towers, is mandated to periodically monitor the charges and fees imposed by common tower owners or operators.

As for the towers built by telcos prior to this issuance, Mr. Rio said these will not be covered by new rules.

“Hindi na sila gagalawin, especially ’yung towers na na-put up ng Globe and Smart na about 30,000. Bahala na sila if they want to have their towers taken over by common tower providers or sila mismo ang mag offer sa competitors nila,” he said.

The DICT is also mandated to provide “reasonable assistance” to common tower providers or telcos in obtaining access or right-of-way to public or private land “as may be necessary for the installation, construction, maintenance or operation” of shared towers.

The department may also participate in the use of the common towers “whenever deemed necessary and desirable in the public interest” for the implementation of the government’s Free Public Internet Access Program.

Under the guidelines, common tower owners or operators should not offer or impose terms, conditions, fees, and charges to the DICT “that are more onerous than those offered or imposed upon its private sector clients.”

Barangays, local government units, and national government agencies are required to strictly adhere to the 7-working-day maximum time period mandated by law for processing and approving the application of common tower providers for licenses, clearances, permits, certifications, or authorizations to construct, install or operate shared towers.

There is a “non-extendible” period of 20 working days for documents that require the approval of a local legislative body.

Homeowners associations are given a maximum of 10 working days to refer to their members the application of common tower providers. They will have to decide on the application within the non-extendible period of 30 working days.

The DICT had pushed the concept of tower sharing to improve tower density, which is said to be one of the lowest in the region at 4,000 subscribers per tower. Allowing common towers means more than one telco can use a single tower, thereby increasing the number of subscribers being served by each tower.

Financial system may face $505M in ‘collateral damage’

June 11, 2020 | 12:32 am

THE coronavirus disease 2019 (COVID-19) pandemic is causing widespread financial difficulties around the world, and the Philippines is no exception. — *REUTERS*

THE Philippine financial system may face as much as $505.3 million (P25.2 billion) in incremental “collateral damage” caused by distressed banks, as credit and contagion risks rise amid the pandemic, the ASEAN+3 Macroeconomic Research Office (AMRO) said on Tuesday.

“As a result (of the pandemic), banks are confronted with sharp drops in revenue and rising credit risks… Concurrently, banks are facing increasing bad loans, as corporate customers go under and unemployed retail borrowers struggle to service their obligations,” AMRO said in a analytical note “COVID, Credit, and Contagion risks to ASEAN+3 Financial Systems.”

In the note, AMRO did a stress test for “additional expected costs to the wider financial system from shocks to individual ASEAN+3 banks as a result of the pandemic.” Additional costs refer to the loss on top of direct credit costs already booked in the financial system before the pandemic, and costs to the wider financial system beyond the direct damage to an individual banks’ asset quality, it said.

The stress test was done by applying the actual increase in probability of default (PD) since January, prior to the global spread of the pandemic of 20 basis points (bps) to each bank.

AMRO estimated the incremental expected “collateral damage” from distressed banks on the Philippine financial system will reach $505.3 million.

The Philippines’ potential “collateral damage” are the fourth highest in the region, after China’s $19.777 billion, Singapore’s $2.926 billion and Japan’s $2.541 billion.

Hong Kong, on the otherhand, faces incremental expected losses of $292 million, followed by Indonesia’s $287 million, Korea’s $226 million, Vietnam’s $225 million, Thailand’s $133 million, and Malaysia’s $3.5 million.

Based on the impact on other financial systems excluding its own, AMRO estimated the “collateral damage” of Philippine banks in distress on the wider ASEAN financial system is valued at $3.7 million, while a $191-million impact on the financial system of ASEAN+3 is seen. The potential impact on the rest of the world’s financial system is at $184 million.

Meanwhile, AMRO projected the estimated additional credit loss of Philippine banks from source entity to direct creditors is at $252.2 million, based on the nine banks it studied.

“The total incremental expected losses to the wider financial system from a bank’s distress may be attributable to two key sources,” it said, citing the direct credit losses from defaulted obligations and the “collateral damage due to contagion through financial interconnectedness.”

AMRO explained that default risk is the likelihood that a bank cannot pay off its debts, while contagion risks are from several factors such as “borrowing-lending relationships, common business models and stakeholders, capital market transactions and market sentiment.”

For the global systemically important banks (G-SIBs), AMRO saw an incremental expected credit losses of as much as $10 billion and another $10 billion in contagion losses to the wider global financial system, while for the domestic systemically important banks (D-SIBs), the estimated incremental losses are lower at $10 million to over $1 billion in credit losses and $10 million to $1 billion for contagion losses.

“The additional expected losses from credit and contagion risks could have important ramifications for the affected FIs (financial institutions) and at the extreme, for the fiscal purse,” it said, adding that the “actual failure of any one of the G-SIBs or D-SIBs could have massive implications for the global or regional financial system.”

According to AMRO, the aim of the study is “to provide financial regulators with a gauge of the potential magnitude of any financial fallout from the ripple effects ultimately triggered by the pandemic, and allow fiscal authorities to gauge the contingent claims from the banking system if any provision or capital buffers pre-pandemic are not sufficient to cover such additional costs.” — Beatrice M. Laforga

BIR streamlines registration of new businesses

June 11, 2020 | 12:31 am

THE Bureau of Internal Revenue (BIR) is streamlining the process for registering a new business, by removing the mayor’s permit as one of the requirements.

BIR Commissioner Caesar R. Dulay issued Revenue Memorandum Circular No. 57-2020 dated March 12 but released on June 9, which provides an updated checklist of documentary requirements for business registration and other applications.

“The requirements for registering a new business with the bureau have been streamlined by removing the Mayor’s Permit as one of the mandatory requirements when the BIR Citizen’s Charter 2019 was published on BIR website,” the circular read.

The BIR reiterated it will only process applications with complete documentary requirements.

“The Bureau shall not process deficient or incomplete application or requirements and shall only process an application if it is complete, pursuant to Rule VII, Section 2(b) of the implementing rules and regulations of Republic Act No. 11032, otherwise known as “Ease of Doing Business and Efficient Government Delivery Act of 2018,” it said.

The BIR also updated the checklist of documents needed for other types of applications such as those wanting to register their branches or facilities, their employees, ONETT or one-time transactions, books of accounts, and information updates.

The new guidelines also cover applications for authority to print, permit to use manual loose leaf, issuance of taxpayer identification number (TIN) card, transfer of registration and cancellation of TIN or registration of closure of business.

The government has been introducing reforms to improve the ease-of-doing business in the country.

In the World Bank’s Doing Business report released in October 2019, the Philippines rose to 95^th place from 124^th in 2018.

Despite the rank improvement, Manila was seventh among 10 Southeast Asian economies, behind Singapore which ranked second overall, Malaysia at No. 12, Thailand at 21^st, Brunei at 66^th, Vietnam at 70^th and Indonesia at 73^rd. — BML

ERC to Meralco: Explain billing ‘violations’

June 11, 2020 | 12:10 am

MANILA Electric Co. (Meralco) was told to appear before the Energy Regulatory Commission (ERC) to explain its supposed violations of the regulator’s advisories on customer billings during the lockdown period.

The ERC on Wednesday said it had issued a show-cause order to the electricity distributor for defying certain orders of the commission that guided utilities on how to charge power users during the enhanced community quarantine and the modified lockdown.

“We cannot tolerate such non-compliance and any erring party must be held accountable for their actions or misactions,” ERC Chairperson and Chief Executive Officer Agnes VST Devanadera said in a statement.

In an order dated May 29, the commission said the listed utility violated its order on estimated billing, the implementation of the former staggered payment scheme, and the start of bills payments on May 30 for customers in areas under strict lockdown.

In response, the Philippines’ biggest electricity distributor maintained that it did not breach any government regulation despite being also hit by the pandemic.

“We believe that we have complied with the existing regulations and directives set by the regulator and we will explain in full to the Commission the basis for our actions and compliance,” Jose Ronald V. Valles, Meralco’s first vice president and head of Regulatory Management, said in a Viber message.

“We reiterate that Meralco has not violated any rule even if our operations were severely challenged by this pandemic,” the Meralco official added.

The company has been under fire for the high electricity charges in the past three months, computing bills based on customers’ estimated consumption from March to April, when meter reading activities were suspended, and actual usage in May.

Previously, the ERC allowed the estimated billing of customers’ power consumption by distribution utilities as meter readings were suspended, provided they comply with its distribution services and open access rules (DSOAR).

Meralco did so by estimating some March and all April bills using customers’ consumption in the past three months.

Following criticisms on such a scheme, the regulator told utilities on May 22 to conduct actual readings and to issue new bills.

Moreover, the ERC revised its earlier order to power distributors of allowing customers to pay their unpaid bills during the lockdown months in four installments.

Now, customers with 200 kilowatt-hours (kWh) consumption and below in February can settle their unpaid bills in six portions starting mid-June, while those with usage above 200 kWh can pay their March-May bills in four installments.

Complying with this order, Meralco said on June 6 that its customers with unpaid bills will receive two statements: one for the installment bill and the other for their monthly bill.

Aside from the commission, the Department of Energy and legislators had called Meralco’s attention to explain the so-called “bill shock” experienced by consumers.

Meralco’s controlling stakeholder, Beacon Electric Asset Holdings, Inc., is partly owned by PLDT Inc. Hastings Holdings, Inc., a unit of PLDT Beneficial Trust Fund subsidiary MediaQuest Holdings, Inc., has interest in BusinessWorld through the Philippine Star Group, which it controls. — Adam J. Ang

Max’s Group incurs P169-million net loss

June 11, 2020 | 12:09 am

MAX’S Group, Inc. (MGI) swung to a net loss in the first quarter as its stores closed when Luzon locked down to fight the spread of the of the coronavirus disease 2019 (COVID-19) pandemic.

The listed operator of casual dining restaurants told the exchange Wednesday it had booked a net loss of P169.28 million in the January-to-March period, a turnaround from its net income of P138.57 million in the same period last year.

Systemwide sales, which include sales from company-owned and franchised stores, fell 13% to P3.99 billion because of store closures since mid-March. Consolidated revenues likewise dropped 19% to P2.72 billion.

“The cumulative impact of temporary store closures, dine-in restrictions and various fixed costs have resulted in a swift reversal from last year’s performance. We anticipate that this trend will continue through the second quarter as well,” MGI President and Chief Executive Officer Robert F. Trota said in a statement.

The company said it had to stop operations in all mall-located stores since the imposition of the lockdown in mid-March. It kept running delivery and take-away services for stand-alone and in-line locations, until it eventually suspended all operations from March 26 to April 4.

But since then, MGI has worked on getting back on its feet and has reopened 573 stores or 76% of its total store network.

“We believe that the convergent power of our brands gives us a unique resilience as we navigate what we acknowledge will be a challenging second quarter. Our delivery business continues to operate in multiples of 2-3x versus their previous same-store levels, demonstrating the continued trust and confidence consumers put in our portfolio…,” MGI Group Chief Operating Officer Ariel P. Fermin said.

MGI is the company behind brands such as Max’s Restaurant, Pancake House, Yellow Cab Pizza, Krispy Kreme, Jamba Juice, Max’s Corner Bakery, Teriyaki Boy, Dencio’s, Sizzlin’ Steak, Maple and Kabisera.

But as its finances are dampened, the company said it would suspend plans to open new stores in the meantime to help it lower overhead costs and limit capital spending.

It has also cut margin-dilutive products, improved its online services, expanded into lateral categories such as offering ready-to-cook items, and developed its team to focus on cloud-based sales.

“Our goal is to successfully execute strategic shifts to thrive within the ‘new normal’… Though challenges remain, we will continue to be vigilant and prudent in our decisions, building on the durability of our brands and in MGI’s capacity for renewal,” Mr. Fermin said.

MGI had 756 stores at the end of April, where 698 are located in the Philippines and 58 are spread across North America, Middle East and other parts of Asia.

Shares in MGI at the stock exchange shed 26 centavos or 4.13% to close at P6.04 each on Wednesday. — Denise A. Valdez

Suntrust to sell convertible bonds to HK firms

June 11, 2020 | 12:08 am

SUNTRUST Home Developers, Inc. is selling more shares in the company to Hong Kong-based firms to fund the construction of its hotel casino project in Parañaque City.

In disclosures to the stock exchange Wednesday, the listed company said it is finalizing its application with the Securities and Exchange Commission (SEC) to sell P7.3-billion and P5.6-billion convertible bonds to Fortune Noble Ltd. and Summit Ascent Investments Ltd., respectively.

For its deal with Fortune Noble, Suntrust entered a subscription agreement on May 29 to issue P7.3-billion convertible bonds that will be subscribed to by Fortune Noble. Suntrust committed to get the approval of the SEC on or before July 31. After the transaction, Fortune Noble’s ownership of Suntrust will increase to 74.42%.

To recall, Fortune Noble bought shares in Suntrust last year and currently holds a 51% stake in the firm. This diluted Megaworld Corp.’s ownership of Suntrust to 34%.

Fortune Noble is a wholly owned subsidiary of Suncity Group Holdings, Ltd., a Hong Kong-listed company engaged in leisure and entertainment.

Suntrust said the proceeds from selling convertible bonds to Fortune Noble will be used in the development of its five-star hotel casino project in Parañaque City. After the transaction, Megaworld’s ownership of Suntrust will be reduced to 17.75%.

Fortune Noble may convert the bonds into 6.64 billion common shares at the initial conversion price of P1.1 each, representing about 47.79% of Suntrust’s enlarged issued share capital. But if Fortune Noble chooses not to turn the bonds into conversion shares, the amount of the bonds will become debt.

For its deal with Summit Ascent, Suntrust will issue P5.6-billion convertible bonds to be subscribed to by the Hong Kong firm. Suntrust is tasked to obtain the approval of the SEC on or before September 30.

After the transaction, Fortune Noble’s ownership of Suntrust will be 35.69%, Summit Ascent’s ownership will be 30.03% and Megaworld’s ownership will be 23.79%.

Summit Ascent is a Hong Kong property development firm under Summit Ascent Holdings Ltd., where Suncity holds approximately 24.74% direct and indirect interest.

Summit Ascent may convert the bonds into approximately 3.11 billion common shares in Suntrust, representing about 30% of its issued and outstanding capital stock upon conversion. But similar to its deal with Fortune Noble, Suntrust said the amount of the convertible bonds will become debt if Summit Ascent opts not to convert them into conversion shares.

Proceeds from selling the convertible bonds will also be used to support the construction of Suntrust’s hotel casino project. It is envisioned to have 400 hotel rooms, a casino establishment with 400 gaming tables and 1,200 slot machines, and a parking facility with 960 slots. It will be erected at the Manila Bayshore Integrated City as part of Megaworld’s Westside City.

Shares in Suntrust at the stock exchange inched up three centavos or 2.36% to P1.30 each on Wednesday. — Denise A. Valdez

SEC orders companies to improve cybersecurity

June 11, 2020 | 12:07 am

THE Securities and Exchange Commission (SEC) told companies to enhance cybersecurity safeguards as most business transactions move to digital spaces due to physical distancing protocols.

In a statement Wednesday, the corporate regulator said it advised corporations to assess their exposure to cybersecurity risks now that people are flocking to online platforms due to the coronavirus disease 2019 (COVID-19) pandemic.

It noted there are recent cases of hacking and duplicate social media accounts that may lead to new cyber crimes, and in turn, harm corporations.

“Digital transformation benefits businesses, allowing them to improve their productivity and realize greater efficiencies, but not without risks,” SEC Chairperson Emilio B. Aquino said in the statement.

“The boards of directors of companies must ensure that a robust cybersecurity strategy is in place and that existing cybersecurity measures, including regular penetration testing and risk assessments, remain effective amid the evolving security landscape,” he added.

Over the weekend, there have been reports of multiple creation of Facebook profiles bearing the names of students, journalists and other Filipino users, sounding alarm at universities and private institutions over the safety of the internet.

The National Privacy Commission said it had alerted Facebook, which claimed it was doing its own investigation of the issue.

The SEC said digital platforms have enabled most companies to maintain operations especially when Luzon was under a strict quarantine. Because of this, some are already shifting to low-touch and online-only services as a way to adapt to life post-lockdown.

With this trend, the need for strong cybersecurity measures has become more relevant among corporations, the SEC said, as it told companies to be wary of phishing attempts, data breaches and other cyberattacks that may harm them and their customers.

“Cybersecurity is more than an IT matter. It is a corporate governance issue that companies should give serious attention to and proactively manage, as cyberattacks could damage their reputation, disrupt their operations, and eventually jeopardize their profitability and enterprise value,” Mr. Aquino said. — Denise A. Valdez

Avoiding meat during the pandemic

June 11, 2020 | 12:07 am

By Joseph L. Garcia, Reporter

THE novel coronavirus that has effectively frozen our lives is thought to have animal origins — the virus may have spread from eating certain wild animals which were the original reservoirs of the SARS-Cov-2 virus which causes COVID-19 (scientists today point to either bats or pangolins; we’ll not get into the other conspiracy theories surrounding the spread of the virus). At the same time, the lockdowns and lack of public transportation have made it more difficult to acquire food than it was before the pandemic. As a temporary solution, some — this reporter included — have taken to eating meat analogues, or products made to resemble meat, to provide protein substitutes in the absence of meat.

Meat analogues are simply a new name given to a practice that began eons ago. Buddhist monks in China valued wheat gluten and tofu as substitutes for duck or mutton. Closer to our era, the Archer Daniels Midland Co. invented textured vegetable protein in the 1960s, made out of soy protein created by defattening soy beans. This product, sold dry, keeps for a year when stored properly. A cup of it, when rehydrated in hot water, expands to about four times its weight. Its nutritional value is comparable to ground beef, providing high levels of iron, potassium, magnesium, and large amounts of B vitamins. It has been used as a meat extender for prisons and schools, and this reporter has used it for a meatless version of chili con carne. Keep in mind though, that just because the product is meatless, it is still very much a processed food.

“It is always wiser to eat vegan foods because of its benefits, regardless of a pandemic,” said Mitch Trinidad, co-owner of Meatless Philippines, a company that provides “meat” assembled out of flaxseed, rice flour, soy, and other plant-based ingredients, in an e-mail. “As more and more vegan food is developed around the world, the stigma of vegan diets having no taste and blatantly identified as boring food is a thing of the past.”

Mr. Trinidad gave a practical reason for adopting a meatless lifestyle: “It’s a cheaper alternative to fast food.” The meat analogue used by this reporter costs about a third the price of ground beef. Over at Meatless Philippines, their products range in price from P300 for pork barbecue good for four people (assembled with rice flour “fat”) to P1,500 for a pack of plant-based “ribs.” He also says that it’s cheaper to produce — one doesn’t have to house or feed animals.

It is also nutritious. “Because we use a combination of different locally sourced vegetables to boost the nutrient benefits and taste of each product, our customers can enjoy a balanced meal without fear of not getting the same nutrition compared to eating meats,” he said. “We only use real foods to make our products. For example, we use real portobello and shiitake mushrooms, sweet potatoes, kale, flaxseeds to name a few… we learned that each vegetable could contribute to a specific flavor profile of a certain food product. Through extensive research and a lot of testing, we perfected combinations of vegetables to replicate the taste of meat whether it is fish, chicken, pork, or beef. We use bamboo for bones!”

He also adds, “You can eat bigger portions without worrying about cholesterol.”

According to data from the Food and Agriculture Organization of the United Nations, the livestock industry produces emissions of “7.1 gigatonnes of C02-equiv per year, representing 14.5% of all anthropogenic GHG (greenhouse gas) emissions.” So eating less meat, or no meat, is good for the environment.

Some hardcore vegans (those who do not eat any animal-derived products, including milk, eggs, and honey) might say that in using meat analogues, one isn’t fully immersed in the vegan cause. After all, you are still looking for the “meaty” experience. Mr. Trinidad says, “We think adopting a vegan diet is not about what society dictates, it is about you making a conscious decision to protect your health, to eat better foods, and to safeguard the animals from senseless slaughter.”

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