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Diokno warns of risks associated with transition away from coal power

The Philippines needs to take into account the financial risks that may come with its plans to move away from coal energy, Bangko Sentral ng Pilipinas (BSP) governor Benjamin E. Diokno said.

“While we are accustomed to physical risks such as typhoons and earthquakes, we should focus our attention as well to the transition risks that arise from migrating out of fossil fuels,” Mr. Diokno said in a statement Friday.

“This may seem like a very long-term risk, but in reality, it also takes a long period to properly move towards low greenhouse gas emissions, especially for a country that is traditionally dependent on fossil fuels,” he added.

He made the remarks during a recent meeting of the Financial Stability Board (FSB), a global body that monitors the international financial system.

The FSB was created in 2009 to advise economies on achieving financial stability.

The Department of Energy (DoE) is planning to move away from coal in favor of cleaner energy sources. It has a target of sourcing 66% of energy requirements from clean or renewable sources after 20 years.

In October, the DoE stopped endorsing new coal power plant projects while allowing foreign investors to take full ownership of geothermal plant projects.

“This is the very point of financial stability. We have to assess the systemic risks, most especially those that we do not readily see, and make choices with the welfare of the general public in mind, across various constituents, across varying conditions, and across periods of time,” Mr. Diokno added.

Mr. Diokno co-chairs the FSB Regional Consultative Group for Asia. — Beatrice M. Laforga

PHL palay output projected at 19.68 million MT by USDA

PHILIPPINE production of palay, or unmilled rice, is expected to rise 1.6% in marketing year 2021-2022 to 19.68 million metric tons (MT), the US Department of Agriculture (USDA) said.

In its Grain and Feed Annual report, the USDA’s Foreign Agricultural Service estimated an increase in the rice harvest area of 1.1% to 4.75 million hectares.

The USDA projected yield per hectare at 4.14 MT, against 4.12 MT a year earlier. Milled rice production for the period is also expected to increase 1.6% to 12.4 million MT.

“The interventions established by Republic Act No. 11203 or Rice Tariffication Law and the Rice Competitiveness Enhancement Fund (RCEF), including the greater than expected tariff revenue from rice imports, will begin to take effect,” the USDA said.

Signed in 2019, the law liberalized rice imports by private entities. To mitigate the effects on farmers, the law called for P10 billion to be allocated yearly to the RCEF to fund farm mechanization, seed distribution, crop insurance, and instruction in planting methods.

The USDA said rice imports are expected to be stable at 2.2 million MT due to higher domestic production as a result of RCEF and other support programs.

The USDA projected a decline in corn production in marketing year 2021-2022 of 2.4% to 8 million MT.

It cited low farmgate prices and reduced demand for feed for both hogs and broiler chickens. It also projected demand for corn to drop 2.8% to 8.60 million MT.

“Feed consumption (yellow corn) is expected to decline by 250,000 MT to 6.5 million MT, while food consumption (white corn) will stay flat at 2.1 million MT,” the USDA said.

Corn imports during marketing year 2021-2022 are also projected to drop 33.3% to 500,000 MT.

The USDA said wheat imports are also projected to decline 2.9% to 6.6 million MT, due to weak hog feed demand as a result of the African Swine Fever (ASF) outbreak.

“The disease continues to spread to new regions of the country, including now in the Visayan island of Leyte,” the USDA said.

Import demand for milling wheat for human consumption is expected to be flat “due to continued coronavirus disease 2019 (COVID-19) economic restrictions,” it added.

Thee USDA said wheat consumption is expected to drop 2% to 6.5 million MT for the milling year.

The Philippine Department of Agriculture (DA) has a production target of 20.47 million MT forpalay for the calendar year, as well as 2.5% growth in farm sector output. — Revin Mikhael D. Ochave

World Bank sees Customs modernization as tax-free way to boost gov’t revenue

The automation of the Bureau of Customs’ (BoC) processes is expected to raise government revenue without introducing new taxes. the World Bank said

The BoC launched on Friday the Philippine Customs Modernization Project, which hopes to bring the agency’s systems in line with international standards, while reducing the costs associated with trade.

“We expect this to reduce unregistered foreign trade and expand the country’s tax base and duty base. This will lead to an increase in the government revenue without implementing additional taxes,” Ndiame Diop, World Bank country director for Brunei, Malaysia, the Philippines and Thailand, said during the virtual launch Friday.

Mr. Diop said Customs reforms implemented by other countries boosted their duty and tax collections by anywhere from 11% to 300%.

“The project will reform the way the Bureau of Customs operates, thereby enhancing its dual goals of revenue generation and trade facilitation,” Finance Secretary Carlos G. Dominguez III said in the same event.

The P5 billion project was partly financed by an $88-million loan from the World Bank, which was approved in October.

The automation of processes should increase accountability, dramatically reduce face-to-face interactions and reduce delays at the border, Mr. Diop said.

“The launching of this project is very timely. The pandemic has magnified the importance of modernizing our systems to thrive in the new digital economy. Now more than ever, we need more revenue to fund not only our COVID-19 response, but also our economic recovery program,” Finance Secretary Carlos G. Dominguez III said at the launch.

The project will be partially implemented by 2023 and enter full operations by 2024, Mr. Dominguez said.

Mr. Diop also said digitalization will improve the resiliency of Customs in trade facilitation, after the pandemic highlighted the bottlenecks that could result in shipping goods when borders are shut down.

Mr. Dominguez said a steering committee will be set up to further support the project’s implementation.

“When this project is done, we expect to see more efficient port operations, dramatic gains in reducing corruption in the agency, and a major increase in our trade volumes. The project will allow us to be at the cutting edge in the application of new technologies to achieve the best revenue performance. All these will support the sustainable and long term growth of our economy,” he said.

The BoC beat its collection target in February by 9.5%, after collecting P46.15 billion.

The BoC has been tasked to generate P620 billion in duties and taxes this year, up 15% from actual collections of P537.687 billion in 2020. — Beatrice M. Laforga

PHL smart city projects, fintech, agriculture offered up for Singapore investment

The Philippines considers digitization projects like smart city initiatives, financial technology, and agriculture as potential areas of collaboration with investors from Singapore, officials said.

In his speech at the Philippine Chamber of Commerce and Industry (PCCI) Philippines-Singapore Business and Investment Summit Friday, Philippine Ambassador to Singapore Joseph del Mar Yap said the pandemic crisis has opened up opportunities that also include, automation and e-commerce as companies effect a transformation to adapt to the post-pandemic realities, Mr. Yap said.

Trade Secretary Ramon M. Lopez added that priority sectors being promoted to Singapore include services, infrastructure, public-private partnership (PPP) projects, and startups.

The strategic intent of this approach is to provide “basic necessities, supporting the fourth Industrial Revolution, address supply chain gaps, develop a more modern Philippines, and generate high-value jobs,” Mr. Lopez said.

Mr. Lopez noted pending measures facilitating greater trade and investment like the Corporate Recovery and Tax Incentives for Enterprises (CREATE) bill.

“Under the ratified version of the bill, qualified activities or projects can enjoy the incentives package for a maximum of 17 years. These include four to seven years of Income Tax Holiday (ITH), and a 5% Special corporate income tax (or CIT) rate based on Gross Income Earned (GIE) for 10 years, in lieu of all national and local taxes, among others,” he said.

“There is obviously a wide scope of complementation and industry collaboration between the Philippines and Singapore, and we invite our potential and existing partners in Singapore to explore these business opportunities,” Mr. Lopez added.

Finance Secretary Carlos G. Dominguez III said: “I urge the Singapore business community to take a much closer look at the investment opportunities in the Philippines. I hope that our strong fundamentals, fiscal stamina, pro-business environment, and effective governance will continue to make us a promising investment destination for Singapore investors.”

“The best way forward for the region is to resume integration and cooperation in earnest. We are each other’s best allies in recovery. We create products for each other’s consumers. A surge in demand later this year should translate into an expansion of our manufacturing activities and more robust investment flows,” Mr. Dominguez added.

PCCI President Benedicto V. Yujuico said the areas of “great opportunity” in the Philippines are: “Number one, agriculture – both in vegetables and fruits. Number two, aquaculture, the growing of fish and shrimp. Number three, financial technology and microfinance. Number four, renewable energy: wind, solar, or run of river power plants. Number five, medical and healthcare, and, number six, science park land development.”

“If there are any Singapore companies that are interested in these six specific business areas, the PCCI has counterpart businessmen who have the capability and willingness to go into joint ventures,” he said.

Bangko Sentral ng Pilipinas governor Benjamin E. Diokno said country is a “smart investment destination” for potential Singapore investors.

“The reform momentum will help fuel the Philippines’ recovery, address structural issues, and continue to enhance the Philippines’ competitiveness as a leading investment destination. You are welcome to do business with us and be part of our exciting post-COVID narrative,” Mr. Diokno added.

The economy slumped by a record 9.5% last year due to the pandemic, but is expected to rebound by 6.5-7.5% this year.

Among the other bills that the economic team is supporting were the amendments to Foreign Investment Act, the Public Service Act, and Retail Trade Liberalization Law. — Arjay L. Balinbin, Beatrice M. Laforga

Food Security summit scheduled for late April

A NATIONAL Food Security Summit has been scheduled for April 28-29, the Department of Agriculture (DA) said.

According to a special order signed March 23, Agriculture Secretary William D. Dar said the two-day food security summit will tackle, among others, the pork shortage resulting from the African Swine Fever (ASF) outbreak.

Mr. Dar said the DA will present the actions it has taken to address broader issues in the agriculture sector.

It created an Advisory Committee, National Steering Committee, and various subcommittees to oversee the conduct of the summit, the DA said in the special order.

In February, the President’s Spokesman Herminio L. Roque, Jr. said Malacañang is calling for a food security summit after surging pork prices needed to be capped following herd losses arising from the spread of ASF.

Mr. Roque said the summit’s deliverables include a national food security plan ensuring the uninterupted flow of agricultural commodities and stable food prices.

President Rodrigo R. Duterte signed Executive Order No. 124 on Feb. 1, implementing price controls on pork and chicken products.

The EO, which took effect on Feb. 8 and will remain effective until April 8, capped the prices of pork shoulder (kasim) at P270 per kilogram, pork belly (liempo) at P300 per kilogram, and whole chicken at P160 per kilogram.

According to the DA’s price monitoring report Friday, the price of kasim ranged from P310 to P360 per kilogram, while liempo was at P340-P380. — Revin Mikhael D. Ochave

COVID seen more disruptive to women’s careers due to domestic responsibilities

Working women are far more likely than men to have their careers disrupted because of expectations they will take charge of household duties during the pandemic, the Makati Business Club, Inc. (MBC) said, citing a study it conducted with the UN Women C-suite Project.

“Nearly 70% of women experienced negative changes in their work-life routines and believe their career progression will slow down as well,” Angie Zafra, head of the MBC-UN Women C-Suite Project said at an online forum Friday.

“The experiences of working women during this crisis has led to the realization that many women are either planning to take a career break or exit the workforce due to anxiety, burnout, and competing priorities at home,” she added.

The study took in the responses to online surveys of 200 respondents to look into how the pandemic has impacted their professional and personal lives. Online interviews were also conducted with executive-level workers.

“Women have been burned out physically, emotionally, and psychologically during the COVID-19 lockdown. Some women also reportedly suffered from domestic violence,” according to the report, known as “Women in the Philippine C-Suite.”

In Luzon, 42% of female and 16% of male respondents said their careers were affected by the pandemic. Of the women who said they were affected, 10% were demoted or had their working hours reduced “because of home duties,” while 21% saw their salaries cut.

“COVID-19 has increased the amount of care work responsibilities of women,” the report said. “Assisting children in their homeschooling typically fell on women.

Some 80% of married women said they received assistance from their spouses during the lockdown, while 100% of men said their spouses helped them.

The report found that “women and men (79%) equally prioritize family… over their careers.”

Male respondents also said they have “stepped up” in taking on household responsibilities. The men said they are now more selective with work projects to increase time spentnwith their families.

Women account for 39% of the global workforce, but 54% of women lost their jobs during the pandemic. The study found that more women worked in heavily affected sectors such as education, hospitality and apparel.

“(Companies must) identify measures to protect vulnerable employees, retain employees who may be overburdened by current difficulties, and determine what works in the ‘new normal’ as part of business recovery from COVID-19,” according to the report. — Keren Concepcion G. Valmonte

Power co-op revenue down 4% in 2020

Electric cooperatives (ECs) reported a 4% decline in revenue from power sales to P211.46 billion, even as sales volumes rose, according to the National Electrification Administration (NEA).

In a statement Friday, the NEA said the utilities implemented extension of grace periods for bill payments, in compliance with the Energy Regulatory Commission’s (ERC) directive to ease the pandemic’s burden on consumers.

“Revenue dropped by 2% in the first quarter of 2020 due to the eruption of Taal Volcano and disruption of economic activities caused by COVID-19. The ECs suffered a double-digit decline of 12% in revenue during the second quarter; and a 4% drop during the third quarter,” the NEA said.

In the fourth quarter, EC revenue rose 1% year-on-year to P53.356 billion.

The energy department said in its Jan. 13, 2020 task force report that the Taal eruption affected five power plants, four transmission lines, and three distribution utilities serving the area.

Meanwhile, EC electricity sales volume amounted to 23,622 gigaWatt-hours in 2020, up 2%, the NEA said.

The NEA said volume sales in the second quarter declined 4% due to the government’s imposition of community quarantines to curb the transmission of COVID-19.

Volume sales in the third and fourth quarters rose 3% and 7%, respectively, as quarantine restrictions were scaled back.

Earlier this month, the NEA said that ECs had connected 522,905 new power consumers last year, beating the target set for them by 14%. The updated total of consumer connections within EC franchise areas stood at nearly 14.25 million, at the end of 2020. — Angelica Y. Yang

SSS pension shortfall seen mitigated by young workforce

UNFUNDED pension liabilities of the Social Security System (SSS) are currently at P4.3 trillion, somewhat mitigated by the Philippines’ young workforce, a senior legislator said.

Representative Jose Ma. Clemente S. Salceda, who chairs the House Ways and Means committee, said the panel will explore ways to reduce the gap between its potential pension liabilities and its expected resources.

“The problem doesn’t hurt yet, because we still have a very young workforce who exceed our pensioners. But it’s our duty as lawmakers to solve this now rather than hurt our children in the future,” Mr. Salceda said.

“(I hope) the SSS pension will be similar to that of countries like those in Europe that meet the retirement needs of their workers. At the very least, let’s aim for something like the Singapore model that covers all of the essentials for retirement – housing, healthcare, living expenses.” Mr. Salceda added.

According to SSS Chief Actuary Edgar Cruz, the perpetual unfunded pension liability of the SSS is under constant pressure due to proposals to increase pension benefits.

“Once the SSS contribution increases are implemented, plus the proposed incremental private pension contributions, our payroll tax would be at around 29% (resulting in) subpar benefits. Singapore’s is at 37% but their provident fund covers everything. We need to do so much better,” Mr. Salceda added.

“As a senior citizen, this should no longer my problem. The young will pay for my pension. But as a senior lawmaker, this is my problem. We lawmakers are only worth our salary if we will try to address future problems early,” Mr. Salceda added. — Bianca Angelica D. Añago

BSP fully awards P70 billion worth of bills; average rate falls

The central bank made a full award of the short-term securities it offered Friday at a lower average rate after the cental bank extended its pause on monetary action, keeping rates at record lows.

The Bangko Sentral ng Pilipinas (BSP) raised P70 billion from 28-day bills, having attracted bids amounting to P109 billion, or about 1.56 times the volume of securities on offer.

In last week’s auction, bids had totaled P96.2 billion.

The bills fetched an average rate of 1.934%, down from 1.963% previously.

Banks sought yields ranging from 1.875% to 1.989%, against the week-earlier range of 1.85-2.05%.

BSP securities and term deposits are designed to mop up excess liquidity and to guide short-term market rates.

The 28-day yields corrected after having risen since mid-February following the central bank’s decision Thursday to keep policy rates unchanged at record lows, Rizal Commercial Banking Corp. (RCBC) Chief Economist Michael L. Ricafort said in a Viber message.

In its second policy-setting meeting of the year, the Monetary Board kept the overnight reverse repurchase rate at 2%, in line with expectations of 19 economists polled by BusinessWorld last week. Rates for the overnight lending and deposit facilities were also maintained at 2.5% and 1.5%, respectively.

“The 28-day BSP auction yield was also lower after the latest tighter quarantine restrictions from March 22-April 4, 2021 (were thought to) slow down demand conditions/economic recovery prospects, which could temper inflation,” Mr. Ricafort said. — Beatrice M. Laforga

PHL peso bond market growth slows in fourth quarter

THE growith of the market for peso bonds slowed in the fourth quarter to 5.3% against 8.8% a quarter earlier, as the government eased off on borrowing while corporate activity in the market declined, the Asian Development Bank (ADB) said.

According to the March issue of the ADB’s Asia Bond Monitor report released Friday, the peso bond market was valued at P8.568 trillion.
On a year-on-year basis, growth in the quarter was 28.9%, against the 21.5% rise in the third quarter.

“The slower growth was driven by a slowdown in the government bond segment combined with a contraction in the corporate bond segment,” the report read.

The bond market consists of 81.2% government securities and 18.8% corporate bonds.

Outstanding government bonds amounted to P6.956 trillion at the end of 2020, up 7% from the end of September and up 35.3% year-on-year. In the three months to September, the quarter-on-quarter growth rate had been 10%.

The government also owes P220 billion to the central bank to help fund its pandemic containment program.

The Bangko Sentral ng Pilipinas (BSP) approved on Dec. 28, 2020 another P540 billion loan to the government, the third time the central bank has made such a loan. The central bank can lend up to P850 billion to the government according to current law.

“Growth in the outstanding stock of government bonds dropped primarily due to a contraction in issuance of treasury and government bonds; the government issued a fairly large amount of Retail Treasury Bonds in Q3 2020,” the ADB said.

Meanwhile, the corporate bond segment declined 1.3% quarter-on-quarter to P1.612 trillion due to debt maturities and lower issuances.

Year-on-year, outstanding corporate securities rose 7.1%, against a year-earlier growth rate of 14.5%.

Banks took up 43.7% of the corporate bonds issued.
“Quarter-on-quarter bond issuance growth was driven solely by central bank bonds, which rose more than 1,000% as the central bank sterilized foreign capital inflows. Q4 2020 bond issuance was still higher compared to pre-pandemic levels due to the need to fund stimulus measures,” the ADB said.

Across emerging East Asia, the Philippine bond market was the third-fastest growing on a quarter-on-quarter basis, after Vietnam’s 8.1% growth and Indonesia’s 10%. — Beatrice M. Laforga

Shares snap out of rally on higher COVID-19 infection rate

Philippine stocks on Friday closed in the red a day after the country reported a record high coronavirus disease 2019 (COVID-19) infection rate and dampened investor sentiment.

The 30-member Philippine Stock Exchange index (PSEi) declined by 36.37 points or 0.55% to close at 6,544.63 on Friday, while the broader all shares index went down by 9.04 points or 0.22% to 3,967.79.

“Market went on profit taking [on Friday] as [a] new record high COVID-19 infection rate was reported [on Thursday. This] may prompt the government to maintain or apply stricter restrictions so as to contain the spread of the virus,” Diversified Securities, Inc. Equity Trader Aniceto K. Pangan said in a Viber message.

Philstocks Financial, Inc. Research Associate Claire T. Alviar said in a separate Viber message that negative sentiment “spilled over” after the country recorded its highest COVID-19 single-day tally.

The Health department reported a 16.1% COVID-19 infection rate on Thursday, logging an additional 8,773 cases. The daily tally brought the number of total COVID-19 infections in the country to over 693,000.

Juanis G. Barredo, chief technical analyst at COL Financial Group, Inc., said the market “corrected,” after three consecutive days of posting gains.

“Rallies in the previous days had come with sparse volumes and this still shows tenderness in demand,” Mr. Barredo said in a separate Viber message.

The sectoral indices were split on Friday. Holding firms decreased by 58.34 points or 0.87% to 6,605.40; financials fell by 10.55 points or 0.74% to finish at 1,401.64; and services declined by 9.23 points or 0.63% to 1,435.98.

Meanwhile, mining and oil improved by 177.22 points or 2.09% to 8,633.94; industrials rose by 19.67 points or 0.22% to 8,590.72; and property inched up by 3.43 points or 0.1% to close at 3,276.96.

Value turnover went down to P6.28 billion with 4.91 billion shares switching hands from P6.10 billion with 2.49 billion issues traded on the previous trading day. Advancers outperformed decliners, 101 against 92, while 49 names closed unchanged.

Net foreign selling declined to P724.71 million on Friday from the P783.51 million seen on Thursday.

COL Financial’s Mr. Barredo said the index still needs to “recoup” over its 6,700 to 6,800 resistance.

“Unless this happens, this rally could simply be temporary, part of its regular cascade within a reactive trend. Support is seen between 6,400 and 6,250,” he said. — Keren Concepcion G. Valmonte

Peso little changed after Monetary Board meeting

The peso closed little changed Friday after the Monetary Board kept benchmark interest rates steady at record lows.

The peso closed at P48.49, against its P48.58 finish Thursday, according to the Bankers Association of the Philippines.

The currency strengthened from its week-earlier close of P48.62.

The peso opened the Friday ession at P48.55. Its low was P48.585 while its high was P48.48.

Dollar trading volume rose to $740.8 million from $691.29 million a day earlier.

“The peso was nearly unchanged after the BSP decided to keep its policy rates unchanged during its meeting this week,” a trader said via e-mail.

In its second policy-setting meeting on Thursday, the Monetary Board kept the overnight reverse repurchase rate at an all-time low of 2%, in line with the expectations of 19 economists polled by BusinessWorld last week. Rates for the overnight lending and deposit facilities were also maintained at 2.5% and 1.5%, respectively.

The peso hit its strongest level in two weeks Friday as investors awaited the signing of a bill that will lower the corporate income tax rate, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said.

The Corporate Recovery and Tax Incentives for Enterprises (CREATE) bill, which also aims to streamline fiscal incentives, is now awaiting President Rodrigo R. Duterte’s signature. If left unsigned, the bill will lapse into law on March 27.

“The peso was also stronger ahead of the arrival of more COVID-19 vaccine shots: one million from Sinovac and 979,200 from AstraZeneca,” Mr. Ricafort added.

The expected increase in remittances from overseas Filipino workers ahead of the Easter holidays may have supported the peso as well, he said. — Beatrice M. Laforga

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