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Nationwide round-up (02/17/21)

New consumer group to focus on fair service in power sector

NEWLY-launched consumer group Kuryente.org said on Wednesday that it aims to ensure the welfare of electricity consumers, and pursue transparency in the country’s energy industry sector. During the group’s virtual launch, national coordinator Nic Satur, Jr. said their organization is “open for collaboration with all sectors of the power industry,” including politicians, lawyers and the media, among others. “Our sole focus is (for) consumers to have a fair service of what (they) are paying for. The consumers’ welfare is our agenda, with consumers’ participation in the ERC (Energy Regulatory Commission) for representation and transparency,” Mr. Satur said. The group said the country has an “energy crisis,” which is “aggravated by the lack of consumer participation in the energy industry.” The group has been active through Facebook since last year, but their own Kuryente.org platform was officially launched Wednesday. “The Philippines remains to charge one of the highest electricity costs in Asia. This and the continued poor services especially during the current pandemic are affecting the ordinary Filipino’s capacity to cope. Many are also losing their jobs,” Mr. Satur said in a statement.

‘ENERGY ADVOCATE’
Senator Sherwin T. Gatchalian, who attended the event, said consumer protection and the competitive operations of the electricity industry are enhanced in the proposed Energy Advocate Act under Senate Bill No. 173. “The rationale for the Energy Advocate Act is to give organizations a bigger voice in terms of rates setting and going into the approval of retail rates here in our country,” he explained. The lawmaker, who chairs the Senate committee on energy, was also quoted in the group’s statement as saying that “consumer advocacy groups such as Kuryente.Org must come together to make noise and study the complexity of the energy industry to protect the rights of the consumers.” — Angelica Y. Yang

POPCOM pushes for law to decrease adolescent pregnancies

THE COMMISSION on Population and Development (POPCOM) called on the current Congress to pass proposed laws that will help prevent the rising number of adolescent pregnancies. Among the pending legislation are prohibition of child marriage, and raising the age to determine statutory rape from below 12 years old to below 16. Results of a nationwide survey conducted by the Social Weather Stations and commissioned by POPCOM, which were presented in an online briefing Wednesday, show 59% of the respondents said teenage pregnancy is the most pressing problem of women today, followed by physical violence (11%), unintended pregnancy (11%), and sexual violence (7%). With the lockdown due to the coronavirus pandemic from March 2020 contributing to the pregnancy boom in the Philippines, POPCOM projects 62,510 thousand live births by minors and 133,265 minor-led families at the end of 2021. In 2019, the National Economic and Development Authority (NEDA) declared the high adolescent pregnancy rate in the country as a national social emergency. POPCOM Executive Director Juan Antonio A. Perez III said while there are various programs already being implemented under the Reproductive Health Law, further measures and funding focusing on adolescents are needed. “We need Congress to act on the access of minors to reproductive health services,” Mr. Perez said. — Bianca Angelica D. Añago

Dismissal of charges against those in amnesty list not automatic, says Guevarra

JUSTICE Secretary Menardo I. Guevarra on Wednesday said legal cases involving persons included in a recent amnesty proclamation will not be automatically dropped. “The dismissals of these cases are not automatic,” Mr. Guevarra said in a Viber message to reporters. He said the National Prosecution Service will make an inventory of pending investigations or trials of people covered by the amnesty, and these will be subject to an evaluation by the National Amnesty Commission (NAC). The commission was recently created through an executive order signed by President Rodrigo R. Duterte. NAC has yet to draft the screening and evaluation rules, but the most important criterion “is whether or not the offense committed by the subject individual was in pursuit of a political objective,” Mr. Guevarra said. — Bianca Angelica D. Añago

Regional Updates (02/17/21)

Panay-Guimaras-Negros bridge construction won’t start under Duterte administration — Drilon

CONSTRUCTION of the Panay-Guimaras-Negros (PGN) bridges will be passed on to the next administration, Senate Minority Leader Franklin M. Drilon said on Wednesday following a meeting with the government’s adviser for flagship projects. “There is simply no time,” Mr. Drilon said in a statement. The senator, who hails from Iloilo where the Panay link will be located, said Presidential Adviser for Flagship Projects Vince B. Dizon informed him that the project is still undergoing feasibility study and that the target date for starting construction is 2023. Department of Public Works and Highways (DPWH) Information Officer Randy R. Del Rosario confirmed this, saying the project is still in the “Feasibility Studies stage.” Mr. Drilon has been pushing for the bridges that will span 32.47 kilometers, connecting the three islands of Panay, Guimaras, and Negros and boost the Western Visayas economy .“The PGN Bridge is a dream of the people of Western Visayas. The lack of inter-connectivity is a stumbling block to the region’s growth and development. We must address the lack of connectivity to transport our agricultural products between Panay, Guimaras, and Negros,” Mr. Drilon said. This “undelivered commitment,” he said, will be a factor when voters make their choices in next year’s local and national elections. — Bianca Angelica D. Añago

Tropical depression Auring enters PHL area Wednesday, heavy rain expected by weekend

THE country’s first typhoon for the year, named Auring, entered the Philippine area Wednesday morning but its impact is not expected until the weekend, according to the national weather bureau. Tropical depression Auring, located 900 kilometers southeast of Hinatuan in Surigao del Sur as of 10 a.m. Feb. 17, is expected to intensify into a tropical storm and make landfall within the Caraga Region by Saturday evening or early Sunday. The Philippine Atmospheric, Geophysical, and Astronomical Services Administration (PAGASA) alerted authorities and residents in the storm’s path to “take appropriate preparatory measures due to increasing likelihood of heavy rains and gusty conditions associated with the potential passage of a tropical cyclone during the weekend through Monday.” Areas that are expected to be affected are: the Visayas islands; the regions of Bicol, MIMAROPA (Mindoro-Marinduque-Romblon-Palawan), Caraga, Northern Mindanao, and Davao; and the provinces of Cotabato and Lanao del Sur. PAGASA said typhoon signal #1 might be raised over Caraga and Davao by Friday due to expected strong wind. Auring was moving at 20 kilometers per hour (km/h) with maximum sustained winds of 45 km/h.

Ormoc Bay added to list of red tide areas

THE Bureau of Fisheries and Aquatic Resources (BFAR) has warned consumers from eating shellfish harvested in Ormoc Bay, Leyte after the area tested positive for red tide contamination. In its fourth shellfish bulletin for the year, BFAR said Ormoc Bay joins the growing list of red tide zones such as Inner Malampaya Sound, Palawan; Sorsogon Bay; Dauis and Tagbiliran City, Bohol; Tambobo Bay, Negros Oriental; and Daram Island, Zumarraga, San Pedro Bay and Cambatutay Bay in Western Samar. Other areas that remain positive for red tide include Calubian, Carigara Bay, and Cancabato Bay in Leyte; Biliran Islands; Guiuan and Matarinao Bay in Eastern Samar; Dumanquillas Bay in Zamboanga del Sur; Balite Bay in Davao Oriental; and Lianga Bay and Hinatuan in Surigao del Sur. All types of shellfish and Acetes sp. or alamang harvested from the aforementioned areas are unsafe for human consumption. Other marine species gathered in these areas can be eaten with proper handling and cooking. — Revin Mikhael D. Ochave

ARTA: Lack of automation at BAI an inflation risk

THE Anti-Red Tape Authority (ARTA) has asked the Bureau of Animal Industry (BAI) to automate its processes to help bring down the cost of produce and contain inflation.

ARTA Director-General Jeremiah B. Belgica said the BAI, which regulates livestock and related industries like animal feed, needs to bring online its document submission, payment, and releasing procedures, with permits made printable at home.

“Ang konsepto kasi natin dapat, ‘yung papel ang umiikot, hindi ‘yung tao at aksyunan agad ang mga pending applications, (The concept that needs to be adopted is that the documents should make the rounds, not people. The BAI should act on pending applications immediately),” he said in a statement Tuesday.

If online processes are not yet up to date, he said that the agency should send permits to applicants via courier to reduce on-site visits.

Mr. Belgica added that streamlined and automated processes will reduce the prices of meat and animal feed, thereby helping contain food prices and reducing the threat of another inflation crisis.

“Pag mahirap ang proseso, nadadagdagan ‘yung gastos mo sa permit… so tataas ang presyo. Pag streamlined, mabilis. Makakapagnegosyo agad ang tao, ang presyo din of course maaapektuhan. Makakatulong sa pagbaba ng presyo (If the process is difficult, applicants spend more for the permit. A streamlined process gets applicants through faster. They can go about their business right away and prices will fall).”

The Ease of Doing Business law requires government agencies to meet three types of deadlines: Three working days for simple transactions, seven working days for complex transactions, and 20 working days for highly technical applications.

ARTA asked the BAI to submit a list of completed and fully paid applications that are still pending at the agency.

A price ceiling was placed on pork earlier this month after the African Swine Fever outbreak increased the cost of raising hogs while drastically reducing supply in Luzon. — Jenina P. Ibañez

Priority dredging works on Marikina River targeted for completion by end of April

THE Department of Public Works and Highways (DPWH) said Wednesday that dredging in three parts of the Marikina River identified as priority areas will be substantially complete by the end of April.

The dredging works are expected to improve the flow of the Marikina River and minimize the flooding risk after its waters rose during the typhoons that hit the country late last year.

The DPWH is helping the Department of Environment and Natural Resources (DENR) rehabilitate the Marikina River basin.

“By the end of April, we will see a significant accomplishment of this dredging activity in time, for the months of May and June, the time when typhoons usually start entering the country,” DPWH Engineer Jerry A. Fano said during the launch of the Marikina River Rehabilitation project Wednesday.

He said the priority areas identified by the DPWH for dredging are the stretch of river along the Olandes sewage treatment plant, designated “Site A,” near the SM Marikina or “Site B,” and near the East Metro Terminal or “Site C.”

Dredging in the three priority areas is expected to move out a combined 95,000 cubic meters, he said.

During the launch, Environment Secretary Roy A. Cimatu said the government plans to finish dredging at the three sites in about 65 days.

“I’m very sure that we would be able to speed up the movement of water in the river, and reduce flooding in the area,” Mr. Cimatu, who chairs Task Force Build Back Better, said.

Aside from the Wednesday launch of the pilot dredging activity in Barangay Kalumpang, Marikina City, the DENR also held a bamboo planting activity on the riverbank at Barangay Industrial Valley Complex, also in Marikina.

Fifteen days earlier, the DENR launched dredging operations on the Cagayan River, which overflowed and flooded towns in the Cagayan Valley late last year.

In a statement Wednesday, Mr. Cimatu added that efforts are now underway to dredge and desilt the Bicol River and Lake Bato, and rehabilitate floodgates and rivers around Mayon Volcano. — Angelica Y. Yang

PHL rice inventory drops 12.8% at start of 2021

THE national rice inventory declined 12.8% year on year to 2.33 million metric tons (MT) as of Jan. 1, the Philippine Statistics Authority (PSA) said.

In its rice and corn inventory report, the PSA said rice stocks held by households rose 7.6% year on year to 1.29 million MT, while inventories held by commercial warehouses fell 27.5% to 689.96 thousand MT.

Rice stocks held by the National Food Authority (NFA) fell 32.8% to 352.52 thousand MT.

The rice inventory fell 15.7% from 2.77 million MT at the start of December.

Household rice stocks fell 20.3% month on month, while inventory held by commercial warehouses fell 13.2% over the same period.

NFA rice volumes fell 0.1% month on month.

“The total rice inventory level during the month was composed of 55.3% households (stocks), 29.6% commercial warehouses, and 15.1% with the NFA,” the PSA said.

Meanwhile, the national corn inventory as of Jan. 1 rose 12.6% year on year to 914.07 thousand MT.

Corn held by households rose 37.7% to 289.03 thousand MT, while inventory in commercial warehouses rose 3.8% to 625.03 thousand MT.

Month on month, corn stocks fell 4.9% from the start of December.

Corn held by households fell 17.9%, while stocks in commercial warehouses rose 2.6%.

The NFA held no corn stocks during the period, according to the PSA.

“The total corn stocks during the month (consisted of) 31.6% in households and 68.4% in commercial warehouses,” the PSA said. — Revin Mikhael D. Ochave

Metro Manila retail price growth eases in 2020

RETAIL PRICE growth in the National Capital Region slowed to 1.2% in 2020, from 1.6% a year earlier, mainly due to lower fuel prices, the Philippine Statistics Authority (PSA) said Tuesday.

The PSA said in December, the general retail price index (GRPI) rose 1.1%, decelerating from the year-earlier rate of 1.7% and the 1.3% rise in November.

It attributed the slowdown to a sustained downtrend of GRPI of mineral fuels, lubricants and related materials, which fell 6.3% in December after having declined 7.9% drop in November. A year earlier, the December GRPI rose 4.1%.

Growth in retail food prices slowed to 2% from 2.2% a year earlier, while that of chemicals, including animal and vegetable oils and fats, rose 0.1% compared to a rise of 0.9% a year earlier.

Manufactured goods classified chiefly by materials also posted slower growth of 1.1% in December compared with 1.4% a year earlier, while price growth in miscellaneous manufactured articles slowed to 0.4% from 1.1% previously.

On the other hand, price growth accelerated in beverages and tobacco (6.1% from 3.4%) and crude materials, inedible except fuels (1.7% from 1.1%).

Price growth in the machinery and transport equipment segment was unchanged at 0.5%.

In 2020, the GRPI of mineral fuels, lubricants and related materials fell 7.6%, against the 1.4% decline in 2019.

Also decelerating were price growth in food (2.3% from 2.6% in 2019), crude materials, inedible except fuels (1.6% from 3.9%), chemicals, including animal and vegetable oils and fats, (0.5% from 1.2%) and machinery and transport equipment (0.1% from 0.7%).

Price growth in beverages and tobacco in 2020 accelerated to 4.7% from 2.8%, while miscellaneous manufactured articles price growth ticked up at 0.9% from 0.7%.

Price growth in manufactured goods classified chiefly by materials was unchanged at 1.4%.

Security Bank Corp. Chief Economist Robert Dan J. Roces attributed the decline in general retail prices to weak consumer demand last year due to the pandemic and quarantine restrictions.

“This was notable in the food, fuel, and manufactured indices; these declined more in the March to June ECQ (enhanced community quarantine) period,” Mr. Roces said via Viber.

“Interestingly, towards the end of the year, we may glimpse the slow climb from food and fuel which are, as we know, contributing primarily to the inflation pressures at the start of 2021,” he added.

The government placed Metro Manila under ECQ from mid-March to May to curb the spread of the coronavirus. Quarantine restrictions have been relaxed since June. — Beatrice M. Laforga

Online platform seeks to attract young people to agriculture

THE Department of Agriculture (DA) said it tied up with IOT Technology, Inc. to develop an online application designed to help young agricultural entrepreneurs build their markets digitally.

Launched on Feb. 16, the AgriKonek app allows young agriculturists, including those engaged in fishing, to post product prices and available volume online for potential buyers.

The DA said users can tap AgriKonek data to monitor inventory, track changes, and streamline inefficiencies, lowering production costs.

At the launch, Agriculture Secretary William D. Dar said the app is intended to encourage more young people to engage in agriculture, which is transitioning to digital platforms by necessity due to the coronavirus disease 2019 (COVID-19) pandemic.

“We are hoping to attract more young blood to give agriculture a second look, and consider starting a journey of not only becoming agripreneurs, but also partners in national development,” Mr. Dar said.

Leo Lirio, IOT Technology president and chief executive officer, said the AgriKonek app will assist users in managing their farm assets and sell to a virtual marketplace.

According to the DA’s Agricultural Credit Policy Council (ACPC), its loan program for young agricultural entrepreneurs will be offered on the app.

ACPC Executive Director Jocelyn Alma R. Badiola said beneficiaries from other loan programs will also be eventually integrated into the application.

“With these digital solutions, we are actually turning the challenges of COVID-19 into opportunities as we are attracting more youth, who are naturally attracted to digital tools, to go back to agriculture and fisheries,” Ms. Badiola said.

“By promoting more use of digital technology, COVID-19 may have unintentionally made agriculture more attractive to younger generations. We can consider this a silver lining in these uncertain times,” she added. — Revin Mikhael D. Ochave

Fish supply seen adequate in 2021

THE supply of fish in 2021 is expected to be adequate due to favorable production trends, though volcanic activity may affect the output of Taal Lake, according to a non-governmental organization.

In a statement Wednesday, Tugon Kabuhayan convenor Asis G. Perez said production from aquaculture, commercial fisheries, and municipal waters typically peaks during the second quarter, based on data from the Philippine Statistics Authority.

“Apart from this positive trend, the aquaculture industry is also ready to further contribute in steadying the supply. Last year, the aquaculture sector produced 2.3 million tons or 52.77% of total fisheries production,” Mr. Perez said.

Mr. Perez, a former director of the Bureau of Fisheries and Aquatic Resources, said Tugon Kabuhayan and the Taal Lake Aquaculture Alliance, Inc. are also keeping tabs on the recent volcanic activity recorded in Taal.

“While our top priority is the safety of our fisherfolk and aquaculture workers, our group is confident of meeting growing demand. We have plenty of tilapia in Taal Lake and in other parts of the country,” Mr. Perez said.

Mr. Perez said fish supply is also expected to increase as warmer weather accelerates the fish growth cycle, improving yields.

He added more fish will be available in markets after the closed fishing season for round scad, or galunggong, ended on Jan. 31.

“We’re confident that our population can still be nourished despite increasing prices of most commodities as fish becomes more available and more affordable,” Mr. Perez said.

Meanwhile, Tugon Kabuhayan projected falling fish prices in the next few months based on patterns seen in the previous year, during which the price of galunggong and milkfish, or bangus, fell P50 to P60 per kilogram.

Citing government price monitors, Mr. Perez said aquaculture products such as bangus and tilapia fetched about P170 and P120 per kilogram, respectively, making them more attractive than pork, which is at about P400.

“We have lots of fish. All we need to do is to ensure that we’re able to make it available to consumers, especially in population centers like Metro Manila,” Mr. Perez said. — Revin Mikhael D. Ochave

PHL asks World Bank to extend validity of rural dev’t grant

THE GOVERNMENT has asked the World Bank for a two-year extension on the validity of a $7-million rural development grant due to the slow implementation of an agricultural productivity enhancement project in selected provinces.

According to World Bank documents obtained by BusinessWorld, the government requested a two-year extension of the Global Environment Facility (GEF) grant to May 31, 2023 from the original ending date of May 31, 2021.

The grant targets projects in six regions, supporting livelihood programs and capacity-building at coastal local government units (LGUs) and communities.

“Project startup was significantly affected by delays in the initial release of project funds as well as by low LGU capacity to support planning and facilitation of subprojects. LGUs and communities had relatively low resources, and generating counterpart funding and facilitating transactions were initially difficult, especially for those located in remote areas,” the bank said in a report.

The initial delays were eventually addressed and the implementation was brought back on track, it said, but the restrictions on movement imposed by the pandemic last year derailed progress once more.

“Completing all the subprojects is expected to go beyond the original closing date, especially those that have slowed down in 2020 due to COVID-19 restrictions as well as those affected and damaged by the series of typhoons,” it added.

The bank also acknowledged that the project needs more time for follow-up technical assistance on expanding GEF activities and ensuring their sustainability. It said deeper training and facilitation for integrated protected area management are needed to ensure LGUs and communities sustain the gains.

The grant is linked to the broader Philippine Rural Development Project which was approved in August 2014, with a loan of $412.33 million.

Within this loan, the government also asked to divert undisbursed funds worth $697,021 from the $4.261-million component of the loan for the “Enterprise Development Grants” program.

The balance was initially meant to fund a second round or an expansion of marine protected areas and micro-enterprise subprojects of other qualified LGUs that wanted to participate in the program but the government considers the implementation period insufficient to process another batch of recipients.

“Implementing relatively small but transaction-intensive subprojects in often remote and calamity-hit communities and low class/poor LGUs have been key challenges experienced by the project in the past,” according to the report.

“These are further aggravated by difficulties in the preparation of documentary requirements, procurement, implementation, fund utilization and liquidation, among others. The pandemic… has also made it more difficult for LGUs to generate counterpart funds,” it added.

If approved, the remaining funds will instead support activities such as hands-on research technology information and market-driven development test projects, consultants’ services and incremental operating costs for project management.

The Department of Agriculture is the main implementor of the rural development project.

The report indicates that 82% or $5.77 million has been disbursed from the grant, leaving a $1.23 million balance.

From the $412-million loan, the World Bank has released 91% or $376.12 million, leaving a balance of $36.21 million. — Beatrice M. Laforga

Dominguez counting on BIR to beat collection target this year

THE Bureau of Internal Revenue (BIR) is being counted on to exceed its collection target for 2021, Finance Secretary Carlos G. Dominguez III said Wednesday, after the agency beat its 2020 target, the first time it has done so in 17 years.

The BIR collected P1.94 trillion in taxes last year, down 11% from a year earlier but 15% higher than the P1.69-trillion revised target for 2020.

“With digitalization, improved administrative systems, and the dedication of the men and women of the bureau, I have no doubt that the target will not be just met, but will be exceeded again,” Mr. Dominguez said during a BIR virtual event.

Around 85% of the taxes collected last year were coursed through electronic payment platforms, while nearly all tax returns were filed online as well, against the 43% seen in 2015.

“I am confident that the agency will continue to make progress in applying digital technology for all its processes. This will enhance efficiency throughout the agency,” Mr. Dominguez said.

The BIR is tasked to collect P2.081 trillion this year, exceeding its 2020 total by about 7%. The economic team revised revenue targets downwards several times for the BIR and the Bureau of Customs last year after the economic downturn dampened consumption and forced many businesses to reduce operations or shut down.

In the virtual event, BIR Commissioner Caesar R. Dulay said the agency’s programs to provide tax relief to individuals and help them settle their back taxes will continue this year. This includes the Tax Amnesty program on delinquent accounts, which was extended to the end of June, and the pursuit of compromise settlements for those with arrears.

“Ngayong 2021, tuloy tuloy (the programs will continue this year). I appeal to the taxpayers to take advantage, first, of the amnesty and second, the program of compromise agreement. After all, sabi rin ni President, mas maganda ‘yung mag-compromise kaysa magkakaso kayo (the President has said compromise agreement is better than running after taxpayers in court), as long as the agreement is within the parameters of the law,” Mr. Dulay said.

On other possible forms of tax relief, he said discussions will be held with Mr. Dominguez.

The BIR released on Wednesday streamlined policies and procedures for issuing the final decisions of approval on applications for compromise settlements, whether these are denied, accepted or canceled, through Revenue Memorandum Order No. 8-2021.

It said notices of denial on applications with deficiency tax of less than P500,000 will only be signed by regional directors, while those beyond the threshold will have to be signed by the BIR Commissioner.

Certificates of availment to be issued in case an application is approved, will have to be “signed by the assistant commissioner of the collection service, except those involving large taxpayers cases, which shall be signed by the assistant commissioner of the large taxpayers service.”

Regional directors or assistant commissioners have been named signatories for all cases involving authority to cancel assessments. — Beatrice M. Laforga

How FIST will help revive the economy

It has been nearly a year since the World Health Organization declared the coronavirus outbreak a pandemic. The world is still dealing with the pandemic’s adverse impacts, not just in the public health sphere, but also on the economy.

In 2020, the Philippines suffered its worst economic performance with a Gross Domestic Product contraction of 9.5%, the largest decline since the indicator was first formally compiled in the period following independence. Economists attribute this outcome to the lockdown, which may end only when herd immunity is achieved primarily through mass vaccination.

THE STRUGGLE IN FINANCIAL SERVICES
The pandemic did not just take away the freedom to enjoy the good things in life — it also took away livelihoods and dashed many hopes for a prosperous life. The government deployed resources and handed out cash assistance to help cushion the adverse impacts of the pandemic, but it can only do so much. It needs the help of the private sector, particularly the financial services industry. To their credit, financial institutions (FIs) extended concessions to borrowers and made sizeable donations, apart from keeping many of their employees on payroll.

Nevertheless, many borrowers have been failing to meet their loan obligations, putting immense pressure on an FI’s capital as non-performing loans (NPLs) rise. While some NPLs are secured by property, these are highly illiquid and difficult to sell — especially in an economy riddled with uncertainties and everyone is reluctant to spend.

If left unchecked, the Philippines may plunge deeper into financial crisis. To maintain the integrity and stability of the financial system, it is critical to provide the necessary support to FIs, helping them stay liquid, flexible enough to use their capital, and agile in responding to opportunities and challenges that may arise.

LETTING LIQUIDITY FLOW THROUGH FIST
One of the key legislative agenda items for the government in response to the pandemic was the Financial Institutions Strategic Transfer (FIST) Act, which was signed by President Rodrigo R. Duterte on Feb. 16, going into the books as Republic Act No. 11523. The FIST Act aims to ensure liquidity in the financial system by encouraging private sector investment in non-performing assets (NPAs).

FIST CORPORATION (FISTC)
A central feature of the proposed law is the creation of a special type of corporation called a FIST Corporation. A FISTC may be established by interested investors to acquire non-performing loans and assets of FIs for a consideration.

The law provides that a FISTC cannot be set up as a one-person corporation. Also, if the FISTC acquires land, at least 60% of its outstanding capital needs to be owned by Philippine nationals.

Through FISTCs, illiquid NPAs held by FIs may be converted to cash or liquid assets, thereby re-injecting unutilized funds back into the financial system where they can be utilized for more economically productive and viable pursuits. In addition, taking these NPAs out from the balance sheets of the FIs frees up capital that can be used for more profitable undertakings instead of being tied up in maintaining NPAs and ease the burden of meeting capital adequacy requirements.

These FISTCs will be specifically established to acquire, maintain, and/or develop the NPAs, among other activities. Having a business model focused on such activities ensures that these NPAs do not stay non-performing. Rather, NPAs will be turned into productive assets that yield value and usufruct.

SOURCING FUNDS FROM THE PUBLIC
The funds of FISTCs may come from capitalization and/or the issuance of Investment Unit Instruments (IUIs).

IUIs are a participation certificate, debt instrument, or similar instrument issued by the FISTC and subscribed for by Permitted Investors pursuant to an approved FISTC Plan. FISTCs obtain funds from the public through the issuance of IUIs giving equity participation to Permitted Investors, who may acquire or hold IUIs in a FISTC in the minimum amount of P10 million.

PRIVILEGES
To entice investors to set up FISTCs, certain tax exemptions and fee privileges will be granted for a certain period. The transfer of NPAs from FIs to FISTCs, FISTC to third parties, or dation in payment in favor of an FI or FISTC will be entitled to income tax, value-added tax / gross receipts tax, and documentary stamp tax (DST) exemptions. Transactions are also entitled to reduced regulatory fees for registration, transfer, and filing.

In addition, to encourage the infusion of capital and financial assistance by the FISTC to rehabilitate the borrower’s business, the FISTC, for a period of not more than five years from the acquisition of NPLs, is exempt from income tax on net interest income, DST, and mortgage registration fees on new loans in excess of existing loans extended to borrowers with NPLs which have been acquired by the FISTC. In case of capital infusion by the FISTC to the borrower with NPLs, the FISTC will also be exempt from the DST.

On the part of the FIs, any loss, excluding the accrued interests and penalties component, incurred by them as a result of the transfer of an NPA within two years from the effectivity of the FIST Act will be treated as an ordinary loss. Such loss incurred by the FI may be carried over for a period of five consecutive taxable years immediately following the year of such loss, subject to pertinent laws.

If the law is successfully implemented as envisioned, the additional liquidity will keep the financial system afloat, thereby resolving many economic uncertainties. The Philippine economy may once again be poised for another period of growth. This will stimulate economic activity, creating a ripple effect extending to other industries. Another key to success is to encourage participation from the global market to induce capital flows into the country.

The views or opinions expressed in this article are solely those of the author and do not necessarily represent those of Isla Lipana & Co. The content is for general information purposes only and should not be used as a substitute for specific advice.

  

Gabriel Eroy is a Manager at the Tax Services Department of Isla Lipana & Co., the Philippine member firm of the PwC network.

(02) 8845 2728

gabriel.eroy@pwc.com

Investing is not all greed: A little history

Whenever people discuss investing in financial markets, or even in assets like real estate or businesses, greed — or the want for an increasing amount of wealth beyond what we need to sustain a comfortable life — is not only central but is the accepted rationale. We spend all this time trying to understand where to put our money with the purpose of making ourselves richer, to achieve a lifestyle we see possible from other people who managed somehow to get the big bucks by making either smart or lucky investment choices. But in my previous column, I had explained that not all people are motivated by greed and becoming richer. Believe it or not, some people have other things in mind when they imagine a meaningful life and invest according to these principles. But with finance having suffered such a reputation of being a primary vehicle for luxury and excess, we have forgotten that this industry serves many purposes — even, surprise, surprise, addressing social issues.

We call this Responsible Investment (RI), i.e., when we consider things apart from financial return important when we put our money somewhere. Over decades, such “non-financial” returns have been defined and over-engineered with terms like “triple bottom-line” (people, profit, planet), “inclusive finance,” socially responsible screening, ESG (environmental, social, governance), “ethical investing,” and the terms go on. But the bottom line is that there has existed for centuries prior, a form of finance which has always gone beyond the myopic performance story. And it is not just a niche for the holier-than-thou people who want to change the world; it’s the basis of finance, and always has been.

Religion, like it or not, has had a strong influence in the development of cultures and creating ethical codes for society and the same has been true for investments. Religious congregations in America and the UK used investments to address their ethical concerns in society by excluding controversial businesses from their portfolios. This type of ethical investing has ancient Greek, Jewish, Christian, and Islamic roots.

The Torah, for instance, provides some rules on how money must be used whereas the Catholic Church prohibits usury. As early as the 1700s, Quakers prohibited their members from participating in investing in the slave and weapon trade, and during the same period, the founder of Methodism John Wesley preached a sermon calling on its faithful to avoid investing in companies engaged in alcohol, tobacco, gambling, and weapons. Following the rules enacted by the Koran, Muslim investors have historically avoided investing in companies involved in pork production, alcohol, gambling, and in interest-based financial institutions.*

From the 1960s, the attention started shifting away from religious motivations and a spotlight was shed on pressing societal events. During the Vietnam war, students led a protest and called for the boycott of companies providing weapons used in the war. This brought about the birth of the Pax World fund in 1971, which avoided investing in companies significantly involved in the manufacture of weapons. The rise of the civil rights and racial equality movements in Europe and the US through the Civil Rights Act in 1964 and the Voting Rights Act in 1965 increased the pressure on companies operating in South Africa during the reign of apartheid. Investors were eventually forced to withdraw investments in these firms. Massive environmental disasters including the 1986 Chernobyl catastrophe in Ukraine and the oil spill of the Exxon Valdez near Alaska made companies more aware of the consequences of environmental risks on their revenues. These critical events brought society’s attention towards how money is invested and how it could be used for both negative and positive social ends and cast a spotlight on the financial sector as instrumental in bringing about solutions to such massive societal problems.

In the first half of the 2000s, the Parmalat fraud and money laundering scandal of its CEO and top managers in 2003 and the audit scandal which led to the collapse of Enron in 2001 severely affected pension and mutual funds in Europe that invested in these companies and highlighted the need for better governance controls, which was exacerbated even more during the 2008 financial crisis. The crisis provided legitimacy to ethical funds since these funds had done more in-depth research and to some extent were divested from risky companies, making the practice of looking at non-financial issues particularly attractive to the mainstream.

In Europe, several countries have been able to implement RI through supportive legislation at a local level. For instance, Belgium, France, and Italy have prohibited the investment in companies producing weapons. More popularly, Norway’s “Petroleum fund” has prohibited investments in tobacco since 2004. According to the European Social Investment Forum, tobacco features as the most popular exclusion criteria, reflecting a wave of divestment. The number of signatories to the UN Principles for Responsible Investment (PRI) who vow to improve asset management practices is currently close to 2,700 firms, representing the management of over $104 trillion globally (PRI Website).

So, if you think you are alone in believing your money could serve better ends, fret not. We have a long way to go in rethinking finance as serving the needs of society — but there is a slow and steady movement underway, which we simply need to jump on. n

*A list of references is available from the author upon request.

 

Daniela “Danie” Laurel is a business journalist and anchor-producer of BusinessWorld Live on One News, formerly Bloomberg TV Philippines. Prior to this, she was a permanent professor of Finance at IESEG School of Management in Paris and maintains teaching affiliations at IESEG and the Ateneo School of Government. She has also worked as an investment banker in The Netherlands. Ms. Laurel holds a Ph.D. in Management Engineering with concentrations in Finance and Accounting from the Politecnico di Milano in Italy and an MBA from the Universidad Carlos III de Madrid.

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