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SquidPay Technology and Phil Star Development Bank jointly files application for digital banking license

Homegrown fintech startup SquidPay Technology Inc. (SquidPay) has entered into last stage negotiations for the acquisition of a 60% stake in Phil Star, a development bank headquartered in Batangas City. Upon finalization of its majority stake, SquidPay will increase bank capitalization to P1.5 billion, the BSP requires a total of at least P1.0 billion for digital bank license applicants.

Phil Star Development Bank (Phil Star), Inc. is a subsidiary of Philippine Regional Investment Development Corporation (PRIDE), a wholly-owned subsidiary of AbaCore Holdings Corporation, a publicly-traded company (ABA) with interests in financial services, real estate, and gaming technology.

This acquisition forges the path for SquidPay to strengthen its platform’s alliances and provide financial services for millions of unbanked and underserved Filipinos across the nation. Integrating digital bank operations creates an array of financial services for SquidPay users that closes the gap between the country’s deep mobile phone penetration and lagging online transaction growth. “The partnership for digital banking is a social enterprise to address the financial services needs of the unbanked,” says Bernando Villegas PhD., an independent director of AbaCore Capital, Professor at UAP, and Director of the Center for Research and Communication, Manila.

Atty Antonio Gregorio, Vice Chairman of AbaCore and President of PRIDE adds, “ABA and PRIDE are eager to forge this partnership with SquidPay. The dedication and expertise of SquidPay perfectly fits our vision to help uplift the Philippine countryside.”

Marvin Dela Cruz, CEO of SquidPay notes, “this consolidates the development of SquidPay’s end-to-end financial ecosystem. In terms of impact, it accelerates our ability to reach our target markets, in terms of value it enables us to create more services and transactions per platform user.  “Bakit ka pa maghihintay sa bangko, kung pwede naman ang bangko na lang ang papuntahin sayo?” [Why will you still wait in line at the bank, if the bank can come to you instead?]

Digital banks service customers through an entirely application-based platform. Although the platform utilizes cash agents or other delivery partners for some activities, the core banking functions such as granting loans, issuing electronic money, credit cards, foreign exchange, and micro-insurance are executed with ease online.

“SquidPay’s acquisition shall fortify the financial backbone for our future smart cities to operate metropolitan-level IoT systems. We want the security and robustness of a bank but with the speed and efficiency only possible with the latest technologies.”

SquidPay intends to implement this ‘financial backbone’ and its vision of shared countryside development with listed company Premiere Horizon Alliance (PHA), another recent key partner. “Growth should come from everywhere,” says Mr. Dela Cruz.

Bolstered by the SquidPay platform and its team, Phil Star’s future plans will enable greater financial industry participation by leveraging SquidPay’s relationship with various LGUs, together with major banks to promote greater financial inclusion especially during this pandemic.

“One of the big challenges facing our BSP’s digital roadmap is financial education and perceptions- I think people learn best when they see and experience, show me, don’t tell me. That’s our strategy- we want to show that our online transactions are safe and simple- and we want to let our services be engaging everyday experiences.”  – Marvin Dela Cruz, CEO, SquidPay Technology.

Get SquidPay for free via these links:

Play Store: https://bit.ly/squidpayplaystore

App Store: https://bit.ly/squidpayappstore

For more info and updates visit these links:

Website: https://squidpay.ph

FB: https://www.facebook.com/squidpay

IG: https://www.instagram.com/squidpayphilippines/

Twitter: https://twitter.com/SquidpayP

[B-SIDE Podcast] How thinking small can lead to something big

Follow us on Spotify BusinessWorld B-Side

Carvey Ehren R. Maigue, an electrical engineering student at Mapua University, invented a plastic-like material that makes renewable energy from rotting fruits and vegetables. His invention won the first James Dyson Award for Sustainability in 2020, beating a record 1,800 entries from around the world. And now he’s fielding inquiries from electric car manufacturers who are interested in his technology.

Mr. Maigue’s story is about persistence. He first joined the James Dyson Award in 2018 and didn’t even make it past the national level.

In this episode of B-Side, he talks to BusinessWorld reporter Patricia B. Mirasol about his company, AuREUS System Technology, and the commercial applications of his invention: aside from powering electric cars, his technology can be used for window and wall solutions and e-textiles.

“AuREUS is not just an invention, not just a business, but an ecosystem that can positively impact different sectors,” said Mr. Maigue. “You do not need to solve a problem for the world. [Your solution] can be for a person that, for you, means the world.”

TAKEAWAYS

Your own mindset can be the biggest roadblock.

According to Mr. Maigue, there is a notion that that inventions made in the Philippines will be wasted, overlooked, or underappreciated. 

“We have to overcome that thinking,” he said. “Even though we are in the Philippines, we do have the talent and caliber to compete and be recognized globally.” 

‘You can think small and come up with something big.’

When Mr. Maigue spoke to students in Cagayan de Oro, one of the pressing questions involved the struggle in finding what to invent. “The task is a bit daunting,” he said. “There are many solutions and many problems: what can you offer? What should you do?”

He suggested finding a problem of a person close to you: what are they struggling with? In farming, are there any tools that might improve what they’re doing? In the kitchen, are there things that might make their work more efficient? There are simple things that are often overlooked, but which can be the starting point to create something better.

“Inventing is a very long process. If the inspiration is something for the benefit of a person very close to you, then that’s already a great motivation to carry on and move forward,” he said. “You can think small and come up with something big.” 

Don’t fall in love with your product, fall in love with solving the problem.

Mr. Maigue shared the three principles he learned from his inventor journey:

1. Do not box yourself to a specific industry, as inspiration can come from other fields.

“One of my inspirations came from something I saw in a pub. Had I boxed myself in, I wouldn’t have been able to converge different inspirations to create what I created.”

2. Inventing is not a 9-to-5 career but a 24/7 lifestyle.

“There’s this disconnect that—if you want to invent something—you either need a stable job, or else pursue the path of an inventor in the hopes of hitting the jackpot eventually,” he said. “You can be a baker or a musician: be open to the ideas that pop up, and create something new from there.”

3. Self-acceptance is part of the journey. Acknowledging defects and imperfections will allow you to make things better.

“By accepting your flaws and your invention’s flaws, you can remove the bias of being in love with your invention. Be in love [instead] with solving the problem you want your invention to solve.”

This B-Side episode was recorded remotely on Dec. 16, 2020. Produced by Nina M. DiazPaolo L. Lopez, and Sam L. Marcelo.

Follow us on Spotify BusinessWorld B-Side

Pag-IBIG home loan releases hit record-high P12.11B in December amid the pandemic

Pag-IBIG Fund home loan releases hit a record-high in December as disbursement  reached P12.11 billion despite the economic downturn caused by the Covid-19 pandemic,  top officials of the agency announced on Wednesday (Jan. 27). This amount is P640  million higher, or a six percent increase, from the previous record of P11.47B that was  set in December 2019.

“Our home loan takeouts in December is the highest for a single month in Pag-IBIG  Fund’s history. Because of it, we were able to finance the acquisition of 12,275 homes for  our members in December alone, which is also a record-high. Amid the challenges, Pag IBIG has provided homes to more members during the pandemic, aiding in the  government’s efforts led by President Duterte, to keep Filipino families safe at home,”  said Secretary Eduardo D. del Rosario, who heads both the Department of Human  Settlements and Urban Development (DHSUD), and the 11-member Pag-IBIG Fund  Board of Trustees.

For year 2020, Pag-IBIG Fund released P63.75 billion in home loans allowing 63,750  members to acquire their own homes. Out of the total amount, 11 percent or P7.1 billion  were released as socialized home loans for the benefit of 16,975 Pag-IBIG Fund members  who belong to the minimum-wage and low-income sectors, del Rosario added.

Meanwhile, Pag-IBIG Fund Chief Executive Officer Acmad Rizaldy P. Moti expressed  optimism that the numbers will continue to rise especially as the economy has reopened.

“From September to December, our home loan releases were close to ‘pre-pandemic’  levels. We released more than P6 billion to P7 billion in home loans every month,  reaching its peak in December when releases reached over P12 billion. The year 2020  may not have been record-breaking in terms of numbers, but it was a story of grit and  resiliency as we were able to bounce back quickly,” Moti said.

He said that Pag-IBIG Fund was poised to achieve another milestone year in 2020 as the  combined home loan releases in January and February amounted to P12 billion, growing  17 percent compared to the same period in 2019. But as expected, home loan numbers  started to decline in March when strict community quarantine measures were imposed to  curb the spread of Covid-19. Home loan releases dipped to P3.8 billion in March and  P883 million in April. But, as restrictions were eased, home loan figures started to  recover in as early as May when disbursements jumped to P1.2 billion and rose even  higher to P2.9 billion in June. Loan releases continued to climb in the second half of  2020. And by the end of the third quarter, home loan releases had already recovered.

“Looking at the bigger picture, the improvement in numbers does not only mean  increased homeownership among Filipinos. It also means that Pag-IBIG Fund is able to  take part in ensuring the safety of our members and their families, especially during this  time of a pandemic. Rest assured that as 2021 unfolds, we will continue to be our  members’ reliable partner as we all journey to full recovery,” Moti added.

In total, Pag-IBIG Fund approved P84.53 billion in home loans to finance the acquisition  of 80,748 homes last year. Of this, the amount of P20.78 billion represents approved  home loan applications pending for release, the proceeds of which are ready for  disbursement upon submission by borrowers of post-approval requirements.

Inflation likely picked up in January

Pork prices have soared amid a shortage due to the outbreak of African Swine Fever (ASF). — PHILIPPINE STAR/MICHAEL VARCAS

By Luz Wendy T. Noble, Reporter

HEADLINE INFLATION likely quickened for the fourth straight month in January amid rising prices of food and oil products, a BusinessWorld poll of economists showed.

A poll of 16 economists last week yielded a median estimate of 3.6%, within the 3.3-4.1% estimate by the Bangko Sentral ng Pilipinas (BSP) for the month but near the upper end of the 2-4% annual target.

If realized, January inflation will be the fastest since 3.8% in February 2019 and will mark the fourth consecutive monthly rise since October. It will also be quicker than 3.5% in December and 2.9% a year ago.

The Philippine Statistics Authority will report the official January inflation data on Feb. 5.

As inflation nears the higher end of the central bank’s annual target, analysts said there may be less wiggle room for another rate cut. Instead, policies should be put in place to help households struggling to cope with soaring prices of basic goods, they said

Food prices have skyrocketed due to supply-side disruptions caused by lockdowns, agriculture damage caused by typhoons and the African Swine Fever (ASF) outbreak.

A supply shortage caused by typhoons in the last two months of 2020 continued to push food prices up, with conditions only likely to normalize after the next harvest, ING Bank N.V. Manila Senior Economist Nicholas Antonio T. Mapa said.

“It would help if government agencies identify any signs of collusion among manufacturers and suppliers. A proposal to remove import duties on imported meat products is suggested to help address the shortage of local pork meat due to the ASF,”  De La Salle University Economist Mitzie Anne P. Conchada said.

Transport costs may have also contributed to a faster rise in the consumer price index (CPI).

“There had been back-to-back hikes in pump prices, likely on the back of higher global crude oil prices after the OPEC+ (Organization of the Petroleum Exporting Countries) actions at the start of the year,” Security Bank Corp. Chief Economist Robert Dan J. Roces said.

In January, oil-exporting countries agreed to an output cut of one million barrels a day for Saudi Arabia in February and March.

At the same time, the gradual reopening of more industries drove up consumer spending and production costs, which may have led to quicker inflation in January, said Colegio de San Juan de Letran Graduate School Dean Emmanuel J. Lopez.

“However, it should not be misconstrued as detrimental to the economy, considering that it is an indication that the recession has eased because of increased consumer confidence as manifested by increased spending,” he said.

The central bank expects inflation increase to average 3.2% this year, faster than 2.6% last year as it factors in the rise in food and oil prices.

Analysts said the central bank would keep an accommodative policy but might avoid a rate cut in the first quarter.

“With the BSP governor clearly keeping an eye on the growth objective throughout 2020, it would be difficult to expect Mr. Diokno to hike policy rates in the face of the still very fragile economic recovery,” Mr. Mapa said.

The country is experiencing a negative real interest rate environment given that December inflation was at 3.5%, while the key policy rate is at 2%.

“There is very little room for the BSP to cut policy rates further. This is because even though inflation is currently within the comfortable 2-4% target, upside risks can no longer be ignored,” said Alvin Joseph A. Arogo, vice-president and head of equity research division at Philippine National Bank.

The BSP slashed rates by 200 basis points (bps) last year to support the economy during the pandemic. This reduced the reverse repurchase, lending and deposit facilities to record lows of 2%, 2.5% and 1.5%, respectively.

In previous policy meetings where it slashed rates, the central bank said the benign inflation environment supported the decision for further easing.

Inflation rate started to hover around 3% in November. By December, even rice prices rose 0.1%, the first time it posted an increase after 19 months of deflation due to the Rice Tariffication Law (Republic Act No. 11203).

Central bank officials have said earlier they view the faster inflation as “transitory.” BSP Deputy Governor Francisco G. Dakila, Jr. said in January that short-term considerations such as weather disruptions caused the uptick and would still have happened anyway, whether or not there was aggressive rate easing last year.

On the other hand, ANZ Research analyst Kanika Bhatnagar said they are still expecting a 25-bp cut from the BSP within the first quarter “to support growth.”

For Mr. Arogo, fiscal policies will be more effective to bolster recovery instead of monetary easing at this point.

“We believe that the government should focus on fiscal policy, such as higher public spending on infrastructure projects, healthcare capacity, and COVID-19 vaccination,” Mr. Arogo said.

The Monetary Board has two policy-setting meetings falling within the first quarter — the first on Feb. 11 and another on Mar. 25.

Analysts’ January inflation estimates (2021)

Analysts’ January inflation estimates (2021)

HEADLINE INFLATION likely quickened for the fourth straight month in January amid rising prices of food and oil products, a BusinessWorld poll of economists showed. Read the full story.

Analysts’ January inflation estimates (2021)

Coronavirus pandemic highlights failures of Philippine education

The pandemic would have given the government a chance to use technology to reboot the country’s education system, but it highlighted serious problems instead, including slow internet connectivity. — PHILIPPINE STAR/MICHAEL VARCAS

By Charmaine A. Tadalan, Reporter

JIRO A. NOBLE, 14, has been trying to learn Algebra on his own since classes started in October amid a coronavirus pandemic.

The Grade 9 student from Batangas National High School finds self-learning convenient in the absence of classroom noise and other distractions. But he finds it difficult to understand complex Math lessons without a teacher.

“I need a teacher because it takes me days to understand a lesson,” he said in Filipino by telephone.

BW Bullseye 2020-focusJiro’s father works as a driver, while his mom is a housewife. He has seven siblings, two of whom are also studying online. One is in senior high school, while the other has just started college and he would tap them whenever he needs help.

The COVID-19 crisis has forced school closures in almost 200 countries, disrupting the learning process of more than 1.7 billion children, according to the Organization for Economic Cooperation and Development (OECD).

Most governments including the Philippines were forced to adopt distance-learning solutions to ensure education continuity, and much of the debate focuses on how much students have learned (or missed) during school closures.

“While this potential learning loss may only be temporary, other elements that happen in the absence of traditional schooling, such as the curbing of educational aspirations or the disengagement from the school system, will have a long-term impact on students’ outcomes,” the OECD said in a report last year.

“This ‘hysteresis’ effect in education requires specific attention,” it said, citing the need to bring disengaged students back to school and mitigate student disengagement in case of future lockdowns.

In the Philippines, the coronavirus forced 2.6 million kids out of school as their parents lost their jobs or became underemployed. Many had to transfer to public schools where tuition is free. The enrollment rate fell by a tenth from a year earlier to 24.6 million.

‘BIGGER PROBLEMS’
The pandemic worsened the quality of Philippine education system that was already problematic before the global health crisis set in, according to youth group Samahan ng Progresibong Kabataan.

Local schools have had issues on accessibility especially for the poor, and the lack of infrastructure complicates it.

“Problems in education reflect bigger problems in society — labor, infrastructure, economic and social development, and healthcare, group spokesman John Lazaro said by telephone.

The pandemic would have given the government a chance to use technology to reboot the country’s education system, but it highlighted serious problems instead, including slow internet connectivity.

Mr. Lazaro said many parents are incapable of teaching their kids complex lessons, and majority of families don’t have laptops and other gadgets needed to make the online learning experience easier.

A government plan to improve the quality of education was stalled because of the crisis, he pointed out.

Mr. Lazaro’s group had been pushing for an academic freeze — classes shouldn’t start until COVID-19 vaccines arrive — arguing that the Department of Education (DepEd) should have planned the steps better under the so-called “new normal” instead.

He admits the freeze is a “Band-Aid solution” — it doesn’t really get to the bottom of the problem.

“It’s an emergency measure meant for education agencies to sit down and really think about the problem at hand rather than trying to rush through plans that don’t work, in favor of stakeholders,” he said.

Otherwise, the government should at least subsidize expenses related to distance learning, Mr. Lazaro said.

DepEd had planned to resume face-to-face classes in low-risk areas this month, but President Rodrigo R. Duterte recalled it given the risk from a new coronavirus strain first detected in the United Kingdom. At least 17 people in the Philippines have tested positive for the more contagious variant.

Senator Sherwin T. Gatchalian, who heads the Basic Education Committee, said an academic freeze would be regressive.

“Even though there are a lot of questions on absorption, there is learning happening in their homes as opposed to completely zero,” he said in a phone interview. “If we don’t implement distance learning, regression will happen.”

‘DEEP CRISIS’
“When regression happens, there will be massive dropouts and that will be a much greater, long-term concern,” he pointed out.

Mr. Gatchalian said the education sector had been in a “very deep crisis” even before the pandemic.

The Philippines ranked lowest out of 79 countries in the OECD’s Program for International Student Assessment in 2018.

Filipino students posted a mean score of 340 in Reading, 357 in Science and 353 in Mathematics, much lower than the average scores of 487 in Reading and 489 each in Science and Math.

The country also ranked last out of 58 countries after scoring 297 and 249 in Grade 4 Math and Science respectively, in the 2019 Trends in International Mathematics and Science Study by the International Association for the Evaluation of Educational Achievement.

Fifth-grade Filipino students also lagged behind students in five other Southeast Asian countries, in Reading, Writing and Math in the 2019 Southeast Asia Primary Learning Metrics.

Mr. Gatchalian said the government should address quality issues now because these will have a lasting impact.

“The health crisis is a short-term crisis,” he said. “Eventually this will pass. We will get our vaccines but the problems in education now will have long-term effects.”

“Dropouts, teenage pregnancies, quality and performance issues will eventually affect the quality of jobs, innovation and our country’s competitiveness,” he added.

Jerome T. Buenviaje, dean of the University of the Philippines College of Education, said education is a major indicator of a country’s progress.

Allotting a bigger budget for the sector, which got the biggest share of P708 billion in this year’s P4.5-trilion national budget will also boost the economy in the long term.

“Learning should continue despite the crisis,” Mr. Buenviaje said. “These modalities may not be the most effective but these are mitigating measures to reduce learning gaps and other impacts after the pandemic.”

He said schools should plug learning gaps caused by the crisis as soon as physical classes resume.

Jiro, the Grade 9 student, looks forward to seeing his classmates in school soon. “There are times when I don’t understand the modules because I’m not used to learning on my own. I need a teacher.”

PHL beats FATF deadline; new ‘dirty money’ rules out

THE Philippines beat the Feb. 1 deadline set by the Financial Action Task Force (FATF) to enact tougher rules against money laundering and terrorist financing, the chairman of the House committee on banks said on Sunday.

The Anti-Money Laundering Council (AMLC) on Sunday published the updated implementing rules and regulations for Republic Act No. 11521, which further strengthens the Anti-Money Laundering Act (AMLA) of 2001.

President Rodrigio R. Duterte signed the law on Jan. 29.

“In so far as the timeliness is concerned, we beat the deadline,” Quirino Rep. Junie E. Cua, who heads the House committee, said in a phone call.

Mr. Cua said the immediate implementation of the law would support the country’s bid to avoid being “gray-listed” by the FATF.

Under the law, AMLC is allowed to enforce targeted financial sanctions, such as asset freezing, in relation to the proliferation of weapons of mass destruction and their financing.

“The AMLC, consistent with the Philippines’ international obligations, shall be authorized to issue a sanctions freeze order with respect to property or funds of a designated organization, association, group or any individual to comply with the binding terrorism-related resolutions,” the council said under Regulatory Issuance No. 2.

The updated rules empower the Anti-Terrorism Council to designate covered persons, following provisions of the controversial Republic Act No. 11479 or the Anti-Terror Act of 2020. This is in addition to persons and groups mentioned in the consolidated list of the UN Security Council.

The AMLC can direct covered persons and government agencies to immediately freeze assets, property or funds, and related accounts of groups and individuals “without prior notice” based on provisions of the new anti-laundering law and the new anti-terror law.

Once a freeze order takes effect, all transactions, conversions and moving of funds and assets will be blocked unless they qualify as “authorized dealings,” the AMLC said.

This means frozen accounts will only be allowed to perform payments necessary for costs of administrative and judicial procedures that occurred before the designation of an individual or group.

Moreover, “humanitarian exemptions” or transactions meant to support sustenance, family needs and medical procedures of designated persons and groups will be allowed to be carried out through frozen accounts.

“These [humanitarian exemptions] are features proposed by the Senate. We agreed to accept that because I think it’s fair in the spirit of humanitarian reasons,” Mr. Cua said.

AMLC’s revised regulation also provides for lifting of a freeze order in case of mistaken identity, following provisions of the Anti-Terror Act. Delisting that can occur upon the request of foreign or international jurisdictions could also result in the lifting of a freeze order.

The updated rules likewise allow groups or people to file a petition before the Court of Appeals to determine the basis of a targeted financial sanction against them within 20 days.

Last year, several lawsuits were filed against the anti-terror law, saying it is unconstitutional and could violate human rights.

In December, freeze orders on bank accounts and assets of the Communist Party of the Philippines and the New People’s Army were issued following their designation as terrorists by the ATC. The same order was given for accounts and assets linked to local and international Islamic extremist groups.

The FATF gave the Philippines one year to address gaps on anti-money laundering and counter-terrorism financing and to implement these tighter measures. The original Oct. 1, 2020 deadline was moved to Feb. 1 due to the pandemic.

The country was removed from the FATF’s gray list in February 2005, five years after its inclusion in 2000. Officials have warned that going back to the list could affect remittance and investment flows due to more stringent processes and cross-border financial documents. — Luz Wendy T.Noble

COVID crisis, elections may derail Duterte’s reform agenda

The Duterte administration may run out of time to pursue its key reform measures. — PHILIPPINE STAR/MICHAEL VARCAS

THE coronavirus crisis and lawmakers’ preparations for the 2022 national elections could hamper efforts to legislate reforms to boost the Philippine investment climate, Moody’s Investors Service said.

“The combination of the coronavirus pandemic and the forthcoming election cycle possibly exerts an opportunity cost with regards to the implementation of further reform that would build on recent gains in improving the investment climate, promoting investment and assisting in fiscal consolidation,” Christian de Guzman, senior vice-president of Sovereign Risk Group at Moody’s said in a recent e-mail.

“As the 2022 general election draws closer, the government window of opportunity to pursue its legislative agenda is shortened,” Mr. De Guzman said.

A reconciled version of the proposed Corporate Recovery and Tax Incentives for Enterprises Act will be up for ratification in Congress this week. The measure will lower the corporate income tax to 25% from 30% and will streamline fiscal incentives for businesses.

However, several priority measures have yet to be approved. The amendments to the Public Service Act and Foreign Investment Act have already been approved at the House of Representatives, but counterpart bills at the Senate are still pending at the committee level.

Meanwhile, amendments to the Retail Trade Liberalization Act were finalized in the House of Representatives but are pending for approval in the second reading at the Senate.

Investors are hoping these measures will liberalize more sectors of the economy, and improve recovery prospects.

Moody’s affirmed the Philippine sovereign rating of Baa2 with a stable outlook in July last year, citing the country’s track record of improving fiscal management.

This year, Moody’s expects the economy to grow by 7%, but sees the Philippines to be a laggard in recovery compared with other Association of Southeast Asian Nations (ASEAN) peers that have better handled the pandemic.

Moody’s projection for 2021 is near the higher end of the government’s 6.5% to 7.5% projection for gross domestic product growth this year.

“Apart from the vaccine rollout, a number of factors could influence the growth outlook for the Philippines,” Mr. De Guzman said.

“Most prominently, these include the risk of a significant resurgence in infections that leads to a return of stricter containment measures, which in turn would depress domestic demand and delay the recovery,” he added.

The Health department on Sunday reported 2,103 coronavirus disease 2019 (COVID-19) infections, bringing the total to 525,618. The Philippines still has the second-highest number of COVID-19 cases in Southeast Asia. — Luz Wendy T. Noble

Philippines remains a starter in digital transformation

By Arjay L. Balinbin, Senior Reporter

THE Philippines ranked 59th out of 79 countries in the 2020 Global Connectivity Index (GCI) report by Chinese technology firm Huawei Technologies Co.,Ltd., suggesting that the country remains a “starter” when it comes to digital transformation.

The Philippines had an average score of 38 out of 120 based on the four pillars used by the index, namely: levels of supply of information and communications technology (ICT) products and services, demand for connectivity, connectivity experience, and potential for future development of the digital economy.

The ranking of the Philippines was unchanged, although its latest GCI score was one point higher than 37 in the 2019 index report.

Under the four pillars used by the report, which analyzed the changes of each country’s GCI score since 2015, 40 indicators were used to track the impact of ICT on the country’s economy, digital competitiveness, and future growth. The indicators include ICT laws, mobile broadband subscriptions, e-government services, and ICT influencing new business models.

Four technology enablers were also determined, such as broadband, cloud, artificial intelligence (AI), and the Internet of Things (IoT). The Philippines got its highest score in the availability of broadband technology (45), three points higher than its score in 2019. Its scores lowered three points for cloud (33), and increased three points each for AI (27) and IoT (27).

The index grouped nations into three clusters: starters (ranks 58 to 79), adopters (21 to 57) , and frontrunners (1 to 20).

The Philippines and Indonesia (58th) were the only Southeast Asian countries in the list of starters, with scores of 38 and 39, respectively. Ethiopia, which scored 23, was the worst of them.

Among the Southeast Asian adopters were Malaysia (34th), Thailand (46th), and Vietnam (55th), with scores of 52, 46, and 41, respectively.

Singapore, which scored 81, was the second frontrunner after the United States whose GCI score was 87.

“The digital transformation of economic sectors will help economies develop ‘higher-order’ productivity to spur economic recovery and future competitiveness,” the report said.

It proposed five key stages for the digital transformation of economic sectors, namely: task efficiency, function efficiency, system efficiency, organizational efficiency and agility, and ecosystem efficiency and resilience.

ICT industry observer and expert Eliseo M. Rio, Jr., a former undersecretary at the Department of Information and Communications Technology, attributed the Philippines’ performance to the “lack of telecommunication infrastructure.”

“We are far behind our neighboring countries in terms of telco infrastructure. Vietnam has 70,000 towers as against our 24,000 towers, for example,” Mr. Rio said in a phone message on Friday.

He said the country’s digital services will only improve if it has sufficient infrastructure reaching the underserved and unserved areas.

“The aggressive rollout (of cell towers) will definitely improve our next ranking, especially when the third telco starts its commercial operations by March this year. Dito Telecommunity Corp. contributed around 3,000 additional towers. But even at this rate, it will take around seven more years if the government will not make telco infrastructure as important as its other Build, Build, Build programs,” he explained.

Infrawatch PH convenor Terry L. Ridon said the path towards full digital transformation is still “far and long.”

“Digital competitiveness between telecoms providers remain unchallenged, as the duopoly still corners a vast majority of the market despite the emergence of a new major player. On the other hand, lesser competitors cannot cope with consistency of service amid limited infrastructure and capital expenditures,” he said in an e-mailed reply to questions on Friday.

Mr. Ridon noted that several e-government services “have not been fully integrated nor intuitive” to public needs.

He pointed out that driver’s license databases are not fully integrated with vehicle information and other databases.

“Cloud services are now slowly being integrated in both government and industry, with Amazon Web Services establishing its foothold in the country. Competition in this field should be encouraged to reduce costs and ensure wider usage,” he noted.

The country is expected to continue being a “starter” nation in the medium term, as it still has limited investments in AI and IoT. “There is a bright spot in the financial technology sector with the new round of investments in GCash by foreign investors, as the current valuation may raise the company to the level of one of Southeast Asia’s valuation unicorns, those with market valuations of more than $1 billion.”

“There is also no shortage in emerging ICT influencing new business models, as various consumer service apps get launched almost every month, especially during the coronavirus pandemic. Their main challenge however is how to compete in an already crowded field of consumer service apps dominated by already established tech firms. Another challenge is how to build these apps for use not only in the Philippines, but in other parts of the world,” Mr. Ridon said.

To encourage growth and raise the level of domestic and foreign investments in the ICT sector, the government should remove bureaucratic roadblocks, he said.

The government should “allow the sector a wide latitude to innovate,” he also said, noting that government financial institutions “can even set aside investment funding to support nascent domestic tech initiatives, for as long as there is a clear proof of concept and plan of growth.”

T-bill and bond rates may move sideways on cautious sentiment

RATES ON government securities may move sideways this week as investors are becoming more cautious amid uncertain recovery prospects. — BW FILE PHOTO

RATES OF government securities on offer this week will likely move sideways or end mixed, with investors becoming increasingly cautious towards long-term debt despite strong liquidity in the market.

The Bureau of the Treasury (BTr) wants to borrow P20 billion from its offer of Treasury bills (T-bills) on Monday, broken down into P5 billion each from the 91- and 182-day debt papers and P10 billion via the 364-day securities.

On Tuesday, the BTr will auction off P30 billion in reissued 10-year Treasury bonds (T-bonds), which have a remaining life of nine years and five months. The notes bear a coupon of 2.875%.

T-bill yields may move sideways or higher by five basis points (bps) from the previous week, Security Bank Corp. First Vice-President and Head of Wholesale Treasury Sales Carlyn Therese X. Dulay said in an e-mail.

Ms. Dulay said the recent sell-off could push the rates of these short-term debt to inch up, but this will be partly tempered by abundant liquidity in the market.

However, a bond trader expects T-bill rates to continue to go down by 5-10 bps at this week’s auction.

Robinsons Bank Corp. peso sovereign debt trader Kevin S. Palma, for his part, said “demand for the front end of the curve is still expected to be tenacious as liquidity remains the name of the game.”

“Investors opt to diversify their excess cash on the intermediate term as policy settings remain to be accommodative and may not likely tighten until we see the economy in full throttle,” Mr. Palma added.

Meanwhile, for the reissued 10-year bonds, Ms. Dulay said they expect the notes to fetch a rate between 2.9% and 3%, while the trader gave a forecast range of 3-3.1%.

“We think the 10-year auction [this] week will meet demand relatively weaker than that of a three- or five-year bond as players have been quite aloof on the long end due to prospects of better conditions in the country from the pandemic. Alongside that, the market is also set to take in tenors under 10-year in the second half of February, so we might not see tenders like 3 to 4 times the supply size,” Ms. Dulay said.

Robinsons Bank’s Mr. Palma also sees a slight uptick in the 10-year bond’s rate as investors remain cautious, even as they seek higher returns amid the low interest rate environment.

The Bangko Sentral ng Pilipinas (BSP) slashed benchmark rates by 200 bps last year, bringing down the overnight reverse repurchase, lending and deposit yields to record lows of 2%, 2.5%, and 1.5%, respectively.

The BTr last week upsized the volume of T-bills it awarded to P22 billion from P20 billion and even opened its tap facility to accommodate the strong demand seen for the offering. The auction attracted total tenders of P112.2 billion, making the offer over five times oversubscribed.

Broken down, the Treasury raised P5 billion in 91-day T-bills as planned from P17.33 billion in bids. The three-month debt fetched an average rate of 0.969%, down 1.5 bps from the 0.984% logged in the previous week.

The government also accepted P7 billion in bids for the 182-day T-bills, higher than the P5-billion program, as tenders hit P31.527 billion. The average yield of the six-month papers went down by 2.5 bps to 1.323% from 1.348% previously.

Lastly, the Treasury made a full P10-billion award of the 364-day securities on offer, with total bids reaching P63.355 billion. The one-year instruments were quoted at an average rate of 1.542%, down 4 bps from the 1.582% seen in the previous offering.

Meanwhile, the last time the BTr offered the reissued 10-year bonds on offer on Tuesday was on Aug. 11 where it made a full P30-billion award out of P54.725 billion in bids. The T-bonds fetched an average rate of 2.724%, down from the coupon fetched when the papers were first auctioned off on July 11.

At the secondary market on Friday, the 91-, 182- and 364-day T-bills were quoted at 1.091%, 1.091% and 1.53%, respectively, while the 10-year bonds fetched a yield of 2.937%, based on the PHL Bloomberg Valuation Reference Rates published on the Philippine Dealing System’s website.

The BTr plans to borrow P140 billion from the local debt market this month: P80 billion via weekly auctions of T-bills and P60 billion from fortnightly T-bond offerings.

The government is looking to raise P3 trillion this year from domestic and external lenders to help fund its budget deficit seen to hit 8.9% of gross domestic product. — Beatrice M. Laforga

Material trends offer opportunities for textile sustainability challenges

TEXTILE presents sustainability challenges as the world moves to a more circular economy, but recent trends provide an opportunity to surpass these.

“The initial challenges are almost insurmountable, but we’re starting to chip away at that,” said Andrew Dent, executive vice-president for research of Material ConneXion, a New York-based materials consultancy. In a presentation on sustainable material trends at the recently held TELA Conference 2021, he gave examples related to reduced waste from digital manufacturing, new performance treatments, dyeing technologies, leather and cotton-free alternatives, and end-of-textile-life practices. “These innovations are small-volume. That’s the concern. How do we take these innovations and have them end up as larger volume solutions for the market?”

SUSTAINABLE MATERIAL TRENDS
A way to reduce textile waste that has emerged is 3D (three-dimensional) or digitized knitting, where items are produced by inputting design information into a program, and a machine knits the information using only the needed materials. Companies that use the technology include the Swedish furniture company Ikea, which uses it for one of its chairs. 

Meanwhile, Dutch dyeing technology supplier DyeCoo has a waterless dyeing solution that is able to infuse dye particles into an entire bolt of fabric. “Pigments fall like water, even though they’re still like gas, then go through the fabric so zero water is needed,” said Mr. Dent. “It dyes entire bolts in one go with zero water, but does require more of a capital investment. These are not small machines.”

Material manipulation is another growing trend in the textile industry. Liquid silk, for one, is a water-based, non-animal protein source that is being used to create a coating on other lower cost, readily available fabrics. The resulting fabric has the feel of silk without the need to actually produce it from silkworms. Meanwhile, mushrooms are being utilized by San Francisco-based startup MycoWorks to produce leather-looking membranes. “Although not having quite the same durability as real leather, it does have the same look and feel, and composts safely at the end of its material life,” Mr. Dent said.

One problem is what happens to textiles after they’ve come to the end of their usefulness. Brands such as OSOM use upcycled yarns from discarded garments to reduce textile waste. The company pulls fabrics apart through a machine that maintains the fabric’s fiber length and thus integrity.

As Mr. Dent explained, “The challenge with recycling natural fabrics such as cotton is that they’re made of individual fibers that are spun together. When you chop those fibers up, the less strong the resulting fabric is. OSOM is able to pull fabrics while maintaining 80% of the fiber length of those yarns.”

SHIFTING TO A CIRCULAR ECONOMY
Shifting to a circular economy requires asking the right questions. Textile upcycling, for instance, may be sustainable — but you need to be careful about what you do with it, Mr. Dent told the audience at the conference. Solutions need to be localized and not labor intensive. “If you can upcycle, produce new products, and use renewable energy, then you have your solution. We don’t want to put out so much plastic material out there in the world.”

A three-pronged approach involving the consumer, the brand, and the government is also necessary to spark a shift to a circular economy.

“Consumers need to want to purchase products that are circular. Brands need to offer circular options. The government and other institutions need to provide the infrastructure that allows materials to be recycled and reused,” Mr Dent said. “Without a combination of these three, it’s not gonna work.”  Patricia Mirasol

Trading in January led by local investors – PSE

LOCAL retail and institutional investors dominated stock market trading in January, marking the eight straight months that foreigners were left behind, the Philippine Stock Exchange (PSE) said.

PSE President and Chief Executive Officer Ramon S. Monzon said in a statement that local investors have accounted for 75.3% of the market’s value turnover in January, with the remaining 24.7% going to foreign participants.

The PSE said local investor participation in January is the highest recorded on a monthly basis since March 2010, which was at 76.2%.

“This is the eighth consecutive month that locals outpaced foreign investors in terms of value traded in the stock market. Trading activity of foreign funds may have abated, but liquidity in the stock market has not deteriorated,” Mr. Monzon said.

For January 2021, the market’s daily average value turnover amounted to P11.04 billion, against P7.35 billion as of end-2020 and P6.13 billion at the end of January last year.

“Daily average value turnover is up 50.3% year to date and 82.4% year on year,” Mr. Monzon said.

Further, the PSE said the volume turnover of the local market reached 1.43 trillion in January while value turnover for the month amounted to P220.85 billion. For the month, the PSE said 22.28 billion shares valued at P128.76 billion were traded.

It added that retail participation as of Jan. 22 accounted for 52.2% of the market’s value turnover, while 47.8% came from institutional investors.

“Retail participation started to expand when the pandemic started. In 2020, the retail market was responsible for 26.9% of value traded from 18.2% in 2019,” Mr. Monzon said.

“Initial public offerings (IPO) usually serve as the entry point in the stock market of retail investors. We hope to have a robust IPO pipeline this year, including Real Estate Investment Trusts (REITs), to further grow the retail market,” he added.

Meanwhile, Mr. Monzon said that despite wishing to see more local and retail investors at the PSE, new investors should learn the basics of the stock market before investing.

He said local small investors can subscribe to IPO shares via the PSE’s Electronic Allocation System web and mobile platforms, adding that the public can attend monthly webinars to increase their trading knowledge. — Revin Mikhael D. Ochave