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There will be a price to pay for making vaccines too expensive

THE WORLD is unequal enough and the COVID-19 (coronavirus disease 2019) pandemic threatens to make things more unequal still. Poorer countries have had to take on debt they will struggle to pay back. Their more fragile healthcare systems and crowded cities forced them into stricter and more economically harmful lockdowns, and poverty rates have risen dramatically. Now, they rightly fear a staggered recovery from the pandemic will further disadvantage them, given how expensive vaccine rollouts look to be.

It should not be surprising then that several developing countries, led by India and South Africa, argued last week at the World Trade Organization’s intellectual property rights council that IPR-related payments should be suspended for the duration of the pandemic for COVID-19 related vaccines, therapeutics, and equipment. They worry about “intellectual property rights hindering or potentially hindering timely provisioning of affordable medical products” to their citizens.

The full council will meet on the subject in December. Whatever the outcome, the bid is a shot across the bow of the current IPR system. The issue isn’t just about getting poor countries access to vaccines. It is about allowing them to choose the vaccine that best suits their populations and infrastructure, and ensuring that they get enough doses quickly enough that they don’t have to wait until 2024 to resume normal life while the West and China move forward.

At one level, the current petition clearly amounts to overkill. There’s no reason for all pandemic-related IPR to be suspended. Few developing countries will be interested, for example, in the vaccine produced by Moderna, Inc., which requires the sort of super-cooled storage facilities they would struggle to build.

Most had already bet big on the vaccine from AstraZeneca Plc and the University of Oxford, which the company has promised to sell at cost to many developing countries. With news this weekend that the vaccine was, on average, 70% effective against preventing COVID-19, any argument that a wholesale suspension of property rights is needed to prevent poor-country taxes flowing into Big Pharma’s coffers begins to sound quite thin.

Yet the fact remains that if those capital flows are forced to materialize — if not for vaccines, then as royalties for therapeutic treatments or cutting-edge tests — then developing countries can and will revolt. We need to ensure poorer countries aren’t pushed to their limits if we want to avoid a breakdown in the global acknowledgement of IPR that would set back innovation worldwide.

This is the first test of importance that the global intellectual property system has faced — and it will not be the last. A future in which owners of algorithms, capital, data, or platforms in the West exact unending rents from consumers and governments in poorer countries is far less likely than a wholesale repudiation of their right to do so by the rest of the world. An intellectual property regime that is not flexible enough to manage this crisis is one that will break under the weight of that techno-dystopia.

In other words, it is in everyone’s interest — including the residents of the world’s poorest countries, who depend upon innovation in the world’s richest nations to improve their lives — to head off this disgruntlement before it has a chance to gather political momentum. Some corporations recognize this. AstraZeneca, for example, has promised not to profit off the vaccine as long as COVID-19 is a pandemic (though how they will declare the pandemic is at an end remains mysterious).

Some rich-country leaders do as well. Boris Johnson hosted a global vaccine conference and the United Kingdom has so far committed $700 million to the shared vaccine fund, COVAX. French President Emmanuel Macron has helped set up the Access to COVID-19 Tools Accelerator, or ACT-A, which offers the best chance of distributing not just vaccines, but also diagnostic tests and therapeutic treatments.

Yet most rich-country governments have produced pandemic-response packages that are sharply nationalist and inward-looking in nature. ACT-A’s $38-billion budget is less than 1% of the amount that the Western world has committed to its lavish stimulus packages. And still Macron’s initiative is struggling for cash, having raised only $3 billion so far.

The biggest culprit has been the United States. Neither President Donald Trump nor Democrats in Congress have shown any interest in helping fund this effort, even though the country’s hopes for future prosperity depend on a functional global IPR system. If President-elect Joe Biden wants to demonstrate that the US is once again a good-faith contributor to global efforts, he could start by promising that his administration will do what’s needed to ensure that ACT-A is fully funded. If the US takes a back seat even under Biden, its hopes of recovering global respect and leadership will be truly finished.

BLOOMBERG OPINION

Barangay Ginebra and Phoenix Super LPG go for series closeout

By Michael Angelo S. Murillo, Senior Reporter

THE Barangay Ginebra San Miguel Kings and Phoenix Super LPG Fuel Masters shoot for a spot in the finals of the PBA Philippine Cup when they trek back to the Angeles University Foundation Sports Arena in Pampanga on Wednesday.

Up 2-1 in their respective best-of-five semifinal series, the Gin Kings and Fuel Masters use one of their two chances to set up a date in the championship of the Philippine Basketball Association (PBA) All-Filipino tournament.

Barangay Ginebra reengages the Meralco Bolts in the 3:45 p.m. curtain-raiser while Phoenix takes on the TNT Tropang Giga in the 6:30 p.m. main game.

The Kings seized the driver’s seat anew in their series after their 91-84 victory in Game Three, where they came out with more bounce and consistency in their game to rule the contest from point to point.

Stanley Pringle led a balance by Barangay Ginebra, finishing with 24 points, nine rebounds and six assists.

He was backstopped by big man Prince Caperal, who had 15 points, with LA Tenorio and Japeth Aguilar adding 12 each.

Joe Devance was the other Kings in double digits with 10 points.

Barangay Ginebra has been dominant in their wins, beating Meralco by an average margin of 12 points.

But despite that, Kings coach Tim Cone is still wary of the tough challenge they are set to face in Game Four from the Bolts, describing it as a “great force.”

“It’s a ping-pong match. You have good teams playing. It’s not easy to roll over Meralco, They’re going to come back… [we have to] build a good force to beat what we know will be a great force in the next game,” said Mr. Cone following their Game Three victory.

It is the same sentiment Mr. Pringle had, saying “We have to do a better job in our execution if we are to close things out.”

FIRST FINAL APPEARANCE
Meanwhile, Phoenix is girding for what could be the most important game in franchise history as a win over TNT thrusts the former to its first-ever finals appearance in the PBA.

The Fuel Masters put themselves in such a position with a gutsy 92-89 win in Game Three. In yet another close fight between the two teams, Phoenix held strong down the stretch amid a ferocious challenge from TNT.

Matthew Wright, returning to his deadly form after being limited by ankle injury in the first two games, top-scored for Phoenix in Game Three with 25 points.

Calvin Abueva, meanwhile, tallied all-around numbers of 24 points, 14 rebounds, six assists, four steals and a block. RJ Jazul and Jason Perkins, for their part, had 11 markers each.

Despite being in a good position to advance to the “Big Dance,” Phoenix coach Topex Robinson said they are not getting ahead of themselves, letting their play decide their fate instead.

“If we can go to the finals, and inspire a lot of people, that’s where we’re headed,” he said.

For TNT, with its back against the wall, the need to recalibrate their game is needed, said coach Bong Ravena.

“They (Phoenix) have been able to read our game so we have to change our game plan. We have to think out of the box,” he said.

But Tropang Giga coach is taking solace in the fact that the series has been a tight one and that they were in the games in each of the time.

PFF’s futsal thrust set to be ramped up

FUTSAL in the country is set to be given a shot in the arm as the Philippine Football Federation (PFF) is girding to ramp up its program for the sport.

In a virtual press conference on Monday, PFF officials said they are ushering in a new dawn in their futsal affairs by lining up activities with the end view of further growing the sport among Filipinos.

“We are marking a new page, a new chapter in Philippine futsal development,” said Kevin Goco, PFF futsal head.

To help the PFF in its push, noted Dutch futsal coach Vic Hermans has come on board to be the organization’s technical consultant for its program.

The PFF is hoping that Mr. Hermans’ vast experience in handling futsal in different parts of the world would allow the football body to carve a successful path for futsal’s growth here.

“Vic is well respected by the players and the coaches and they want to learn from him,” said PFF president Mariano Araneta.

It is an involvement that Mr. Hermans is equally excited about, seeing how Filipinos exhibit qualities to excel in futsal.

“I’ve been in the Philippines before and I saw a lot of good qualities to succeed in futsal. I cannot wait to start and thankful for the support I’m given,” said Mr. Hermans, who was due to the country in May but had his arrival deferred to a later date because of the coronavirus pandemic.

The PFF shared that for its futsal program it will try to make it as comprehensive as possible, catering from the youth all the way to the seniors.

Age-group tournaments, which are hoped to start by the second half of 2021, are being planned in different parts of the country.

Futsal courses will also be offered so as to shore up the knowledge of stakeholders.

A professional futsal league down the line is also being envisioned, but the PFF said it is taking it a step at a time to make it sustainable.

“We’re doing it slowly and looking to generate more interest first,” said Mr. Goco.

The PFF futsal head admitted that the pandemic has affected their plans but expressed determination to still see them through when conditions finally permit it just as he underscored the role that the private sector plays in the development of futsal especially during these uncertain times.

“Yes. The pandemic has delayed us a little bit. Given that our program is focused on amateurs right now we are at a point where we can’t play until there is a vaccine. So we’re looking at maybe the end of the second quarter or start of the third next year but we’re optimistic we get to play before that. This is also why we want to bring Vic over as soon as possible so we can plan ahead and put up the needed structures,” said Mr. Goco.

“The private sector, meanwhile, will play a key role in the development of futsal. Sports is in a very challenging moment right now and we need to secure all the support we can get to fashion out a win-win situation where we can get through this pandemic,” he added.

Apart from officials of the PFF and Mr. Hermans, present during the press conference was Danny Moran from the Henry V. Moran Foundation, one of the major proponents of futsal in the country. — Michael Angelo S. Murillo

FIFA bans African football head for five years after ethics investigation

MANCHESTER, England — The head of African football, Ahmad Ahmad, has been banned from football for five years by International Federation of Association Football (FIFA) following an ethics investigation by world soccer’s governing body.

Ahmad, who is president of the Confederation of African Football (CAF), had intended to stand in an election in March in which he would have faced a number of challengers.

FIFA said in a statement the independent Ethics Committee has found Ahmad guilty of offering and accepting gifts and other benefits, and misappropriation of funds.

FIFA had “sanctioned him with a ban from all football-related activity (administrative, sports or any other) at both national and international level for five years,” it said.

It also fined him Sƒ200,000 ($200,000). Ahmad declined to comment when contacted by Reuters.

Former CAF general secretary Amr Fahmy, who died earlier this year from cancer, had been dismissed after he made corruption allegations against Ahmad last year in a document sent to FIFA.

The document, sent on March 31 2019 by Fahmy to a FIFA investigations committee and seen by Reuters, accused Ahmad of ordering his secretary-general to pay $20,000 bribes into accounts of African football association presidents. They included Cape Verde and Tanzania.

The document also accused Ahmad of costing CAF an extra $830,000 by ordering equipment via a French intermediary company called Tactical Steel. The company denied any wrongdoing and said it had won the contract on merit.

Furthermore, it accused him of harassing four female CAF staff, whom it did not name; violating statutes to increase Moroccan representation within the organization; and over-spending more than $400,000 of CAF money on cars in Egypt and Madagascar, where a satellite office has been set up for him.

Senior CAF officials, speaking on condition of anonymity at the time of his dismissal, said Fahmy was fired in reprisal for compiling the document with the allegations against Ahmad. — Reuters

Lakers sign Harrell

One of the biggest surprises in free agency was the decision of reigning Sixth Man of the Year Montrezl Harrell to jump to the Lakers. Not that the move made no sense. In fact, there are no downsides to claiming a crucial spot on the rotation of the defending champions — and especially when doing so makes them even more favored to retain their collective status as the best of the best. Nonetheless, the development raised eyebrows, and not just because he’s fresh off a personally productive campaign with their intra-town rivals.

Not coincidentally, the Clippers were among those taken aback by the turn of events, with longtime teammate and friend Patrick Beverley exemplifying the shock by incredulously tweeting “what” in reaction. For Harrell, however, it was a matter of being wanted. His contributions and ensuing formal recognition from the National Basketball Association notwithstanding, he found his position untenable given lingering ill will following a less-than-stellar playoff stint. Speculation pointed to his rift with All-Star Kawhi Leonard, and while he made no mention of it in his virtual presser yesterday, he said enough to convey his sentiments.

For the record, Harrell was asked if the Clippers angled to retain him while he explored his options. The answer “goes without saying,” he noted. “Apparently not if I’m on the other side. So it is what it is, really.” And so he will be burning rubber for the Lakers in the foreseeable future, pledging to give his all every time out in furtherance of his “business decision… When I was playing for the Clippers, I gave it everything I had every night when I laced up my sneakers. And now that I’m here with the Los Angeles Lakers, that’s the same thing I’m going to do.”

No doubt, Harrell’s thought process was facilitated by his association with Klutch Sports, which counts among its clients Lakers top dogs LeBron James and Anthony Davis and vital cogs Kentavious Caldwell-Pope and Markieff Morris. That said, he contended that the choice was his. “I talked to my family and, you know, it’s where we decided I wanted to go. Simple as that.” In any case, it’s clear that he has moved on, and that he figures to be a boon for the purple and gold — and, therefore, a bane for the Clippers — moving forward. “I’m just trying to do anything I can to help them get back” the top of the league. Enough said.

 

Anthony L. Cuaycong has been writing Courtside since BusinessWorld introduced a Sports section in 1994. He is a consultant on strategic planning, operations and Human Resources management, corporate communications, and business development.

Japan’s ramen bars struggle to stay open as COVID hammers small firms

TOKYO — Sixty-year-old Yashiro Haga is folding his Tokyo noodle ramen shop after 15 years in December, unable to overcome the prospect of a lasting customer slump due to the coronavirus crisis.

“The flow of people has changed due to the coronavirus,” Haga said, standing behind the counter of his ground-floor shop, Shirohachi. “Customers aren’t coming in and queuing up outside shops any longer.”

The pandemic is damaging Japan’s “mom-and-pop” restaurants—including noodle shops like Haga’s—at a growing rate, despite evidence the government’s massive effort to stave off bankruptcies is working in other sectors of the economy.

Hurt by deflationary pressures and growing competition in the run-up to the now-delayed Tokyo Olympics, noodle bars are particularly prone to the economic malaise the pandemic triggered in the service sector.

Small and mid-sized businesses like Haga’s noodle bar employ about 70% of Japan’s workers and account for 99.7% of the total number of enterprises, according to government data, leading some to worry that a COVID-19 resurgence could trigger an increasing number of layoffs among small firms.

While overall bankruptcies among firms with at least 10 million yen ($96,228) in liabilities in the six months to October fell 5.2% from a year earlier, those among restaurants rose 4.5%, data from private credit company Teikoku Databank showed.

Bankruptcies among restaurants with less than 10 million yen in liabilities were up by 137% for the same period, Tokyo Shoko Research, a firm that monitors similar data, said, while the total for the service sector, including restaurants, rose 64.4%.

But industry insiders expect that is just the tip of the iceberg, as local shops often close up with no official filing.

“Many ramen shops won’t appear in any figures when they’re closing down because they’re small, privately owned businesses,” said Haga, who has gone without salary since April.

Hiroaki Nakazawa, a 42-year-old pharmacist who has frequented Shirohachi for about a decade, said he felt sad about its closure. “There’s only one place like this.”

At least seven other noodle stalls in the central Tokyo area popular with tourists where Haga has his table-less shop, which seats nine people at the counter, have already closed since March this year.

Nationwide, 34 ramen businesses with at least 10 million yen in liabilities went bankrupt during the first nine months of 2020, also a record high for the period, Teikoku Databank said.

LACK OF FUNDS

Another reason why experts say statistics underestimate the true impact of the pandemic on ramen shops is that winding down is expensive due to requirements from landlords to leave the stores stripped down after a six-month notice period.

“There are many firms with a lack of cash flow,” said Manabu Shintani, chief executive officer of Actpro Co., a property intermediation services provider.

Among noodle shops, the first to fold this year were those whose businesses were already on knife-edge before COVID-19, often run by elderly owners, said Takeshi Yamamoto, an independent ramen critic who tracks shop closures.

Those were followed by a wave of noodle chains closing outlets, and now some places with younger owners are shutting down, said Yamamoto, who has eaten at more than 10,000 noodle shops.

He estimated that the real number of ramen shops shutting down nationwide was about 290 in October and November alone.

The spate of closures has helped some. Actpro’s platform for matching businesses looking to shut down with firms hoping to move into the location being vacated has been a hit.

Once a match is made, a restaurant owner and the incoming owner negotiate with the landlord, cutting costs.

The company has seen the matchings quadruple to about 70 to 80 a month after the crisis started taking its toll, Shintani said.

Shirohachi’s Haga used about $29,000 in government subsidies to get through until his closure.

He tried offering his noodles through takeout but was unable to make up for the income he lost after office workers’ visits fell due to work-from-home restrictions.

“Even among the most popular places, sales from takeout aren’t exceeding” the sales drop from the crisis, ramen critic Yamamoto said. — Daniel Leussink/Reuters

Big changes in the global insurance market: will they affect you?

You’ll probably be aware of the terms “bull market” and “bear market” in terms of stocks and shares. But did you know that the insurance world has cycles too? It is useful to know because market changes cause a knock-on effect on insurance policies worldwide.

In investing, a bull market is characterised by strong investor confidence: capital flooding into the equity markets, and rising share prices. Conversely, a bear market sees a flight of capital out of the stock exchange to lower-risk investment classes e.g. gold. The demand to buy shares falls. So do share prices, until they dip so low that they’re undervalued. Then investment capital returns and prices begin to rise again.

While not a like-for-like comparison, the insurance world is subject to market forces, too. 

Hard market? Soft Market? What does it mean for me? 

An insurance market cycle consists of ‘hard’ and ‘soft’ markets. 

In a soft market, insurance companies are awash with investment capital. This means there is a huge supply of insurance (capacity) available and to win clients, premium prices are low. In a soft market, insurance is freely available to anyone who wants to buy it.  Terms are broad and comprehensive. 

In short, a soft market is a buyer’s market. 

When the market gradually ‘hardens’ towards a hard market, underwriting conditions tighten. In other words, sellers become choosier about who they will sell to and on what terms. As supply contracts, prices begin to rise. 

What market cycle are we in now? Causes of changes in market conditions

Traditional wisdom says there will be a hard market for one year in every seven. More recently, we’ve seen a lengthy soft market, running for well over 10 years. But for the last 18 months or so, many insurers have been running at a negative operating ratio. That is, the amount of premium and investment income they receive is less than the value of claims paid out plus expenses.

In 2020, as well as billions of USD worth of COVID claims, there have been an unusually large amount of major weather events and natural catastrophes, not only in the Philippines, but all over the world. This has resulted in pay-outs of many billions more. 

To further understand the underlying market forces of insurance, let’s look at how insurers share and offset the risk of such huge claims. 

Please put yourself in the perspective of the insurer for a moment. If a client wanted coverage for a fleet of ships, that’s a liability that you may not want on stuck on your balance sheet. Overnight, you could be on the hook for several billion dollars. It could bankrupt your business. 

So how do insurers mitigate such losses? 

They “re-insure” them. This means paying their peers a premium to take on part of the risk. And oftentimes, peers enact their own risk management. To protect their own balance sheet, they go ahead and re-insure the re-insurance, on what is called the retrocessional insurance market. 

Still with us?

Essentially, when insurance companies take on a risk, they seek to offset it. This sets off a chain of risk sharing throughout the interconnected global insurance markets. It’s similar to general insurance: an agreement under what terms each re-insurance policy will pay out on, an assessment of what the chances of a claim are, and the premium priced accordingly. 

At the time of writing, there is a definite tightening of capacity in the retrocessional markets, with reinsurance premiums rising for any insurer wanting to offset risk in this way. 

In more prosperous times, any increased costs of doing business would be outweighed by investment earnings. Insurers are after all, prolific institutional investors. But since the global financial crisis, insurers have been required by rating agencies and regulators to invest ever more conservatively, and even before COVID, yields on ‘safe’ investments had fallen drastically, in some cases, into negative territory. This situation has only deteriorated with COVID.

Are we in a hard market now?

No underwriter likes to use the phrase hard market (just as Harry Potter would rather not say Voldemort). 

But prices are rising, underwriting is tightening and risk appetites within insurers are changing. 

To meet the opportunity of rising prices, there have been record levels of capital raising by insurers, with £29bn’ of new financing so far in 2020. More than usual, insurers are now taking more risk with more of their own money. This is another factor in the tightening of underwriting. 

These are the current market conditions that all brokers and agents are working in. 

So what can I do? 

In a word, tailoring. 

We mentioned that a soft market included very broad conditions. This can often be the result of extra clauses and bolt-ons to add value. 

At your next renewal, you may be offered a policy that doesn’t cover things it used to. At the same time, you may also be asked to pay more. But, just as insurance prices have been impacted by the pandemic and other macro-economic factors, so have the business models and practices of most other industries.

As you adapt to these changes, it might be a good idea to revisit the information that you had provided for renewal quote to evaluate whether it truly represents your business as it is today. By really digging into the information submitted to insurers and thoroughly analysing the underwriting methodology behind the quotes, various improvements can be made in acceptance, pricing and coverage. 

A specialist broker can help you present your business in the best possible light and this can make a big difference.

Howden Broking Group

In just 25 years  Howden has grown from three friends and a dog in the UK, to one of the largest brokers on the world stage. We’re trusted all over the world, advising on more than 7bn USD of premium globally. 

In 2020, Howden has won three of the most coveted awards an insurance broker can win; Insurance Insider Broker of the Year, Insurance Asia News P&C Broker of the Year, and the Advisen Cyber Broker of the Year. 

In the hardening market and the new normal, you may find your existing insurance relationships not delivering the value they used to anymore. We’d be happy to help you and explore whether there is a better way.

 

Spotlight is BusinessWorld’s new sponsored section that allows advertisers to amplify their brand and connect with BusinessWorld’s audience by enabling them to publish their stories directly on the BusinessWorld Web site. For more information, send an email to online@bworldonline.com.

 

Virus hits Philippines outlook most across Southeast Asia

Economists have slashed their 2020 outlook for the Philippines by more than any other Southeast Asian nation as it struggles with one of the region’s worst coronavirus outbreaks.

The forecast for the country’s gross domestic product dropped from a 6.1% expansion at the beginning of the year to an 8.9% contraction, a swing of 15 percentage points, according to the median of estimates compiled by Bloomberg. Thailand is second-worst, at 10.1 percentage points, followed by Malaysia’s 9.8 percentage points.

The Philippines central bank unexpectedly cut policy rates last week to help accelerate the economy’s disappointing recovery amid weak consumption and fiscal spending and as it grapples with the impact of back-to-back typhoons.

“The third-quarter and nine-month year-to-date data show an alarming lack of consumer demand that requires direct fiscal stimulus,” said Patrick Ella, a portfolio manager and economist at Sun Life of Canada Philippines Inc.

While Thailand has contained the spread of the virus, its tourism industry has been gutted by international travel restrictions while weak global demand and a strengthening baht have pummeled exports. The nation’s economy is forecast to shrink 7.1% this year.

Vietnam is expected to suffer the least from the pandemic, with its 2020 growth forecast revised down by 3.9 percentage points to 2.8%, outpacing the 2% forecast for China. — Cynthia Li and Ailing Tan/Bloomberg

Philippines in advanced talks with AstraZeneca for vaccine

The Philippines is close to concluding talks with Britain’s AstraZeneca for the supply of at least 20 million doses of its COVID-19 vaccine, a top coronavirus task force official said on Monday.

Carlito G. Galvez, Jr., the former general in charge of strategy to fight the coronavirus, said the government was also in talks with Pfizer Inc. and China’s Sinovac for vaccine supply deals.

Mr. Galvez said the government could enter into an advance market agreement with AstraZeneca before the month ends.

If negotiations with three drugmakers were successful, Mr. Galvez said in a televised briefing with President Rodrigo R. Duterte, the Philippines could lock in 60 million vaccine doses.

AstraZeneca said on Monday its COVID-19 vaccine could be as much as 90% effective, giving the world’s fight against the global pandemic a new weapon, cheaper to make, easier to distribute and faster to scale-up than rivals. 

Mr. Galvez said the British government has offered to send military personnel to the country to help with roll out of vaccines, which may arrive in the country in the second quarter of next year.

Finance Secretary Carlos G. Dominguez III said in the same briefing the government was seeking 73.2 billion pesos ($1.52 billion) from the World Bank, Asian Development Bank, state-run banks, and bilateral sources to fund the purchase of the vaccines.

With its more than 108 million people and some of the highest numbers of COVID-19 infections in Asia, the Philippines is considered as both a suitable location for clinical trials and a large market for global vaccine manufacturers. — Reuters

PEZA may exceed investment goal

New investment pledges are expected to be lower this year amid the pandemic. — REUTERS/ERIK DE CASTRO

THE Philippine Economic Zone Authority (PEZA) is aiming to approve more than P100 billion in investment pledges by the end of the year, led by a potential investor relocating from China.

“We might exceed more than P100 billion this year, with all these positive responses of our present investors and incoming investors,” PEZA Director General Charito B. Plaza in a press conference on Monday.

For the first 10 months of 2020, the agency reported P72.6 billion in new investment pledges, falling by more than a quarter from a year earlier.

The PEZA board approved another P14.6 billion worth of new investments during its board meeting earlier this month.

However, even if PEZA reaches P100 billion in new investment pledges, this would still be around 15% lower than P117.54 billion in investments approved in 2019.

Before the pandemic, PEZA aimed for 5-10% growth in new investment pledges this year.

Ms. Plaza said that the agency is in talks with an Israeli company that could transfer 16 of its facilities from China to the Philippines, while some companies already in PEZA ecozones are also looking to expand their current operations.

“We will first have an MoU (memorandum of understanding) and then we are helping them in finding the appropriate economic zone to locate their 16 branches,” she said.

Details on the company’s projects and industry have not yet been released.

Ms. Plaza said she is aiming to have all companies in PEZA economic zones to be operational by the end of the year.

As of Nov. 6, 87% or 2,627 companies on PEZA ecozones are operational, representing more than a million workers. The remaining 13% are non-operational companies with 432,747 employees.

More companies that remain non-operational are in Luzon, representing 14% of 2,560 companies. Meanwhile, 6% of the 409 Visayas-based companies are not operating and 7% of 46 Mindanao-based companies are non-operational.

Ms. Plaza in a press release last week said the competition from Southeast Asian neighbors in attracting investors transferring from China remains “tough,” noting the country’s underdeveloped infrastructure and logistics. — Jenina P. Ibañez

Too early to say worst is over, says ex-BSP exec

The coronavirus pandemic continues to dampen consumer confidence, even as the holiday season nears. — PHILIPPINE STAR/MICHAEL VARCAS

FORMER economic managers warned it might be too early to claim the “worst is over” for the Philippine economy, saying that quarantine restrictions should be further loosened to ensure a stronger and more inclusive recovery.

“It would be unrealistic to assume that we have already flattened the pandemic, and economic activities are on their way to recovery. A resurgence can reverse any initial gains,” Diwa C. Guinigundo, former Bangko Sentral ng Pilipinas (BSP) deputy governor, said in a forum hosted by think tank Stratbase ADR Institute on Monday.

Mr. Guinigundo noted a new wave of coronavirus infections is hitting the United States, as well as some countries in Europe and Asia that have reported early success in containment.

The Health department on Monday reported 1,799 new cases of coronavirus infections, bringing the total number to 420,614.

BSP Governor Benjamin E. Diokno and Socioeconomic Planning Secretary Karl Kendrick T. Chua recently said the “worst is over” for the economy after seeing signs of recovery.

Among the economic data cited are the balance of payment (BoP) surplus widening to $2.104 billion in September, and a 9.3% rise in cash remittances to $2.601 billion in the same month. Foreign direct investments jumped 35% to $797 million in July.

However, the economy remained in a recession, as gross domestic product (GDP) shrank by 11.5% in the third quarter.

“It is too early to claim victory over the deep recession. It would be too ambitious to expect them to resume the usual business activities. This is the essence of economic scars that take time to heal. Savings must have been drawn down, investments have ground to a halt and business activities will be difficult to be put on stream immediately, [since] output and jobs have been lost, while productivity will need time to gain momentum,” Mr. Guinigundo said.

In the same forum, former Socioeconomic Planning Secretary Ernesto M. Pernia said he expects fourth-quarter GDP to shrink by five percent as infections continued to rise and fiscal response remained low. He estimates GDP to contract by 8.5% for the full year.

The Development Budget Coordination Committee is set to revise its projections for the year. It currently expects GDP to shrink by up to 6.6% by yearend.

Mr. Pernia said fiscal stimulus should be further ramped up to help the economy bounce back faster, citing data from the Asian Development Bank that the country’s $21.65 billion spending on pandemic response is the lowest among its Southeast Asian peers: Indonesia, Malaysia, Singapore, Thailand and Vietnam.

“From the beginning, and even now, we can still spend enough to really get things going,” Mr. Pernia said.

Mr. Guinigundo said fiscal policy “should not be timid in this particular issue.”

He said the improvements in key sectors could be sustained by restoring business and consumer confidence, since the Philippine economy is largely driven by consumption. The government should lead the way through effective crisis management and response, he added.

“Unless this is effectively and credibly done, the economic scars of loss output, loss of jobs, businesses, weak consumer and business confidence, will continue to take their toll on future economic performance,” Mr. Guinigundo said.

At the House of Representatives, another bill proposing a third stimulus package has been filed.

House Bill No. 8059, or the Bayanihan to Rebuild as One Act (Bayanihan III), proposes to allocate P247 billion in emergency response and economic recovery programs.

House Ways and Means Chair and Albay Rep. Jose Maria Clemente S. Salceda, the bill’s co-author, said a third stimulus package is necessary to ensure that the crisis does not “eat up too much of our economic structure.”

“It is very hard to recover when so many businesses have already closed for good,” he said in a statement, adding the Bayanihan III is “the necessary booster shot so we can truly begin recuperating in 2021.”

“The Executive can make their concerns known, and we will take them into consideration. They can even give us a fiscal limit to work on. But what we cannot accept is the idea that we have spent enough in 2020. That may have been barely true if the recent calamities did not strike. But the sheer fact is that more people have gone into poverty this year than we expected,” Mr. Salceda said.

“Finance Secretary Carlos Dominguez does not have to worry about fiscal discipline on the part of the House. If there is only so much in Bayanihan III that the government can afford, we will cooperate. But it cannot be zero.”

House Stimulus Committee Chair and Marikina Rep. Stella Luz A. Quimbo earlier filed her own version of the Bayanihan III bill, which would require an allocation of P427 billion. — Beatrice M. Laforga and Kyle Aristophere T. Atienza

South Korea eyes more investments in PHL but flags ‘high’ corporate tax

SOUTH KOREA granted $100 million worth of loans to the Philippines to boost its war chest against the coronavirus disease 2019 (COVID-19) pandemic. — REUTERS

SOUTH KOREA is looking to expand investments in the Philippines, but expressed concern over the country’s “high” corporate income tax rate, according to the Department of Finance (DoF).

A DoF statement said South Korean Ambassador to the Philippines Han Dong-man expressed concern over the country’s current 30% corporate income tax (CIT) rate during a recent meeting with Finance Secretary Carlos G. Dominguez III.

Mr. Dominguez assured Mr. Han that the proposed Corporate Recovery and Tax Incentives for Enterprises (CREATE) bill aims to immediately cut CIT by five percentage points to 25% this year, and by an additional one percentage point every year until it hits 20%.

The CREATE bill is still pending in the Senate.

Mr. Han said the two countries should explore investment opportunities involving the manufacturing of environment-friendly vehicles, since the Philippines is among the world’s largest producers of nickel. Nickel is a key component in electric car batteries.

South Korea also committed to providing more funding support for the Philippines’ infrastructure projects.

Mr. Dominguez said the South Korean government “expressed willingness” to grant financial assistance for the proposed P65.7-billion Panay-Guimaras-Negros Bridge Project in Visayas.

He said the Philippine government affirmed its plan to advance the processing of the South Korean loans and grants in the pipeline.

This includes possible additional loans for pandemic response and more funding to support projects on maritime safety, water resources management information system, agricultural modernization and forest management.

Last month, South Korea granted $100 million (P4.8 billion) worth of loans to the Philippines to boost its war chest against the coronavirus disease 2019 (COVID-19) pandemic.

In January, South Korea also provided a $50-million (P2.4-billion) loan for the Philippines-Korea Project Preparation Facility that will fund feasibility studies and various preliminary activities for infrastructure projects under the “Build, Build, Build” program.

Mr. Dominguez also sought South Korea’s support to create a framework agreement needed to process tied financing in buying military equipment for the Department of National Defense (DND).

South Korea is ready to extend the financial support needed by the Philippines for its projects and COVID-19 response, said Mr. Han.

He also assured that the two nations are already in the final stages of negotiations on the proposed Philippines-Korea free trade agreement.

South Korea is the Philippines’ fifth-biggest source of foreign funding with ongoing loans and grants amounting to $680 million (P33 billion) as of June.

As of Oct. 2, the government has secured $9.91 billion (P480 billion) worth of loans and grants from its bilateral and multilateral partners for its coronavirus pandemic response. — B.M.Laforga

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