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10-month PEZA investments fall amid pandemic

Investments in the country’s economic zones fell by more than a quarter to P72.6 billion in the 10 months through October amid a coronavirus pandemic, according to the Philippine Economic Zone Authority (PEZA).

The number of projects dropped by 45% to 248, PEZA Director-General Charito B. Plaza told an online meeting of the Semiconductor and Electronics Industries in the Philippines, Inc. on Friday.

Direct employment in economic zones also fell by 2.4% to 1.53 million jobs from January to September from a year earlier, she said. PEZA posted a 0.63% improvement in the value of exports to $40.8 billion, she added.

“Despite the pandemic, PEZA continuously receives [reports of] expansions and new investments,” Ms. Plaza said, noting that the semiconductor and electronics manufacturing sector continued to “contribute the biggest export income.”

Semiconductors and electronics in PEZA ecozones posted an 8.23% decline in exports to $16.71 in the first nine months.

Ms. Plaza traced the decline to difficulties in importing raw materials amid a coronavirus pandemic. She said almost half of the sector’s raw materials and supplies are imported.

The sector’s direct employment fell by 3.18% to 371,138 jobs during the period from a year earlier.

Investment in the sector from January to October dropped by a quarter to P8.86 billion, Ms. Plaza said.

Still, she said export companies have survived during the pandemic. “While domestic enterprises are on lockdown, our export companies are the ones maintaining the economy.”

As of Oct. 10, 87% or 2,629 companies in economic zones nationwide were operating, Ms. Plaza said, adding that these employ about 1.2 million Filipinos. She said only 13% or 387 companies were not operating or had no production.

Ms. Plaza said the agency had suspended the 30% limit on yearly revenue that locators can generate outside IT parks given the work-from-home arrangements during the health crisis.

The limit was increased to 90% and will be effective until Sept. 12 next year, she added. — Arjay L. Balinbin

Forex reserves hit all-time high at end-October

By Beatrice M. Laforga, Reporter

Philippine dollar reserves rose to a fresh record of $103.814 billion at the end of October, boosted by the central bank’s foreign exchange operations.

The gross international reserves rose by 3.35% from a month earlier, based on documents sent by Bangko Sentral ng Pilipinas (BSP) Governor Benjamin E. Diokno to reporters on Friday.

The higher reserves were largely due to the central bank’s net foreign exchange operations worth $3.46 billion, $77 million worth of net deposits made by the government in foreign currency, and the revaluation gains on BSP’s gold holdings worth $49 million.

The reserve level at the end of September was already higher than the central bank’s $100-billion projection for the full year.

“The end-October 2020 GIR level represents more than adequate external liquidity buffer,” BSP said in a statement.

It said the current stock was equivalent to 10.3 months of imports of goods and payments of services and primary income. It could also cover 9.3 times the country’s short-term foreign debt based on original maturity, and 5.4 times based on residual maturity.

The higher reserve level reflects the narrowing trade deficit data as the growth in exports outpace imports, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message .

“For the coming months, the GIR could still post new record highs, partly on relatively narrower trade deficits/net imports from year-ago levels by about $1 billion to $2 billion per month,” he said.

Exports rose by 2.2% to $6.22 billion in September, the first expansion in seven months, while merchandise imports were still down by 16.5% to $7.92 billion.

The trade deficit narrowed to $1.71 billion that month from $3.41 billion a year ago.

Mr. Ricafort said the expected increase in remittances from migrant Filipino workers in time for the Christmas season could further push reserve levels to a new record.

“The GIR could also post new record highs in view of more proceeds of foreign borrowings by the government especially for various COVID-19 programs and by the private sector that entail foreign investors in the coming months amid near record low interest rates,” he added.

BSP fully awards P60-billion short-term securities

The Philippine central bank fully awarded P60 billion short-term securities it offered on Friday due to strong liquidity.

The Bangko Sentral ng Pilipinas (BSP) fully awarded the 28-day bills from tenders worth P88.9 billion, making the auction 1.48 times oversubscribed, it said in a statement posted on its website.

This marked the ninth straight week that the central bank made a full award of the debt papers it offers since it started issuing its own securities in mid-September.

The bills fetched an average yield of 1.9621%, which slid by 3.01 basis points (bps) from the auction last week. The rates accepted during the auction ranged from 1.875% to 2%, which was wider.

“The results of the BSP bill auction continue to show ample liquidity in the financial system,” central bank Deputy Governor Francisco G. Dakila, Jr. said in the statement. “The BSP’s monetary operations will continue to be guided by its assessment of market developments and liquidity conditions going forward.”

The strong liquidity was supported by central bank policy measures meant to boost the market and the economy amid a coronavirus pandemic, Robert Dan J. Roces, chief economist at Security Bank Corp. said in a Viber message. — Beatrice M. Laforga

House to expedite approval of Land Use, Coco Fund, gov’t restructuring bills

The House of Representatives will focus on passing at least seven of Speaker Lord Alan Q. Velasco’s priority bills, including the Coconut Levy Fund bill, the proposed National Land Use Act, and a measure outlining the restructuring of the government, the Majority Leader said Friday.

"We discussed how to expedite the approval of pending legislative measures in compliance with Speaker Velasco's directive to hit the ground running," Majority Leader Martin G. Romualdez said in a statement.

Mr. Romualdez, who chairs the House committee on rules, said bills that were passed by the chamber on third and final reading in the previous Congress can be "disposed of" by invoking Rule 10 Section 48 of House rules, which permit one day of hearings only for such measures

"The concerned committees for these measures may meet for just one hearing and immediately refer the committee reports for plenary deliberation," Mr. Romualdez said.

Mr. Velasco's priority measures pending at committee level and eligible for one-day hearings are the Coconut Levy Fund bill, the proposed National Land Use Act, the Mandatory Reserve Officers' Training Corps bill, the Rightsizing the National Government bill, the Right to Adequate Food bill, the Anti-Ethnic, Racial and Religious Discrimination bill, and the On-Site, In-City Near City Local Government Resettlement Program bill.

Mr. Romualdez said the Speaker is also pushing for the immediate approval of other proposals, including the Ordaining the Development of the Downstream Natural Gas Industry bull,the proposed Internet Transaction Act, the Military Uniformed Personnel Pension Fund bill, the Magna Carta for Barangays bill, Amendments to the Revised Penal Code, Amendments to the Government Procurement Reform Act, the proposed Marinduque Special Economic Zone Act, the proposed Marinduque Sports Academy and Training Center Act, and the proposed Bisekleta Para sa Kinabukasan (“bicycles for the future”)Act.

"All other priority measures to be identified by the Speaker as his priority bills are expected to face easy sailing in the House," he said.

The House leadership on Tuesday included 12 economic measures sought by the Finance department for inclusion in the priority list for fast-tracking into floor and committee deliberations to help the government revive the economy following the damage done by the pandemic.

The priority measures include House Bill (HB) No. 7749 or the proposed Government Financial Institutions Unified Initiatives to Distressed Enterprises for Economic Recovery act, which is in plenary. Its purpose is to strengthen the capacity of government financial institutions to provide assistance to micro-, small-, and medium-sized enterprises.

Other priority measures in plenary are HB 7425 or the proposed Digital Transactions Value-Added Tax act, HB 7406 or the proposed Bureau of Fire Protection Modernization Program act, HB 6135 or the Fiscal Mining Regime, and HB 7425 or the proposed Internet Transactions Act/E-Commerce Law.

Priority measures that have yet to make it past committee are the Military and Uniformed Personnel Services Separation, Retirement, and Pension bill, the Armed Forces of the Philippines Modernization bill, the Coconut Farmers Trust Fund bill, the Department of Water Resources and Water Regulatory Commission bill, the Warehouse Receipts bill, the National Disease Prevention and Management Authority bill, and the National Land Use bill.

Legislators are set to convene the bicameral conference on the proposed 2021 national budget on Nov. 16. — Kyle Aristophere T. Atienza

Last two years of gov’t term focused on transport, water projects

The government will focus on finishing mass transport, water supply, and road projects during the last two years of the government’s term, the administration’s point man for flagship projects said.

"Our priorities now are the transport and mobility projects, and also the projects with respect to water supply because these really the most pressing issues moving forward," according to Vivencio B. Dizon, the presidential adviser for flagship infrastructure projects, speaking at a webinar Friday.

Mr. Dizon said the projects include railways, regional airports and water supply projects for Metro Manila, as well as big-ticket projects in the Visayas and Mindanao, mostly roads, bridges and the first phase of the Mindanao Railway project.

The National Economic and Development Authority (NEDA) Board, chaired by President Rodrigo R. Duterte, approved in August the expanded list of 104 infrastructure flagship projects worth P4.13 trillion. The government hopes to start all of the priority projects by 2022, before Mr. Duterte ends his six-year term.

The priority list is part of the administration's "Build, Build, Build” infrastructure. It has undergone several revisions since last year with some projects shelved and others added.

He said more details on the status of priority projects will be released before the year ends.

Among the major railway projects are the North South Commuter Railway in Luzon and extensions of the Manila Light Rail Transit system (LRT); while the regional airports include the expansion of Clark International Airport, the new Bohol International Airport, and New Manila International Airport in Bulacan.

To address the capital's dwindling water supply, ongoing projects include the P20-billion New Centennial Water Source – Kaliwa Dam Project and the Angat Water Transmission Improvement Project.

The Metropolitan Waterworks and Sewerage System (MWSS) has warned that the capacity of Angat Dam, which is Metro Manila's major source of water, will no longer be able to meet the capital's needs between 2020 and 2025.

Mr. Dizon said the government is also fast-tracking the approval process for infrastructure works to keep the project pipeline going.

"The goal of this government is not only to finish as many projects as we can, which we are way on track to do, but it is also very important to think past the Duterte administration… We want the next administration to have a robust pipeline of projects," he said.

Government spending on infrastructure fell 40% from a year earlier to P56.9 billion in September, bringing the nine-month tally to P451.5 billion, down 16.5%.

The government allotted P1.12 trillion for infrastructure projects in next year's P4.5- trillion budget, with a goal of generating 1.7 million jobs and pump-prime the economy. — Beatrice M. Laforga

Farm damage estimate for Typhoon Ulysses upgraded to P969.8-M

AGRICULTURAL damage caused by Typhoon Ulysses (international name: Vamco) was estimated at P969.8 million o Friday, against the previous estimate of P124.3 million, according to the Department of Agriculture (DA).

In a bulletin Friday afternoon, the DA said the storm caused the loss of 58,897 metric tons (MT) of produce, affecting 40,519 farmers across 51,241 hectares of farmland.

Losses were reported in the regions of Ilocos, Cagayan Valley, CAR (Cordillera Administrative Region), CALABARZON (Cavite, Laguna, Batangas, Rizal, and Quezon), Central Luzon, and Bicol.

"The increase in value is attributed to additional reports from the Ilocos Region and Cagayan Valley, as well as updated reports from Central Luzon, CALABARZON, and Bicol Region," the DA said.

Segments of the industry that were affected were rice, corn, fisheries, high-value crops, and livestock. Damage was also reported to agricultural facilities, irrigation facilities, and equipment.

Rice accounted for 53.3% of the total losses, followed by high-value crops at 42.6%, other agricultural commodities at 2.7%, and corn at 1.4%.

Damage to rice amounted to P516.9 million, with 36,479 MT in lost output and 33,836 hectares of affected farmland.

Losses to high-value crops were valued at P413.1 million on volume of 22,220 MT over 7,211 hectares.

Damage to corn was pegged at P13.7 million, with 10,193 hectares of farmland were affected and lost volume of 197 MT.

Losses to livestock were estimated at P5.6 million.

Other reported losses were P3 million for fisheries and P193,000 for agricultural facilities.

Damage estimates are still expected to rise with DA regional offices still validating losses. —Revin Mikhael D. Ochave

PNB reports Q3 profit gain after reducing provisions

The Philippine National Bank (PNB) said net income rose in the third quarter after going largely against the grain of the industry with reduced provisioning levels during the period, though provisions during the nine months were more than six times their year- earlier levels.

PNB earnings rose 4% to P2.5 billion in the three months to September, it said in a disclosure to the bourse Friday. It set aside loan loss provisions of P587 million during the period, down from P618 million a year earlier.

On a nine-month basis, provisioning rose to P9 billion from P1.4 billion a year earlier. The third-quarter earnings accounted for about 64% of the nine-month profit of P3.9 billion.

Over the nine months, PNB said pre-provision operating income rose 42% to P14.1 billion.

Net interest income rose 12% to P26.2 billion in the year to date.

“(This was) driven by lower funding costs due to the stable growth in low-cost deposits combined with the significant reduction in levels of high-cost deposits, particularly with the maturity of P7 billion worth of long-term negotiable certificates of time deposit," PNB said.

Interest income from loans and receivables declined 3% to P28.7 billion in the nine months, with the bank saying it was “focused on strengthening its liquidity position.” Pre-provision operating costs were flat at P20 billion. PNB said it managed its expenses "despite the supplemental costs for frontline employees" for operations during the pandemic, and following the rationalization of non-critical expenditures.

Assets stood at P1.03 trillion at the end of September from P1.14 trillion at the end of 2019.

The capital adequacy ratio was 16.40% and common equity tier-1 ratio 15.67%. PNB closed at P28.80 Friday, up 45 centavos.

Security Bank third quarter net profit falls on sharp rise in provisions

Security Bank Corp. said net profit fell sharply in the third quarter to P1.0 billion from P2.7 billion a year earlier after it raised loan loss reserves “proactively” to P10.1 billion to account for the likely impairment of loan assets due to the pandemic.

In the nine months to September, net profit fell 13% to P6.7 billion on provisioning of P21.1 billion, according to a bank disclosure to the bourse Friday.

Third-quarter operating income was up 64% at P14.4 billion while provisioning rose nine times to P10.1 billion, as net interest income rose 7.6% to P7.6 billion. Net trading gains during the quarter amounted to P5.2 billion, up sharply from P369 million a year earlier.

During the nine months, operating income rose 66% year-on-year to P40.2 billion as net interest income grew 24% to P23.4 billion. Net trading gains amounted to P9.2 billion from P1.4 billion a year earlier.

The loan portfolio at the end of September was P431 billion against P449 billion at the end of 2019.

In the nine months to September, interest income on loans rose to P26 billion from P24 billion. The corresponding total for the third quarter was P8.2 billion against the year-earlier P8.8 billion.

The share of retail loans fell to 26% of the total at the end of September from 27% a year earlier.

The gross non-performing loan (NPL) ratio rose to 4.03% during the third quarter from 1.58% at the end of June. NPL cover was 122%.

Total deposits at the end of September declined to P436 billion from nearly P500 billion at the end of 2019, with the share of low-cost savings and demand deposits rising to 59%.

"While revenue, margins, and capital are resilient, the bank has maintained proactive credit provisioning given economic challenges arising from the pandemic. We are prudently supporting our clients, continuing vigilance in managing risks, and investing in initiatives to fortify our services," Security Bank President & Chief Executive Officer Sanjiv Vohra said.

The capital adequacy ratio rose to 19.9% at the end of September from 18.0% a year earlier. Total assets declined to P651 billion from P793 billion at the end of 2019.

The return on shareholder equity was 7.3%, and the return on assets 1.23%.

Security Bank added that it recently entered into a partnership with Thailand's Bank of Ayudhya Pcl to develop loan products and reach more customers through digital channels.

Security Bank closed at P105.50 on Friday, down 1.4%.

PSBank third quarter profit weighed down by surge in provisions

Philippine Savings Bank (PSBank) reported a sharp decline in net profit for the third quarter, joining an industry-wide trend of increased provisioning as the economy weakened under pressure from a prolonged lockdown.

In the three months to September, net income dropped to P36.8 million from P813 million a year earlier, according to its disclosure to the Philippine Stock Exchange Friday.

Interest income declined 8% year-on-year to P3.6 billion in the third quarter. Reserves for bad loans surged to P2.5 billion from P545 million a year earlier.

PSBank, the thrift unit of Metropolitan Bank & Trust Co. (Metrobank), said profit in the nine months to September was P1.33 billion, down 39% year-on-year.

Gross revenue rose 23.9% to P13.3 billion in the nine months as net interest income grew 27.6% to P10.4 billion.

During the period, operating income grew 11.9% to P2.8 billion, buoyed by higher trading gains.

Total loans at the end of September amounted to P150.4 billion, while the net non- performing loan ratio was 4%. Loan loss provisions for the nine-month period amounted to P5.3 billion, three times the year-earlier level. The bank attributed this to the pandemic, which placed clients’ finances under stress.

"PSBank continues to take a conservative stance on credit provisioning amid the present business landscape while leveraging operating efficiencies and focusing on our digital transformation roadmap," PSBank President Jose Vicente L. Alde said. Deposits rose to P24 billion from P22 billion at the end of 2019, while total assets amounted to P214.7 billion from P224.9 billion.

"PSBank has seen an exponential rise in the use of its digital banking services, and is committed to improve on them given the fast adoption of consumers to non-contact platforms brought about by the pandemic," PSBank said.

Total assets amounted to P214.7 billion, while capital was P34.9 billion. The capital adequacy ratio was 18.65% and common equity tier-1 ratio at 17.7%. PSBank closed at P53.40, down 10 centavos. — Kathryn Kristina T. Jose

PayPal says preference for digital payments surged during pandemic

Digital payments firm PayPal said 93% of consumers in the Philippines indicated in a survey that they preferred digital modes of payment over cash during the public health emergency.

In a statement, PayPal said its online survey had 500 respondents and sought to determine the impact of the pandemic on payment behaviors.

The company found that between May and August, 93% of respondents “preferred digital payments over cash” while 87% said they “increased their usage of digital payments” during the crisis.

PayPal also said seven of 10 respondents “expect to shop more from international online stores in the next three months.”

Rajkishore Agrawal, PayPal’s senior director and head of sales for Southeast Asia, said: “While cash remains the most dominant method of payment in the Philippines, circumstances brought on by the pandemic have given digital payments a more prominent role in the everyday lives of Filipinos.”

Citing a recent study by the World Bank and the National Economic Development Authority, PayPal noted the use of digital payments, e-commerce, telemedicine, and online education “has helped the Philippine economy cope with social-distancing measures, business continuity, and public service delivery.”

Mr. Agrawal said health and safety should still be a “fundamental part” of business decisions, as the public health crisis continues.

“But when you consider continued usage of digital payments, convenience and security also play vital roles,” he added.

He said that the usage of digital payments opens the door to global e-commerce for Filipino consumers.

“From May to August this year, 61% of the survey participants said they purchased from international merchants with the most common purchases being for fashion (41%) and technology (34%),” PayPal said. — Arjay L. Balinbin

Bill boosting BSP enforcement powers being prepared

A measure seeking to strengthen the central bank’s oversight functions is currently being drafted, a senior legislator said Friday, following the release of an international assessment report on the Philippine financial sector.

“I am working on a draft and will be collaborating with Bangko Sentral ng Pilipinas (BSP) Governor Benjamin E. Diokno on matters we can work on,” House Ways and Means Chairman Jose Maria Clemente S. Salceda told BusinessWorld Friday.

The International Monetary Fund (IMF), in its financial sector assessment program, recommended the amendment of the bank secrecy law to give the BSP “additional teeth” in regulating financial institutions.

The IMF said the central bank’s regulatory framework “is broadly effective for the size and complexity of the Philippine banking system, but legislative gaps continue to hinder effective supervision of banks.”

“More work is needed to strengthen BSP’s oversight on the assessment of ultimate beneficial ownership of banks operating in the Philippines,” the report said. “Limitations on BSP’s enforcement powers also impair its ability to fully protect the bank from the actions of parent companies and affiliates.”

“The weaknesses in the regulatory oversight functions of the Bangko Sentral ng Pilipinas can be addressed with some changes in its charter,” Mr. Salceda noted, saying that a measure expanding BSP’s risk oversight powers “may be a useful backstop to induce banks to grow loans to more sectors faster.”

Mr. Salceda said various issues raised by the IMF are related to the Manual of Regulations for Banks, which the central bank can resolve without new legislation. “The crux of my work will be on a legislative framework for crisis management, recovery and resolution.”

“My options are to file an omnibus bill on the recommendations, or to take them up separately. An omnibus is probably the most effective way to do this, but I will consult with Governor Diokno on what he thinks is best,” Mr. Salceda said. “My inclination is to use the report as an impetus to expand financial inclusion in a safe manner and to future-proof our banking sector and prepare it for a more digital economy.” — Kyle Aristophere T. Atienza

Peso ends stronger on vaccine development news, US inflation data

The peso closed stronger Friday on positive news regarding the development of another coronavirus vaccine, and as US inflation slowed in October.

US biotechnology company Moderna, Inc. reported that it will move forward with its vaccine trials with an expanded the number of cases under study, which will trigger a stage of development known as the “first interim analysis” before an independent panel.

Meanwhile, the US reported inflation of 1.2% in October, down from 1.4% in September.

Core inflation which excludes volatile items like food and energy, was unchanged.

The peso closed at P48.21 against the dollar, against P48.27 on Wednesday, according to the Bankers Association of the Philippines. The market was closed Thursday due to typhoon Ulysses.

The peso opened the Friday session at P48.46, its low for the day. Its peak during the session was P48.20.

Dollar volume was $669.1 million on Friday, up from $507.9 million previously.

Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a text that the progress made by Moderna was a key catalyst.

Meanwhile, a trader said in an e-mail that the peso was also stronger after US inflation came in lower than expected.

On Monday, Mr. Ricafort expects the peso to trade between P48.15 and P48.30. The trader gave a range of P48.15 to P48.25. — Kathryn Kristina T. Jose

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